The tariff maths begins with embedded emissions. Importers must declare, for each CBAM good, its verified direct (Scope 1) emissions from production. Indirect emissions from electricity are charged only for cement and fertilisers, so for steel and aluminium the bill is currently driven by direct emissions alone. Each tonne of CO2 owed must be covered by a CBAM certificate priced against EU ETS allowance auctions: quarterly averages for 2026 imports, then weekly averages from 2027. Carbon prices already paid in the country of origin can be deducted. Because EU producers still receive most of their allowances free, CBAM applies a matching factor: 2.5% in 2026, rising each year to 100% in 2034. Certificate purchases begin in February 2027, and the first declarations and surrenders are due by 30 September 2027.
| Parameter | Legacy unrestricted importing | CBAM definitive regime |
|---|---|---|
| Carbon cost at border | None | Certificates at ETS-linked price, scaled by CBAM factor (2.5% in 2026, 100% by 2034) |
| Carbon accounting scope | Not required | Verified direct emissions; indirect only for cement and fertilisers |
| Reporting overhead | Customs data only | Authorised declarant status, installation-level data, third-party verification, annual declaration |
| Default values | N/A | Punitive defaults where verified supplier data is missing |
| Sourcing logic | Lowest landed €/t | Lowest landed €/t including carbon; rewards EAF, DRI and low-carbon smelting |
The cost impact on materials becomes clear at full phase-in. Blast-furnace steel embeds roughly 2 tCO2 per tonne. At an ETS price of about €82, that is up to around €160 per tonne before deductions, a large premium on structural steel frames, reinforcing bar and floor mesh. A greenfield gigafactory using 50,000 tonnes of steel would face a carbon line item in the millions of euros (an illustrative estimate). Aluminium busbars and conduits are covered too, but since only direct smelting emissions count for now, their exposure is smaller than their power-heavy footprint suggests.
For capital allocators, the transition years matter most. Today's charge is small, but plants commissioned now will be expanded and maintained into the 2030s, when the factor reaches 100%. Specifiers and supply chain lawyers should lock in verified emissions data, low-carbon steel contracts and price-adjustment clauses now, before the border cost scales up. The same embedded-carbon scrutiny now extends to the battery packs those plants produce.