EU CBAM scope

The Carbon Border Adjustment Mechanism (CBAM) is the EU's instrument to put a carbon price on imports of certain carbon-intensive goods, mirroring the price paid by EU producers under the EU Emissions Trading System (ETS). Its "scope" defines three things: which products are covered, which emissions count as embedded, and who must report and eventually pay.

Under Regulation (EU) 2023/956, the initial product scope covers six sectors considered at high risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen, along with selected downstream products like screws, bolts, and certain iron or steel articles. The exact goods are identified by CN (Combined Nomenclature) customs codes listed in Annex I of the regulation.

The emissions scope includes direct emissions from the production process for all covered goods. For cement and fertilisers, indirect emissions (from electricity used in production) are also counted during the definitive period. For iron, steel, aluminium, and hydrogen, indirect emissions are excluded at the start, pending review.

CBAM applies to importers established in the EU (or indirect customs representatives) bringing covered goods into the EU customs territory. Goods originating in countries fully linked to the EU ETS — currently Iceland, Liechtenstein, Norway, and Switzerland — are excluded.

The mechanism has two phases:

• Transitional phase (1 October 2023 – 31 December 2025): quarterly reporting of embedded emissions only, no financial payment.
• Definitive phase (from 1 January 2026): importers must buy and surrender CBAM certificates priced on the weekly ETS average, with free ETS allowances for EU producers phased out in parallel through 2034.

In February 2025 the Commission proposed an "Omnibus" simplification introducing a de minimis threshold of 50 tonnes per importer per year, which would exempt most small importers while retaining roughly 99% of covered emissions. A review clause foresees possible extension to additional ETS sectors and to more downstream products.