EU Carbon Border Adjustment Mechanism (CBAM)

Regulation (EU) 2023/956 establishes the European Union Carbon Border Adjustment Mechanism to apply an EU-ETS-linked carbon cost to the embedded emissions of covered imports and reduce carbon-leakage risk. The initial product scope includes cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. A reporting-only transitional phase ran from October 2023 through December 2025; the definitive regime began on 1 January 2026, requiring authorised CBAM declarants to report verified embedded emissions and ultimately surrender CBAM certificates priced by reference to EU ETS allowance auctions, with adjustments for qualifying carbon prices paid in the country of origin. CBAM calculation rules are directly relevant to CCUS: monitored CO2 transferred through a documented chain for long-term geological storage, or permanently chemically bound in qualifying products, may be accounted for as not emitted when the required monitoring and chain-of-custody evidence is available. CBAM does not finance capture projects or approve storage sites, but it can reward lower verified product emissions and increases the value of credible cross-border carbon accounting.