Legal analysis by Fan Zhang, Attorney at Law · Legal position reviewed as of 11 October 2026.

Regulation (EU) 2023/956 is dated 10 May 2023, was published on 16 May 2023 (OJ L 130, p. 52) and entered into force on 17 May. CBAM uses emissions accounting and certificate purchase and surrender, with adjustments for third-country carbon pricing and EU ETS free allocation, to address carbon leakage. It is not an ordinary ad valorem customs tariff, nor a literal transplant of every ETS calculation rule; equivalent policy treatment does not guarantee identical costs for all products and transactions. This briefing covers the transition, definitive regime, scope, obligations, simplification and proposed downstream extension.

Where CBAM Comes From: Carbon Leakage and the Phase-Out of Free AllocationPART 01 · ORIGIN

The origin of CBAM is the EU climate target. In December 2019 the Commission set out the goal of climate neutrality by 2050 in the European Green Deal. To deliver the intermediate target of cutting emissions by at least 55 percent against 1990 levels by 2030, the EU adopted the Fit for 55 package. The central move in that package is to tighten the EU ETS by phasing out the free allowances previously granted to high-carbon industries.

The difficulty is immediate. If EU steel, aluminium and cement producers pay for every tonne of emissions while like products imported from third countries do not, production may relocate to jurisdictions with looser climate policy: emissions fall inside Europe but rise outside. This is carbon leakage. The EU previously relied on free allocation to limit it, but free allocation weakens the carbon price signal. CBAM reverses the method: instead of granting free allowances to domestic producers, it makes imported goods bear an equivalent carbon price.

The Regulation is dated 10 May 2023, was published on 16 May and entered into force the following day. Article 36 provides staged application from 1 October 2023. Publication and entry into force are distinct.

The Transitional Period: Report Only, No PaymentPART 02 · TRANSITIONAL

Under Article 32, the period from 1 October 2023 to 31 December 2025 is the transitional period. During it, the obligation on importers is confined to reporting: CBAM reports under Articles 33, 34 and 35, with no purchase or surrender of CBAM certificates.

The reporting entity is determined in three cases: an importer established in a member state reports itself; where the importer appoints an indirect customs representative and that representative agrees, the representative reports; where the importer is not established in a member state, the obligation falls on the indirect customs representative. Reporting is quarterly and covers import quantities, country of origin, embedded emissions and any carbon price already paid in the country of origin.

The Definitive Period: Three Decoupled TimelinesPART 03 · DEFINITIVE

As amended, Article 36(2)(b) brings Article 2(2), Articles 2a, 4, 6–9, 10a, 15, 19 and 21, Article 22(1) and (3), and Articles 23–27 and 31 into application from 1 January 2026. Articles 5, 10, 14, 16 and 17 already applied from 31 December 2024. Quarterly certificate holdings under Article 22(2) start on 1 January 2027; Article 20(1), (3), (4) and (5) on certificate sales apply from 1 February 2027. The pre-amendment commencement list must not be used to imply that every certificate duty started in 2026.

The authorised CBAM declarant is generally required for non-exempt imports, subject to Article 2a and the operator rules in Article 5. An importer expecting to exceed the annual threshold should apply in advance. An indirect representative’s authorisation must be assessed separately under Article 5(1a) and (2), even where the importer is exempt. Article 17(7a) permits applicants who submitted by 31 March 2026 to continue imports provisionally until a decision; that application window has closed and does not cover every pending or late application. Customs controls under Article 25 must respect these exceptions.

Certificate prices track EU ETS auctions. Article 21(1a) uses the average for the quarter of importation for 2026 goods; the weekly mechanism applies to imports from 2027, with weighted calculation and publication under Implementing Regulation (EU) 2025/2548. The current annual declaration deadline is directly stated as 30 September of the following year, first in 2027 for 2026 imports: 31 May should not be presented as current law with a correcting footnote. Declarations include quantities, emissions and adjusted certificate numbers, with verification reports where actual emissions are used.

Covered Sectors and Annex I CN CodesPART 04 · SCOPE

CBAM currently covers six high-carbon sectors: cement, electricity, fertilisers, iron and steel, aluminium, and hydrogen. The test for whether a good is caught is direct: whether it falls within a CN code listed in Annex I. Annex I also specifies, for each category, the greenhouse gases concerned (carbon dioxide and, where relevant, nitrous oxide and perfluorocarbons).

Some downstream goods, including fasteners and aluminium structures, are already covered. Under Article 6(3), where Annex I goods undergo inward processing and the resulting products are released for free circulation, the relevant emissions of the goods placed under that procedure are declared even if the processed-product code is outside Annex I. Re-export and other customs procedures require separate analysis; processing alone is not a universal trigger.

Accounting for Embedded Emissions, and Who Verifies ThemPART 05 · CORE OBLIGATIONS

Non-electricity goods may use actual or default emissions under Article 7. Actual data must comply with production-installation, system-boundary and precursor rules and be verified. Default emissions themselves do not require the same actual-emissions verification, but classification, origin and import quantities still need evidence. Non-electricity defaults generally use the exporting country’s average goods-specific intensity plus a mark-up; if reliable data are unavailable, they use the average of the ten highest-intensity exporting countries with reliable data. Imported electricity and indirect emissions follow separate Annex IV methods, not one universal country electricity factor.

Article 8 verification applies to actual emissions. Article 7(6) requires calculation records and verification reports until the end of the fourth year after the year of submission or required submission; carbon-price evidence has separate Article 9 retention rules. Article 15 provides risk-based controls. Default data must reflect Regulation (EU) 2025/2621 and its correcting act 2026/1740, rather than an obsolete initial spreadsheet.

Article 26 distinguishes an authorised declarant’s shortfall from unauthorised imports. The former attracts the applicable-year ETS-linked penalty per missing certificate, without removing the surrender obligation; the latter generally attracts three to five times that rate. Amendments allow specified reductions, including third-party misinformation or a limited threshold overrun, and provide relief from declaration and surrender for specified penalised unauthorised imports. Consequences cannot be described as identical for every breach.

Article 27 targets trade-pattern changes lacking sufficient due cause or economic justification other than wholly or partly avoiding CBAM obligations. It includes slight product changes without changed essential characteristics, and artificial splitting of imports through non-genuine arrangements to avoid the annual mass threshold. Genuine separate operations by related entities are not automatically unlawful. Member States and substantiated interested parties may notify the Commission. CBAM circumvention and trade-defence circumvention have different legal bases and consequences.

Regulation (EU) 2025/2083: Four Key AdjustmentsPART 06 · SIMPLIFICATION

Regulation (EU) 2025/2083 is dated 8 October 2025, was published on 17 October and entered into force on 20 October, with the definitive changes staged under amended Article 36. The table highlights four adjustments; quarterly pricing for 2026, actual-value verification scope and penalty reductions also matter:

The widest-reaching change is the 50-tonne annual exemption: the same importer may use Article 2a where covered non-electricity, non-hydrogen goods do not cumulatively exceed 50 tonnes per calendar year. The exemption must be declared to customs and quantities monitored; indirect representatives’ status is separately assessed under Article 5. The Commission’s estimate of about 90% of importers exempted and at least 99% of emissions retained is a legislative estimate, not a universal sectoral or national outcome.

The Proposed 2028 Extension: Institutional Positions and Legislative ProgressPART 07 · EXPANSION

The next step for CBAM is to extend the scope from basic materials to steel- and aluminium-intensive downstream products. Under Article 30, the Commission must assess the expansion and report to the European Parliament and the Council. The Commission has proposed legislation to extend CBAM from 1 January 2028 to roughly 180 additional CN codes, mainly steel- and aluminium-intensive downstream goods.

COM(2025) 989 proposes downstream coverage and stronger anti-circumvention rules. The Council’s 12 June 2026 position revises the list; Parliament adopted amendments on 15 September and referred the file back for negotiations. Positions differ on lists, exceptions and abusive practices, rather than forming a simple progressively wider sequence. The Commission proposal focuses downstream accounting on steel and aluminium precursor emissions; boundaries remain subject to the proposal and any final legislation, not a universal exclusion of every processing step. Parliament favours systematic ex ante defaults for high-risk country–goods combinations, but preserves actual values for operators meeting predefined criteria showing no abusive practices. It is therefore not an exclusive-default rule, and remains a negotiating position.