CBAM Readiness: Managing Rising Carbon Costs and Protecting Competitiveness

The EU’s Carbon Border Adjustment Mechanism (CBAM) fundamentally changes the cost base for companies importing carbon-intensive goods into the European Union. While CBAM is often framed as a compliance exercise, in practice it is a commercial and procurement issue. Companies that rely on default emissions values, lack visibility across their supply chain or delay supplier engagement are likely to face significantly higher carbon costs than those that act early to secure accurate data and optimise sourcing decisions. As EU carbon prices remain volatile but structurally high and CBAM is explicitly not cost-neutral by design, how can companies measure their exposure to carbon pricing and optimise potential cost savings?

What is CBAM?

CBAM is an EU policy designed to put a carbon price on high-emissions goods imported into the European Union. It aligns the carbon cost of imported goods with the EU Emissions Trading System (EU ETS), ensuring equal treatment between EU and non-EU producers. CBAM currently applies to six carbon-intensive goods:

• Cement

• Iron and steel

• Aluminium

• Fertilisers

• Electricity

• Hydrogen

EU importers bringing in over 50 tonnes of these CBAM goods per year must: i) hold Authorised CBAM Declarant status, ii) report the embedded greenhouse gas emissions of these products, iii) purchase CBAM certificates to cover those emissions and, iv) surrender the CBAM certificates annually. 

Scope for Carbon Cost Savings

CBAM costs are a function of the carbon emissions embedded within the input materials of in-scope goods and the average price from the EU’s internal carbon market – Figure 1:

Figure 1: Carbon Pricing under the EU CBAM

Other elements that can impact a company’s CBAM liability include the proportion of emissions covered by free allocations in the EU’s internal carbon market and any carbon price already paid in the country of origin. This means that carbon cost savings can achieved by, for instance, reducing the carbon intensity of imported products and through more accurate data reporting utilising actual emissions data instead of high default values.

Implementation Hurdles

The transition period for CBAM has highlighted a need for companies to gather better data, update their reporting processes and enhance coordination across complex supply chains. Common challenges faced have included:

i) Data and methodology challenges: Importers need to have a clearer picture of the carbon footprint of imported goods from the countries of origin to reduce their reliance on EU default values that can inflate reported emissions and CBAM liabilities. Embedded emissions must also be calculated using verified inputs and energy sources.

ii) Supplier engagement: Companies must collect verified emissions data from upstream producers, often in non-EU countries with weaker climate reporting standards. Reporting accuracy is critical for EU importers to avoid significant financial penalties.

iii) Reporting burden: From 1 February 2027, there is a requirement to have CBAM certificates to cover 50% of the embedded emissions from imports for the calendar year to date at the end of each quarter. This would entail quarterly monitoring of imported goods and their associated emissions for CBAM compliance.

CEN’s Solution

CEN has over five years of experience supporting public and private companies with carbon data analysis, supply chain engagement and audit-ready disclosures. Our tried-and-tested process supports the end-to-end CBAM journey from practical steps to securing and validating actual supplier data to quantifying financial obligations and capturing carbon cost savings – Figure 2.

Figure 2: CEN’s End-to-End CBAM Process 

As individual countries such as the UK, Australia and Canada consider CBAM and the products in scope expand to other high-emissions goods, CBAM readiness is becoming an operational and financial imperative. The CEN team is here to guide you through every step in managing your CBAM compliance journey.