CBAM
The Carbon Border Adjustment Mechanism is an EU regulation imposing a carbon price on imports of specified goods from countries without equivalent carbon pricing, phased in from 2026.
Last refreshed: 1 June 2026 · Appears in 1 active topic
How fast are CBAM certificate costs rising as the EU cuts free allowances to covered industries?
Timeline for CBAM
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- CBAM requires importers of carbon-intensive goods (steel, cement, aluminium, fertilisers, electricity, hydrogen) to buy certificates matching the EU carbon price those goods would have paid if made inside the EU. The definitive phase started in January 2026.
- When does CBAM fully replace free EU ETS allowances?
- Free allowances to CBAM-covered sectors are cut 2.5% in 2026 and 5% in 2027, with a full phase-out completed by 2034. After that, imports and domestic producers face the same carbon cost with no free-allowance offset.Source: EU Regulation 2023/956
- How is CBAM driving the EU carbon price higher in 2026?
- The annual ETS cap falls roughly 180 Mt per year while CBAM-related free-allocation cuts tighten supply further. EUA prices recovered to about EUR 77.46 in late May 2026, recouping most of a 13% drop that followed the Commission's benchmark revision.Source: Lowdown european-energy-markets briefing
Background
The Carbon Border Adjustment Mechanism (CBAM) requires importers of steel, cement, aluminium, fertilisers, electricity, and hydrogen into the EU to purchase certificates matching the carbon price those goods would have paid under the EU Emissions Trading System if made inside the EU. The transitional reporting phase ran from October 2023 to December 2025; the financial mechanism entered its definitive phase in January 2026, with importers buying certificates from the start of each compliance year. The CBAM certificate price tracks the EU Allowance (EUA) weekly average.
CBAM's energy-market significance is bound up with the parallel phase-down of free ETS allowances. Free allocations to covered sectors fall 2.5% in 2026 and 5% in 2027, reaching zero by 2034. As free allowances shrink, the carbon cost that previously stayed within EU supply chains migrates to the import price. EUA prices recovered to roughly EUR 77.46 in late May 2026, partly attributed to this tightening dynamic alongside the annual cap falling around 180 Mt year-on-year.
CBAM sits at the junction of trade, industrial, and climate policy. WTO compatibility challenges from India, Turkey, and others are live; steel and cement exporters in those countries face the steepest near-term cost exposure. The full phase-in through 2034 means its effect on global supply chains will take a decade to materialise, making it among the most consequential single-market regulations passed in the 2020s.
