Carbon becomes a customs line: CBAM's first compliance year is repricing trade routes

On 1 January 2026, after a two-year transitional phase of reporting without paying, the EU's Carbon Border Adjustment Mechanism crossed into its definitive regime. Importers of iron and steel, aluminum, cement, fertilisers, electricity and hydrogen above a 50-tonne annual threshold had until 31 March to apply for authorised CBAM declarant status; they will buy and surrender certificates in 2027 against the embedded emissions of goods imported this year, with the first declarations due by 30 September 2027. The machinery is still being tuned — the Commission published a key implementing act on 13 May, with consultation closing this week, but the principle is now operational: carbon content is a customs line item on the EU border.

The sums are material. Fastmarkets estimates CBAM liabilities could reach €9 billion in 2026 and €22 billion by 2035 if trade flows hold, with iron and steel bearing roughly 75% of total liabilities and aluminum a further 7%. By 2035, around 70% of CBAM-covered imports could face an effective levy above 10% of import value, and 15% could exceed 50%. Cement is the extreme case: low unit value and high carbon intensity could push CBAM costs to 150% of import value. These are upper-bound numbers — trade will reroute precisely to avoid them, but that rerouting is the policy working, not failing.

The exposure is strikingly concentrated. Russia, India, Türkiye, China and Ukraine together are projected to account for over half of all CBAM certificate demand by 2030, reflecting both their export volumes and their emissions intensity. The origin of a product now sets its carbon bill: hot-rolled steel coil from India could carry CBAM costs equal to 80% of product value by 2030, while the same coil from the United States would face about 6%. Within a single tariff line, the production route — blast furnace versus electric arc furnace, coal grid versus clean grid — has become a price differential measured in tens of percentage points.

Markets moved before the regulation did. Fastmarkets calculates that importers front-loaded shipments in late 2025 to clear roughly €780 million in CBAM liabilities before the definitive phase began. Low-emissions producers are positioning for the new demand: Emirates Steel and scrap-heavy EAF producers can sell into Europe with minimal CBAM cost, while Hyundai Steel and POSCO are retrofitting electric furnaces explicitly citing European automaker demand for carbon-reduced steel. The circumvention games have started too — EU mills complain that buyers are importing ready-made fabricated structures that sit outside CBAM's scope, dodging the levy by moving one step downstream.

The policy is still in motion, in both directions. A year-end review will weigh anti-circumvention measures, expansion to downstream products, and relief for EU exporters who pay ETS costs but get no rebate abroad. Certificate prices are tied to the EU ETS and expected to climb from around €70 today toward €130 by 2030 and nearly €200 by 2035 — meaning every year of delayed decarbonisation gets more expensive. And the most consequential ripple is fiscal: Türkiye and Ukraine are accelerating their own carbon-pricing systems so that the revenue on their exporters' emissions accrues at home rather than to Brussels. Expect more finance ministries to make that calculation; a domestic carbon price is becoming a trade-policy instrument.

For the practitioner community, CBAM collapses the old separation between climate policy and trade promotion. An export promotion agency whose steel, cement or fertiliser SMEs cannot produce verifiable emissions data is now watching them price themselves out of the EU market by default, since unverified imports get assigned punitive default intensities. An investment promotion agency with a clean grid is holding a new locational asset that shows up directly in a customer's landed cost. The carbon ledger has joined the tariff schedule as core tradecraft.