The European Union’s Carbon Border Adjustment Mechanism (CBAM) officially entered its definitive phase on January 1, 2026, marking a new stage in the bloc’s climate policy framework. The system now fully applies to imports of cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen—sectors identified by the EU as most exposed to carbon leakage risks.
Under the mechanism, importers bringing carbon-intensive goods into the EU must declare the greenhouse gas emissions embedded in their imports and surrender corresponding CBAM certificates. This ensures that imported products face a carbon cost equivalent to what EU-based producers already pay under the Emissions Trading System (ETS). Applications are required before importation and no later than March 31 for all affected companies.
The CBAM aims to create a level playing field, discouraging production from moving to countries with weaker emissions standards while supporting the EU’s net-zero objectives. The European Commission described the mechanism as a critical tool for aligning trade and climate action, reinforcing the EU’s position as a leader in sustainable regulation.
The full implementation follows a two-year transitional phase, during which importers were obligated only to report emissions rather than pay for them. With the definitive phase now active, financial obligations come into effect for the first time, introducing a tangible carbon cost on non-EU producers.
CBAM will operate alongside ongoing reforms to the EU’s Emissions Trading System to ensure that both domestic and imported products reflect the price of carbon. The measure is expected to influence global supply chains, encouraging trading partners to adopt cleaner technologies and more transparent emissions reporting standards.
As one of the EU’s flagship climate initiatives, CBAM forms a cornerstone of the European Green Deal. It reinforces the EU’s broader ambition to link environmental goals with trade policy and promote more sustainable industry transitions worldwide.
DMX continues to monitor policy developments influencing trade, energy, and carbon regulation across Europe and the wider EMEA region. Stay connected through our website and LinkedIn page for insights on how these changes shape global market dynamics.
