CBAM

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 fell 2.5% in 2026 and will fall 5% in 2027, reaching zero by 2034. That structural tightening drove EUA prices through the EUR 80 mark for the first time on 25 June 2026 as the carbon cost that previously stayed within EU supply chains migrated to import prices. The annual cap falling around 180 Mt year-on-year reinforced the upward pressure; EUAs had recovered to roughly EUR 77.46 in late May 2026 on the same dynamic.

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.