When carbon crosses borders: the European CBAM and regulatory consolidation

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When carbon crosses borders: the European CBAM and regulatory consolidation

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Emissions from an industrial plant, with a ship in the foreground

Sofia Araújo Alves of Morais Leitão, Galvão Teles, Soares da Silva & Associados explains the Carbon Border Adjustment Mechanism’s transition to its definitive phase, highlighting new compliance requirements, thresholds, and regulatory simplifications

The Carbon Border Adjustment Mechanism (CBAM), established in 2023, aims to correct carbon price differences between imported products and EU-produced products. It encourages cleaner industrial production in non-EU countries by assigning a fair price to the carbon emitted during the production of carbon-intensive goods entering the EU, thus promoting the union’s climate objectives; specifically, climate neutrality.

After a transitional period, the definitive phase of the programme began on January 1 2026, which requires economic operators to comply with a series of measures.

Key aspects of the scheme

The CBAM, as introduced by Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023, applies to imports into the EU of certain goods with significant greenhouse gas emissions (e.g., cement, iron, electricity, steel, and aluminum).

It generally applies to goods originating in a third country when those goods or products processed from those goods are imported into the customs territory of the union, except where provided otherwise in the regulation.

The CBAM is presented as a regulatory-economic mechanism based on the obligation to submit CBAM certificates and to obtain authorised CBAM declarant status as a condition for importing these goods into the customs territory of the EU. However, in practical terms, it closely resembles a carbon tax or a customs duty on selected goods based on the greenhouse gas emissions embodied in the imported goods. CBAM declarants must acquire CBAM certificates from the competent national authorities of their member state of establishment and the price of such certificates is linked to the auction price of EU Emissions Trading System allowances, expressed in euros per tonne of CO₂ emitted.

During the transitional period, economic operators importing the affected goods were only required to report to the national customs authorities information such as the total quantity of each type of good, the total actual embedded emissions, and the carbon price due in the country of origin for the emissions embedded in the imported goods.

This differs greatly from the situation under the definitive period. Now, economic operators will have to comply with a set of important formalities, including the following:

  • An obligation to obtain authorisation and register to participate in the programme;

  • An obligation to submit an annual CBAM declaration including the quantity of goods imported, embedded emissions, and a set of certificates to be surrendered;

  • An annual return of CBAM certificates corresponding to verified embedded emissions;

  • Quarterly maintenance of at least 50% of CBAM certificates relating to embedded emissions in imports since the beginning of the calendar year (starting in 2027); and

  • An update of any changes to the information submitted in the authorisation application in the CBAM register.

Operators are subject to financial penalties in the event of non-compliance. The regulation provides specific mechanisms to combat evasion practices, such as modifying products and their essential characteristics or splitting consignments to avoid the legal threshold.

Simplification of the legal framework

Approximately three months before the definitive period took effect, Regulation (EU) 2025/2083 of the European Parliament and of the Council of 8 October 2025, amending Regulation (EU) 2023/956, was adopted with the aim of softening the regime.

Of particular note is the exemption based on cumulative net mass. Importers whose total annual volume of covered goods does not exceed 50 tonnes are exempt from CBAM obligations, excluding electricity and hydrogen (importers in these sectors are subject to CBAM obligations from their first import).

Therefore, importers that expect to exceed the annual threshold of 50 tonnes of CBAM goods must apply in advance for authorised CBAM declarant status. Also, when CBAM obligations are assumed by an indirect customs representative, the representative must obtain the status prior to importation.

It is also noteworthy that if customs authorities determine that an importer has exceeded the single threshold based on mass, either through their own knowledge or information from the relevant authorities, they will not allow that importer to import any more goods until the end of the calendar year in question or until they have obtained authorised CBAM declarant status.

Another note regarding simplification is that an authorised CBAM declarant may also delegate the submission of CBAM declarations to a person acting on its behalf and in its name, thus facilitating compliance with its obligations.

Key takeaways

After more than a year of experience with the transitional regime, the legislator has made an effort to facilitate the position of small importers and streamline procedures without neglecting – on the contrary, reinforcing – the monitoring and enforcement powers of the authorities.

Nevertheless, uncertainty remains over how the regime will be implemented in each member state. This could create difficulties for CBAM declarants trying to comply with the current formalities, as member states have significantly delayed implementing the legal regimes necessary for full compliance. And it should be noted that economic operators that do not comply with the provisions may face import interruptions or blockages and sanctions.

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