The CBAM for imported products was proposed by the EU to prevent carbon leakage within the EU Emissions Trading System (ETS), and was expected to be implemented from January 1, 2026.
Despite the short time-frame, European steel market participants were still digesting important details on how the mechanism will be administered.
Effectively, CBAM will come into force on January 1, but the fiscal implications will only become effective in May 2027.
“The EU delayed the operational handing of CBAM until May 2027 because the [electronic] platform for handing the certificates is not ready for trading,” Alexander Julius, president of European steel distributors’ association EUROMETAL, said during his presentation in Milan.
The price of CBAM certificates will be linked to ETS prices. For example, EU carbon emissions allowance prices hovered around €71.52 ($80.49) per tCO2e in January this year, peaked at more than €81 per tCO2e in mid-February, and then dropped below €60 per tCO2e in early April.
Under CBAM, those involved will need to buy certificates on the EU platform and can also resell those which are not used, Fastmarkets understands.
There are actual values of CO2 in imported goods, and the European Commission has also introduced default values that can be accepted in the future and will be set in the system. But the default values will be higher than the actual values, Fastmarkets understands.
To import steel when CBAM is in effect, customs-authorized companies need to be registered with the platform to be able to pay for CBAM certificates.
Initially, CBAM declarations will need to be done for Scope 1-2 emissions, but eventually also for Scope 3.
Declarants will be held liable for declaring incorrect emissions values.
Therefore, to provide more transparency, non-EU suppliers can register their installations on the EU platform to declare their Scope 1-2 emissions. But this will have to be checked by EU verifiers and certification companies.
“This is a good plan because not every declarant can risk registering [CO2 emissions] independently,” Julius said.
There will be around 100,000 companies that will be authorised on the EU platform to buy CBAM certificates, he estimated.
Dangerous misunderstanding
But while some buyers felt that the delay of CBAM certificates purchases may relieve some immediate financial pressure, that impression was faulty because the exposure to financial risk remained the same.
“The problem with this [delay of certificates sales] is that we don’t know what will be the exact CO2 values under ETS,” Julius said.
“It’s a cashflow issue,” he added, “because in 2027 the declarant will have to buy all the certificates for the goods that have been fiscally cleared in 2026. And the declarant has to build [financial] reserves. And CBAM certificate prices must be displayed in the final pricing.”
In the first year of CBAM – 2026 – Importers will have to pay for only 2.5% of embedded emissions, but this rate will gradually increase to 100% of grey emissions by 2034.
Therefore, the costs of handling imports will dramatically change next year, and buyers should start to prepare now.
“Everything that has been ordered from non-EU countries for the second half of 2025 will be fiscally treated on January 1, 2026, will be subject to CBAM and CBAM extras,” Julius said.
High extras for carbon emissions-intense steel
The complexity of CBAM might become a significant burden for smaller business, with intermediary companies simply unable to digest the costs.
“In the future, we will need much more stronger cooperation in the supply chain between importing companies, processing companies [and] up to the end-user company,” Julius said.
“We made calculation based on our imports volumes in 2024,” a buyer in Northern Europe said, “and CBAM handing costs are estimated to be €6.5 million [$7.3 million]. This is totally unmanageable.”
A buying company will need to be familiar with the system to be able to take the cost factor into consideration. Extras will have to be paid for imported steel with higher emissions, bringing additional costs of round €56 per tonne, Julius said.
One way to address the issue could be the introduction of “emissions surcharges” – adapting contracts to include advance emissions-tracking coordination between mills, customers and logistics partners, and to consider the use of digital systems for emissions reporting and certificate management.
“Nobody is willing to pay [emissions] extras, but under CBAM steel prices will increase dramatically,” Julius said. “These extras need to be discussed in the supply chain.”
What’s next?
In the fourth quarter of 2025, the European Commission will introduce CBAM amendments, including a potential extension of its scope downstream and additional anti-circumvention measures.
The proposed amendments will be in three areas – to address the problem of carbon leakage for CBAM goods exported from the EU to third countries; to introduce a CBAM scope extension to certain steel downstream products, to address the risk of carbon leakage being pushed further down the value chain; and to propose anti-circumvention measures, including those against resource shuffling.
While steel imported into the EU to produce finished goods will be subject to CBAM regulations, some steel derivatives – products made from steel, such as auto parts, cookware, nails or furniture. – can be imported directly without falling under the scope of CBAM. But this carbon leakage might do further damage to the already-suffering manufacturing industry in the EU, trade sources said.
“Instead of bringing the steel coil, beam, section or whatever from Asia and processing it in the EU,” a mill source said, “we buy the ready-made steel structure without quota, without anti-dumping duty and CBAM. That’s killing our downstream industry.”
