EU Carbon Border Adjustment Mechanism (Regulation (EU) 2023/956)

The EU Carbon Border Adjustment Mechanism reaches eight of the markets ESGOS covers through a regulation that binds the importer rather than the exporter. This explainer sets out what the Regulation says, as it stands in the consolidated text.

What it is

Regulation (EU) 2023/956 establishes a carbon border adjustment mechanism to address greenhouse gas emissions embedded in the goods listed in Annex I on their importation into the customs territory of the Union, in order to prevent the risk of carbon leakage.¹ The same Article states that the mechanism complements the emission allowance trading system established under Directive 2003/87/EC by applying an equivalent set of rules to imports, and that it is set to replace the mechanisms in that Directive that prevent carbon leakage, by reflecting the extent to which EU ETS allowances are allocated free of charge under its Article 10a.¹

Annex I lists cement, electricity, fertilisers, iron and steel, aluminium and hydrogen.² Article 2(1) applies the Regulation to those goods where they originate in a third country and are imported into the customs territory of the Union, and Article 4 provides that they shall be imported only by an authorised CBAM declarant.¹ The instrument the declarant buys and surrenders is the CBAM certificate. Article 21 has the Commission calculate its price as the average of the closing prices of EU ETS allowances on the auction platform, under Delegated Regulation (EU) 2023/2830, for each calendar week; by derogation, the price for embedded emissions declared in respect of the year 2026 is the quarterly average for the quarter of importation.¹

Who it binds

The obligations sit with the importer. Article 5(1) requires an importer established in a Member State to apply for the status of authorised CBAM declarant before importing; Article 6(1) places the annual CBAM declaration on that declarant and Article 22(1) the surrender of certificates.¹ A producer outside the Union is not addressed by these articles; it is reached indirectly, because the declarant needs installation-level embedded-emissions data to complete the declaration.

ESGOS holds one CBAM regime row per origin market, and the origin matters in two ways. On scope, Annex III excludes only goods originating in Iceland, Liechtenstein, Norway and Switzerland and five territories, so goods originating in the United Arab Emirates, China, India, Japan, Malaysia, Oman, Singapore and Thailand are within scope.² On price, Article 9 — headed “Carbon price paid in a third country” — provides that, where embedded emissions are determined on the basis of actual emissions, the declarant may claim a reduction in the number of certificates to be surrendered to take into account the carbon price paid in a third country, and that the reduction may be claimed only if the carbon price has been effectively paid in a third country, with any rebate or compensation available in that country taken into account.¹ Whether such a price exists in a given origin is a question about that market’s own regime; each market overview on ESGOS records what its primary sources state.

Dates

Article 32 limited the importer’s obligations during the transitional period from 1 October 2023 until 31 December 2025 to reporting.¹ Article 36(2), as amended by Regulation (EU) 2025/2083, then phases the definitive regime in four steps: Articles 5, 10, 14, 16 and 17 — including the application for authorised CBAM declarant status — from 31 December 2024; Article 2(2) and Articles 2a, 4, 6 to 9, 10a, 15, 19 and 21, Article 22(1) and 22(3), and Articles 23 to 27 and 31 from 1 January 2026; Article 22(2) from 1 January 2027; and Article 20(1), (3), (4) and (5) from 1 February 2027.¹

The reporting rhythm follows from those dates. Article 6(1) requires the CBAM declaration by 30 September of each year, and for the first time in 2027 for the year 2026; Article 22(1) requires the corresponding certificates to be surrendered by the same date.¹ The first declaration and surrender therefore fall due by 30 September 2027 for goods imported in 2026.¹

Thresholds

Article 2a exempts an importer — including one already holding authorised CBAM declarant status — from the obligations under the Regulation where the net mass of imported goods in a calendar year does not cumulatively exceed the single mass-based threshold in point 1 of Annex VII, set at 50 tonnes of net mass and applied to the total net mass of goods under all CN codes, aggregated per importer and per calendar year; the exemption is declared in the customs declaration.¹ It is a cliff, not a deduction: an importer that crosses the threshold during the year becomes subject to all obligations in respect of all emissions embedded in all goods imported in that year, and the Article does not apply at all to imports of electricity or hydrogen.¹ Regulation (EU) 2025/2083, which introduced the threshold, entered into force on 20 October 2025.³

A second quantitative rule governs holdings rather than scope: from 2027, the declarant must ensure that the certificates on its account at the end of each quarter cover at least 50 % of the embedded emissions in all goods imported since the beginning of the calendar year, measured against Annex IV default values without the mark-up or against the previous year’s surrender.¹

Verification standard

Article 7 allows embedded emissions to be determined on actual emissions or on default values; where actual emissions are used, Article 8(1) requires them to be verified by a verifier accredited under Article 18 on the principles in Annex VI.¹ Article 8(2) lets the declarant instead use verified information disclosed by a third-country installation registered under Article 10, which determines its embedded emissions under Annex IV, has them verified by an accredited verifier and keeps the verification report for four years; registration runs for five years.¹ Accreditation itself is national: Article 18(2) has national accreditation bodies accredit verifiers, taking into account accreditation under Implementing Regulation (EU) 2018/2067.¹ A carbon-price reduction claimed under Article 9 rests on a separate attestation — documentation certified by a person independent from the declarant and from the authorities of the third country.¹

Enforcement is monetary. Article 26 makes a declarant that fails to surrender the required certificates liable for a penalty identical to the excess emissions penalty in Article 16(3) of Directive 2003/87/EC, as increased under Article 16(4), for each certificate not surrendered, which the competent authority may reduce where the shortfall follows from incorrect information supplied by an operator, a verifier or the independent certifying person.¹

What an organisation on ESGOS can do

A producer of Annex I goods can find its listing in the directory and claim it from its profile page, or get listed and add a compliance profile recording installation-level embedded-emissions data, whether the installation is registered in the CBAM registry, and which accredited verifier tested the figures — the evidence an EU customer draws on for its declaration. The exposure check shows how a product line sits against Annex I and the single mass-based threshold. The verifiers directory lists accredited verification bodies drawn from national accreditation registers; verifiers accredited for CBAM are not yet published by the Commission, so the directory does not hold them. The market overviews for the United Arab Emirates, China, India, Japan, Malaysia, Oman, Singapore and Thailand set the domestic regimes alongside this one.

Footnotes

1. Regulation (EU) 2023/956 — consolidated text 02023R0956-20251020, as amended by Regulation (EU) 2025/2083, EUR-Lex. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹ ↩¹² ↩¹³ ↩¹⁴ ↩¹⁵ ↩¹⁶ ↩¹⁷ ↩¹⁸

2. Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism, EUR-Lex. ↩ ↩²

3. Regulation (EU) 2025/2083 amending Regulation (EU) 2023/956, EUR-Lex. ↩