The CBAM is an EU policy that imposes a carbon price on imported goods to prevent carbon leakage and ensure fair competition with EU producers. It targets sectors with high carbon emissions and significant exposure to international trade, including cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. The CBAM entered its transitional phase on 1 October 2023, requiring importers to report the embedded carbon emissions of their imports. This phase continues until 31 December 2025, during which no financial adjustments are required. The definitive phase is set to commence on 1 January 2026, when importers will be obligated to purchase CBAM certificates corresponding to the carbon emissions of their imports. The price of these certificates will align with the EU Emissions Trading System (ETS) carbon price, varying weekly.
In February 2025, the European Commission proposed simplifications to the CBAM regulation to reduce administrative burdens for businesses. These changes are expected to be formally endorsed by the European Parliament and Council by September 2025 and would enter into force shortly thereafter. Additionally, the Commission is considering measures to mitigate the risk of carbon leakage for exporters affected by the CBAM.
