What Is the Carbon Border Adjustment Mechanism (CBAM)?
CBAM is the EU's carbon tariff on imported goods. Learn which products are affected and what it means for UK exporters.
Key Takeaways
- CBAM applies a carbon price to imports of certain high-emission goods into the EU
- Currently covers cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen
- Transitional reporting phase ran from October 2023; charges began in 2026
- UK exporters in these sectors must report embedded carbon emissions
What CBAM is
The Carbon Border Adjustment Mechanism (CBAM) is the EU's policy tool designed to prevent carbon leakage — the risk that European companies move production to countries with weaker carbon rules. CBAM puts a carbon price on imports of certain goods equivalent to the price EU producers pay under the EU Emissions Trading System (ETS).
Which sectors are covered
The initial scope covers six sectors: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. These are high-emission, trade-exposed sectors where carbon leakage risk is greatest. The European Commission has committed to reviewing and potentially expanding CBAM to further sectors including organic chemicals and polymers.
The timeline
A transitional reporting phase ran from October 2023 to December 2025. During this phase, EU importers in scope must report embedded carbon emissions but did not yet pay carbon charges. From January 2026, the full mechanism applies — EU importers must purchase CBAM certificates corresponding to the carbon price on embedded emissions.
Implications for UK exporters
If you manufacture and export goods in CBAM sectors to the EU, your EU customers will face a carbon cost on importing your goods unless you can demonstrate an equivalent carbon price was paid in the UK. The UK has its own Emissions Trading Scheme — if the UK ETS carbon price matches the EU ETS price, CBAM should not apply.
What to do now
If your goods are in a CBAM-covered sector and you export to the EU, start tracking embedded carbon emissions in your production process now. Your EU customers will need this data to complete their CBAM reports. Work with a sustainability consultant or trade compliance specialist to model your CBAM exposure.