The EU’s Emissions Trading System (ETS) sets a price on carbon emissions. To reduce costs associated with carbon emissions, some industries relocated to outside the EU, leading to so-called ‘carbon leakage’. To counteract this, the EU introduced the Carbon Border Adjustment Mechanism (CBAM). This new regulation aims to level the playing field between EU and non-EU market participants, and to drive emission reductions outside the EU. It sets a price on the embedded emissions of certain goods imported into the EU and requires monitoring and reporting of these emissions.

The goods currently in scope are: aluminium, iron & steel, cement, electricity, fertilisers and hydrogen. The CBAM's reporting requirements are already in effect, with financial impacts starting in 2026. In practical terms, EU-importers will be paying a price for embedded emissions, this will of course also affect suppliers and supply chains in a broader sense.

CBAM presents challenges for exporters outside the EU and importers into the EU, both in terms of costs, but also when it comes to monitoring and reporting emissions correctly, in line with the EU rules. For non-EU suppliers in particular, there is a steep learning curve, as they will need to communicate correct data to their clients in the EU.

However, it also offers opportunities for businesses making efforts to deliver low-emission products, or use efficient technology. They will have a competitive edge against those lagging behind.

While the EU is leading the way with CBAM, other regions, like the UK, are considering similar measures. It's important for businesses to stay ahead of these developments and take action today:

Assess supply chains: Evaluate your supply chains to identify and address significant carbon emissions.

Implement decarbonisation strategies: Adopt technologies and practices that reduce your carbon footprint.

Stay informed and compliant: Keep up with regulatory changes, focus on compliance with reporting requirements, and be prepared for audits.