EU CBAM – Complete Guide to Carbon Border Adjustment Mechanism, Compliance, Certificates & Indian Exporters

The European Union Carbon Border Adjustment Mechanism (EU CBAM) is an EU climate policy mechanism that places a carbon-related cost on certain carbon-intensive goods imported into the European Union.

CBAM is designed to address the risk of carbon leakage by ensuring that the carbon emissions embedded in certain imported goods are reflected in the cost faced by importers, alongside the carbon costs applicable to production within the EU under the EU Emissions Trading System (EU ETS).

The CBAM framework initially covered six major sectors:

• Iron and steel
• Aluminium
• Cement
• Fertilisers
• Electricity
• Hydrogen

The definitive CBAM regime began on 1 January 2026, following the transitional period that ran from October 2023 through December 2025.

For manufacturers and exporters outside the EU, including businesses in India, CBAM is particularly important because EU importers may require detailed information about the greenhouse-gas emissions embedded in imported products.

Although the formal CBAM declaration and certificate obligations generally sit with the EU importer or authorised CBAM declarant, non-EU manufacturers can have an important role in supplying accurate production and emissions information for their exported goods. The European Commission has published dedicated guidance for non-EU installation operators for the definitive period.

What Is EU CBAM?

CBAM stands for Carbon Border Adjustment Mechanism.

It is a European Union mechanism established by Regulation (EU) 2023/956 to address greenhouse-gas emissions embedded in certain goods imported into the EU.

The regulation states that CBAM is intended to address the risk of carbon leakage, reduce global emissions and support the objectives of the Paris Agreement by creating incentives for emissions reductions in third countries.

Why Was the EU CBAM Introduced?

One of the principal policy objectives behind CBAM is addressing carbon leakage.

Carbon leakage can occur when production moves from jurisdictions with relatively stronger climate policies to jurisdictions with less stringent climate policies, or when lower-carbon EU production is replaced by more carbon-intensive imported products.

CBAM is designed to complement the EU Emissions Trading System (EU ETS).

The basic policy concept is that carbon-intensive products imported into the EU should face a carbon cost that reflects their embedded emissions, while EU producers in relevant sectors are subject to the EU's carbon-pricing framework.

The European Commission describes CBAM as a mechanism intended to ensure that the carbon price of imports is equivalent to the carbon price of domestic production, while supporting the EU's climate objectives.

Which Products Are Covered Under EU CBAM?

CBAM currently covers selected goods in six sectors.

The actual legal scope is determined by the applicable CN codes and CBAM legislation, not merely by the commercial name of a product.

This is an important point for exporters.

For example, saying that a company exports "steel products" is not by itself sufficient to determine whether CBAM applies. The exporter and EU importer should identify the relevant CN/TARIC classification and check the applicable CBAM scope.

Who Is Responsible for CBAM Compliance?

One of the most important points to understand is the distinction between the EU importer/declarant and the non-EU manufacturer or producer.

EU Importer / Authorised CBAM Declarant

The EU-side declarant is responsible for obligations such as:

• obtaining the required authorisation where applicable;
• declaring imported CBAM goods;
• declaring embedded emissions;
• purchasing CBAM certificates;
• surrendering certificates; and
• complying with applicable EU reporting and verification requirements.

The European Commission states that EU importers or their indirect customs representatives importing more than the applicable single mass-based threshold of 50 tonnes of CBAM goods must apply for authorised CBAM declarant status. This threshold applies to the four goods categories of cement, iron and steel, aluminium and fertilisers; electricity and hydrogen are subject to their specific rules.

Non-EU Manufacturer / Exporter

The non-EU producer generally does not become the EU's CBAM declarant merely because it manufactures the product.

However, the producer can be required commercially and operationally to provide information concerning:

• installation;
• production processes;
• quantities produced;
• emissions;
• precursor materials;
• emission factors;
• electricity;
• production routes; and
• other information needed to calculate embedded emissions.

The European Commission has specifically published guidance to help installation operators outside the EU implement CBAM during the definitive period.

What Is the 50-Tonne CBAM Threshold?

The definitive CBAM framework introduced a single mass-based threshold of 50 tonnes for relevant CBAM goods.

The threshold is designed to simplify compliance for smaller import volumes.

Under the current framework, the 50-tonne threshold applies to imports in the:

• cement;
• iron and steel;
• aluminium; and
• fertiliser

categories.

Importers of electricity and hydrogen are subject to the specific rules applicable to those sectors rather than the same 50-tonne threshold.

The threshold should not be interpreted as a general exemption for every CBAM product or every importer. Product classification and the applicable sector-specific provisions must be checked.

How Are CBAM Embedded Emissions Calculated?

The calculation methodology depends on:

• the CBAM sector;
• production process;
• relevant emissions;
• precursor materials;
• applicable calculation methodology;
• available installation data;
• electricity consumption where relevant; and
• whether actual or applicable default values are used.

The EU has established specific calculation rules under its implementing legislation.

The European Commission published Commission Implementing Regulation (EU) 2025/2547 concerning methods for calculating emissions embedded in goods.

The Commission has also published definitive-period guidance covering:

• general CBAM concepts;
• quick guidance for non-EU operators;
• embedded-emissions calculation methods;
• free-allocation adjustment;
• cement;
• hydrogen;
• fertilisers;
• iron and steel;
• aluminium; and
• electricity.

Why Is CBAM Emissions Data Important for Indian Exporters?

India is among the countries identified by the European Commission as a major origin of CBAM-covered imports during the early implementation of the definitive regime.

The EU and India have also engaged in cooperation relating to CBAM.

For Indian exporters, CBAM can create a practical requirement to develop a reliable system for:

The European Commission has specifically stated that CBAM embedded emissions are calculated at product level and has provided sector-specific information for non-EU producers.

CBAM Compliance for Indian Manufacturers

Indian manufacturers exporting covered goods to the European Union should first determine whether their products actually fall within CBAM scope.

A practical assessment should include:

1. Identify the Export Product

2. Confirm the CN/TARIC Code

3. Determine the Manufacturing Installation

4. Identify the Production Route

5. Collect Energy Data

6. Identify Process Emissions

7. Identify Relevant Precursors

8. Calculate Product-Level Embedded Emissions

9. Maintain Supporting Evidence

10. Coordinate With the EU Importer

CBAM Compliance Documents for Exporters

The exact documentation required can vary depending on the sector, product and calculation methodology.

A CBAM data package may involve:

• product details;
• CN/TARIC classification;
• manufacturing installation information;
• production quantity;
• production process information;
• fuel consumption;
• electricity consumption;
• process emissions;
• precursor information;
• emission factors;
• embedded-emissions calculations;
• supporting records;
• carbon-price information where applicable; and
• verification-related documentation.

The European Commission's definitive-period guidance for non-EU installation operators should be used to determine the detailed information applicable to a particular sector.

What Are CBAM Certificates?

CBAM certificates are used under the definitive regime to cover the embedded emissions associated with CBAM goods imported into the EU.

EU authorised CBAM declarants purchase CBAM certificates from the applicable EU system and surrender the required number in connection with their annual CBAM obligations.

The certificate price is linked to the EU ETS carbon market.

The European Commission calculates the CBAM certificate price based on EU ETS allowance auction prices. In 2026, the price is calculated on a quarterly basis. From 2027, the Commission will calculate and publish prices weekly.

CBAM Compliance Process – Step by Step

A practical CBAM compliance workflow can be represented as:

1. Identify exported products
2. Verify CN/TARIC classification
3. Confirm CBAM applicability
4. Identify manufacturing installation
5. Map production process
6. Collect energy and production data
7. Identify relevant direct and indirect emissions
8. Identify relevant precursor emissions
9. Calculate embedded emissions using applicable methodology
10. Prepare supporting documentation
11. Verification where applicable
12. Share required information with the EU importer/declarant
13. EU declarant completes CBAM obligations

Conclusion

The European Union Carbon Border Adjustment Mechanism (EU CBAM) has moved from its transitional reporting phase into its definitive regime from 1 January 2026.

For companies exporting covered products to the European Union, CBAM is no longer simply a future regulatory issue. It is an active part of the EU import and carbon-pricing framework.

The six sectors currently covered are:

Iron & Steel | Aluminium | Cement | Fertilisers | Electricity | Hydrogen

The exact scope, however, must be determined using the applicable CN/TARIC classifications and current CBAM legislation rather than relying solely on a product's commercial description.

For Indian manufacturers, one of the most important practical aspects is the quality of embedded-emissions data. Although the formal CBAM declaration and certificate obligations generally sit with the EU importer or authorised CBAM declarant, the non-EU manufacturer may need to provide reliable information about its production installation, processes and emissions.

Frequently Asked Questions