Carbon Border Adjustment Mechanism (CBAM): A new era for European trade and climate policy

From transition phase to full implementation

From January 2026, CBAM moved into its operational phase. Importers of covered goods will be required to purchase and surrender CBAM certificates corresponding to the emissions embedded in their imports, adjusted for any carbon price already paid in the country of origin. The price of these certificates will be linked directly to the EU ETS carbon price, anchoring CBAM firmly within Europe’s existing climate policy framework.

Initially, CBAM applies to a limited set of carbon‑intensive sectors: steel and iron, aluminium, cement, fertilisers, electricity and hydrogen. These sectors were selected due to their high emissions intensity and elevated risk of carbon leakage. However, the scope is expected to expand over time, potentially including downstream products and indirect emissions later in the decade.

Levelling the playing field – and reshaping supply chains

At its core, CBAM aims to correct a long‑standing imbalance. European producers operating under the EU ETS have faced rising carbon costs, while foreign producers exporting to the EU have largely avoided equivalent pricing. CBAM changes this dynamic by embedding a carbon cost directly into imports, reducing the incentive to relocate production to jurisdictions with weaker climate policies.

This shift is already influencing corporate behaviour. Many European companies are reassessing their supply chains, placing greater emphasis on sourcing low‑carbon materials, reshoring production or working more closely with suppliers to reduce emissions at source. For carbon‑intensive materials, CBAM increases the strategic value of transparency, traceability and verified emissions data.

At the same time, CBAM creates a clearer business case for low‑carbon production methods. Materials produced with cleaner technologies – such as scrap‑based steel, renewable‑powered aluminium or low‑carbon fertilisers – gain a competitive advantage relative to more emissions‑intensive alternatives. Over time, this may accelerate investment in clean industrial processes both within Europe and in exporting countries.

Corporate readiness and administrative complexity

Despite its strategic intent, CBAM introduces significant administrative and operational challenges. Importers must gather detailed, verifiable emissions data from non‑EU suppliers, often across complex and fragmented value chains. Where actual emissions data is unavailable, default values apply – typically at a conservative level – increasing the cost of non‑transparent supply chains.

Registration requirements, annual reporting, third‑party verification and certificate management all add layers of complexity, particularly for smaller companies with limited compliance resources. While de minimis thresholds exempt very small import volumes, many mid‑sized firms will still fall within CBAM’s scope and face a steep learning curve.

Uncertainty remains another defining feature. The future expansion of CBAM to downstream products, potential changes to benchmarks, and interaction with the phase‑out of free allowances under the EU ETS all introduce planning challenges for companies making long‑term investment decisions today.

Possible market impacts for Nordic companies

The pricing of the CBAM certificates is a function of the ETS price at the time of import and the emissions embedded in the imported product. 

According to Nordea Equities’ Head of ESG Research Marko Kisic: “The impact on companies varies by sector. We believe that many companies do not yet have a clear or comprehensive understanding as to what the net impact will be. For European materials producers, however, we believe the net effect should be positive, as the CBAM should limit competition from low-cost imports. For producers and importers of downstream products, the effect is somewhat negative at this stage, but may change if the CBAM extends to downstream products in 2028.”

Kisic recently published the results of a survey of a group of Nordic listed companies about the expected impact of the CBAM. Find out more about the survey results.

Source: Nordea survey of companies

A structural shift for the future, not a temporary measure

CBAM represents a long‑term structural change in how climate costs are integrated into global trade. While its early years will inevitably involve complexity, uncertainty and adjustment costs, the direction of travel is clear: Carbon intensity is becoming a core determinant of competitiveness.

But what can be expected in the upcoming years? Currently CBAM only covers most emissions-intense materials but not the downstream products. EU will most likely take care of this loophole in the future as there have been discussions about expanding CBAM to a list of 180 downstream products, which also includes Europe’s crown jewel, the automotive industry.

Marko Kisic adds: “The cost impact of CBAM on downstream automotive producers would not be enormous: By 2030, it could add around €200 per vehicle (under 1% of total cost), with similar effects for EVs. But, for individual car parts, estimated CBAM costs average about 3–4% of the selling price, though impacts vary widely by component.”