On January 1, 2026, the European Union activated the Carbon Border Adjustment Mechanism (CBAM), the world’s first carbon border levy. After more than two years of transition, the system has moved from theory to enforcement. Yet the launch marks the start of a longer evolution rather than a finished policy.
The long-awaited regulatory acts, adopted in December 2025, just two weeks before full implementation, clarified key compliance elements. However, these acts also confirmed what many businesses already suspected: CBAM will grow in scope, complexity, and financial impact.
Long-awaited regulatory acts adopted in December 2025, just two weeks before full implementation, clarified key compliance elements.
CBAM applies a carbon price to certain imported goods so they match the cost faced by EU producers under the EU Emissions Trading System (ETS). The mechanism targets carbon leakage, where companies shift production to jurisdictions with weaker climate rules.
The levy currently covers cement, aluminum, fertilizers, iron and steel, hydrogen, and electricity. EU importers must report embedded emissions and, eventually, purchase CBAM certificates to cover them.
The policy aims to protect the EU industry while encouraging cleaner production beyond EU borders. It also reshapes trade incentives by linking market access to emissions data and verification quality.
CBAM entered its so-called “definitive phase” on January 1, 2026. Importers now begin accumulating liabilities for embedded emissions. However, they will not buy or surrender CBAM certificates until 2027.
This delayed payment structure reduces immediate financial pressure. However, it also creates risk. Companies that treat 2026 as a grace period may face a sharp cost shock once settlement begins.
CBAM costs track the EU carbon price. Volatility in the ETS will therefore directly affect import exposure. What looks manageable today may escalate quickly by the time certificates become due.
CBAM does not operate in isolation. The mechanism accounts for carbon prices already paid outside the EU. If a non-EU producer pays a domestic carbon tax or participates in an emissions trading system, that cost can reduce CBAM liabilities at the border.
As a result, EU importers must monitor more than supplier emissions. They must also track carbon pricing regimes in exporting countries. Regulatory change abroad will increasingly affect net CBAM exposure.
The current scope represents only the first step. The European Commission has confirmed plans to extend CBAM from 2026. Future coverage will expand beyond basic materials to include downstream products. Steel- and aluminium-intensive goods will likely dominate the next phase. Machinery, vehicles, components, appliances, and industrial equipment sit firmly in the Commission’s sights.
As the scope widens, CBAM will affect hundreds of product categories, becoming not only a climate but a structural condition for access to the EU market. Differences in emissions intensity, data quality, and verification readiness will shape sourcing decisions alongside price and logistics.
CBAM no longer concerns only a narrow group of commodity traders. Entire value chains now face exposure. Companies must:
Secure reliable emissions data from suppliers
Prepare for verification and audit requirements
Model future cost exposure linked to ETS prices
Anticipate scope expansion
Businesses that delay preparation risk losing competitiveness once CBAM costs materialize in full.
The Western Balkans face a particularly sensitive CBAM challenge. Most economies in the region rely heavily on carbon-intensive electricity generation, metals, cement, and basic industrial production. Many exporters depend on the EU market as their primary destination. At the same time, domestic carbon pricing systems are still taking shape.
This combination creates exposure on several fronts. First, exporters from the Western Balkans risk higher CBAM costs due to carbon-intensive production. With measures to introduce domestic carbon pricing, some of these liabilities will be offset at the EU border.
Second, weak emissions data and verification capacity may create compliance bottlenecks. EU importers increasingly favor suppliers that can provide credible, auditable emissions data. Firms that cannot do so may lose contracts even before CBAM costs apply.
Third, CBAM will amplify pressure for regulatory alignment. The mechanism strengthens the case for carbon pricing, emissions reporting, and ETS-style reforms across the region. Delay will widen the competitiveness gap with EU-based producers.
Finally, CBAM creates both risk and leverage. Governments and companies that move early can use alignment with EU climate rules as a trade advantage. Those that do not may face shrinking market access over the next decade.
For the Western Balkans, CBAM is not only a climate policy. It is a trade, industrial, and accession-relevant instrument that will shape investment and reform choices well beyond 2026.
CBAM has entered force, but its final shape remains unfinished. Payment mechanics, scope expansion, and international interaction will continue to evolve throughout this decade.
For companies tied to the EU market, the message is straightforward: compliance is no longer theoretical. Early preparation will separate those who adapt from those who absorb rising costs later.
CBAM has begun. However, the adjustment phase has not ended.
To view a PDF version of the recently adopted key Implementing Acts, click this link.
