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Knowledge base · 03a-cbam-deep-dive

03a - CBAM, in depth

Status. Draft v0.1 · First draft: 17-03-2026 · Pre-discussion. Article references are based on the consolidated text of Regulation (EU) 2023/956 as amended by the “Omnibus I” simplification package (Regulation (EU) 2025/2083) and the December 2025 implementing/delegated acts; verbatim quotation of regulation text has been deliberately avoided pending a manual cross-check against the OJ-published versions - see “How to read this doc” below.

Why this matters. CBAM is the first binding regulatory regime that turns carbon accounting from a voluntary disclosure exercise into a customs gate. For a steel exporter into the EU, CBAM is not a sustainability story; it is a price-of-doing-business story. For a buyer in the EU, it is a certificates-to-buy story. For the platform, it is the concrete reason a Tenant pays for verifiable carbon data, on a binding deadline, today. If you only understand one regulation in detail, understand this one - every other regime in 03 - Regulations overview is downstream of, or analogous to, the moves CBAM has already made.

How to read this doc

CBAM is not one regulation. It is a base regulation ((EU) 2023/956), an “Omnibus” simplification regulation ((EU) 2025/2083, adopted October 2025), and a constellation of implementing and delegated acts published in December 2025 that operationalise the definitive period. The shape and timing of the regime in 2026 are determined by all of these together.

Where this doc cites “Article X” without qualification, it refers to Regulation (EU) 2023/956 as amended by 2025/2083. Where a specific implementing or delegated regulation matters, it is named. Article references should be treated as accurate structural pointers; precise textual wording should be verified against the OJ-published consolidated text before being quoted in any commercial communication. (See the references section for direct EUR-Lex links.)

1. What CBAM is, in one paragraph

CBAM is the EU’s mechanism for putting an effective carbon price on goods imported into the EU, equivalent to the carbon price EU producers pay under the EU Emissions Trading System (EU ETS). It does this by requiring importers of certain carbon-intensive goods to (a) declare the embedded emissions of those goods, (b) have that declaration verified by an accredited verifier, and (c) surrender CBAM certificates equal to those embedded emissions, with each certificate priced to the prevailing EU ETS allowance price. The mechanism phases in as EU ETS free allocation to EU producers phases out, between 2026 and 2034. Six sectors are in scope from 2026: iron and steel, cement, fertilisers, aluminium, hydrogen, and electricity. A proposal to extend scope to roughly 180 downstream products from 2028 was tabled in December 2025 and is in legislative process. 1 2

2. The two phases

CBAM has run, and is running, in two phases.

Transitional period (1 October 2023 – 31 December 2025). Importers filed quarterly CBAM reports declaring embedded emissions of imported in-scope goods, with no financial obligation. The transitional period was a data-collection and capacity-building phase: importers learnt how to gather supplier data; the Commission learnt how the supply chains actually look. Implementing Regulation (EU) 2023/1773 governed the transitional reporting requirements. 3 The last transitional quarterly report covered Q4 2025 and was filed in January 2026.

Definitive period (1 January 2026 onwards). Financial obligations begin. Importers must be authorised CBAM declarants (the previous open-access reporting regime is closed). They file annual CBAM declarations covering the prior calendar year. They surrender CBAM certificates for the embedded emissions declared. The first annual declaration is due 30 September 2027 (for 2026 imports); certificate purchases open 1 February 2027.

Two things are worth noticing about this timeline:

  • The first surrender is not in 2026. All 2026 activity is preparatory - getting authorised, gathering supplier data, lining up verifiers. Financial pain begins in 2027.
  • Verifier accreditation is a 2026 bottleneck. Verifiers cannot register in the CBAM Registry before 1 September 2026, per the Omnibus. The first annual declaration falls due 12 months later. Industry expects a verifier shortage in H1 2027. Tenants who are early to engage an accredited verifier have a real operational advantage.

3. The two questions everyone asks

Two questions came up in the framing of this knowledge base. They are the right questions to ask, and the answers are not obvious from a casual reading of the regulation. Each has consequences for how a steel exporter and a buyer should operate.

3.1 Does a carbon declaration need to be filed per shipment?

No. The CBAM declaration is annual, not per-shipment. One authorised CBAM declarant files one CBAM declaration per calendar year, covering the aggregate of CBAM-covered goods imported in the prior calendar year. The cadence is set by Article 6 of the regulation (as amended by the Omnibus), and the deadline was pushed from 31 May to 30 September of the year following the import year, again by the Omnibus. The first definitive-period CBAM declaration is due 30 September 2027, covering 2026 imports. 1

Per shipment, what does happen is more administrative than carbon-substantive: each import customs declaration must reference an authorised CBAM declarant (and their EORI), so the customs system can track who is on the hook for which imports. But the carbon data itself does not travel per shipment to a regulator. It travels in aggregate, annually, with verification attached.

There is one intra-year financial obligation: declarants must hold at least 50% of cumulative embedded emissions since the start of the calendar year in their CBAM Registry account at each quarter end (the Omnibus reduced this from 80%). This is a cash-flow rule, not a declaration rule - it is about how much money you have parked in certificates at each quarter, not how often you tell the regulator what you imported.

3.2 Does the declared carbon number need to match the exact lot of goods imported?

No, and this is the most operationally important nuance in the regime. Embedded emissions are calculated and reported at the installation level, over the installation’s reporting period, not at the level of a specific lot, heat number, or ETD-of-departure. The methodology is set in Annex IV of the base regulation and elaborated in Implementing Regulation (EU) 2025/2547 on calculation methods. 4

In practical terms:

  • A producing installation (say, Mill X) computes its specific embedded emissions (SEE) for each aggregated goods category it produces, over a defined reporting period - by default, one calendar year, but shorter periods are permitted if continuous, sufficient monitoring data can be demonstrated.
  • The SEE is total installation emissions for the reporting period divided by total production output of that aggregated goods category over the same period. Expressed as tCO₂e per tonne of good.
  • Every tonne of Mill X’s relevant production that an EU importer received during that period travels with the same SEE. Not heat-number-specific. Not melt-batch-specific. Not consignment-specific. The unit of carbon data that flows in CBAM supply chains is the CBAM Communication (the producer’s data sheet, sometimes called the “CBAM mill certificate” in steel), one per reporting period per installation per aggregated goods category.

For complex goods (e.g., a fertiliser produced from imported ammonia precursor), Implementing Regulation 2025/2547 sets a default rule: the precursor’s reporting period is taken to be the year of production of the complex good, unless the operator provides the verifier with sufficient evidence to identify the actual time of production. This default creates a known shadow-misalignment for inventoried precursors and rewards producers with strong traceability.

A few consequences worth carrying:

  • The regulation does not codify FIFO/LIFO inventory matching. A trader holding steel produced across multiple reporting periods has no explicit rule preventing them from preferring the lower-emission period’s SEE for a given consignment, beyond what mill paperwork supports. Verifiers will likely apply a “consistency” lens here in practice, but this is interpretive, not codified.
  • A “lot-level carbon number” is achievable, but not required. Producers who can produce per-lot or per-heat carbon data have a commercial advantage with discerning buyers and an evidentiary advantage with verifiers - but they do not need it to comply with CBAM as such.
  • This is exactly where a platform with lot-level lineage adds value. The regulation requires installation-period SEE; the market increasingly wants better than that. A platform that lets a producer produce, sign, and verify per-lot Product Carbon Footprints, while still being able to roll those up into the CBAM Communication, sits on both sides of the requirement-versus-market gap.

4. Embedded emissions - direct and indirect

CBAM distinguishes two emission categories. CBAM’s boundary - the “production process” boundary, defined per aggregated goods category - is not interchangeable with cradle-to-gate or any other off-the-shelf boundary; see 02a - Boundaries §3 for how it sits relative to the standard boundary families.

Direct embedded emissions are the Scope-1-equivalent emissions of the production process (and, for complex goods, of the precursors used to make the functional unit), within the system boundaries defined per aggregated goods category in Annex I of the base regulation.

Indirect embedded emissions are the emissions from the electricity consumed by the production process - i.e., a Scope-2-equivalent. The Omnibus restricted electricity-as-a-CBAM-good to direct emissions only; for non-electricity CBAM goods, indirect embedded emissions are part of what is declared and surrendered against.

The Carbon Engine’s existing dual Scope 2 (location vs market) machinery [see 02 - Scope 1, 2, 3] is directly useful here: CBAM’s indirect-emissions methodology is essentially a location-based Scope 2 with carefully constrained exceptions for market-based contractual instruments.

5. Defaults vs actuals - and the rising cost of defaults

Where an importer can obtain actual, verified embedded emissions from the producer, those are used. Where the importer cannot - typically because the producer will not, or cannot, share installation-specific data - default values are permitted. Article 7 (as amended) and Implementing Regulation (EU) 2025/2621 govern this. 5

The Omnibus did two things that pull in opposite directions:

  • It widened access to defaults - making them a more accessible fallback in 2026 specifically.
  • It made defaults economically painful over time by setting a progressive mark-up on top of the default value, designed to incentivise importers to chase actuals.

The mark-up structure (per IR 2025/2621):

Sector2026 mark-up2027 mark-up2028 mark-up
Iron & steel+10%+20%+30%
Cement+10%+20%+30%
Aluminium+10%+20%+30%
Fertilisers+1%+1%+1%

The default values themselves are country-specific (Annex I of IR 2025/2621), with separate electricity emission factors (Annex II). The methodology, per the Omnibus, is the average emission intensity of the ten highest-emitting exporting countries for that aggregated goods category - a worst-in-class benchmark whose WTO compatibility is one of the live open questions.

The commercial implication is unambiguous: from 2027 onwards, a steel exporter whose data is verified-actual undercuts a competitor stuck on defaults by ~20-30%. From the platform’s perspective, this is the binding constraint that turns “we should produce verifiable carbon data” into “we must, by 2027”.

6. Verification - who can sign

CBAM data must be verified by a verifier accredited under EN ISO/IEC 14065, in accordance with the EU’s general accreditation regulation (EC) 765/2008, with a CBAM-specific overlay set in Delegated Regulation (EU) 2025/2551. 6 The verification procedure itself is set in Implementing Regulation (EU) 2025/2546, including mandatory site visits to non-EU production installations for the first verification period.

What this means in practice:

  • A verifier accredited under IR 2018/2067 (the EU ETS verification regulation) is not automatically accredited for CBAM. CBAM has its own scope; existing ETS verifiers can extend, but the operational mechanics through National Accreditation Bodies are still being implemented in 2026.
  • A verifier in a third country (e.g., India, Vietnam, Türkiye) can be accredited by any EU National Accreditation Body that offers CBAM scope. EU NABs operate under European Accreditation peer evaluation to ensure mutual recognition.
  • Article 18 of the base regulation is the accreditation anchor; DR 2025/2551 and IR 2025/2546 are where the day-to-day rules live.
  • The CBAM Registry will not accept declarations supported by data verified by a non-accredited party. This is a hard gate.

The 2026 bottleneck. Verifiers can only register in the CBAM Registry from 1 September 2026 onwards. NAB accreditation timelines for new scopes typically run 6–12 months. By 30 September 2027, an importer of significant volume needs a verifier already engaged, scoped, and capable. This is a real operational constraint and an early opportunity for any party that can help importers move faster - including, very directly, a platform that produces verifier-readable data with a strong audit chain.

7. Sectoral scope, the 50-tonne de minimis, and the proposed downstream extension

Sectors in scope from 2026: Iron and steel, cement, fertilisers, aluminium, hydrogen, electricity. The Omnibus did not add new sectors; it trimmed a small number of CN codes at the margin (notably non-calcined kaolinic clays out of cement).

The new de minimis. The Omnibus replaced the prior €150-per-consignment exemption with a single 50-tonne-net-mass-per-importer-per-calendar-year threshold, cumulative across all CBAM-covered goods. Hydrogen and electricity are excluded from the 50-tonne exemption - they are always in scope, regardless of volume. The Commission must review the threshold annually to ensure 99% of embedded emissions remain in scope, and can adjust the threshold by delegated act. 2

Two operationally painful details about the 50-tonne threshold:

  • It is retroactive across the calendar year. A declarant who didn’t expect to cross 50 tonnes but does becomes CBAM-liable for all imports since 1 January of that year - no grace period.
  • An aggravated penalty applies to artificial splitting of imports across legal entities to stay under the threshold: EUR 300–500 per tCO₂e, vs the standard EUR 100. This is anti-circumvention; expect enforcement.

The downstream extension. On 17 December 2025, the Commission proposed extending CBAM from 1 January 2028 to approximately 180 downstream products - fasteners, wire, processed aluminium, fabricated structural steel, and similar - covering the embedded emissions in the input precursors (not the downstream processing emissions). Still in the ordinary legislative procedure as of May 2026 - not yet law, but a known unknown that any party with steel-derivative exposure should be planning for.

8. Certificates, pricing, and the surrender mechanism

One CBAM certificate = the right to import one tonne of embedded CO₂e. Certificates are bought from a centralised EU sales platform managed by the Commission, opening 1 February 2027.

Pricing (per IR 2025/2548):

  • Certificates priced against 2026 imports (purchased in 2027): the quarterly average of 2026 EU ETS auction allowance prices.
  • Certificates from 2027 onwards: weekly average of EU ETS auction closing prices.

Surrender: Annual, alongside the CBAM declaration, due 30 September. The first mandatory surrender is 30 September 2027 for 2026 imports.

Quarterly holding requirement: From 2027 onwards, declarants must hold at least 50% of cumulative embedded emissions since 1 January in their CBAM Registry account at each quarter end. The Omnibus reduced this from 80% - material easing of working-capital pressure for high-import-volume declarants.

Repurchase and cancellation: A declarant can request to sell back excess certificates by 31 October each year, capped at 33% of certificates bought. Remaining unused certificates are cancelled on 1 November without compensation. 2026-vintage certificates can only be repurchased in 2027.

Carbon-price deduction. A declarant can deduct verifiable carbon prices effectively paid in the country of origin (or another third country, per the Omnibus). The methodology for “effective” and the treatment of free allocation in the origin country are open implementing questions, with Commission guidance expected. This is where a national carbon market - India’s CCTS, the UK ETS, regional Chinese ETS - interacts with CBAM in ways that materially change the economics for exporters in those jurisdictions.

9. Penalties, enforcement, and where the risk actually sits

Standard penalty. EUR 100 per tonne of CO₂e of missing certificates, escalating annually by EU consumer price index inflation. Mirrors the EU ETS excess emissions penalty. Paying the penalty does not discharge the surrender obligation - the declarant still has to surrender certificates.

Aggravated penalty for circumvention. EUR 300–500 per tonne for artificial import-splitting designed to stay below the 50-tonne threshold. Reducible if the overage is small (≤10%).

Indirect customs representative liability. Indirect customs reps are liable when acting as authorised CBAM declarants, except where representing an EU-established importer without having explicitly agreed to take on that capacity. Freight forwarders and customs brokers who do not paper this carefully are in scope.

Where the real risk sits. 2026 is a build-up year - no certificates traded, no surrender failures yet. The first real enforcement moment is 30 September 2027. Expect divergent national-competent-authority practice in the first cycle, with Germany, France, Netherlands, Belgium, and Italy (the highest-import-volume jurisdictions) setting the early precedent.

10. Open questions a careful practitioner should flag

These are points where the regulation is silent, deferred, or open to interpretation. They are the questions internal stakeholders, customers, and investors are most likely to push on.

  1. No codified FIFO/LIFO for inventory matching. A trader holding multiple production periods’ steel from the same installation has no explicit rule for which SEE attaches to which consignment. Mill paperwork is the de facto anchor; less-scrupulous declarants could cherry-pick the lowest period’s SEE within the same installation. Verifier discretion will define practice.
  2. The precursor “year of complex good” default rule. IR 2025/2547’s default that the precursor’s reporting period is the complex good’s production year creates a one-year shadow misalignment unless the operator demonstrates the actual production date.
  3. Verifier capacity shortage in H1 2027. A binding operational constraint, not a legal one - but it will reshape who can credibly supply verified data on time.
  4. EU ETS verifier crosswalk to CBAM. Whether and how existing IR 2018/2067 accreditation extends to CBAM scope, and at what cost.
  5. Methodology of country-default benchmarks (“ten highest-emitting countries”). Politically contested; WTO-compatibility argument is open.
  6. What counts as a “carbon price effectively paid” in the country of origin. The deduction methodology is to be set by Commission act; treatment of free allocation in the origin country is the contested question.
  7. Downstream extension scope. The 17 December 2025 proposal for ~180 downstream products from 2028 is in trilogue - companies producing or importing fasteners, wire, processed aluminium, fabricated structural steel are operating with material regulatory uncertainty.
  8. De minimis retroactivity. A declarant who crosses 50 tonnes mid-year is retroactively liable for all imports since 1 January. No grace period.
  9. Indirect customs representative liability boundary. The “unless they have not agreed to act in that capacity” wording is contract-drafting-sensitive.
  10. Penalty granularity for under-declaration vs surrender shortfall vs unaccredited verifier data. Article 26 (post-Omnibus) is clearer than before, but enforcement discretion will define case-by-case practice.
  11. First-cycle data quality on supplier-reported actuals. Many non-EU producers have not previously measured installation-level emissions to ETS-equivalent standards. The “verified-but-shaky-actuals” zone is where most early disputes will arise.
  12. EU ETS free-allocation phase-out trajectory. IR 2025/2620 sets the SEFA factor that scales CBAM down by residual ETS free allocation to EU producers, 2026–2034. Mechanically clean but creates a complex multi-year valuation challenge for investors in CBAM-exposed equities.

11. So what this means for the platform

Three concrete implications, none of which is rhetorical:

The unit of carbon data CBAM consumes is installation-period SEE per aggregated goods category, attested by an accredited verifier. The platform must be able to produce this unit, with a verifier-walkable audit chain, in time for the first 30 September 2027 deadline. The Carbon Engine’s installation-level CalculationResult with boundary, allocation, and method provenance is exactly that unit. Tenants who deploy the platform in 2026 are deploying for a 2027 deadline.

The market wants more than CBAM requires. Buyers, particularly EU steel buyers exposed to downstream-extension speculation, want per-lot Product Carbon Footprints with strong provenance. CBAM does not require this - but a platform that produces it, while still being able to roll up to the installation-period SEE that CBAM does require, has both compliance value and commercial differentiation. The lot-level lineage and passport machinery in SIDK is the technical answer to the second question; the engine’s boundary-as-input design is the technical answer to “produce both views from the same underlying data”.

Verification capacity is the binding constraint, not data quality. Even tenants with excellent data face a 2027 verifier shortage. Anything the platform can do to make a verifier’s job faster - pre-walked audit chains, signed evidence packages, machine-readable VerificationStatement scaffolding - is a real commercial moat for the Tenant, not just the platform. Verifier Workspace - the verifier-side application in the mature platform (see 08b §2) - exists to compress verifier time. This is the loop that monetises the architecture’s neutrality property.

References & further reading

Primary regulatory sources

Authoritative secondary sources

Sector-specific (steel)

Footnotes

  1. Regulation (EU) 2023/956 of the European Parliament and of the Council establishing a Carbon Border Adjustment Mechanism, as amended by Regulation (EU) 2025/2083 (the “Omnibus I” simplification regulation, adopted October 2025). The consolidated text on EUR-Lex is the authoritative reference; cite article numbers from the consolidated version. https://eur-lex.europa.eu/eli/reg/2023/956/oj/eng · Omnibus: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202502083 ↩ ↩2

  2. European Commission - Officially published: simplifications to the CBAM (20 October 2025). The Commission’s plain-English summary of the Omnibus changes, including the new 50-tonne de minimis, the 30 September annual deadline, the reduced 50% quarterly holding requirement, and the EUR 300–500/t aggravated penalty. https://taxation-customs.ec.europa.eu/news/officially-published-simplifications-carbon-border-adjustment-mechanism-cbam-2025-10-20_en ↩ ↩2

  3. Implementing Regulation (EU) 2023/1773 - transitional period reporting rules (governed quarterly reports filed Q4 2023 through Q4 2025). Now superseded for new periods. https://eur-lex.europa.eu/eli/reg_impl/2023/1773/oj ↩

  4. Implementing Regulation (EU) 2025/2547 of 10 December 2025 - methods for the calculation of emissions embedded in goods for the definitive period. Elaborates Annex IV of the base regulation, including the rules for installation-level SEE, reporting periods, and complex-good precursor handling. https://eur-lex.europa.eu/eli/reg_impl/2025/2547/oj/eng ↩

  5. Implementing Regulation (EU) 2025/2621 of 16 December 2025 - default values for embedded emissions, with country-specific defaults (Annex I), electricity emission factors (Annex II), and the progressive mark-up structure (10/20/30% for steel/aluminium/cement in 2026/2027/2028; 1% flat for fertilisers). Scheduled for revision by December 2027. https://eur-lex.europa.eu/eli/reg_impl/2025/2621/oj/eng ↩

  6. Delegated Regulation (EU) 2025/2551 of 20 November 2025 - conditions for granting accreditation to verifiers, control and oversight, withdrawal, and mutual recognition. CBAM-specific accreditation rulebook anchored to EN ISO/IEC 14065. https://taxation-customs.ec.europa.eu/document/download/c851e0f5-a16d-4809-a47d-cf1b73f5853a_en?filename=DA+on+accreditation_0.pdf ↩

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