CBAM (Carbon Border Adjustment Mechanism): What European Buyers Need to Know

Key Points at a Glance

• The EU Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in October 2023, with full financial obligations beginning January 2026
• CBAM requires importers to purchase and surrender CBAM certificates matching the embedded carbon emissions in imported goods
• 90% of importers will be exempt under the new 50-tonne de minimis threshold introduced by Regulation (EU) 2025/2083
• Steel and aluminum imports account for approximately 60% of CBAM-covered embedded emissions
• European buyers must prepare for potential cost increases and documentation requirements from Chinese suppliers

What Buyers Need to Know

The European Union’s Carbon Border Adjustment Mechanism (CBAM) represents the most significant change in trade policy affecting steel imports in decades. As the EU’s tool to prevent carbon leakage and level the playing field between domestic and imported goods, CBAM will fundamentally change how European businesses source carbon-intensive materials.

For European steel buyers, understanding CBAM is essential for procurement planning, supplier management, and cost projection. With full CBAM obligations beginning January 2026, importers must act now to prepare their systems, documentation, and supplier relationships for compliance.

According to PwC’s CBAM guidance, approximately 90% of importers will benefit from the new 50-tonne de minimis threshold, but those importing significant volumes of steel products will face substantial new compliance requirements.

Understanding CBAM Fundamentals

What is CBAM?

The Carbon Border Adjustment Mechanism is designed to:

1. Equalize carbon costs between EU-produced and imported goods

2. Prevent carbon leakage where production moves to countries with lower carbon costs

3. Incentivize global decarbonization by requiring equivalent carbon pricing for imported goods

CBAM operates by requiring importers to purchase CBAM certificates corresponding to the embedded carbon emissions in their imported goods. The certificate price is linked to the EU Emissions Trading System (ETS) carbon price.

CBAM Timeline

Phase	Period	Requirements
Transitional	Oct 2023 – Dec 2025	Reporting only (no financial obligations)
Full Implementation	Jan 2026 onwards	CBAM certificate purchase and surrender required

The transitional phase requires importers to report embedded emissions quarterly, building data collection capabilities before financial obligations begin.

Covered Products

CBAM initially covers carbon-intensive sectors:

Sector	HS Codes	Share of Covered Emissions
Steel and iron	Various	~60%
Aluminum	Various	~15%
Cement	Various	~10%
Fertilizers	Various	~10%
Electricity	2716	~5%
Hydrogen	2804	Trace

Steel products under CBAM include:

• Crude steel and ingots
• Flat-rolled products
• Long products (bars, rods, sections)
• Pipes and tubes
• Ferroalloys

Regulatory Updates: 2025 Simplification

Regulation (EU) 2025/2083

Adopted on 8 October 2025 and effective from 20 October 2025, this regulation introduces significant simplifications:

Key Changes:

1. 50-tonne de minimis threshold: Importers importing less than 50 tonnes annually are exempt

2. Simplified authorization process: Reduced administrative burden for declarants

3. Adjusted financial requirements: Reduced quarterly certificate holding requirements

4. Enhanced anti-abuse provisions: Strengthened enforcement mechanisms

Impact Assessment:

• 90% of importers will be exempt from CBAM under the de minimis threshold
• 99% of embedded emissions remain covered despite the exemption
• Environmental integrity is maintained while reducing SME burden

De Minimis Exemption Details

Threshold	Application	Impact
Below 50 tonnes/year	Fully exempt	No CBAM obligations
Above 50 tonnes/year	Full compliance required	All imports subject to CBAM

For most small importers and occasional buyers, CBAM will have minimal impact. However, significant steel importers will face full compliance requirements.

Calculating Embedded Emissions

Default vs. Actual Values

CBAM allows two approaches to determining embedded emissions:

Default Values:

• Pre-determined emission factors published by the European Commission
• Industry-average values based on third-country production
• Lower administrative burden but potentially higher costs
• Values will be periodically updated

Actual Values:

• Production-specific data from the manufacturing facility
• Requires detailed measurement and documentation
• Can result in lower CBAM obligations if production is efficient
• Requires verification by accredited verifiers

Emission Components

Embedded emissions include:

1. Direct emissions: From the manufacturing process itself

2. Indirect emissions: From electricity consumption in production (if relevant)

3. Upstream emissions: From raw material production (included in default values)

Steel-Specific Considerations

Steel production emissions vary significantly by process:

Process	Typical Emissions (tCO2/tonne)
Basic oxygen steelmaking (BOS)	1.4 – 2.0
Electric arc furnace (EAF)	0.4 – 1.0
Sintering/pelletizing	0.2 – 0.4
Blast furnace ironmaking	1.2 – 1.8

Chinese steel production, predominantly using blast furnace/BOS routes, typically incurs higher embedded emissions than the EU average, where EAF penetration is greater.

Compliance Requirements for Importers

Authorization Requirements

Before importing CBAM-covered goods, importers must:

1. Apply for authorized CBAM declarant status with national competent authority

2. Register in the CBAM registry

3. Appoint an indirect customs representative (if required)

4. Establish CBAM certificate procurement process

Applications submitted by 31 March 2026 may continue importing while applications are processed.

Annual Reporting Obligations

By 31 May each year (covering previous calendar year):

1. Quarterly reports submission: Due 30 days after each quarter

2. Annual CBAM declaration: Total embedded emissions

3. Certificate surrender: By 30 September each year

Financial Obligations:

• CBAM certificates must be purchased at current ETS price
• January 2027 onwards: Must hold 50% of estimated annual emissions in certificates by quarter end
• Final surrender due 30 September following the reporting year

Documentation Requirements

Importers must obtain and retain:

• Supplier declarations: From the production facility
• Production records: Detailed manufacturing process data
• Emission verifications: If using actual values (requires accredited verifier)
• Electricity consumption data: For indirect emissions calculation
• Customs documentation: Proof of import quantities

Impact on European Steel Buyers

Cost Implications

CBAM will increase the cost of imported steel:

Estimated Impact:

• EUR 30-80 per tonne for typical steel products (based on current ETS prices)
• Higher for products with above-average emission intensity
• Lower for efficient producers with lower carbon footprint

These costs will be passed through from suppliers (through CBAM certificate costs) to buyers in the purchase price.

Strategic Considerations

European buyers should evaluate:

1. Supply chain carbon intensity: Assess embedded emissions in current sourcing

2. Supplier decarbonization efforts: Evaluate suppliers’ carbon reduction roadmaps

3. Total cost of ownership: Include CBAM costs in procurement decisions

4. Diversification options: Consider multiple sourcing strategies

5. Long-term contracts: Lock in pricing before full CBAM implementation

Supplier Communication

Effective CBAM preparation requires engagement with suppliers:

Key questions for Chinese steel suppliers:

1. What is their current emission intensity (kgCO2/tonne)?

2. Do they have a decarbonization strategy?

3. Can they provide verified actual emission data?

4. How will they handle CBAM certificate transfer?

5. What documentation systems are in place?

Working with Suppliers Like Createel

Supplier Readiness Assessment

When evaluating steel suppliers, assess:

Capability	What to Verify
Emission tracking	Systems for measuring production emissions
Data documentation	Ability to provide emission documentation
Verification capability	Partnerships with accredited verifiers
CBAM expertise	Understanding of reporting requirements
Certificate handling	Process for managing CBAM obligations

Documentation Checklist

Request from suppliers:

• [ ] Production process description
• [ ] Annual energy consumption breakdown
• [ ] Direct and indirect emission calculations
• [ ] Third-party verification statements (if available)
• [ ] Emission intensity trend data
• [ ] Decarbonization roadmap

Contract Considerations

Review purchase contracts for:

1. Price adjustment clauses for CBAM cost pass-through

2. Emission data provision requirements

3. Verification cooperation obligations

4. Force majeure provisions related to CBAM compliance

5. Documentation retention requirements

Preparing for Full Implementation

Immediate Actions (Before January 2026)

1. Assess CBAM applicability: Calculate annual import volumes by HS code

2. Register for authorized declarant status: Begin application process early

3. Engage suppliers: Request emission data and documentation capabilities

4. Review contracts: Identify gaps in CBAM provisions

5. Establish procedures: Develop internal CBAM compliance processes

Ongoing Requirements

1. Quarterly reporting: Submit reports within 30 days of quarter end

2. Annual declarations: Complete by 31 May each year

3. Certificate management: Purchase and hold required certificates

4. Documentation retention: Maintain records for 4 years minimum

5. Monitoring regulatory updates: Track guidance and interpretation

Bottom Line for Buyers

CBAM represents a fundamental shift in steel procurement:

Key takeaways for European buyers:

1. Understand your exposure: Calculate annual import volumes and CBAM applicability

2. Engage suppliers now: Request emission data and documentation capabilities

3. Plan for costs: Budget for CBAM certificate costs from January 2026

4. Verify compliance: Ensure suppliers can meet documentation requirements

5. Review contracts: Update agreements to address CBAM provisions

The 90% de minimis exemption means many smaller importers will avoid full CBAM requirements. However, significant steel importers must prepare comprehensive compliance programs or face penalties.

Createel International Limited is preparing for CBAM compliance, including emission tracking, documentation systems, and verification capabilities to support European customers’ CBAM reporting requirements.

CBAM-Compliant Steel Supply from CREATEEL

For EU buyers affected by the Carbon Border Adjustment Mechanism, CREATEEL provides the embedded-emissions documentation chain your declarant needs — mill EPD-type data, production route declarations, and supporting MTC records for CBAM reporting.

CBAM Requirement	What CREATEEL Provides	Notes
Embedded emissions (direct/indirect)	Mill production data: energy mix, process route (BF-BOF vs EAF vs DRI), scrap ratio	Provided per heat/order in CBAM reporting format
Installation identification	Mill name, address, installation ID for EU reporting	Via mill’s EPD/declaration
Production route declaration	Hot-rolled coil vs plate; ERW vs seamless; coating inputs	Matches CN code of your import
Verification readiness	Mill records ready for accredited verifier review (2025+ transitional to definitive)	Coordinate verification scope at order stage
Documentation pack	MTC + production route statement + energy data summary with each CBAM-relevant shipment	Free of charge; EPD/verification at cost
Default values avoidance	We help EU buyers avoid default-value penalties by providing actual mill data	Speak to our export team for CBAM quotes

Buyer FAQ

Q: When do I need to start paying for CBAM certificates?

A: Financial obligations (certificate purchase and surrender) begin January 2026, with the first annual declaration due by 31 May 2027 covering 2026 imports.

Q: How are CBAM certificate prices determined?

A: CBAM certificate prices are linked to the EU ETS weekly average auction price, published by the European Commission.

Q: What happens if I don’t have enough certificates?

A: Penalties apply for insufficient certificate surrender, calculated as EUR 100 per tonne of unreported emissions in the first year, increasing thereafter.

Q: Can I use renewable energy certificates to reduce CBAM obligations?

A: Production facilities can claim carbon pricing already paid in the country of origin. However, renewable energy certificates must be properly documented and verified.

Q: What documentation do I need from my Chinese supplier?

A: Minimum documentation includes production process details, energy consumption data, and emission calculations. For actual values, third-party verification is required.

Q: Does CBAM apply to processing trade or only direct imports?

A: CBAM applies to goods imported into the EU customs territory. Processing trade where goods are re-exported from the EU may have reduced exposure, but specific rules apply.