Background

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The Carbon Border Adjustment Mechanism (CBAM) is an EU policy that places a carbon tariff on carbon intensive goods imported into the EU. The tariff is based on the embedded carbon emissions generated during the production of the imported goods. This will ensure that the carbon price of imports is equivalent to the carbon price of domestic production under the EU ETS. This environmental policy instrument was designed to support the EU climate ambitions of achieving a net reduction of greenhouse gas (GHG) emissions of at least 55% by 2030 and of reaching climate neutrality by 2050 at the latest. There are currently six sectors that contain specific goods that are covered by the CBAM, these sectors are the Iron & steel, aluminum, cement, fertilizers, electricity, and hydrogen sectors. 

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The CBAM came into force in May 2023 initiating a transitional phase that started in October 2023 and is scheduled to run until December 2025. During this transitional phase, companies who are importing CBAM goods must submit quarterly reports detailing the emissions released from the production of the imported goods. Failure to report emissions result in penalties that range from 10€ to 50€ per ton of unreported emissions. During this transitional period, though reporting is mandatory, no carbon tariffs apply. The idea is to give stakeholders adequate time to adapt to the new regulations and requirements of the CBAM. The definitive regime will come into effect in 2026. From that point on, the mechanism becomes legally enforceable and carbon tariffs apply in the form of mandatory CBAM certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EU's carbon pricing rules. Sale of CBAM certificates will commence in 2027 to cover the embedded emissions of goods imported in 2026.

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The Omnibus package proposed by the EU to simplify ESG regulation also affected the CBAM. Most notably, importers of small quantities of CBAM goods will be exempt from CBAM obligations. This will be achieved by introducing a new mass threshold to exclude importers who import less than 50 tonnes of CBAM goods per year. Before this simplification, the threshold was a monetary value of 150€. Thus, this proposed simplification is expected to exempt approximately 90% of importers while maintaining more than 99% of embedded emissions in scope of CBAM. In most cases, excluded importers will correspond to SMEs and individuals.  Further notable changes include the removal of non-calcined kaolinic clays from the list of CBAM goods and delaying the sale of CBAM certificates  from January 2026 to February 2027.

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The calculation methodology of the CBAM itself remains unchanged save 2 exceptions: 

• For CBAM goods and precursors, declarants can now freely decide to use default values plus a mark-up made available by the commission or values based on actual data from the operation producing the goods.
• The embedded emissions of some finishing processes can now be excluded from the system boundaries of the calculation of emissions. This is because the embedded emissions of some products that go through finishing processes are dominated by the input precursors while the emissions from the finishing processes themselves are relatively low

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The Challenges

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The CBAM undoubtedly is a robust mechanism that will reduce carbon leakage in the EU and potentially further drive decarbonisation, supporting the EU climate goals. However, the regulatory, reporting, and other administrative aspects coupled with the complex calculations and data collection processes make this policy particularly cumbersome. Since challenges are muli-faceted, multiple stakeholder groups may face several categorical obstacles:

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• Pain points for importers: 
  
  • Data collection: Importers of CBAM goods need access to primary data from their suppliers. This involves time and cost, even more so as supply chains are often complex with multiple suppliers existing in different regions of the world. These issues are further exacerbated by data availability issues. Since recently, the omnibus package allows for the use of conservative EU commission default values. However, relying on these default values would result in increased levels of embedded emissions and increased carbon tariffs d. 
  • Data interpretation: Importers may lack the knowledge to assess the received data from suppliers to carry out necessary CBAM calculations as interpreting supplier data can be tricky for many different reasons such as units and methodology. For example, suppliers from different countries may supply data with inconsistent units that can easily be overlooked or misinterperted. Furthermore, the PCF results of the supplied product may follow different standards that are not aligned with the CBAM. For example, the PCF of a precursor from a supplier may include scopes 1, 2, and 3 emissions. However, following the CBAM only scopes 1 and 2 emissions should be considered for the embedded emissions of a precursor.
  • Another challenge can be around the lack of granularity of the emissions to produce the product. A supplier may provide facility-wide data rather than product-specific embedded emissions that are needed for the CBAM. Further challenges include receiving incomplete and outdated data, or no data at all. Navigating these challenges can be complicated
  • Complex Regulations: The CBAM has its own methodology that diverges from traditional PCF’s. Its specific requirements call for a deep understanding of the technical aspects making it challenging to carry out without specialized knowledge.  

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• Pain points non EU suppliers
  
  • Data requests: Suppliers outside of the EU struggle to respond to importer data requests. The data requested by the supplier may be non-existent or unclear to the supplier as non-EU suppliers are likely unaware of CBAM and its requirements, hence they may lack knowledge on what data is needed or how to calculate it.
  • Inadequate tools and lack of guidance: The CBAM methodology is complex and unfamiliar due to its novelty and has been subject to change since its first release. Though guidance is given in the implementation regulation, it is difficult to understand since legal, technical, and environmental frameworks are combined along with sector specific jargon. There is no official support or help desk from the EU for data collection and calculations. There do exist templates offered by the EU CBAM as well as an excel tool available for download, however they  lack intuitiveness, are non user-friendly, and lack integration with existing systems. Furthermore, not all data points that need to be reported by the importer are shared with the communications template which leads to inefficiencies and confusion. 

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Platform providers

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• Lack of solutions: Due to the novelty and inherent complexity of the CBAM, there is currently a notable lack of third-party support and specialized expertise available to stakeholders. This gap in methodological knowledge makes it particularly challenging for suppliers and importers of CBAM-covered goods and their precursors to identify qualified professionals who can confidently assist with the emissions calculations required for compliance. Moreover, given the financial implications associated with CBAM reporting — including costs tied to purchasing CBAM certificates — companies are especially cautious and seek assurance that calculations are both accurate and fully aligned with regulatory requirements.

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Contents for Our Solution

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Meeting the EU’s CBAM requirements no longer has to feel like guesswork. Our supplier-first platform walks you through the process in three clear steps—capturing requests, guiding data-rich assessments, and auto-calculating emission results. The outcome: audit-ready numbers you can trust and the agility to correct them in minutes, not weeks.

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Core capabilities that enable suppliers include: 

• Tailored data collection - Suppliers are guided to provide the correct input data based on the products they need to report on.
• Tier-2 engagement - Reach out to tier-2 suppliers to improve upstream data quality for precursors used and reduce overall emissions.
• Trustworthy Calculations and Results - Provide accurate and reliable emissions data from  suppliers that your clients can trust for CBAM compliance.
• Up-to-Date Regulatory Compliance - Keep your platform current with the latest CBAM regulations and standards, automatically.
• Effortless Integration - Quickly integrate our solution into your platform with minimal effort.
• Whitelabel Integration - Offer end-to-end CBAM compliance solutions under your brand, enhancing your platform's value and strengthening client relationships.
• Resource Optimization - Save on development costs and time by leveraging our ready-made, reliable solution.

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If you’re a supplier, importer or platform provider looking to simplify CBAM reporting, let’s talk. Reach out via our contact form and we’ll set up a personalized walkthrough to show how effortlessly you can generate compliant and defensible emission figures.

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