The number of CBAM certificates can be reduced by carbon prices already paid in the country of origin. An EU draft regulation defines two calculation options based on default or actual carbon prices. The regulation also specifies how actual reductions are calculated and how they must be certified.

  (Last update on 19/05/2026)

Reducing CBAM certificates for carbon prices

The deduction of carbon prices paid in third countries is a key element of the EU Carbon Border Adjustment Mechanism (CBAM). Until now, this has been a missing piece of the CBAM rulebook.

The CBAM Regulation (EU) 2023/956 sets out the principle: carbon prices already paid reduce the number of CBAM certificates to be surrendered. The European Commission (EC) has now published a draft implementing regulation (IR) that specifies these reductions.

This draft is open for consultation until 10 June. It takes into account the results of an earlier consultation, which are summarised in a synopsis report.

For policy: A step towards global carbon pricing

The mechanism is designed to avoid double carbon pricing. At the same time, it creates a clear incentive for non-EU countries to introduce or expand their carbon pricing systems in line with EU rules so that carbon revenues remain at home.

This IR creates a structural link between CBAM and global carbon pricing systems. It establishes a framework that integrates different carbon prices. It will therefore be analysed carefully by policymakers in non-EU countries.

For businesses: A way to reduce carbon payments

For importers, the logic is simple: when calculating CBAM costs based on the number of CBAM certificates to be purchased, carbon prices already paid lower the number of certificates, similar to free allocation adjustments.

A higher recognised carbon price paid abroad can therefore lower the CBAM cost burden. While this does not reduce overall carbon costs, it shifts the payment obligation from the EU importer to the non-EU manufacturer.

Which carbon prices are recognised for reductions

There have been varying options for the types of carbon price mechanisms to be recognised under CBAM. The IR now refers to four carbon price mechanisms:

1. Emissions trading systems (ETS)
2. Point source carbon taxes
3. Fuel-based carbon taxes
4. Carbon price mechanisms with multiple compliance options, including through carbon credits: to focus on domestic mitigation efforts, the contribution of international credits, such as those under Article 6, is limited to 10% of emissions.

Across all mechanisms, the recognised carbon price must reflect the carbon price effectively paid for the emissions embedded in the goods:

1. Only binding carbon price mechanisms are eligible;
2. The price must be linked to specific emissions from production;
3. Any rebates, exemptions or compensation must be deducted.

How to calculate carbon price reductions

The IR distinguishes between two main approaches for calculating the reduction in CBAM certificates for carbon prices already paid:

1. Default carbon prices
2. Actual carbon prices

Reduction based on default carbon prices

The IR allows the use of default carbon prices, similar to the default values for embedded emissions.

Default carbon prices may be used in the following cases:

1. where embedded emissions are determined using default values;
2. where declarants choose to use default carbon price values instead of reporting actual data;
3. where operators determine carbon prices for precursors or electricity (i.e. indirect emissions) produced outside of the installation.

These default carbon prices are determined at country or mechanism level. They are based on publicly available data and information provided by third countries. They will be published in the CBAM Registry.

Reduction based on actual carbon prices

The alternative approach is based on calculating the carbon price effectively paid. This approach follows the methodology set out in Annex I of the IR. It requires operators to follow four key steps equivalent to the calculation of actual emissions:

Step 1: The carbon price per tonne of emissions at installation level under each carbon price mechanism must be determined. Methods vary by carbon price mechanism.

Step 2: Emissions are attributed to individual goods at CN code level. This follows the same system boundaries and allocation methods used for embedded emissions. It ensures consistency between emissions and carbon price calculations.

Step 3: A central requirement of the calculation is the adjustment for rebates and compensation, including:

1. any emissions exempt from pricing through free allowances, emissions below a baseline, and exemptions from carbon pricing
2. reduced tax rates
3. monetary refunds or indirect cost compensation

These elements must be quantified and subtracted from the carbon price per tonne. The result is the effective carbon price actually paid.

Step 4: The final step is to convert carbon prices into Euros using the yearly average exchange rates published by the EC and to aggregate them across all carbon price mechanisms.

How to certify carbon price reductions

The IR establishes a detailed framework for evidence and certification by independent persons for the use of actual carbon prices. This certification follows a similar logic and similar requirements to the verification of actual emission values.

Evidence requirements

Operators must prepare a carbon price report for each installation. The report must be consistent with the emissions report used for CBAM.

This report must follow a standard template provided by the EC. It must include, for example:

1. carbon price mechanisms and rates
2. total emissions covered
3. rebates and compensation
4. carbon price effectively paid per product

The IR also defines detailed evidence requirements for installations depending on the carbon price mechanism.

Certification by independent persons

The carbon price report must be certified by an independent person. The certification provides assurance that the carbon price has been correctly calculated and effectively paid. The results are summarized in a verification report which will be required for CBAM declarations.

The IR defines strict requirements for independent persons. They must:

1. comply with international standards for conformity assessment;
2. demonstrate technical competence in carbon pricing and emissions accounting;
3. be accredited for the certification of carbon price reports.

To ensure impartiality and credibility, they must also be independent of the operator, CBAM authorities, and third-country regulators.

Implications for industrial companies

With this IR, there is a consistent framework across embedded emissions, free allocations, and carbon price deductions. For all, there is a free choice between default and actual values.

When default emission values are used, they must be applied to all elements. Where actual emissions data is used, it must be independently reviewed and certified on the basis of evidence. Where these conditions cannot be met for individual elements, default data provides a fallback.

While carbon price deductions will remain low for most countries for now, EU  importers can follow three steps to assess potential reductions:

1. identify relevant carbon price mechanisms in their countries of origin;
2. assess the potential carbon price deductions for key products;
3. collect and certify carbon price data where required.

Carbon price deductions are a core element of CBAM. They connect carbon pricing in third countries with the EU carbon market. The operational rules set out in the IR have implications for EU importers, non-EU manufacturers, and policymakers alike.

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Sources and further information:

• EU: Regulation Establishing CBAM (2023/956)
• EC: Carbon Price Paid in a Third Country (draft)
• EC: Synopsis Report on Carbon Prices Paid
• CO2 IQ: CO2 Price Radar

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Photo y Michael SKOPAL on Unsplash