Implementation Progress: Stronger Than Expected
When the CBAM transitional phase began on October 1, 2023, many market observers expected a slow initial uptake, given the novelty of the instrument and the significant data collection requirements it imposed on importers. The reality proved more dynamic: by mid-2024, the European Commission's CBAM transitional registry recorded:
- More than 12,000 applications submitted by EU importers seeking CBAM declarant status
- More than 4,100 authorized declarants — companies that had successfully completed the authorization process and were registered to submit CBAM reports
- Quarterly reports covering a significant portion of import volumes in the six covered sectors
The Data Challenge: Embedded Emissions at the Installation Level
The most significant operational challenge of the CBAM transitional phase has been the collection of installation-level embedded emissions data from third-country suppliers. CBAM requires importers to report:
- Direct emissions (Scope 1) from the production process of the imported goods
- Indirect emissions (Scope 2) for certain sectors (electricity, fertilisers)
- The carbon price already paid in the country of origin (to avoid double charging)
In practice, many third-country suppliers — particularly in countries without established MRV systems or carbon pricing frameworks — lacked the monitoring infrastructure to provide the required production-level emissions data. This led to significant use of default values published by the European Commission as interim reporting proxies.
The data collection challenge of the CBAM transition phase has revealed a critical gap: global supply chains are not yet instrumented for carbon transparency at the granularity required by compliance-grade reporting frameworks.
Country and Sector Distribution
The geographic distribution of CBAM-relevant imports subjected to transitional reporting revealed several key patterns:
- Steel and iron dominated in volume terms, with major import origins including Turkey, China, India, and Ukraine
- Aluminium imports showed significant sourcing from Russia, Norway, and the Middle East
- Fertilisers (particularly ammonia and nitric acid) had significant origins in Russia, Egypt, and Algeria
- Many declarants reported challenges in obtaining supplier cooperation for emissions data disclosure
Preparing for Full Implementation: 2026
The transitional phase ends on December 31, 2025. From January 1, 2026, authorized CBAM declarants will face financial obligations:
- Purchase of CBAM certificates at a price tied to the EU ETS weekly average auction price
- Surrender of certificates proportional to verified embedded emissions
- Use of only verified (third-party audited) emissions data — default values will no longer be acceptable for financial settlement
This creates an urgent imperative for both EU importers and third-country producers to invest in robust emissions monitoring and reporting infrastructure ahead of the 2026 deadline.
CBAM as a Global Carbon Price Signal
Beyond its direct regulatory impact, CBAM's transitional phase has already exerted an influence on investment decisions and supply chain strategy globally. Several major non-EU producers have begun decarbonization investments specifically to maintain competitive access to the EU market. This "carbon leakage prevention" effect — the core policy rationale for CBAM — appears to be materializing ahead of full implementation, validating the design logic of the instrument.