Introduction: CBAM Is Moving From Reporting to Cost

The EU Carbon Border Adjustment Mechanism is entering a decisive phase. After more than a year of transitional reporting, attention has intensified following news around January start dates and growing pressure from regulators and importers. The reason is straightforward. CBAM is approaching the point where emissions data translates directly into financial liability. For companies trading with the European Union, this shift changes CBAM from a compliance exercise into a strategic business issue that affects pricing, supplier relationships, and market access.

CBAM is designed to prevent carbon leakage by applying a carbon price to certain imported goods that mirrors the cost faced by EU producers under the EU Emissions Trading System. While the mechanism is often described as an import regulation, its practical impact reaches far upstream into global supply chains. Both EU importers and non EU producers are now being asked to meet detailed emissions disclosure requirements that were previously voluntary or loosely defined.

This article explains the most updated CBAM rules, clarifies the timeline, and outlines what companies must disclose today to prepare for financial compliance starting in 2026.

CBAM Timeline and Current Legal Status

Confusion around CBAM often stems from misunderstanding its phased rollout. The mechanism is already in force, but obligations evolve over time.

CBAM entered its transitional phase on October 1, 2023. This phase runs until December 31, 2025. During this period, companies must report emissions embedded in covered imports, but no carbon price is yet applied.

From January 1, 2026, CBAM moves into its definitive phase. This is the moment when reporting obligations remain in place and financial obligations begin.

CBAM phases at a glance

Phase	Period	Core obligation	Financial impact
Transitional phase	Oct 2023 to Dec 2025	Quarterly emissions reporting	None
Definitive phase	From Jan 2026	Verified emissions and CBAM certificates	Yes

This timeline is now fixed in EU law and supported by implementing regulations and guidance. Companies should treat 2024 and 2025 as preparation years for a system that will impose real costs from 2026 onward.

Which Goods and Companies Are in Scope

CBAM currently applies to a defined list of carbon intensive goods. These sectors were selected based on high emissions intensity and a high risk of carbon leakage.

Covered sectors

• Iron and steel
• Aluminum
• Cement
• Fertilizers
• Electricity
• Hydrogen

The European Union has also signaled its intention to expand CBAM to selected downstream products over time, particularly goods with high steel or aluminum content.

Who is affected

Legally, CBAM obligations fall on EU importers. They are responsible for submitting reports, purchasing certificates, and surrendering them to cover embedded emissions. In practice, however, non EU producers are deeply involved.

Non EU manufacturers must supply emissions data calculated at the production installation level. Without this information, EU importers cannot complete their CBAM reports accurately. As a result, CBAM is already reshaping supplier expectations and commercial negotiations well beyond EU borders.

What Must Be Disclosed During the Transitional Phase

During the transitional phase, companies importing CBAM goods into the EU must submit quarterly reports through the CBAM Transitional Registry. These reports form the foundation of future financial compliance.

Required disclosure elements

• Type and quantity of CBAM goods imported
• Country of origin
• Identification of the production installation
• Direct embedded emissions for all goods
• Indirect emissions where required, such as for cement and fertilizers
• Any carbon price paid in the country of production

Reporting mechanics

Item	Requirement
Reporting frequency	Quarterly
Submission deadline	One month after the end of each quarter
Reporting platform	CBAM Transitional Registry
Verification	Not mandatory during the transitional phase

Although no payments are required yet, data quality already matters. The use of default values is being progressively restricted, and authorities increasingly expect actual emissions data from suppliers rather than estimates or industry averages.

New Disclosure Expectations Companies Often Underestimate

Many companies underestimate how demanding CBAM disclosure will become, particularly those outside the European Union.

Installation level data requirements: CBAM requires emissions to be calculated at the level of the individual production installation. Company wide averages or regional emission factors are generally not sufficient. For many non EU producers, this represents a significant shift in how emissions data is collected and managed.

Alignment with EU methodologies: Emissions must be calculated using EU approved methodologies that define system boundaries, emission sources, and calculation formulas. Data prepared for other reporting frameworks may not automatically meet these requirements.

Documentation and audit readiness: Even during the transitional phase, companies are expected to document assumptions, data sources, and calculation methods. From 2026 onward, this information must support third party verification. Data that cannot be traced or explained will likely be rejected.

Commercial and contractual pressure: EU importers are increasingly embedding CBAM related data obligations into supply contracts. Suppliers that cannot provide credible emissions data risk higher reported emissions, higher future CBAM costs, or loss of access to the EU market.

For non EU companies, CBAM often becomes the first binding climate disclosure requirement they face. It sets expectations that are likely to spill over into other areas of corporate reporting, including Scope 3 emissions and customer driven ESG disclosures.

What Changes When CBAM Certificates Apply in 2026

The most significant change arrives on January 1, 2026, when CBAM introduces a carbon price on imports.

Key changes in the definitive phase

• Importers must be registered as authorized CBAM declarants
• Embedded emissions must be verified by accredited third parties
• CBAM certificates must be purchased and surrendered annually
• Certificate prices are linked to weekly EU ETS allowance prices

Annual compliance cycle

Step	Timing
Emissions calculation and verification	Ongoing during the year
Annual CBAM declaration	By May 31 of the following year
Certificate surrender	After declaration submission

The number of certificates required corresponds to the embedded emissions of imported goods, adjusted for any carbon price already paid outside the EU. At the same time, free allocation under the EU ETS will be gradually phased out, increasing the effective carbon cost applied through CBAM over time.

Conclusion: CBAM Is Now a Business Competitiveness Issue

CBAM has moved beyond policy design and pilot reporting. It is becoming an operational and financial reality for companies trading with the European Union.

January 1, 2026 marks the point where emissions disclosure directly affects costs. Decisions made today about data systems, supplier engagement, and emissions transparency will shape future CBAM exposure. This is particularly true for non EU producers, who may not face a direct legal obligation but are already subject to market driven enforcement through their customers.

Companies that treat CBAM reporting as a rehearsal for financial compliance will be better positioned to manage costs, protect market access, and respond to growing climate disclosure expectations. Those that delay risk facing higher carbon liabilities and reduced competitiveness in one of the world’s largest markets.

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