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Read More about ASOSThe EU Carbon Border Adjustment Mechanism (CBAM)
The Carbon Border Adjustment Mechanism (CBAM) is an EU regulation that puts a carbon price on imports of certain carbon-intensive goods, including steel, aluminium, cement and fertilisers. Its definitive phase began on 1 January 2026, when EU importers bringing in more than 50 tonnes of covered goods a year became financially liable for the emissions embedded in those imports.
What is the Carbon Border Adjustment Mechanism (CBAM)?
The Carbon Border Adjustment Mechanism is the EU’s tool for putting a carbon price on imported goods, so that imports carry a cost similar to the one EU producers already pay under the EU Emissions Trading System (ETS). Its purpose is to prevent carbon leakage. Carbon leakage happens when production moves to countries with weaker climate rules, or when EU goods are undercut by cheaper, higher-emission imports. By pricing the emissions embedded in covered imports, CBAM is designed to level the playing field while encouraging cleaner production worldwide.
The mechanism was established by the CBAM Regulation (Regulation (EU) 2023/956), signed by the European Parliament and Council on 10 May 2023. Everything that follows, the phasing, the reporting rules and the certificate system, flows from this single piece of Regulation EU law.
In short, CBAM turns the carbon emitted in making a product into a regulated cost at the EU border, rather than a voluntary sustainability metric.
Which goods are in scope of CBAM?
CBAM currently covers iron and steel, aluminium, cement, fertilisers, hydrogen, electricity, and selected precursors, chosen for carbon intensity and leakage risk. Each category of CBAM goods is identified at customs by its Combined Nomenclature (CN) code, which is what links a shipment to a reporting obligation. Once fully phased in, CBAM is expected to cover over half of EU ETS emissions.
The European Commission has proposed extending CBAM to downstream steel and aluminium products from 2028, not yet law, so worth tracking rather than assuming.
The CBAM timeline: transitional and definitive phases
CBAM has been introduced in two stages, and knowing which phase applies matters for what a business has to do.
The transitional phase ran from 1 October 2023 to the end of 2025. During this period, importers had to report the emissions embedded in covered goods each quarter via the CBAM Transitional Registry, but there were no financial payments. It was a learning phase, and it is covered in full in the reporting section below.
The definitive phase began on 1 January 2026. From that date, EU importers of covered goods became financially liable for the embedded emissions in their imports. Importantly, while liability applies to 2026 imports, the actual purchase and surrender of CBAM certificates does not begin until 2027, so the cost is real from 2026 even though the cash payment follows later. This shift, from quarterly no-cost reporting to an annual declaration with a genuine payment schedule attached, is the single biggest change businesses need to plan for.
Ahead of the definitive phase, the EU adopted a set of targeted simplifications through the CBAM Omnibus Regulation (Regulation (EU) 2025/2083), which entered into force on 20 October 2025. The aim was to cut administrative burden, particularly for smaller importers, without weakening the climate goal.
The headline changes are:
| Simplification | Previous Position | Omnibus Change | Effect |
|---|---|---|---|
| 50-tonne de minimis threshold | €150 per consignment exemption | Replaced with a 50-tonne cumulative net mass exemption. Hydrogen and electricity are excluded and remain in scope at any volume. | Exempts around 90% of importers while still covering about 99% of embedded emissions |
| Certificate sales | Due to start January 2026 | Postponed to 1 February 2027 | No certificate purchases in 2026 itself, although 2026 imports still create a financial liability settled in 2027 |
| Annual declaration deadline | 31 May of the following year | Moved to 30 September of the following year | First declaration, covering 2026 imports, is due by 30 September 2027 |
| Quarterly holding requirement | 80% of embedded emissions | Reduced to 50% of embedded emissions | Eases cash flow during the year |
These measures delay and lighten the compliance load, but they do not waive the 2026 obligations for importers above the threshold.
Legal responsibility for CBAM sits with the EU importer, or their indirect customs representative. They are the party that must hold authorised CBAM declarant status, report embedded emissions, and surrender certificates.
But the data that drives those obligations is generated upstream, in the supply chain. EU importers depend on their non-EU suppliers, including UK manufacturers and exporters, to provide accurate, verified emissions data calculated to the EU’s methodology. Where verified data is not available, importers must use default values, which are typically higher and increase the cost. That makes good supplier data a commercial issue, not just a compliance one.
So CBAM affects two groups at once: EU importers who carry the legal obligation, and the suppliers worldwide who need to provide the emissions data those importers rely on.
EU CBAM reporting: from the Transitional Registry to the annual declaration
Reporting is where most of the practical difficulty in CBAM sits, and it works differently depending on which phase applies. This section sets out what changed, what a report must contain, and how the registry systems work.
EU CBAM transitional reporting requirements (2023 to 2025)
During the transitional phase, reporting declarants filed a CBAM report every quarter, broken down per importer, per CN code and per installation. Each report had to include the quantity of CBAM goods imported, their CN codes, the country of origin, the direct and indirect embedded emissions, and any carbon price already paid in the country of production. No payment was due at this stage: the transitional reports existed purely to build a reliable data set ahead of the definitive phase.
Corrections were allowed. A submitted report could normally be amended up to two months after the end of the reporting quarter, with a longer correction window for the first two quarterly reports to allow for the time needed to set up monitoring, reporting and verification systems.
Timeline for EU CBAM reporting obligations
The reporting calendar moved through three distinct stages:
- 1 October 2023 to 31 December 2025: quarterly reports, no payment, filed via the CBAM Transitional Registry. The first report, covering Q4 2023, was due by 31 January 2024.
- From 1 January 2026: the definitive phase begins. Quarterly reports stop and are replaced by a single annual CBAM declaration.
- From 30 September 2027: the first annual declaration, covering 2026 imports, must be submitted and reconciled against the certificates purchased.
Government and the European Commission have repeatedly used simplification regulations to adjust this timeline, most recently through the CBAM Omnibus Regulation, so it is worth checking the latest official guidance before setting internal deadlines.
What must be included in a CBAM report
Whether it is a transitional quarterly report or a definitive annual declaration, a CBAM report needs to bring together the same core data points, just at different levels of formality and verification:
- Type and quantity of imported goods: CBAM goods identified by their eight-digit CN code, with the imported quantity in tonnes (or megawatt hours for electricity).
- Country of origin and installation identification: where the goods were produced, down to the production facility.
- Embedded emissions: direct emissions from the production process, plus indirect emissions from electricity consumption where relevant, expressed as tonnes of CO2 equivalent.
- Reporting method: whether actual, verified emissions data was used, or whether government-set default values had to be applied instead.
- Carbon price paid at source: any carbon pricing already paid in the country of production, which can reduce the CBAM liability.
- Precursor materials: for complex goods, the embedded emissions attributable to precursor materials used further up the supply chain.
This is exactly the data set that non-EU suppliers, including UK manufacturers, are increasingly being asked for by their EU customers, and it is why supplier-side data readiness now sits alongside importer-side compliance as a commercial priority.
How to use the CBAM Transitional Registry
All CBAM reports during the transitional phase were, and where corrections are still being finalised continue to be, submitted through the CBAM Transitional Registry, the European Commission’s online platform for managing CBAM reporting. Reporting declarants access it through the EU Customs Portal, logging in via the UUM&DS system before navigating to the CBAM section to submit quarterly data on emissions, production and country of origin.
For the definitive phase, the Commission has built a successor system, generally referred to as the CBAM Registry, which authorised declarants use to file their annual declaration and to manage the purchase and surrender of CBAM certificates. The two systems sit side by side during the transition between phases: the CBAM Transitional Registry for historic quarterly reports and corrections, and the CBAM Registry for annual declarations and certificates going forward. Businesses should check which registry applies to a given filing before submitting, since using the wrong one is a common and avoidable reporting issue.
How CBAM compliance works
Under the definitive phase, three core obligations apply to EU importers above the 50-tonne threshold.
- First, they must hold authorised CBAM declarant status. Only authorised declarants may import covered goods above the threshold. Importers who submitted an application by 31 March 2026 can continue importing while their application is processed.
- Second, they must report embedded emissions. Each year, declarants file an annual declaration setting out the verified greenhouse gas emissions embedded in their imports. Where actual emissions data is used, it must be verified by an accredited third-party verifier. Where reliable data is unavailable, default values apply.
- Third, they must buy and surrender CBAM certificates to cover those emissions. A CBAM certificate represents one tonne of embedded CO2 emissions, priced on the EU ETS allowance price. Certificates are bought from national authorities, and the right number must be surrendered against the declared emissions each year.
If a carbon price has already been paid in the country where the goods were produced, that amount can be deducted, provided it can be evidenced.
Related regulations and resources
UK CBAM: a separate scheme from 2027
The UK is introducing its own Carbon Border Adjustment Mechanism, separate from the EU's. The UK CBAM is due to start on 1 January 2027, with the enabling legislation set out in the Finance Bill 2025 to 2026, and it will be administered by HMRC as a tax rather than an ETS-linked certificate scheme.
The UK scheme will cover a similar set of carbon-intensive goods, including iron and steel, aluminium, cement, fertilisers and hydrogen. Glass and ceramics have been excluded at launch following industry consultation, though they could be added later. Following consultation, the inclusion of indirect emissions has been proposed for delay until 2029 at the earliest, and government has confirmed a £50,000 import value threshold for registration.
UK CBAM reporting timeline and HMRC returns
Unlike the EU, the UK is not running a reporting-only transitional phase. UK CBAM charging starts directly on 1 January 2027. The first accounting period covers the whole of 2027, and government guidance confirms the first UK CBAM return and any payment due are payable by 31 May 2028. From 1 January 2028, accounting periods are expected to shorten to quarterly, bringing UK reporting cadence closer to the EU’s earlier transitional rhythm.
Under the proposed HMRC system, a UK CBAM return will need to set out the goods imported by commodity code, the date of import, their value and weight, the embedded emissions (either verified actual data or government default values), and any evidence supporting a claim for carbon price paid at source. Businesses will be required to submit a return for each accounting period even where no tax is ultimately due, and records must be retained for six years to support HMRC compliance checks. HMRC has said it will enforce UK CBAM using its existing tax powers, so late or inaccurate returns carry the same kind of penalty risk as other HMRC filings.
How UK CBAM reporting differs from EU CBAM
The two regimes share a policy goal, carbon parity between domestic and imported goods, but the reporting frameworks differ in several practical ways:
- No transitional phase: the EU gave businesses over two years of reporting-only practice before certificates were introduced; the UK moves straight to a tax with reporting and payment obligations from day one.
- Different registry systems: EU declarants file through the CBAM Transitional Registry and, from 2026, the CBAM Registry; UK importers will file returns directly with HMRC, administered under existing tax return infrastructure rather than a dedicated EU-style registry.
- Different accounting rhythm: the EU definitive phase runs on an annual declaration; the UK starts annually in 2027 before moving to quarterly returns from 2028.
- Different emissions scope: the EU CBAM already covers both direct and indirect emissions for most sectors; UK CBAM plans to cover direct emissions only at launch, with indirect emissions not expected before 2029.
- Different thresholds: the EU uses a 50-tonne mass-based exemption; the UK’s plans use a £50,000 value-based registration threshold.
There is also movement on linking the two systems. The EU and UK have agreed to negotiate on linking their emissions trading schemes, which could eventually allow mutual exemptions between the EU and UK CBAMs. Until any such arrangement is finalised, UK businesses should plan for both regimes: supporting EU customers under the EU CBAM’s reporting requirements, and preparing their own compliance plans for UK CBAM from 2027.
How Reconomy helps
CBAM sits within wider environmental compliance, where reliable data and clear processes matter most. Reconomy’s Comply Loop brings together compliance expertise from across our specialist brands to turn CBAM obligations into workable systems, from scope and supplier engagement to the verified emissions data your EU customers need, alongside preparing for UK CBAM from 2027.
Speak to our Comply team to understand your exposure and get the right processes in place.
Common CBAM reporting issues
A few reporting problems come up repeatedly across both EU and UK businesses, and most are avoidable with early planning:
| Common Reporting Issue | Why It Happens | Risk If Left Unaddressed |
|---|---|---|
| Relying on default values for too long | Businesses never move from government-set default values to verified actual data | Default values are usually set conservatively, so businesses typically pay more than they need to |
| Missing or incorrect CN codes | CN codes determine whether a good is in scope of CBAM at all | An incorrect code can mean under-reporting, over-reporting, or missing a filing entirely |
| Confusing the two EU registry systems | The EU runs two separate systems: the CBAM Transitional Registry and the CBAM Registry | Historic transitional-period corrections belong in the CBAM Transitional Registry; annual declarations from 2026 belong in the CBAM Registry |
| Underestimating supplier lead times | Verified emissions data from non-EU suppliers, including UK manufacturers, can take months to gather | Businesses that leave this until close to a filing deadline are most likely to fall back on costlier default values |
| Treating UK CBAM as a copy of EU CBAM | The two sit under different government departments, different legislation, and different reporting rhythms | Plans built for one rarely transfer cleanly to the other |
How to prepare your business for CBAM
CBAM readiness is best treated as an operating capability rather than a one-off project. A practical starting point is to:
- Confirm your scope. Check whether your imports, or the goods you supply, fall under CBAM’s covered sectors and CN codes.
- Assess your volumes. Work out whether you sit below or above the 50-tonne threshold (or the UK’s £50,000 value threshold), and whether you might cross it in a future year.
- Establish emissions data. Put in place the monitoring and supplier engagement needed to produce verified, methodology-aligned emissions data, rather than relying on higher government default values.
- Plan for the cost. Even though EU certificates are not purchased until 2027, build the financial provision for 2026 imports, and for the UK’s first accounting period, into your plans now.
- Assign ownership. Make clear who is accountable for CBAM reporting, since legal responsibility cannot be passed to a representative even where filing is delegated.
Acting early reduces the risk of customs disruption, higher default-value costs and last-minute pressure on verification capacity.
Speak to our CBAM experts
Let’s close the circularity gap
The global economy is currently only 6.9% circular, which means over 90% of natural resources are being wasted rather than reused, repaired, or repurposed. This is not only unsustainable, but also unacceptable.
By continuing to do what we do, we’re helping to protect the global ecosystem and close the circularity gap. Through our #CloseTheGap movement, we’re turning circularity from a buzzword into a business advantage.
Frequently asked questions
CBAM, the Carbon Border Adjustment Mechanism, is an EU regulation that places a carbon price on imports of certain carbon-intensive goods, such as steel, aluminium, cement and fertilisers. It is designed to prevent carbon leakage by making imports carry a carbon cost similar to the one EU producers pay under the EU Emissions Trading System. Its definitive, financially binding phase began on 1 January 2026.
At the start of its definitive phase, CBAM covers imports of iron and steel, aluminium, cement, fertilisers, hydrogen and electricity, together with selected precursors. These sectors are carbon-intensive and at high risk of carbon leakage. In December 2025 the European Commission proposed extending CBAM to a range of downstream steel and aluminium goods from 2028, but that extension is still under negotiation and not yet law.
CBAM began with a transitional phase on 1 October 2023, which required quarterly emissions reporting via the CBAM Transitional Registry but no payments. The definitive phase started on 1 January 2026, when EU importers above the threshold became financially liable for the emissions embedded in their imports. CBAM certificate sales begin on 1 February 2027, and the first annual declaration, covering 2026 imports, is due by 30 September 2027.
Legal responsibility for CBAM rests with the EU importer, or their indirect customs representative, who must hold authorised declarant status, report embedded emissions and surrender certificates. However, the emissions data comes from suppliers upstream, so non-EU manufacturers and exporters, including UK businesses, are also affected. They need to provide verified emissions data so their EU customers can report accurately and avoid higher default-value costs.
A CBAM certificate represents one tonne of CO2 emissions embedded in imported goods. Authorised CBAM declarants buy certificates from national authorities and surrender enough to match the verified emissions in their imports each year. The certificate price is linked to the EU Emissions Trading System allowance price. Certificate sales begin on 1 February 2027, with no purchases required during 2026.
EU CBAM reports and declarations are filed electronically. During the transitional phase, quarterly reports were submitted through the CBAM Transitional Registry, accessed via the EU Customs Portal. From the 2026 definitive phase, annual declarations and certificate transactions move to the CBAM Registry, the Commission’s platform for authorised declarants. Businesses managing historic corrections and new annual declarations may need to work across both systems during the transition.
The annual declaration must set out the CN codes and quantities of goods imported during the year, the installation and country where they were produced, the verified direct and indirect embedded emissions, any carbon price already paid at source, and the number of CBAM certificates being surrendered to cover that liability. Where verified data is not available, government default values must be used instead, usually at a higher cost.
Importers need direct emissions from the production process, indirect emissions from electricity consumption where relevant, and, for complex goods, the embedded emissions of any precursor materials used further up the supply chain. Suppliers are also asked to confirm whether figures are based on actual measured data or default values, and to provide evidence of any carbon price already paid in the country of production.
Yes. Under the 2025 simplifications, importers whose total annual imports of covered goods stay below 50 tonnes (cumulative net mass) are exempt from CBAM obligations, including reporting, authorisation and certificates. This single mass-based threshold replaced the former €150 per consignment exemption. Hydrogen and electricity are excluded from the exemption and remain in scope at any volume.
Yes. The UK is introducing its own Carbon Border Adjustment Mechanism, separate from the EU’s, due to start on 1 January 2027 under the Finance Bill 2025 to 2026. It will cover similar goods, including iron and steel, aluminium, cement, fertilisers and hydrogen. The EU and UK are also negotiating on linking their emissions trading schemes, which could allow mutual CBAM exemptions in future.
UK CBAM charging starts on 1 January 2027 with no reporting-only transitional phase. The first accounting period covers the whole of 2027, with the first return and any payment due by 31 May 2028. From 1 January 2028, accounting periods are expected to move to a quarterly cycle, bringing the reporting rhythm closer to what EU businesses experienced during their transitional phase.
Speak to our CBAM experts