CBAM? and impacts to corporates with Business into the EU

EcoVision
Jan 22
3 min read

What CBAM is (professional definition)

The EU Carbon Border Adjustment Mechanism (CBAM) is a carbon-pricing policy that applies to certain imports into the European Union, intended to reflect the carbon cost that EU producers already face under the EU Emissions Trading System (EU ETS).

Put simply, CBAM requires EU importers (and, indirectly, their non‑EU suppliers) to report embedded greenhouse gas emissions in covered goods and, over time, pay a charge via CBAM certificates that mirrors the EU carbon price.

Its policy aim is to reduce carbon leakage—the shifting of production (and emissions) to jurisdictions with weaker carbon constraints—and to incentivise decarbonisation in global supply chains. (which make senses, right?)

Background and policy rationale

CBAM sits inside the EU’s broader climate agenda, particularly the European Green Deal and the “Fit for 55” package, which targets a significant reduction in EU emissions by 2030.

The EU ETS places a carbon price on many EU industrial installations. Without a border mechanism, EU manufacturers can face higher costs than foreign competitors in carbon-intensive sectors, creating both competitiveness pressure and a risk that emissions simply relocate rather than fall.

CBAM is designed to level that playing field by attaching a comparable carbon cost to imports.

History and timeline (key milestones)

Early 2020s policy development: CBAM was proposed as part of the EU’s Fit for 55 reforms, with extensive debate about WTO-compatibility, administrative feasibility, and impacts on trade partners.
Legal adoption and phase-in: The EU adopted CBAM rules with a staged approach: an initial period focused on reporting obligations, followed by a financial adjustment phase where certificates must be surrendered.
Transitional period (reporting first): Importers must submit periodic CBAM reports covering emissions embedded in covered goods. This period is intended to build data systems and methodologies before payments fully apply.
Full regime (payment/adjustment): After the transition, importers must buy and surrender CBAM certificates corresponding to the embedded emissions, with adjustments to avoid double charging where a carbon price has already been paid in the country of origin.

What products are covered

CBAM started with carbon-intensive sectors where leakage risk is high, commonly including:

Cement
Iron and steel (and certain downstream products)
Aluminium
Fertilisers
Electricity
Hydrogen

The scope can evolve over time, and companies should monitor whether their products (or inputs) fall within current or future coverage.

What “embedded emissions” means

“Embedded emissions” refers to the greenhouse gas emissions associated with producing the imported goods. Depending on product type and rules, this can include direct emissions from production and, in some cases, indirect emissions (e.g., electricity used).

CBAM relies on defined calculation methods and documentation expectations. Practically, this pushes suppliers to move from broad corporate emissions estimates to product- and shipment-level emissions data that can be evidenced.

Corporate impact: what CBAM means in practice

For corporates exporting to the EU, CBAM is best viewed as a trade + carbon accounting + commercial issue, not just a sustainability topic.

1) Cost and margin risk If your goods are covered and have high embedded emissions, your EU customers/importers may face additional costs. That can affect pricing, competitiveness, and contract renegotiations.

Over time, lower-carbon producers may gain a margin advantage.

2) Data, controls, and auditability become commercial requirements EU importers must file compliant reports; they will push upstream for reliable data. Suppliers without credible emissions accounting may lose bids or face tougher terms.

Expect requests for: calculation methodology, boundaries, source data, and supporting evidence—often at product level.

3) Procurement and supplier management changes Even companies not directly exporting covered goods can be impacted through supply chains. Tier-1 suppliers may demand emissions data from tier-2/tier-3 inputs, accelerating traceability and data governance requirements across the value chain. (thus again, ESG is not only impacting big listed corporates.... be prepared...)

4) Transition planning becomes market access CBAM creates a tangible incentive to decarbonise production (energy efficiency, fuel switching, renewable electricity, process changes, recycled inputs). Transition plans that were previously “ESG nice-to-have” can become part of customer qualification.

5) Contracting and legal/compliance implications Companies are revisiting Incoterms responsibilities, data warranties, audit rights, confidentiality, and liability for misreporting. Sustainability and legal teams increasingly need aligned claim-and-data governance.

Strategic meaning for leadership teams (CFO/COO/Procurement)

CBAM effectively turns carbon performance into a commercial attribute—similar to quality, lead time, or safety—because it influences market access and total landed cost.

The most prepared organisations are treating CBAM readiness as a structured programme with: