Operationalisation And Simplification Of The EU CBAM Starting The Year With A CBAM

The EU CBAM moved from the transitional phase to its definitive regime on 1 January 2026. From now on, importers will not only need to report embedded emissions, they will also have to purchase and surrender CBAM certificates corresponding to the CO₂ embedded in imported CBAM goods. In addition, verification of reported emissions will commence.

The transitional phase was always intended as preparatory to the definitive regime and a whole series of detailed rules were left to be developed in the light of experience gained and adopted by the Commission as secondary legislation. 

A first implementing regulation setting up the CBAM registry was adopted at the end of 2024 and another on the status of authorised CBAM declarant early in 2025. Another 5 implementing regulations and one delegated regulation were adopted at the end of 2025 together with amendments to the earlier implementing regulations. 

One reason for the delay was that the transitional phase demonstrated that the CBAM scheme as originally conceived was unduly burdensome and contained other defects and this led the Commission to propose amendments to the original CBAM Regulation (one of its "omnibus" simplification proposals) that was only adopted in October 2025. As a consequence, the legal regime for the definitive CBAM regime consists of:

• The  Amended CBAM Regulation; 
• 9 pieces of secondary legislation on the following topics: (i)  the CBAM Registry; (ii)  the Status of Authorised CBAM Declarant; (iii)  Default Values; (iv)  Embedded Emissions Methodology(v) Free Allocation Adjustment;  ; (vi)  Price of CBAM Certificates; (vii)  Accreditation and Verification; (viii)  Verification Principles; and (ix)  Customs Communication. 

At least one additional measure remains to be adopted – on the default carbon price in the exporting country that can be taken into account for the calculation of the number of CBAM certificates to be surrendered.

Simplification and Operationalisation

The result is a somewhat simplified but more operational definitive CBAM regime (that nevertheless remains exceedingly complex). We summarise the essential changes as follows:

De-minimis exemption 

The Amended CBAM Regulation now contains a mass-based de minimis  exemption of 50 tonnes per calendar year for imports of iron and steel, aluminium, fertilisers, and cement. Importers whose total annual imports of these goods fall below this threshold are exempt from all the EU CBAM obligations. The 50-tonne threshold is set (and can be adjusted) to ensure that at least 99% of emissions from covered goods remain within the scope of the EU CBAM. It is claimed that this will exempt 90% of operators. It is important to note that this exemption does not apply to electricity or hydrogen imports, which remain fully subject to the EU CBAM requirements regardless of volume. 

Default values

Under the Amended CBAM Regulation, declarants are now able to freely choose between reporting actual embedded emissions or using default values (for goods other than electricity), simplifying CBAM compliance compared to the transitional regime where default values were only a fallback option (see our previous blog post  here for more detail). 

The implementing regulation on default values sets out default values for all products in each country over 2400 pages. These default values are based on the average emission intensity of each exporting country, with a "mark-up" (i.e. an increase) to safeguard "environmental integrity". Where reliable country data is lacking, a fallback based on the average of the ten highest-emitting exporters applies. These default values will be subject to periodic revision using the best available data, and region-specific adaptations are permitted where reliable data demonstrates lower emissions than the standard default.

Electricity

Emissions from electricity are relevant both as "indirect emissions" for certain products in the production of which electricity is consumed and with respect to direct imports of electricity.

Since electricity is fungible in the grid, it is difficult to establish embedded emissions precisely and default values were always intended to be widely applicable. 

The use of actual emission values for imported electricity has been facilitated by providing for evidence of: smart metering at both ends, proof of direct technical link, lack of physical congestion, capacity nomination, and a declarant‑specific addendum for electricity. If an installation draws from multiple electricity sources, indirect emissions default to a weighted average unless the operator evidences single/subset sourcing for the relevant process. 

Adjustment for free allocation 

Under the Amended CBAM Regulation, a CBAM declaration must now include the number of certificates to be surrendered after both the deduction for any carbon price paid in a third country and the adjustment for free allocation. The quarterly requirement for holding CBAM certificates has also been reduced from 80% to 50% and must explicitly take into account the free allocation adjustment. Additionally, calculations for guarantees now factor in the free allocation, ensuring that liabilities and compliance costs are accurately aligned with EU ETS benchmarks.

The implementing regulation on the free allocation adjustment modifies the number of CBAM certificates to be surrendered to mirror the phasing out of free EU ETS allowances as CBAM phases in. There is no adjustment applying to electricity for which there is no free allocation in the EU. 

The implementing regulation provides different (rather complex) formulae for calculating the adjustments depending on whether actual emissions are declared or default values are used.

Carbon price paid in a third country

The Amended CBAM Regulation establishes a two‑track system for deducting carbon price paid in a third country: (1) actual carbon price paid (net of rebates/compensation, certified by an independent person, with 4‑year record‑keeping), and (2) default carbon prices that will be set by the Commission from 2027 (used when defaults are used for embedded emissions).

Changes to deadlines

The annual deadline for submitting the EU CBAM declarations has been shifted to 30 September of the following year, with the first declaration under the definitive regime due in 2027 for 2026 imports.

Penalties

The Amended CBAM Regulation introduces a more proportionate penalty regime, (i) allowing for reduced penalties if errors are caused by third-party data, which recognises the complexities of international supply chains, but also (ii) imposing penalties for importers who exceed the exemption threshold without proper authorisation (but releases them from further declaration obligations upon payment).

Next Steps - What you need to do

The EU CBAM has officially moved from the transitional phase to its definitive regime on 1 January 2026, with the Amended CBAM Regulation and the necessary secondary legislation now in full force. 

For businesses, the immediate priorities are:

• Authorisation: apply in the EU CBAM registry for authorised EU CBAM declarant status before importing EU CBAM goods in 2026 (unless you remain below the 50‑tonne de minimis threshold for cement, iron and steel, fertilisers and aluminium). 
• Determine default CBAM obligations: decide whether to rely on default values (including applicable mark‑ups and sector‑specific rules) or to declare actual emissions that will need to be verified; estimate certificate needs using the Commission's default values/benchmarks and the ETS‑linked certificate price; and assess whether Article 9 carbon‑price deductions and free‑allocation adjustments materially affect liability. 
• Operational readiness: align monitoring and verification systems to the new methodology and default/benchmark values; and set up processes for free‑allocation adjustments and, where applicable, carbon price deductions (in line with detailed conversion/evidence rules in the implementing regulations). 
• Timeline: the first annual EU CBAM declaration and certificate surrender for 2026 imports are due by 30 September 2027, with quarterly holdings at 50% from 2027; certificate pricing will follow the EU ETS‑linked methodology set out by the Commission. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.