Carbon Border Adjustment Mechanism
European carbon border adjustment mechanism that applies a cost to imports of carbon-intensive goods. Regulation (EU) 2023/956, with full application from 1 January 2026.
Context
CBAM (Carbon Border Adjustment Mechanism) is the European carbon border adjustment mechanism. It applies a cost to imports of carbon-intensive goods to prevent carbon leakage and level the playing field with European production subject to the EU ETS.
Regulatory origin
Regulation (EU) 2023/956 of the European Parliament and of the Council, of 10 May 2023, published in OJEU L 130 on 16 May 2023. It establishes the CBAM with a transitional period (Oct 2023 - Dec 2025) and definitive application from 1 Jan 2026.
Sectors covered (Annex I)
Cement.
Iron and steel.
Aluminium.
Fertilisers.
Electricity.
Hydrogen.
Timeline
CBAM adopted
Regulation (EU) 2023/956 published in OJEU L 130.
Transitional period
Importers report embedded emissions without paying CBAM.
End of transitional period
Last quarter of reporting at no cost.
Full application
Importers buy CBAM certificates equivalent to the embedded emissions.
Applied case
A textile brand with a line of jackets featuring imported aluminium zips from Asia assesses its CBAM exposure following full application on 1 Jan 2026.
Annual import: 50,000 aluminium zips (~250kg of aluminium in total).
Calculates embedded emissions with the CBAM methodology (emission factor for aluminium imported from China: ~16 tCO2/t aluminium).
Estimated cost: 4 tCO2 x EUR 85/tCO2 (estimated 2026 EU ETS price) = EUR 340/year · marginal against the total cost of the zips (~EUR 8,000).
Decision: continue with the Asian supplier · alternatively, EU sourcing would raise the zip cost by 35 percent.
Common mistakes
CBAM does not apply directly to made-up garments.
The current scope covers cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Garments are not listed. The effect on textiles is indirect, via components and via possible future extension.
It is not a tax.
Technically it is a system of certificates equivalent to the ETS. The legal distinction matters for WTO treaties and for the transposition of equivalent measures in third countries.
CBAM does not exempt you from the textile DPP or the Forced Labour Regulation.
They are parallel regimes. CBAM covers embedded emissions at the border. The DPP covers product transparency. Forced Labour covers forced labour. They coexist.
The transitional period is not optional.
Since October 2023 there is an obligation to report quarterly even though there is no payment. Failure to report is a punishable infringement.
Frequently asked questions
What is the CBAM?
Regulation (EU) 2023/956 Carbon Border Adjustment Mechanism, published in OJEU L 130 (16.5.2023, p. 52-104) (CELEX 32023R0956). In line with Art. 1.1: it establishes a carbon border adjustment mechanism to address greenhouse gas emissions embedded in goods imported into the customs territory of the Union, in order to prevent the risk of carbon leakage.
Which products does the CBAM apply to?
In line with Annex I: cement, electricity, fertilisers, hydrogen, iron and steel, aluminium. For textiles it does NOT apply directly yet (it is not in Annex I), but indirectly it affects brands that import metal structures, aluminium components, iron/steel (specific zips, fasteners). Possible extension to other sectors in future reviews.
How is the CBAM complied with?
Transitional phase 2023-2025: only quarterly reporting of embedded emissions (no payment). Full application from 1 Jan 2026: authorised CBAM declarant + annual purchase of CBAM certificates (price anchored to the EU ETS) for tonnes of CO2eq embedded in imports. In line with Art. 3, Definitions (1)-(11) and Art. 6 on the CBAM declaration.
What is the difference between CBAM and EU ETS?
The EU ETS (Dir. 2003/87/EC) is an emissions trading system applicable to industrial operators WITHIN the EU. CBAM is a border adjustment applicable to IMPORTS in the same sectors. In line with Art. 1.2: CBAM complements the EU ETS by applying an equivalent set of rules to imports, preventing carbon leakage.
When does the CBAM come into force?
Transitional phase from 1 Oct 2023 (reporting only). Full application with the purchase of certificates from 1 Jan 2026 (Art. 36). Gradual phase-out of free EU ETS allowances in CBAM sectors 2026-2034. Importing companies must register as CBAM authorised declarant before 1 Jan 2026.
What penalty is there for breaching CBAM?
In line with Art. 26: a fine of a minimum of EUR 100 per tonne of CO2eq not declared or not covered by certificates, adjusted to the European Index of Consumer Prices. For repeated infringements, a multiplier factor of up to x3. Additionally: confiscation of goods at customs, exclusion from the CBAM register.
Fuentes oficiales
- European Parliament and Council · OJEU10 may 2023Regulation — legislation in force
- European Commission · DG TAXUD2024Official information
- European Commission2024Operational system
