From Reporting to
Carbon Certificate Payments
CBAM’s rollout has two key
phases:
- Transitional
phase (Oct 2023–Dec 2025): Importers
needed only to report greenhouse gas emissions embedded in selected goods
entering the EU.
- Definitive
regime (from 1 January 2026): EU
importers must continue to report emissions and, crucially, purchase and
surrender CBAM certificates that cover the emissions embedded in their imported
products.
These certificates are
priced to reflect the cost of EU ETS allowances, meaning importers pay a carbon
cost on par with EU producers, helping level the competitive playing field
across borders.
The first annual CBAM declaration covering imports in 2026 will be due by May
2027.
Products in Scope
CBAM currently applies to
carbon-intensive goods including:
- Iron and steel
- Aluminium
- Cement
- Fertilisers
- Hydrogen
- *Electricity
is acknowledged under the mechanism but treated separately for purposes of
guidance
Importers and export
partners should work closely to understand how products are classified under
the EU CBAM definitions and whether their supply chains generate emissions that
fall under these categories.
Key Changes under the
Simplified CBAM Rules
To make compliance more
proportionate, particularly for SMEs, the EU adopted a simplification
package (Regulation (EU) 2025/2083), finalised in October 2025 and effective
ahead of 2026 implementation.
1.
De minimis exemption
Importers whose total annual volume of CBAM goods is 50 tonnes or less are now
exempt from CBAM obligations. This replaces a narrower earlier exemption and is
expected to remove about 90 % of importers — mainly small and micro businesses
— from ongoing compliance duty, while still covering over 99 % of emissions
from CBAM-covered imports.
However:
This exemption does not apply to electricity or hydrogen imports.
2.
Operational flexibility and procedural simplifications
The simplification law includes a number of practical changes to help
businesses, such as:
- Easier
authorisation procedures and reduced administrative steps.
- Streamlined
data collection and emission calculation methods.
- More practical
verification rules for emissions reporting.
- Adjusted
timelines and financial liability frameworks for CBAM participants.
These reforms are designed
to reduce red tape, particularly for smaller operators, while maintaining the
environmental integrity of the system.
What Businesses Need to
Do Now
As the definitive CBAM
regime takes effect in January 2026, companies exporting to the EU, including
UK manufacturers and suppliers, must take proactive steps:
Prepare for compliance:
- Map your
supply chain emissions to understand where your products fall under CBAM.
- Collect
emissions data from raw material suppliers and production processes.
- Engage with
your EU importers to ensure they have the information needed for their
reporting and certificate purchase obligations.
- Work with
accredited verifiers if third-party verification is required.
Exporters should be
particularly attentive if their EU customer imports more than 50 tonnes of CBAM
goods annually, even if your shipments are below the threshold, as
this can trigger reporting and verification requirements for them - requiring
emissions data from you.
Why This Matters for UK
and Global Businesses
CBAM represents a
fundamental shift in how carbon pricing is integrated into international trade.
For exporters to the EU:
- Costs will be
tied to emissions intensity, not just tariffs or duties.
- Competitive
advantage will increasingly depend on low-carbon supply chains.
- Early
preparation can reduce compliance costs and avoid customs delays or penalties.
With the added
simplification measures, smaller businesses have more breathing room - but
understanding the rules and planning accordingly is essential.
View the Gov.uk guidance here
How
Essex Chambers Can Support Your Business