While calls for simplification are growing louder, the EU Commission is working on the legal framework for CBAM implementation from 2026. 10 new regulations are expected. They will result in 3 implementation areas: CBAM Declarants and customs rules, CBAM emissions and their verification as well as CBAM certificates.
Calls for simplification
The EU Carbon Border Adjustment Mechanism (CBAM) faces a crucial year to set up the definitive system from January 1, 2026. By then, the rules for implementing CBAM certificates for imported CBAM goods will have to be worked out.
For now, in the current transitional period only reporting obligations apply to the affected industrial companies. However, their implementation already poses considerable challenges in business practice.
Calls for simplifications and exemptions for SMEs are growing louder – also as part of the EU’s efforts to cut red tape. In November, the EU Council proclaimed a “revolutionary simplification process” in the Budapest Declaration. This calls on the EU Commission to make proposals to reduce reporting obligations by at least 25%.
Ursula von der Leyen, President of the Commission, has already announced an “omnibus regulation”. This is intended to bundle reporting obligations from the Taxonomy Regulation, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
In a letter to the EU Commission before Christmas, 4 federal ministers from the outgoing German government also called for simplifications in sustainability reporting. They welcome the announced bundling. CBAM is not mentioned in the letter.
Chancellor Scholz has now followed up with a New Year’s letter to the Commission President. In it, he also addresses CBAM. Besides reducing administrative CBAM burdens, Scholz calls for export compensation.
They would be needed to compensate for the competitive disadvantages of European producers on international markets. The phase out of free emission allowances in the EU Emissions Trading System (ETS) will increase CO2 costs for European industry.
Via a carbon price on imports, CBAM compensates for the competitive disadvantages of domestic goods in EU markets. The new EU Commissioners also recognize its importance in a Clean Industrial Deal. It is now up to the Commission to draw up pragmatic rules for CBAM implementation.
Upcoming CBAM regulations
The overarching CBAM Regulation 2023/956 mandates the Commission to adopt implementing acts and, if necessary, delegated acts for the definitive CBAM system from 2026. A total of 10 regulations have been announced. They result in 3 implementation areas:
CBAM Declarants and custom rules
From 2026, CBAM goods shall only be imported into the EU by authorized CBAM Declarants. To this end, a one-off application for authorization in the country of establishment must be submitted via the CBAM Registry in 2025. The authorization will then be valid for imports in all EU countries.
The German Emissions Trading Authority (DEHSt) is responsible for the approval of companies in Germany. They communicated on 20/12/2024 that the approval process would not be able to start at the beginning of the year as planned.
This is due to delays in the legislative process. The implementing act, which is to regulate the procedure and conditions for authorization, has not yet been adopted. A draft for public consultation was published on 30/10/2024.
In addition, rules for customs procedures and requirements for the communication of import data for CBAM goods are also coming. They will also establish the rules, conditions and procedures for bringing CBAM goods, or processed products placed under the inward processing procedure to the EU.
These regulations are expected this year. Overall, they will determine the custom rules for companies to handle the import of CBAM goods.
CBAM emissions and their verification
Starting this year, only CBAM methods will be recognized for determining the emissions of imported CBAM goods. From next year onwards, only emission values that have been verified by an accredited CBAM verifier can be used.
CBAM verifiers can be accredited by national bodies. The conditions for accreditation will be set out in a delegated act. In addition, another implementing act will detail the principles for verification and the qualifications required. These regulations are expected in Q3.
CBAM verifiers are to perform the following tasks, among others:
- Review of monitoring methodologies and emission calculations;
- Carrying out on-site inspections of the production installations;
- Issuance of verification reports to installation operators.
If verified emissions data is not available, national default values are used to calculate the CBAM allowances. A mark-up is then also added, which will increase the CBAM costs. Both the default values and the mark-ups are still to be set. A supporting study is currently underway.
These values and the methods for determining emissions from 2026 will be set out in a further implementing regulation. This is expected in Q3. It will also detail the submission process for annual CBAM declarations.
The inclusion of indirect emissions for aluminum, iron and steel is also currently being examined. For goods with high electricity consumption in the production processes, this could significantly increase the need for CBAM certificates.
CBAM certificates management and calculation
From 2026, CBAM certificates will have to be purchased for embedded emissions. This expenditure will increase the landed costs of imported goods and must be taken into account in the liquidity and financial planning of importing companies.
Companies will be able to manage CBAM certificates via the Declarant Portal in the final CBAM Registry from 2026. The conditions for the sale and repurchase of CBAM certificates via a Common Central Platform will be defined in another Delegated Act. This regulation is expected in Q2.
The timing of purchasing CBAM certificates can affect the overall costs, as prices for CBAM certificates can vary with the prices in the EU ETS. Depending on the quantity of goods, financial solutions may be necessary to hedge these price risks and manage liquidity.
The final CBAM costs also depend on the number of CBAM certificates required. They can be adjusted for the share of emissions:
- which benefit from the free allocation of emission allowances in the EU ETS;
- for which a carbon price has already been paid in the country of origin.
The implementing act that will define the methods for these adjustments are not expected before Q4. Supporting studies to develop the technical methods are already underway.
Get prepared for 2026 now
Even though the full details for implementation from 2026 are still being worked out, it is already clear that the definitive CBAM rules could have far-reaching impacts on the import of goods and their purchasing costs.
To get ready for implementation, affected companies should:
- Create cross-organizational responsibilities that coordinate between purchasing, finance, import and legal/compliance functions;
- Set up processes for a holistic supply chain management to implement CBAM requirements efficiently;
- Integrate data in the required quality into purchasing decisions and financial planning;
- Develop IT solution(s) for CBAM data management within existing ERP systems and controlling tools.
While for now CBAM has been mostly seen as an administrative task, it will soon be of strategic and financial importance. As the implementation areas outlined above imply, a close cooperation between finance, purchasing and customs units will be needed.
Sources and further information:
- DEHSt: The EU CO2 Border Adjustment Mechanism
- European Commission: CBAM – Questions and Answers
- EU: CBAM Implementing Regulation (2023/1773)
- EU: Regulation establishing CBAM (2023/956)
Photo by Ian Taylor on Unsplash
