The Carbon Border Adjustment Mechanism (CBAM) is designed to create a fair competitive environment between EU-produced goods and imports – and comes to the UK in 2027. Nicolas Endress, ClimEase, explains what importers should do now to avoid locking in inflated costs for 2026-27.
January 1, 2026, marked the beginning of the cost-relevant phase of the Carbon Border Adjustment Mechanism (CBAM).
For most of the importers entering the cost relevant phase of CBAM, it will also mark a transition from regulatory theory to commercial realities.
In essence, CBAM is no longer a topic of discussion in future corporate sustainability reports. Instead, CBAM will represent a new recurring cost that sales and procurement teams of EU importers of raw materials will have to account for as part of the total of each imported shipment.
Early evidence suggests that many companies are modelling their CBAM exposure using conservative EU default values to guard against the risk that supplier data may not be verified in time.
Why default values are proving so expensive under CBAM
Default values were created to serve as a safety net for situations where emissions data was either non-existent, incomplete or could not be verified. Therefore, default values were intentionally conservative and assumed high levels of emissions in order to encourage importers to engage in efforts to obtain actual emissions data.
Currently, many importers continue to rely on default values because they seem easy and defendable. However, while simplicity may be the easy route, it has significant cost implications. Data related to the early implementation of the carbon border adjustment mechanism demonstrates that transitioning from default values to verified, supply chain specific emissions will result in a reduction in CBAM certificate costs ranging between 30-85%.
The numbers presented above represent the difference between CBAM as a manageable line item in an importer’s budget and CBAM significantly impacting an importer’s overall procurement strategy. There is a major risk associated with both overpaying today as well as creating the potential for elevated costs to become institutionalised through the use of default assumptions in long term contracts and supplier relationships.
Why the biggest savings are already appearing in the steel industry
In terms of the potential for savings (particularly in terms of steel) the immediate and quantifiable savings are being realised in steel. Ironically, people do perceive steel as an emission-heavy industry; however, there is one important factor in favour of steel regarding CBAM and that is that steel emissions are quantifiable.
Most of the emissions associated with imported steel occur in the supply chain, often at tier two or three and when these precursor emissions are either disregarded or left unverified, they fall-back on to assumed values. However, if the relevant emissions can be accurately accounted for, the differences are considerable.
This is certainly now not a future goal, but rather the current reality that importers are facing.
In fact, over 80% of all emissions related to global steel production come facilities whose furnace technologies and production routes can align with CBAM requirements when emissions are accurately verified.
The problem is not collecting additional data to support the calculation of emissions, but instead it’s connecting the data from multiple tiers of the supply chain and verifying it through credible means.
Importers who have taken the time to engage their suppliers, trace precursor emissions and replace defaults with genuine figures are seeing the largest cost reductions. These savings are not coming from switching suppliers overnight or investing in new production technologies. They are coming from accuracy.
Importers who have successfully engaged their suppliers, traced the origin of the precursor emissions and replaced defaults with actual numbers are experiencing the most significant cost reductions.
What importers should do now to avoid locking in inflated costs
The biggest flaw that importers can make at this point is to sit back and just wait. Decisions made today are already shaping the costs that will be incurred by importers under the terms of CBAM in 2026 and going into 2027.
First and foremost, importers need to have multi-tiers of emissions visible. Looking only at your direct supplier’s emissions is not enough to accurately reflect the total carbon footprint of each tonne of steel imported into the EU.
When upstream emissions are not accounted for, they are assigned the highest possible value, which results in high CBAM costs for importers, regardless of how energy-efficient the exporter producing the steel may be.
Second, importers should treat the verification process as a planning tool instead of a final compliance requirement. As importers conduct early verifications, they will be able to identify the areas where defaults are still applicable, where data gaps exist and what their realistic CBAM exposure may be.
This provides importers with the ability to create accurate forecasts of their potential CBAM costs and safely discuss cost openings with their customers.
Third, procurement strategies need to be grounded in data and at this stage of CBAM, the fastest and most reliable savings come from avoiding defaults, not from immediately chasing alternative production routes.
Importers who focus first on replacing assumptions with verified emissions are consistently in a better position than those who just jump straight to supplier substitution.
Finally, while there is no doubt that the ultimate strategy for achieving significant savings in CBAM costs will be to pursue alternative production routes.
At this point in time, the fastest and most reliable way to save money under CBAM is to avoid using defaults and instead use verified emissions data. Importers who place their immediate attention on verifying their assumptions regarding emissions and then later pursue alternatives, will be in a much stronger position than those who go after alternatives first.
For importers, the decision is relatively straightforward. Those who act now, engage their suppliers and base decisions on verified data will be better positioned to manage their CBAM costs and protect their margins. Those who delay may only realise later that the economics of their business have drifted.
Because by the time you decide to verify your emissions, your competitor may already have done so. Have you?
