CBAM Regulation: Registration, reporting obligations and standard values simply explained

The Carbon Border Adjustment Mechanism (CBAM) is the European Union's key climate policy instrument for preventing carbon leakage whilst maintaining competitive fairness between EU businesses and international producers. As the transition from the reporting-only phase to full compliance in 2026 approaches, understanding CBAM reporting requirements and ISO 14067 and GHG Protocol-compliant carbon calculations has become critical for EU importers of carbon-intensive goods affected by regulatory compliance in renewable energy procurement and capital expenditure depreciation for hardware modernization.

This guide explains how to navigate CBAM registration, fulfil quarterly reporting obligations, calculate embedded emissions using approved methodologies, manage default values, and prepare for the definitive period when CBAM certificates become mandatory.

This article is part of our comprehensive ESRS Standards 2026 guide.

Executive Summary: What EU Importers Need to Know

The Carbon Border Adjustment Mechanism introduces a carbon price on imported goods to prevent carbon leakage and ensure that carbon-intensive goods imported into the EU face comparable carbon costs to those produced domestically under the EU Emissions Trading System (EU ETS).

Transitional Phase (Until 31 December 2025):

• Quarterly reporting obligations without financial penalties

• Default values permitted (with increasing restrictions)

• Focus on data collection and system testing

• Penalties only for non-reporting or significantly incomplete CBAM reports

Definitive Period (From 1 January 2026):

• Only authorised CBAM declarants can import CBAM covered goods

• Annual declarations replace quarterly reports

• CBAM certificates must be purchased and surrendered

• Certificate prices align with EU ETS allowances

• Verified emissions data becomes mandatory

• First certificate purchases for 2026 imports due in autumn 2027

Companies that strategically invest in accurate emissions data and supplier engagement will significantly reduce carbon costs compared to those relying on default values.

Understanding the Carbon Border Adjustment Mechanism

CBAM addresses a critical challenge: as the EU strengthens its climate policies and increases carbon prices under the EU ETS, there is a risk that production relocates to countries with weaker environmental regulations—a phenomenon known as carbon leakage. By requiring importers to report embedded emissions and ultimately purchase CBAM certificates, the mechanism incentivises third-country producers to reduce greenhouse gas emissions whilst protecting EU businesses from unfair competition.

CBAM operates in synchronisation with the EU ETS. As free allowances for EU producers are progressively phased out between 2026 and 2034, CBAM ensures that importers face equivalent financial obligations. This coordinated approach prevents competitive distortions whilst maintaining pressure for decarbonisation across global supply chains. Critically, CBAM is not a cap-and-trade system. Instead, it applies a carbon price aligned with EU ETS allowance prices to embedded carbon emissions in imported goods, creating financial obligations that mirror domestic carbon costs without capping import volumes.

CBAM Covered Goods: The Six Categories

CBAM currently applies to six sectors identified through carbon leakage risk assessment:

• Cement: Including clinker and various cement products

• Iron and Steel: Covering iron ore, pig iron, ferro-alloys and finished steel products

• Aluminium: Both primary production and unwrought aluminium

• Fertilisers: Ammonia, nitric acid, urea and nitrogen-based fertilisers

• Hydrogen: For industrial applications

• Electricity: Imported power generation

When importing into EU member states, companies must verify whether their goods fall under CBAM by comparing Combined Nomenclature (CN) codes with the list in Annex I of the CBAM Regulation.

Simple vs Complex CBAM Goods: Simple goods use input materials considered to have zero embedded emissions under CBAM methodology—their embedded emissions derive solely from production processes. Complex goods incorporate relevant precursor materials whose embedded emissions must be included, requiring tracking through multiple production stages.

During the transitional phase, importers must report both direct emissions (from manufacturing processes) and indirect emissions (from consumed electricity). From 2026, indirect emissions are removed from scope for iron and steel, aluminium, and hydrogen, whilst cement and fertilisers retain both.

CBAM Registry Registration: Your First Compliance Step

Registration is the mandatory first step for all importers subject to CBAM reporting requirements. EU importers must register through their national customs authority's portal—in Germany, via the Customs Portal (Zoll-Portal). The CBAM Transitional Registry operates as a secure, centralised EU database managed by the European Commission, running independently from the broader EU Customs Trader Portal to ensure data security and specialised emissions reporting functionality.

Registration requires comprehensive company details: legal entity name and registered address, VAT identification number, EORI number (Economic Operators Registration and Identification), contact details for CBAM compliance officers, details of imported CBAM goods categories by CN code, and customs registration documentation. For the definitive period: evidence of financial guarantee capability must also be provided.

For companies operating across multiple EU member states, registration requirements vary depending on customs declaration structures and import locations. Strategic planning around entity structure can optimise reporting efficiency.

For the definitive period from 2026, becoming an authorised CBAM declarant requires additional steps: enhanced documentation in the CBAM Registry, provision of financial guarantee evidence, demonstration of MRV system capability, approval by the national competent authority, and issuance of a CBAM account number for customs declarations. National competent authorities now accept applications for authorised status, and forward-thinking importers are already completing this process ahead of the January 2026 deadline.

Quarterly Reporting Obligations During Transition

Quarterly CBAM reports must be submitted no later than one month after each quarter's conclusion:

• Q1 (January–March): Report due by 30 April

• Q2 (April–June): Report due by 31 July

• Q3 (July–September): Report due by 31 October

• Q4 (October–December): Report due by 31 January following year

Under Article 9(1) of the CBAM Implementing Regulation, amendments to submitted reports can be made until two months after the quarter's end. Each quarterly report must contain installation-level data for each CN code imported, including: total quantity, actual embedded emissions per tonne or MWh, total indirect emissions, any carbon price paid in the country of origin, installation identification, reporting method used, and precursor materials for complex goods.

The CBAM Transitional Registry offers two submission pathways: manual entry through the registry's user interface, suitable for lower import volumes; and XML upload for automated, high-volume submissions. Companies importing significant quantities should invest in XML-compatible reporting systems to reduce manual workload and error risk.

Calculating Embedded Emissions: Methodology Requirements

A critical distinction: CBAM's definition of embedded emissions is substantially narrower than comprehensive lifecycle assessments (LCA) or product carbon footprints. CBAM focuses specifically on emissions covered by the EU ETS—primarily direct production emissions and, in some cases, indirect emissions from consumed electricity. Using LCA emission factors significantly overestimates embedded emissions for CBAM purposes, and since mid-2024, CBAM-prescribed methodologies are mandatory.

The CBAM Implementing Regulation specifies acceptable calculation methods in hierarchical preference:

• Measurement-Based Methods: Direct monitoring through continuous emissions monitoring systems (CEMS) or periodic measurements

• Calculation-Based Methods: Using activity data and installation-specific emission factors

• Default Values: EU-published benchmarks as a last resort

Direct emissions encompass combustion emissions, process emissions (e.g., CO₂ release from chemical reactions), and waste gas emissions. Indirect emissions cover greenhouse gases generated by electricity consumed during production, calculated using the emission factor for the relevant electricity grid or contracted supply, with regulatory drivers for chemical industry decarbonization increasingly shaping these methodologies.

Strategic Management of Default Values

Default values serve as fallback emission factors when actual emissions data is unavailable. The European Commission publishes these values for different sectors, product categories and countries.

During the transitional phase, default values are broadly permitted and carry no direct financial penalty. From 2026 onwards, they are severely restricted for most goods and set deliberately high to incentivise actual data collection. For complex goods, only limited emissions may use estimated data.

Companies that persistently rely on default values will face considerably higher carbon costs compared to competitors providing verified emissions data. The financial differential can significantly impact import economics, particularly for carbon-intensive goods where emission variations between installations are substantial.

Forward-thinking importers are treating CBAM compliance as a strategic opportunity. By investing in supplier engagement programmes, contractual data-sharing arrangements, and verification systems, companies can significantly reduce carbon costs, gain competitive advantages, and build resilient supply chains.

Verification Requirements and Accreditation

From 2026, actual emissions data must undergo verification by accredited verifiers before inclusion in annual CBAM declarations. This mirrors the monitoring, reporting and verification (MRV) system used for EU ETS installations and ensures methodological consistency across domestic and imported production. The CBAM Registry has been progressively expanded to support this infrastructure, now offering a registered installation database, accredited verifier access portals, and national authority integration for oversight and enforcement.

Verifiers must assess: methodology compliance (whether calculations follow CBAM-prescribed methods), data reliability and completeness of activity data and emission factors, appropriate use of site-specific versus default values, documentation quality with sufficient audit trails, and alignment with EU ETS monitoring approaches. Default values published by the European Commission do not require additional verification.

To prepare for mandatory verification, importers should establish contractual frameworks with suppliers specifying emissions data provision, verification access rights, and update frequency. Companies should also implement data management infrastructure with version control and audit trails, institute an internal quality control process before final data submission, and establish clear procedures for handling data gaps, disputes or supplier non-cooperation. Companies should conceptualise their CBAM processes as establishing a comprehensive "MRV system for imports"—encompassing data governance and quality assurance alongside pure emissions calculations.

CBAM Certificates: Purchase and Surrender Obligations

From 1 January 2026, authorised CBAM declarants must purchase CBAM certificates corresponding to embedded emissions in imported goods, with prices aligned to EU ETS allowance values, aligned with broader EU omnibus sustainability measures that are reshaping corporate climate obligations across the bloc. Certificates can be purchased throughout the year via the CBAM Registry. By 31 May each year, declarants submit annual declarations quantifying total embedded emissions for the previous calendar year and surrender corresponding certificates. Certificate prices reflect the weekly average EU ETS allowance prices from preceding weeks.

The number of certificates to surrender equals:

• Total embedded emissions (verified actual emissions or default values)

• Minus carbon price paid in country of origin (where demonstrable)

• Minus EU ETS free allowance equivalents during the phase-out period 2026–2034

This calculation ensures importers face carbon costs equivalent to EU producers, accounting for free allowances still allocated during the transition and avoiding double carbon pricing. The delayed timeline—first certificates for 2026 imports purchased and surrendered in autumn 2027—provides cash flow breathing room whilst requiring robust emissions tracking throughout the calendar year.

Strategic financial planning should consider: certificate price volatility aligned with EU ETS fluctuations, import volume projections across product categories, the cost-benefit analysis of investing in verified data systems versus relying on high-cost default values, and currency exposure (certificates are priced in euros regardless of origin country currency). Companies with significant CBAM goods imports should model multiple carbon price scenarios to understand the financial materiality of these obligations.

Penalties and Enforcement

Article 16 of the CBAM Implementing Regulation establishes graduated penalties during the transitional phase: €10 to €50 per tonne for failure to submit complete reports or for incomplete or inaccurate submissions. The penalty level considers the amount of information not reported, the quantity of goods and associated emissions not reported, the declarant's intent or negligence, and the level of cooperation with authorities. Penalties exceeding €50 per tonne are possible when incomplete or inaccurate reports are submitted twice consecutively or when reporting is delayed beyond six months.

Critically, transitional phase penalties apply to reporting failures rather than to emissions themselves, reflecting the learning period's focus on building compliance capability.

From 2026, enforcement intensifies significantly: significant penalties for insufficient certificate surrender, enhanced sanctions for deliberate misreporting or verification fraud, potential customs holds or seizure for goods imported without authorised declarant status, and compounded enforcement actions for multiple compliance failures. The European Commission conducts initial reviews of submissions, flagging incomplete or suspect reports to national competent authorities, who then determine whether to initiate formal review and correction procedures.

To minimise risk, importers should establish internal quality assurance processes before submission, conduct regular audits of data collection and calculation methodologies, implement comprehensive training programmes for CBAM compliance personnel, and maintain robust documentation for all reported data as retrospective verification and audits are possible.

Carbon Leakage Prevention and Carbon Price Deductions

To avoid double carbon pricing, CBAM allows deduction of carbon costs already paid in the country of origin. Only explicit carbon prices paid under formal carbon pricing mechanisms (carbon taxes or emissions trading systems) qualify—indirect costs or voluntary offset purchases do not. Required documentation includes proof of carbon price payment at installation level, official receipts from the carbon pricing authority, and evidence that no export rebates were received.

The deductible amount equals the effective carbon price per tonne of CO₂ paid on embedded emissions, capped at the equivalent CBAM certificate price. Effective deduction can significantly reduce financial obligations for importers sourcing from countries with established carbon pricing.

Future Scope Extensions and Strategic Preparation

The European Commission is actively analysing potential expansions of CBAM coverage based on carbon leakage risk assessments, data collected during the transitional phase, and technical feasibility of monitoring embedded emissions for complex value chains. Sectors under particular scrutiny for potential inclusion include polymers and plastics, organic chemicals, glass and ceramics, refined petroleum products, and paper and pulp. Scope extension proposals are expected by late 2025, with potential implementation in subsequent years. Companies importing goods in these sectors should monitor developments closely and begin preliminary assessments of CBAM exposure now.

For companies subject to both CBAM and the Corporate Sustainability Reporting Directive (CSRD), significant synergies exist in data collection and reporting infrastructure. CBAM's focus on embedded emissions directly overlaps with CSRD Scope 3 Category 1 (Purchased Goods and Services), meaning emissions data collected for CBAM compliance can inform CSRD reporting under ESRS E1. MRV systems built for CBAM strengthen overall corporate carbon accounting, and verification processes for actual emissions data prepare companies for CSRD limited assurance requirements. Rather than treating CBAM and CSRD as separate compliance exercises, strategic companies are developing integrated climate software for CSRD compliance that reduce duplication and transform reporting from pure compliance burden into Spain's Scope 1, 2, and 3 emissions reporting requirements strategic intelligence.

Strategic preparation for full compliance should include: applying for authorised CBAM declarant status, establishing financial guarantee arrangements, implementing XML-based reporting systems, engaging suppliers on actual emissions data provision, building comprehensive MRV systems aligned with EU ETS methodologies, and integrating CBAM data with CSRD reporting and broader climate strategy. Companies beginning this preparation now will be well-positioned for the January 2026 transition, whilst those delaying face compressed timelines and potentially significant carbon costs through reliance on default values.

Frequently Asked Questions About CBAM

What is the Minimum Threshold for CBAM?

Currently, CBAM does not establish absolute minimum thresholds for import volumes or embedded emissions. All imports of CBAM covered goods fall within scope regardless of quantity, provided they are released for free circulation in EU member states. Goods in transit, temporarily imported for testing, or held in customs warehouses without release for free circulation are excluded.

What are the CBAM Regulations?

The CBAM regulatory framework comprises Regulation (EU) 2023/956 (the core CBAM Regulation), Commission Implementing Regulation (EU) 2023/1773 (specifying reporting obligations, calculation methodologies and registry functionality), and ongoing delegated and implementing acts clarifying definitive period requirements. Importers should monitor the European Commission's CBAM webpage for updates.

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