The European Commission has published the first quarter price for Carbon Border Adjustment Mechanism (CBAM) certificates at EUR75.36, 7 April, allowing importers to better assess their ongoing liability to the carbon leakage instrument.
The CBAM certificate pricing methodology ties certificate value to the average price of EU Emissions Trading System (ETS) allowances, to ensure CBAM imposes equivalent costs on foreign and domestic producers as far as possible.
In 2026, CBAM certificate prices are calculated in reference to the quarterly average of ETS allowances over the period of import for the CBAM good. From 2027, CBAM certificate prices take a weekly average of the ETS price, and are no longer temporally tied to the import period, with importers instead required to hold a minimum 50% of their rolling emissions liability by the end of each quarter.
At a first-quarter price of EUR75.36, the Commission’s published price is slightly below steelmakers’ hopes for CBAM’s inaugural cost reference, depressed by bearish volatility in EUA prices as the EU ETS is increasingly politicised as a factor in the EU’s declining industrial competitiveness on the global stage.
However, as illustrated by McCloskey’s Default Values Calculator, a EUR75 CBAM certificate price still threatens potentially existential costs to small and medium-sized importers, if they fail to sufficiently verify embedded emissions across the supply chain of their imported steels.
For example, Indonesian origin hot-rolled coil (HRC) imported into the EU in Q1 – a trade flow that has arguably been a primary factor in destabilizing the domestic market in the last year via aggressive import offers and exemption from the EU’s existing steel safeguard – could face CBAM costs of as much as EUR580/t if calculated purely on default values.
Imports of Indonesian HRC under commodity code heading 7208 in January are down 37% on the year, according to import data from Global Trade Tracker (GTT), but show a much greater decline in comparison to December clearances – an 86% reduction – illustrating importer desire to minimise CBAM liabilities.
Indian HRC has a lesser, but still significant liability at just over EUR250/t. Code 7208 imports to the EU from India in January, in contrast, have actually increased by 350% on year to almost 200,000 tonnes, or just over 230% higher than December volumes.
McCloskey has tracked high volumes of Indian HRC to the EU’s domestic steelmakers, importing the material for further sale in the EU market, or for processing for downstream portfolio demand.
The EU has already signalled its intention to support India in shifting carbon revenues to its domestic market via provisions included in the recent EU-India Free Trade Agreement, relating to India’s national carbon pricing scheme, the creation of a new default value dataset for in-scope Indian exporters, and the possibility of extending accreditation competencies to India for verification purposes.
Author: Benjamin Steven
