Draft texts of the European Commission’s plans for the implementation of the Carbon Border Adjustment Mechanism (CBAM) show a decisive step toward market-aligned carbon pricing and tighter emissions verification.
The move was expected to reshape trade flows, compliance strategies and carbon-cost exposure for importers when the system becomes fully operational in 2026, Fastmarkets understands.
The two draft texts, seen by Fastmarkets on Tuesday November 12 but thought to have been leaked last week, outlined the methodology for calculating CBAM certificate prices and the principles for verifying embedded emissions in imported goods such as steel, aluminium, fertilizers, cement, electricity and hydrogen. Together, they form the regulatory foundation of the EU’s carbon border system ahead of its full rollout on January 1, 2026.
CBAM certificate prices
Under the pricing regulation, CBAM certificate prices will directly track the weighted average of auction clearing prices in the EU’s Emissions Trading System (ETS), ensuring that imports face a carbon cost equivalent to the cost paid by EU-based producers.
The certificates will be calculated quarterly in 2026 and weekly from 2027, based on auction clearing prices weighted by traded volumes. By aligning CBAM with ETS dynamics, Brussels hoped to close loopholes that could lead to carbon leakage or price distortions.
For market participants, the link will mean greater exposure to ETS volatility. With EU Allowance (EUA) prices hovering around €70-85 ($81-98) per tonne of CO2 in October-November 2026, steel traders expected CBAM certificate costs to follow closely.
“CBAM will effectively extend the ETS price signal to non-EU producers,” a trader in Germany said. “It’s a powerful incentive to decarbonize or lose market share. Let the ‘Hunger Games’ begin!”
Verifying embedded emissions
The companion verification regulation, outlined in another draft seen by Fastmarkets, sets strict conditions for emissions validation. Physical site visits by accredited verifiers will be mandatory in the first year of CBAM, though virtual inspections or waivers may be allowed later under defined low-risk conditions.
Verification will apply a 5% materiality threshold, but smaller discrepancies may still be deemed significant depending on risk assessments.
Industry sources warn that verification capacity, especially in non-EU jurisdictions, could be a problem. “Many exporters do not yet have accredited verifiers or reliable emissions data systems,” a second steel trader in Europe said. “That could limit shipments into Europe or delay customs clearance once CBAM kicks in.”
The Commission will standardize verification reports via the CBAM Registry, ensuring consistency and transparency. Both regulations will enter into force three days after publication in the Official Journal of the EU.
Steel market sentiment
Market participant who spoke to Fastmarkets said that the new rules, and also a potential cut in industrial benchmark emissions values under the ETS, could tighten CBAM-linked costs across supply chains, particularly in sectors such as steel and aluminium, which rely heavily on carbon-intensive production.
“We could see effective import costs rise by some €70 per tonne due to CBAM,” a steel hot-rolled coil buyer in Italy said.
While the Commission’s approach offers greater price transparency in theory, market sources said that the complexity of compliance will increase sharply in 2026 while importers, verifiers and producers adapt to the dual demands of emissions reporting and certificate purchasing.
