CBAM information

CBAM is the European Union’s tool designed to establish a fair balance in carbon pricing between goods produced in the EU and those imported from outside the EU. It requires the purchase of emission certificates under the EU Emissions Trading System (EU ETS 1).

CBAM initially applies to high-emission goods such as electricity, cement, hydrogen or iron, steel and aluminium, as well as to fasteners made of corresponding materials. The requirement to purchase CBAM certificates is intended to prevent the risk of carbon leakage for these goods – the relocation of production activities to countries with weaker environmental regulations and lower carbon prices. From 2026, the affected goods may only be imported into the EU by approved CBAM declarants. 

In order to support global decarbonisation efforts, the European Union wants to reduce its own greenhouse gas emissions by at least 55 per cent by 2030. The EU is set to achieve climate neutrality by 2050. To this end, the ‘Fit for 55’ package was adopted with a set of laws designed to ensure that the path to climate neutrality is socially fair while guaranteeing the competitiveness of EU industry. CBAM also constitutes part of these measures, the idea being that it provides incentives to reduce carbon emissions worldwide.

CBAM currently affects electricity, cement, iron, steel, aluminium, fertilisers and hydrogen, plus – as one of the few downstream products – fasteners made of these materials. Importers of these goods must participate in the CBAM scheme and purchase certificates, which means that the regulations affect all of REYHER’s market competitors in the European area.

Carbon leakage occurs when companies relocate production activities to countries with weaker environmental regulations and lower carbon pricing. Instead of reducing greenhouse gas emissions, however, this only shifts them – often even increasing the values. At the same time, companies within the EU are at a competitive disadvantage. CBAM is designed to prevent this. 

Since 1 October 2023, CBAM declarants have been required to report quarterly information to the EU on the products they import and the emissions generated during production. With CBAM finally entering into force in 2026, however, this information is not yet used as basis for the calculation of CBAM certificates. The reported values must be certified by independent third parties. The EU will announce how this certification is set to work in 2027. Accordingly, the default values assumed from Implementing Regulation 2025/2621 are binding for 2026 at least.

Implementing Regulation 2025/2548 sets out the rules for the number of certificates to be purchased – the formula is as follows:

(Reported emissions – (CBAM benchmark x CBAM factor) – carbon price paid) x quantity of goods = number of certificates

The CBAM benchmark and the CBAM factor are sources of uncertainty when calculating the cost of the CBAM certificates. In the EU Emissions Trading System, the benchmark is currently set on the basis of production processes in the top ten per cent. For CBAM purposes, however, it is still unclear exactly how the calculation will be done – although this will be a significant cost factor.

The CBAM factor is a tool used in the transitional phase to gradually reduce the number of free certificates issued by 2034. In 2026, a CBAM factor of 97.5 per cent will initially apply, which means that only 2.5 per cent of the cost will be charged. The factor will fall to 95 per cent in 2027, to 90 per cent in 2028, and so on, falling to 26.5 per cent by 2032, to 14 per cent by 2033 and finally to 0 per cent by 2034 – the full cost will therefore have to be paid in 2034.

The CBAM system was introduced back in October 2023, albeit with a transitional phase in which numerous changes and adjustments have been made and continue to be made. It moved into its definitive phase on 1 January 2026, which means that the reporting requirement has taken effect and CBAM certificates must be purchased. It will not be possible to purchase these certificates until 2027. The costs incurred for all 2026 imports will therefore be calculated in February 2027 and must then be paid retroactively. While the CBAM factor – which describes the ratio of free certificates to chargeable certificates – will be gradually reduced to zero by 2034, it is uncertain how certificate prices will develop.

There are exceptions for some countries of origin as well as goods used for military purposes (EU or NATO security and defence policy). These apply to Norway, Iceland, Liechtenstein and Switzerland.