What Is CBAM and How Does It Work in 2026

CBAM is the EU's carbon charge on imports of cement, iron and steel, aluminium, fertilisers, hydrogen and electricity. Since 1 January 2026 it is a real cost: importers must buy certificates for the emissions embedded in these goods, starting with the first annual declaration due on 30 September 2027. This guide explains how the mechanism works, who it affects and what suppliers outside the EU need to prepare.

What is CBAM

The Carbon Border Adjustment Mechanism (CBAM) is an EU instrument that puts a price on the greenhouse gas emissions released when certain goods are produced outside the EU. Importers declare the embedded emissions of those goods each year and surrender CBAM certificates, priced in line with the EU Emissions Trading System, to cover them.

CBAM was established by Regulation (EU) 2023/956 as part of the EU's Fit for 55 package. In Turkish it is called SKDM (Sınırda Karbon Düzenleme Mekanizması).

Why the EU introduced a carbon border adjustment

EU producers in heavy industry pay for their emissions under the EU ETS. Until now, most of them received a large share of their allowances free, to protect them against competitors in countries with no carbon price. That protection is being withdrawn between 2026 and 2034.

Without a border measure, the EU worried that production would move to countries with weaker climate rules, a problem known as carbon leakage. CBAM replaces free allocation as the leakage defence: as EU producers lose free allowances, importers pay a matching carbon cost on the same goods. The aim is equal treatment of domestic and imported products, and an incentive for exporting countries to price carbon themselves.

Which products are covered by CBAM

CBAM covers goods listed by CN code in Annex I of the regulation. These are the sectors with high emissions and high trade exposure.

The Commission proposed in December 2025 to add about 180 downstream products made mainly of steel and aluminium, such as machinery parts and household items, from 1 January 2028. The Council and Parliament adopted different positions in 2026, with Parliament calling for a much longer list, and the file was in trilogue negotiations in October 2026. Until it is adopted, the current Annex I list applies.

Who has to comply with CBAM

The legal obligation rests with the importer, or the indirect customs representative acting for it, which must hold the status of authorised CBAM declarant. Importers bringing in 50 tonnes or less of CBAM goods per calendar year are exempt, a rule introduced by the 2025 Omnibus amendment, Regulation (EU) 2025/2083. The 50 tonnes are counted across all sectors except hydrogen and electricity, which have no exemption.

Producers outside the EU have no direct legal duty under CBAM, but they are the only source of actual emissions data. In practice, Turkish, Indian, Chinese and Ukrainian plants receive the data requests, and their ability to answer affects the price their EU customers will pay. Goods from Iceland, Liechtenstein, Norway and Switzerland are excluded because these countries apply the EU ETS or a linked system.

How CBAM works in practice

The annual cycle for an importer looks like this:

1. Before importing above 50 tonnes, obtain authorised CBAM declarant status from the competent authority, through the CBAM Registry.
2. Throughout the year, collect embedded emissions data from each producing installation, ideally verified by an accredited verifier.
3. From 2027, hold certificates covering at least 50% of the embedded emissions imported so far that year at the end of each quarter.
4. By 30 September, submit the annual CBAM declaration for the previous year in the CBAM Registry.
5. By the same date, surrender the required number of CBAM certificates.

Certificates are sold by the Commission through a common central platform from 1 February 2027. They are not traded between companies. Excess certificates can be sold back to the Commission within set limits and deadlines.

How the CBAM certificate price is set

The price follows the EU ETS auction price. For 2026 imports, the Commission publishes a quarterly average, and certificates bought for goods imported in a given quarter use that quarter's price. The published figures so far are EUR 75.36 for Q1 2026, EUR 75.28 for Q2 and EUR 82.32 for Q3, per tonne of CO2e. From 2027 the price is set weekly. Current prices are on the Commission's CBAM certificate price page.

The number of certificates is not simply equal to embedded emissions. It is reduced by a free allocation adjustment that mirrors the free allowances EU producers still receive, which shrinks year by year until 2034, and by any carbon price effectively paid in the country of production.

Embedded emissions, actual data and default values

Embedded emissions are the direct emissions released during production of the goods, plus indirect emissions from electricity for cement and fertilisers, plus the embedded emissions of any precursors used. They are expressed in tonnes of CO2e per tonne of product. The calculation rules are in Implementing Regulation (EU) 2025/2547 and largely follow EU ETS monitoring rules.

When an importer cannot obtain verified actual data, it must use the default values published by the Commission for each country and CN code. These include a mark-up that rises from 10% in 2026 to 30% from 2028 for most goods, with a 1% mark-up for fertilisers. Default values are deliberately conservative, so a well-run plant with verified data almost always produces a lower figure. Our article on how to calculate CBAM embedded emissions walks through the method.

Transitional period and definitive period compared

For a detailed look at what the definitive period and the Omnibus changed, read CBAM in 2026, what changed in the definitive period.

Carbon prices paid outside the EU

Article 9 of the regulation allows a declarant to deduct a carbon price effectively paid in the country of origin, net of rebates or other compensation. The Commission published a draft implementing act on this in May 2026, and the final rules were not yet in force in October 2026. The Omnibus also provides for default carbon price values for third countries from 2027.

For Turkey, the question is practical. Climate Law No. 7552 of July 2025 created the basis for a Turkish ETS, and its implementing regulation entered into force on 27 August 2026. The system starts with a pilot phase in which allowances are expected to be free, so no deductible price exists yet for Turkish goods.

Penalties for non-compliance

An authorised declarant that fails to surrender enough certificates pays a penalty aligned with the EU ETS excess emissions penalty, EUR 100 per tonne of CO2e indexed to inflation, and must still surrender the missing certificates. Importing above the threshold without authorisation can lead to a higher penalty, set as a multiple of that amount. Member States set the detailed penalty rules for other breaches.

Common misunderstandings about CBAM

CBAM is not a customs duty paid at the border. Goods clear customs as usual, and the cost is settled once a year through certificates. The customs declaration still matters, because it records the CN code, origin and net mass that the CBAM declaration must match.

CBAM certificates are not EU ETS allowances. They are bought from the Commission's central platform, cannot be traded between companies and are cancelled if not used within the set period.

A product carbon footprint is not CBAM data. A footprint under ISO 14067 or an EPD covers a different boundary, often including transport and upstream raw materials, and follows different rules. The activity data can be reused, but the CBAM figure must be calculated under the CBAM method.

Transitional period data does not carry over automatically. Figures sent in 2024 or 2025 were often estimates. For the definitive period, actual emissions must be calculated for each reporting year and verified.

What exporters to the EU should do now

For producers in Turkey and other non-EU countries, the 2026 data is already being generated, and the first verification of each installation needs a physical site visit by an accredited verifier. The practical steps are to map products to CN codes, set up monitoring at process level, calculate specific embedded emissions for 2026, and book verification early.

Our CBAM consulting service covers this work for producers and for EU importers buying from Turkish plants.