Navigating the EU CBAM: What Manufacturers Need to Know

As global supply chains face increasing scrutiny under new environmental policies, non-EU manufacturers exporting to the EU must prepare for the EU Carbon Border Adjustment Mechanism (CBAM). This game-changing regulation aims to curb carbon leakage by placing a carbon price on imports of certain goods.

But what exactly is this mechanism, and how can manufacturers ensure readiness? In this article, we’ll break down the essentials of CBAM, who it affects, key timelines, and how manufacturing companies can prepare.

Understanding CBAM

CBAM is a key component of the EU’s Fit for 55 climate package, designed to reduce greenhouse gas (GHG) emissions by at least 55% by 2030.

It targets goods with high carbon emissions during production and at significant risk of carbon leakage — particularly iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity.

By requiring importers to pay for the embedded emissions in these goods, CBAM aims to prevent “carbon leakage”, which refers to the relocation of production to countries with weaker environmental regulations or the replacement of EU products with more carbon-intensive imports.

CBAM Implementation Timeline

October 1, 2023 – December 31, 2025: Transitional Phase

The transitional phase acts as a pilot period for all stakeholders—including importers, manufacturers, and regulatory authorities—to gain experience and collect data on embedded emissions. Insights from this phase will inform and refine the methodology used in the definitive phase.

During this period, importers are required to submit quarterly reports detailing the embedded emissions of covered goods. However, they are not yet subject to any financial obligations. The first reporting deadline was January 31, 2024, and the final deadline is January 31, 2026.

For manufacturers, this phase offers an opportunity to become familiar with CBAM monitoring rules, which will remain applicable during the definitive phase.

January 1, 2026: Definitive Phase Begins

From this date forward, importers must begin purchasing and surrendering CBAM certificates that correspond to the embedded emissions of their imported goods.

Manufacturers will face new verification requirements. Specifically, EU importers will only be permitted to use actual emissions data from their suppliers if it has been independently verified by an accredited third party.

Financial obligations will also be introduced for EU importers, who must start buying CBAM certificates to offset their annual embedded emissions. The first surrender of certificates will occur in 2027 for emissions associated with 2026 imports. As a result, the carbon footprint of goods exported to the EU will become an additional cost that manufacturers should aim to minimize in order to remain competitive and protect their market share.

Key Compliance Requirements for Manufacturers

Manufacturers—particularly those exporting to the EU—must prepare to meet a series of new requirements stemming from the EU CBAM. These obligations primarily involve data collection, monitoring and reporting of emissions at the facility and product level, as well as emissions verification, all of which are essential to support EU importers in fulfilling their CBAM compliance obligations.

Carbon Emissions Reporting

Manufacturers are required to calculate and report the carbon footprint of their products, covering both direct and indirect emissions. Direct emissions refer to those generated at the manufacturing site during the production of CBAM goods, including emissions from heat and cooling consumed in the process—regardless of whether that energy is produced on-site or externally. Indirect emissions include those arising from electricity consumed during production.

In addition to emissions data, manufacturers must also report other relevant parameters, such as electricity intensity (measured in MWh per tonne of CBAM product), the production route (i.e., the industrial technology used), qualifying parameters such as scrap usage, and any carbon price already paid for their emissions, where applicable. All data must be calculated in accordance with the EU CBAM monitoring methodology, which closely mirrors the EU ETS Monitoring, Reporting, and Verification (MRV) rules, as these served as the reference for its development.

Collection of Upstream Emissions Data

If a manufacturer uses CBAM-covered goods purchased from other suppliers—referred to as relevant precursors—as inputs in its production process, it must also collect embedded emissions data from those upstream suppliers. These emissions must be included in the overall carbon footprint of the final product. This requirement is particularly important, as the upstream stages of the supply chain—often the most energy-intensive—account for the majority of emissions in most sectors.

Third-Party Verification of Emissions

Beginning in January 2026, all emissions data provided to EU importers must be independently verified by accredited third-party verifiers. Only emissions figures certified by such entities will be accepted for CBAM reporting. In the absence of verified data, importers will be required to use default emissions values—typically higher than actual figures—which can significantly increase the reported carbon footprint and associated costs. It is therefore in the commercial interest of manufacturers to prepare and provide accurate emissions data.

Main Challenges for Manufacturers

Staying Informed and Building Internal Capacity

To ensure ongoing compliance, manufacturers must stay informed about CBAM developments and related regulatory changes, such as the Omnibus reforms. This may involve developing internal expertise or engaging external specialised partners like Carbon Glance.

Data Measurements

CBAM requires manufacturers to enhance the accuracy and consistency of their activity data monitoring. This includes tracking key metrics such as the exact quantities of purchased inputs—especially from suppliers of CBAM-covered goods—total production output (in tonnes), and consumption of fuel and electricity. Many manufacturers currently face challenges in collecting this level of detail, making early investment in data systems and processes essential for effective CBAM compliance.

Upstream Data Collection

Many manufacturers may face difficulties in tracking or validating emissions data across complex and global supply chains. This challenge is compounded when upstream suppliers lack expertise in carbon accounting or are unfamiliar with CBAM monitoring rules, making it difficult to provide actual emissions data.

Under current CBAM rules, actual emissions can only be used for reporting if default values account for no more than 20% of the product’s total carbon footprint. If the share of default values exceeds this threshold, the data cannot be reported as “actual”, and EU importers must instead apply the full, and typically more costly, default value.

Data Collection and Transparency

Many manufacturers may struggle to track or validate emissions data across complex and global supply chains.

Supply Chain Confidentiality

Some companies—particularly trading firms that resell CBAM goods without engaging in any manufacturing processes—may be reluctant to share information about their supply chain structure, as doing so could compromise their competitive advantage.

Mapping of Production Lines

Many manufacturers face challenges in accurately mapping their production lines to trace which products are linked to specific processes. This level of detail is essential for providing product-specific emissions data to customers. In the absence of such traceability, manufacturers often rely on average emissions values based on product classification codes. However, this approach can obscure the benefits of cleaner production lines and may negate competitive advantages gained through decarbonisation efforts.

Operational Adjustments

To remain competitive in the EU market, manufacturers may need to transition to lower-carbon production methods or switch to cleaner raw materials. These adjustments not only help reduce CBAM-related costs but also align with broader sustainability expectations from EU clients.

Preparing for CBAM as a Manufacturer

To ensure readiness for CBAM, manufacturers should take the following steps:

Assess Product Scope: Determine whether your products fall within the CBAM scope. If they do, and you sell either directly to EU-based clients or to companies that manufacture other CBAM-covered goods destined for export to the EU, you should expect to receive emissions data requests.
Establish a Clear Point of Contact: Designate a dedicated CBAM liaison within your organization to manage data requests and inquiries from clients and suppliers. This streamlines communication and helps strengthen business relationships.
Prepare for Verification: Start engaging with third-party verifiers before 2026 to ensure your emissions data will be valid for CBAM reporting and to avoid default values, which may be financially punitive.
Engage with Suppliers: Collaborate closely—and provide guidance when needed—to help suppliers generate accurate emissions data for any CBAM-covered goods used in your production. This minimizes reliance on default values, which can inflate your product's reported carbon footprint or even prevent the reporting of actual data altogether.
Identify Emission Hotspots: Map out key areas of carbon intensity within your operations to prioritize cost-effective emissions reduction strategies.
Identify Low-Carbon and CBAM-Ready Suppliers: Incorporate product carbon intensity into your procurement decisions to reduce CBAM-related costs by selecting suppliers with lower emissions profiles and readily available CBAM data.
Implement Data Management Systems: Invest in reliable IT systems to efficiently collect, manage, and report CBAM data, ensuring full regulatory compliance and supporting informed decision-making as CBAM's impact on international trade grows.
Monitor Regulatory Updates: Stay informed about ongoing CBAM developments, including updates to monitoring methodologies and potential expansions of product scope.

Looking for a CBAM Solutions Provider?

At Carbon Glance, we specialise in helping manufacturers successfully navigate CBAM, providing efficient digital solutions to tackle all your CBAM challenges.

From emissions tracking and supplier engagement to data reporting and CBAM cost analysis, our solutions empower manufacturers to maintain full control over CBAM compliance and avoid losing business in EU markets.