Compliance guidelines for EU’s CBAM

Core definition and scope of CBAM 

• Core concept of CBAM: The Carbon Border Adjustment Mechanism (CBAM) is an EU cross-border carbon cost regulation designed to address climate change, advance green low-carbon development, and ensure fair competition. Its core principle is to impose equivalent carbon costs on high-carbon imported goods from non-EU countries, aligning carbon expenditure between EU and foreign manufacturers. Functioning as a border carbon regulation rather than a traditional tariff, CBAM has become a flagship tool of EU green trade governance. 

• Current covered product scope: Having entered the definitive phase in 2026, CBAM initially covers six high-emission sectors determined exclusively by HS Codes: cement, steel, aluminum, fertilizers, electricity and hydrogen. EU plans to expand product coverage between 2028 and 2029, with full implementation completed by 2034, eventually restricting the majority of industrial goods exported from China to EU. 

CBAM implementation timeline and core phases

CBAM compliance obliged parties and thresholds 

• Responsible parties: EU-based importers are the primary obliged parties for CBAM reporting, certificate procurement and regulatory coordination. However, Chinese exporters must provide verified embedded carbon emission data, forming a critical collaborative partnership. Under DDP terms, Chinese suppliers are deemed the actual importers and bear direct CBAM compliance liabilities. 
• Compliance threshold: EU importers with annual CBAM product imports below 50 tons are exempt from registration and certificate obligations, only requiring internal data retention. Volumes exceeding 50 tons mandate official registration and full annual compliance procedures. 

CBAM certificates and carbon cost calculation rules 

Core CBAM certificate rules: One CBAM certificate corresponds to one ton of CO₂ equivalent embedded emissions. Certificate prices are linked dynamically to EU Emissions Trading System (ETS) market prices, with the 2026/Q1 price being €75.36 per ton. Pricing will shift to weekly averages from 2027, increasing market volatility. 

Carbon cost calculation formula: CBAM carbon cost=[(embedded carbon emissions−(CBAM benchmark×CBAM factor)]×EU ETS price x volume of goods. The “EU ETS price” refers to the market price of EU’s Emissions Trading System (ETS), serving as the final multiplier for carbon costs. The other two key parameters including “CBAM benchmarks” and annual declining “CBAM factors” are stipulated by EU legislation. Among them, the “embedded carbon emissions” of a product refer to the total greenhouse gas emissions generated throughout the entire product production process, covering carbon emissions from all links including raw material production, processing and manufacturing, and energy consumption. Such data is categorized into two types: enterprise actual measurement data and EU default values. The “CBAM benchmark” value represents the average emission level of the top 10% production facilities with the lowest carbon emission intensity within EU. It is a statutory deduction item designed to gradually reduce enterprises' carbon cost burdens. The “CBAM factor” is an adjustment coefficient that decreases year by year. It stands at 97.5% in 2026 and will decline annually thereafter, which means carbon costs will rise progressively over time. 

Core CBAM compliance obligations for Chinese exporters

• Provide full-lifecycle carbon emission data verified by EU-recognized third-party institutions such as SGS and Bureau Veritas. 
• Establish full supply chain carbon accounting systems by collecting emission data from upstream raw material and energy suppliers. 
• Retain complete documentation for the future deduction of carbon-related taxes and fees already paid in China to avoid double taxation.

Impacts and practical countermeasures for Chinese exporters

Full CBAM implementation increases carbon costs, administrative burdens and supply chain compliance requirements. To respond effectively, enterprises shall: 

• Conduct comprehensive carbon inventory and pre-verification; 
• Optimize production processes and energy structures to reduce carbon intensity; 
• Clarify carbon data responsibilities and cost allocation in commercial contracts; 
• Continuously track EU policy updates and adjust compliance strategies dynamically.