The EU Carbon Border Adjustment Mechanism (CBAM) puts a carbon price on certain goods entering the European Union. From 2026, steel, aluminium, cement, fertilisers, hydrogen and electricity shipped to the EU carry a cost linked to their embedded emissions: EU importers must declare those emissions and buy CBAM certificates, and they rely on exporters worldwide, including in the UK, for accurate data. The UK is introducing its own CBAM from 1 January 2027. This guide explains how the EU CBAM works, which sectors are affected and how to prepare with AI.
CBAM is a charge on the carbon embedded in goods imported into the European Union. It levels the carbon cost between goods made in the EU (which are subject to the EU ETS) and goods imported from countries without an equivalent carbon price. Exporters must report the direct and indirect emissions of their products so that EU importers can declare them and purchase the corresponding CBAM certificates.
The sectors covered by CBAM are iron and steel, aluminium, cement, fertilisers (such as urea and nitrates), hydrogen, and electricity. For many exporting countries, steel and aluminium are the most exposed sectors, representing billions in annual exports to the EU.
Transitional phase (October 2023 to December 2025): emissions reporting only, with no payment. Definitive phase (from January 2026): the CBAM certificate obligation begins and phases in gradually as free allocation under the EU ETS is reduced through 2034. From 2026, exporters need robust emissions calculation systems to avoid default values, which are more expensive.
Calculating emissions for CBAM requires direct emissions (Scope 1) from the production process, indirect emissions (electricity consumed) for certain goods, and methodologies accepted by the EU. When exporters cannot provide actual data, EU default values apply. These are significantly higher and increase the cost of CBAM certificates.
Carbonova’s CarbonOS automates the entire CBAM compliance process: automatic emissions calculation by product and process, reports in the format the EU requires, continuous monitoring of CBAM regulatory changes, financial impact simulation by product and market, alignment with other carbon pricing and reporting obligations, such as the UK ETS, UK CBAM and SECR, for cross-compliance optimisation, and a real-time dashboard showing your CBAM exposure. Book a demo and get your company ready for CBAM.