From Transitional to Full Compliance
The Carbon Border Adjustment Mechanism (CBAM), established under EU Regulation 2023/956, entered its transitional phase in October 2023. During this period, importers were required only to report embedded carbon emissions without financial obligation. That changes fundamentally on 1 January 2026, when full compliance begins: importers must purchase and surrender CBAM certificates corresponding to the carbon embedded in their imported goods.
The certificate price is directly linked to the weekly average auction price of EU ETS allowances. With EU ETS prices at approximately EUR 83 per tonne CO2 in Q4 2025, CBAM is now a material cost factor for European manufacturers' international competitors.
Who Is Affected?
The first phase covers six sectors: iron and steel, cement, aluminium, fertilisers, electricity, and hydrogen. The European Commission estimates that over 4,100 declarants across EU member states are subject to CBAM obligations, representing roughly EUR 69 billion in annual import value across the covered product categories.
Notably, CBAM accounts for carbon pricing already paid in the country of origin. Exporters operating under carbon pricing regimes comparable to the EU ETS may receive deductions. This prevents double taxation while incentivising third-country carbon pricing convergence — a key geopolitical objective of the mechanism.
Certificate Purchasing Mechanics
The CBAM certificate purchase process is administered via the national CBAM registries, coordinated by the European Commission. Key operational requirements include:
- Annual declaration by 31 May covering the prior calendar year's embedded emissions
- Purchase of certificates at any point during the year via the national registry platform
- Minimum holding requirement: at least 80% of the prior year's embedded emissions must be held as certificates at each quarter-end
- Certificates not surrendered may be sold back to the registry at up to EUR 50 below the current ETS price
Strategic Implications for CBAM-Exposed Industries
For energy-intensive manufacturers and commodity traders, CBAM is now a supply chain carbon cost that demands explicit management. The EUR 83/t price point at end-2025 compares unfavourably to the sub-EUR 50/t levels of 2023 — reinforcing the economic case for deep decarbonisation or green procurement of inputs.
CBAM is the EU's most direct instrument for exporting its carbon price to global trade flows. Its expansion to 180 product categories planned for 2028 will substantially increase its economic and geopolitical footprint.
Relevance to Carbon Removal Markets
CBAM drives industrial demand for carbon cost reduction, including through credible carbon removal instruments. As companies seek to offset unavoidable embedded emissions within their supply chains, CRCF-certified carbon removals — such as those generated by VERDANTIS's Polyculture System — may qualify under forthcoming supplementary abatement frameworks. VERDANTIS tracks CBAM price developments as a key reference for the positioning of CRCF credit pricing in institutional markets.