The European Union’s Carbon Border Adjustment Mechanism (CBAM) is one of the most significant trade and climate policy reforms affecting global exporters to the EU. Designed to prevent carbon leakage, where production moves to regions with weaker climate rules, CBAM ensures that imported goods face a carbon cost comparable to products manufactured inside the EU under its Emissions Trading System (EU ETS).
From Reporting to Carbon Certificate Payments
CBAM’s rollout has two key phases:
- Transitional phase (Oct 2023–Dec 2025): Importers needed only to report greenhouse gas emissions embedded in selected goods entering the EU.
- Definitive regime (from 1 January 2026): EU importers must continue to report emissions and, crucially, purchase and surrender CBAM certificates that cover the emissions embedded in their imported products.
These certificates are priced to reflect the cost of EU ETS allowances, meaning importers pay a carbon cost on par with EU producers, helping level the competitive playing field across borders.
The first annual CBAM declaration covering imports in 2026 will be due by May 2027.
Products in Scope
CBAM currently applies to carbon-intensive goods including:
- Iron and steel
- Aluminium
- Cement
- Fertilisers
- Hydrogen
- *Electricity is acknowledged under the mechanism but treated separately for purposes of guidance
Importers and export partners should work closely to understand how products are classified under the EU CBAM definitions and whether their supply chains generate emissions that fall under these categories.
Key Changes under the Simplified CBAM Rules
To make compliance more proportionate, particularly for SMEs, the EU adopted a simplification package (Regulation (EU) 2025/2083), finalised in October 2025 and effective ahead of 2026 implementation.
1. De minimis exemption
Importers whose total annual volume of CBAM goods is 50 tonnes or less are now exempt from CBAM obligations. This replaces a narrower earlier exemption and is expected to remove about 90 % of importers — mainly small and micro businesses — from ongoing compliance duty, while still covering over 99 % of emissions from CBAM-covered imports.
However: This exemption does not apply to electricity or hydrogen imports.
2. Operational flexibility and procedural simplifications
The simplification law includes a number of practical changes to help businesses, such as:
- Easier authorisation procedures and reduced administrative steps.
- Streamlined data collection and emission calculation methods.
- More practical verification rules for emissions reporting.
- Adjusted timelines and financial liability frameworks for CBAM participants.
These reforms are designed to reduce red tape, particularly for smaller operators, while maintaining the environmental integrity of the system.
What Businesses Need to Do Now
As the definitive CBAM regime takes effect in January 2026, companies exporting to the EU — including UK manufacturers and suppliers — must take proactive steps:
Prepare for compliance:
- Map your supply chain emissions to understand where your products fall under CBAM.
- Collect emissions data from raw material suppliers and production processes.
- Engage with your EU importers to ensure they have the information needed for their reporting and certificate purchase obligations.
- Work with accredited verifiers if third-party verification is required.
Exporters should be particularly attentive if their EU customer imports more than 50 tonnes of CBAM goods annually, even if your shipments are below the threshold, as this can trigger reporting and verification requirements for them - requiring emissions data from you.
Why This Matters for UK and Global Businesses
CBAM represents a fundamental shift in how carbon pricing is integrated into international trade. For exporters to the EU:
- Costs will be tied to emissions intensity, not just tariffs or duties.
- Competitive advantage will increasingly depend on low-carbon supply chains.
- Early preparation can reduce compliance costs and avoid customs delays or penalties.
With the added simplification measures, smaller businesses have more breathing room - but understanding the rules and planning accordingly is essential.
View the Gov.uk guidance here
How Essex Chambers Can Support Your Business
Navigating CBAM compliance can be complex and resource-intensive. That’s where Essex Chambers can help your business:
CBAM Consultancy Services
Our specialists offer tailored support to businesses exporting to the EU, including:
✔ Regulatory guidance and readiness assessments
✔ Supply chain emissions mapping and data strategy
✔ Assistance with verification and documentation processes
✔ Training for teams on CBAM reporting obligations
✔ Ongoing updates as EU rules evolve
Whether you’re a manufacturer, exporter, or importer, our expert consultants can help you understand what CBAM means for your business and what practical steps you need to take to comply efficiently and cost-effectively.
Learn more about how Essex Chambers can support you with CBAM and use our FREE EU CBAM Health Check Tool here