Under Regulation (EU) 2023/956 as amended by Regulation (EU) 2025/2083, the cost of the Carbon Border Adjustment Mechanism is determined by one variable that lives in contracts rather than in the regulation: the quality of data the supplier can deliver. For goods other than electricity, amended Article 7(2) provides two legal determination routes: verified actual emissions or applicable default values. The default-value regime uses country- and product-specific values with annual mark-ups, while Article 31 separately requires a free-allocation adjustment reflecting the phase-out of EU ETS free allocation. These are distinct calculations. The legal “CBAM factor” in Article 10a(1a) of Directive 2003/87/EC is the remaining free-allocation factor (97.5% in 2026, 95% in 2027, 90% in 2028, falling to 0% in 2034), not the complementary 2.5%/5%/10% chargeable share commonly used in simplified explanations.

1. Timeline changes under the 2025 amendment

Article 6(1), as replaced, reads: “By 30 September of each year, and for the first time in 2027 for the year 2026, each authorised CBAM declarant shall use the CBAM registry … to submit a CBAM declaration for the preceding calendar year.” The surrender obligation under Article 22(1) moves to the same date. Certificate sales begin on 1 February 2027; the quarterly holding requirement drops from 80% to 50% from 2027, calculated by reference to default values without the mark-up or to the number of certificates surrendered for the preceding year (Art. 22(2)).

2. Scope: six goods categories and the 50-tonne threshold

Annex I covers cement, electricity, fertilisers, iron and steel, aluminium and hydrogen. Complete vehicles (CN 8703) are outside Annex I. Steel or aluminium components are within current CBAM scope only where, when imported separately, their own CN/TARIC codes are actually listed in Annex I; material composition alone does not bring every vehicle component into scope. The new Article 2a creates a 50-tonne annual mass threshold for the four mass-based sectors — cement, fertilisers, iron and steel, and aluminium — aggregated per importer across the relevant CN codes. Electricity and hydrogen are not covered by that mass exemption. Three execution points: the threshold is aggregate per importer per year; exceeding it at any point in the year triggers full obligations retroactively for all goods imported that year; and the sectoral design differs — steel and aluminium count only direct emissions within ETS scope, while cement and fertilisers include indirect emissions.

3. The cost gap between default and actual values

Article 7(2), as amended, provides two determination routes: actual emissions under the applicable methodology, or default values. Implementing Regulation (EU) 2025/2621 established the default-value framework; its Annexes I and IV were subsequently corrected and replaced, with retroactive effect from 1 January 2026, by Implementing Regulation (EU) 2026/1740. For cement, iron and steel, aluminium and hydrogen, the default total-emissions value is increased by 10% in 2026, 20% in 2027 and 30% from 2028; fertilisers use a 1% mark-up.

The mark-up must not be multiplied mechanically by a simplified “2.5%/5%/10% CBAM factor”. Under Article 31 and Implementing Regulation (EU) 2025/2620, the number of certificates is adjusted for EU ETS free allocation using a CBAM benchmark, the legal CBAM factor and the applicable cross-sectoral correction factor. The legal CBAM factor is 97.5% in 2026, 95% in 2027 and 90% in 2028, falling progressively to zero in 2034; its complement is useful only as an intuition for the phase-in of the charge. Implementing Decision (EU) 2026/1862 has set the cross-sectoral correction factor at 100% for 2026-2030. The default route therefore does not cost a fixed 1.10/1.20/1.30 multiple of the actual-data route: the difference depends on the relevant default versus verified actual emissions and on the free-allocation adjustment calculated for each route.

4. The three gates to actual data

Accounting: installation-level monitoring must follow the CBAM methodology, including Implementing Regulation (EU) 2025/2547. Verification: Article 8, Implementing Regulation (EU) 2025/2546 and Delegated Regulation (EU) 2025/2551 require verification by an accredited verifier. In the first reporting year subject to verification, a physical site visit is generally required; in later years a virtual visit or waiver is possible only if the regulatory conditions are met. Records: Article 7(5) requires sufficiently detailed records to enable verification. Supplier readiness therefore means not merely producing a number, but maintaining monitoring plans, calibrated measurement systems, traceable data flows and access arrangements for verification.

5. Carbon-price deduction: the replaced Article 9

Regulation (EU) 2025/2083 replaced Article 9 entirely. Article 9(1) allows a reduction in certificates where embedded emissions are determined on the basis of actual emissions and the carbon price “has been effectively paid in a third country”, taking into account any rebate or compensation that would have reduced it. Article 9(2) requires documentation certified by a person independent of both the declarant and the third-country authorities. Article 9(4) provides a derogation path by reference to yearly default carbon prices — and where embedded emissions are determined on the basis of default values, “a reduction may be claimed only by a reference to yearly default carbon prices”. Whether Chinese ETS compliance costs can support a claim therefore depends on boundary correspondence, proof of effective payment after taking account of rebates or compensation, and the evidence and certification conditions applicable under Article 9. The EU declarant bears the claim burden, while much of the underlying evidence sits with the Chinese operator. The detailed implementing act under Article 9(5) on conversion, proof of payment and independent-person qualifications should still be checked against the final text formally adopted and published; a consultation draft is not itself binding law.

Penalties: under Article 26(1), failure by an authorised CBAM declarant to surrender the required certificates triggers the same excess-emissions penalty as Article 16(3) of Directive 2003/87/EC, increased in accordance with Article 16(4); it should therefore not be described as a permanently fixed EUR 100/t amount. Unauthorised importation is generally subject to three to five times the paragraph 1 penalty per unsurrendered certificate. A further distinction applies under Article 26(2a): an importer that is not authorised and exceeds the 50-tonne threshold is subject to the paragraph 2 penalty, and payment of that penalty releases that importer from the declaration and surrender obligations for those imports.

6. Six questions for CBAM supplier contracts

• Data delivery and permitted use: Specify installation-level and product-level datasets, calculation periods, formats, delivery deadlines, confidentiality and the importer’s right to use the records for CBAM declarations and verification (Articles 6–7; Annexes IV–V).
• Third-party verification cooperation: Require access to monitoring plans, metering and calibration records, and site visits by accredited verifiers; any remote visit or waiver remains subject to the regulatory conditions (Article 8; Annex VI; Regulation (EU) 2025/2546).
• Changes in methods and applicable rules: Require prompt notice of material changes in production routes, monitoring methods or calculation boundaries, and establish a process for revisiting cost estimates when default values, mark-ups or free-allocation rules change (Regulations (EU) 2025/2547, 2025/2621 and 2025/2620).
• CBAM cost and price adjustment: Allocate differences between default and actual emissions, certificate price changes, delayed data and failed verification through a defined adjustment formula, evidence requirements and settlement dates (Articles 7 and 20–22).
• Audit rights and post-termination remedies: Provide contractual audit triggers, correction deadlines, record handover and cooperation after termination for historical declarations and regulatory checks (Article 7(5); Annexes V–VI).
• Third-country carbon prices and independent certification: Allocate responsibility for payment evidence, ETS transaction and compliance records, rebates or compensation, selection and costs of independent certification, and failed certification (Article 9(1)–(3)).

Article 9(2) independent certification of carbon-price payment evidence is separate from Article 8 emissions verification. The agreement should specify who appoints the independent certifier, who pays and what happens if supporting evidence is rejected.