EU CBAM enters definitive phase with certificate obligations from January 2026

The EU's Carbon Border Adjustment Mechanism transitions to its definitive phase on January 1, 2026, requiring authorized declarants to surrender CBAM certificates covering embedded emissions in imported goods. Indian exporters of steel, aluminium, cement, fertilizers and hydrogen face a new financial obligation and mandatory third-party emissions verification.

The EU's Carbon Border Adjustment Mechanism transitions from its transitional phase into a full definitive phase from January 1, 2026, a cornerstone of the "Fit for 55" package aligning import carbon prices with the EU Emissions Trading System. From 2026, only "authorized CBAM declarants" may import in-scope goods, including cement, iron, steel, aluminium, fertilizers, electricity and hydrogen. Reporting becomes annual, with the first full year of 2026 emissions data due by May 31, 2027, and scope expanded to 180 downstream products.

The mechanism affects importers of carbon-intensive commodities and, by extension, international producers including Indian manufacturers of steel, aluminium, cement, fertilizers and hydrogen. Importers must purchase and surrender CBAM certificates tracking the weekly average EU ETS auction price, holding certificates covering at least 50% of embedded emissions at each quarter's end, with the first actual surrender in 2027 for the 2026 period. The regulation now mandates independent third-party verification of all embedded emissions, replacing flexible default values.

Importers should secure authorized declarant status from national competent authorities and build internal systems for certificate procurement and financial planning. A de minimis threshold exempts importers bringing in less than 50 tonnes of Annex I goods annually, though not for hydrogen or electricity. Companies can deduct carbon prices already paid at origin with verifiable evidence. Exporters should accelerate decarbonization, as the gradual phase-out of free ETS allowances through 2034 will steadily raise the CBAM financial burden.

Key figure — Definitive phase start: January 1, 2026, with first emissions report due May 31, 2027