If you import goods into the European Union – or if your supply chain passes through the EU – there is a piece of legislation that came into effect on 1st January 2026 that you need to understand. Not vaguely. Not “we’ll cross that bridge when we come to it.” Actually understand, because the financial and administrative consequences of getting it wrong are real.
The Carbon Border Adjustment Mechanism (CBAM) is the EU’s answer to a problem that has existed since carbon pricing began: what stops a manufacturer in, say, China from undercutting a European competitor simply because they don’t have to pay for the carbon their production emits? The answer, from 1st January 2026, is a carbon price applied at the EU border. And yes, it applies to UK businesses exporting to the EU too.
What CBAM actually is – in plain English
Here’s the core principle: if you import certain goods into the EU from a country that doesn’t price carbon at the same level as the EU does, you now have to pay the difference at the border. The EU sets a carbon price through its Emissions Trading System (EU ETS). CBAM ensures that imports from countries without equivalent carbon pricing face a comparable cost – so that EU manufacturers aren’t disadvantaged by competing against goods produced with no carbon obligations whatsoever.
The mechanism requires EU importers – or their indirect customs representatives – to register as authorised CBAM declarants, declare the carbon emissions embedded in their imported goods, purchase CBAM certificates at a price tied to the EU ETS auction price (expressed per tonne of CO2 emitted), and surrender those certificates annually. If the exporting country already charges a carbon price on the production of those goods, that amount can be deducted – avoiding double-counting.
Which goods does CBAM cover?
In its current form, CBAM applies to six sectors, chosen specifically because they are the most carbon-intensive and most at risk of what the EU calls “carbon leakage” – the process by which production moves to lower-regulation countries to avoid carbon costs:
- Iron and steel – including a wide range of downstream products
- Aluminium – primary and certain processed forms
- Cement
- Fertilisers
- Hydrogen
- Electricity
These six sectors are the beginning, not the end. The EU has been explicit that CBAM will expand to cover more than 50% of emissions from ETS-regulated sectors as the mechanism matures. If your goods aren’t on the list today, it would be unwise to assume they never will be.
What changed on 1st January 2026
CBAM has been in development for years. The transitional phase ran from October 2023 to December 2025 – during this period, importers had to report embedded emissions in their goods but did not yet have to buy and surrender certificates. That reporting-only phase is over.
From 1 January 2026, the full financial obligations are live. Importers bringing more than 50 tonnes of CBAM goods into the EU must now hold authorised CBAM declarant status, purchase certificates, and surrender them each year based on the embedded carbon in their imports. The certificate price is calculated from the weekly average EU ETS auction price from 2027 onwards (quarterly average in 2026). As ETS carbon prices rise – and the trajectory is upward – so does the CBAM cost.
What this means for UK businesses specifically
This is where it gets important for UK exporters and importers to pay close attention, because the post-Brexit landscape creates some specific complexities.
The UK has its own Emissions Trading Scheme (UK ETS), which runs in parallel to – but is not linked to – the EU ETS. The carbon price under the UK ETS and the EU ETS fluctuate independently. Where a UK manufacturer exporting steel or aluminium to the EU can demonstrate that a carbon price has already been paid under the UK ETS for the production of those goods, that amount is deductible from the CBAM liability. However, that deduction requires documentation. It requires your EU importer (or their customs representative) to have that evidence at the point of declaration.
For UK businesses that export CBAM goods to the EU – and there are many, particularly in the steel, aluminium, and fertiliser sectors – the practical requirement is this: you need to be able to provide your EU customers or their customs agents with verified data on the embedded carbon emissions in your products. If you can’t provide that data, the EU importer will have no basis for a deduction and will pay the full CBAM certificate cost – which they will, quite reasonably, want to recover from you through pricing.
For UK businesses that import CBAM goods into the UK – not the EU – CBAM does not currently apply directly. However, the UK government has confirmed it is developing its own Carbon Border Adjustment Mechanism, which is expected to come into force in 2027. The direction of travel is clear.
The compliance obligations: what you actually need to do
If you are an EU importer – or if you act as an indirect customs representative for one – importing any of the six CBAM-covered goods above the 50-tonne threshold, you need to:
- Apply for authorised CBAM declarant status through the CBAM Registry, via your country of establishment’s National Competent Authority (NCA) – this is not optional and should be done immediately if not already completed
- Obtain verified data on embedded carbon emissions from your non-EU suppliers – this requires engagement with your supply chain that many businesses have not yet had
- Purchase CBAM certificates from your national authority at the current EU ETS-linked price
- File an annual CBAM declaration surrendering the number of certificates corresponding to the verified embedded emissions in your imports
- Retain documentation to support any deductions claimed for carbon prices already paid in the country of origin
Non-compliance carries penalties. The EU has built enforcement into the mechanism, and the National Competent Authorities in each member state are responsible for monitoring and sanctioning importers who fail to meet their obligations. This is not a soft launch.
What about the goods in transit – does CBAM affect routing
This is a question we’ve been fielding from clients. CBAM is a mechanism triggered at the point of release for free circulation in the EU – it applies when goods are imported into the EU, not when they transit through it. So if your goods pass through an EU port en route to the UK, but are not released for free circulation there, CBAM does not apply at that stage. However, if you are routing goods into the EU market – including selling to EU-based distributors who then sell onwards – the full CBAM obligations apply at that import point.
The bigger picture: this is the direction of travel for global trade
CBAM is not an isolated EU quirk. The US, Canada, and the UK are all at various stages of developing equivalent mechanisms. The OECD has been working on international frameworks for carbon border measures. What we are watching is the gradual but unmistakable shift toward a global trade environment where the carbon embedded in goods is priced and accounted for, from production to destination border.
For businesses in carbon-intensive supply chains, the question is no longer whether carbon compliance costs will affect your trade economics – it’s how quickly, and by how much. Businesses that engage with this early, build the data infrastructure to track embedded emissions, and work with logistics and customs partners who understand the landscape will be better placed than those who treat it as a future problem.
At Quick Cargo, our customs brokerage team has been working with clients on CBAM readiness since the transitional phase began in 2023. If you’re unsure whether CBAM applies to your goods, what your documentation obligations are, or how to structure your EU customs declarations to manage the cost correctly – that’s exactly the kind of conversation we’re here to have. Call us on +44 (0) 1753 681900 or contact us here.
