The European Commission is calling for evidence until 25 September 2025 on three sets of Implementing Regulations under the Carbon Border Adjustment Mechanism Regulation.
The CBAM applies to certain goods being imported into the EU (in the categories of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen) and is designed to apply the same carbon costs to those goods as would have been incurred had they been produced in the EU. Work is underway to simplify and refine the operation of the CBAM, as well as to later extend the scope of goods to which it applies. We look at these recent developments in our briefing: Carbon Border Adjustment Mechanism: Simplification and Next Steps.
Notwithstanding the changes made to ease implementation of the CBAM as outlined in our briefing, it remains that the CBAM takes full effect from 1 January 2026. The Commission’s view is that the proposed Implementing Regulations are essential to ensure the functioning of the CBAM in its definitive regime starting from 1 January 2026. The Commission calls for evidence including in relation to lessons learned from the transitional reporting phase of the CBAM.
The proposal for three sets of Implementing Regulations relate to:
- the CBAM methodology for the period starting on 1 January 2026. This will include methodologies for determining direct embedded emissions based on actual emissions, embedded emissions for electricity, and indirect embedded emissions, as well as the default values for goods other than electricity to be used when embedded emissions are not based on actual emissions,
- an adjustment of the obligation to surrender CBAM Certificates to take account of free EU Emissions Trading Scheme allowances. Under the EU ETS, carbon leakage is addressed by allocating free allowances. This allocation will be gradually phased out (2026 to 2034) for sectors covered by the CBAM, in parallel with the gradual phase-in of the CBAM. The regulations are intended to set out rules for calculating the adjustment for free allocation, applied as a discount to the CBAM obligation, to reflect the extent to which EU ETS allowances are allocated free of charge, and
- rules for converting into a corresponding number of CBAM certificates the carbon price paid in a third country for declared embedded emissions. This is intended to allow importers to apply for a reduction in the number of CBAM certificates they must surrender to take into account the carbon price effectively paid in a third country for the declared emissions.
Indicative timing for entry into force of the Implementing Regulations is Q4 of 2025.