The Carbon Border Adjustment Mechanism (CBAM) will become effective on 1 January 2026, requiring companies importing certain goods into the European Union to comply with new carbon reporting and payment obligations. CBAM aims to prevent carbon leakage by ensuring imported products face a carbon cost equivalent to EU producers under the Emissions Trading System (ETS). The mechanism initially covers sectors with high carbon intensity, such as cement, steel, aluminum, fertilizers, and electricity. From 2023, importers need to start reporting embedded emissions in their goods, with full financial adjustments beginning in 2026. Companies must prepare by accurately measuring and documenting the carbon footprint of their products, establishing robust data collection systems, and understanding CBAM’s reporting requirements. Early readiness will help avoid compliance risks, financial penalties, and market disruptions. Stakeholders, including manufacturers, exporters, and importers, are urged to assess their supply chains, engage with authorities, and implement necessary changes to ensure smooth CBAM compliance by the enforcement date. This transition represents a significant step in the EU’s climate policy and global efforts to incentivize greener production and reduce carbon emissions worldwide.

Published on: 2025-12-24 at 08:48:58