If you import carbon-intensive goods into Europe, chances are you’ve heard of the Carbon Border Adjustment Mechanism, also known as CBAM.

Part of the EU’s Fit for 55 package, CBAM puts a fair price on the carbon embedded in certain imported products: namely cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. 

Its goal is to prevent carbon leakage, where companies move production abroad to sidestep EU climate rules. It also helps to level the playing field between EU and non-EU producers.

To give businesses time to adjust, CBAM is being rolled out gradually. Until the end of 2025, importers must report emissions linked to covered goods. Come January 1, 2026, they’ll also need to purchase CBAM certificates to cover those emissions, plus some other stricter requirements.

With financial penalties and potential import restrictions for non-compliance looming, getting ahead of the timeline is key. This article outlines the main CBAM phases, upcoming deadlines, and what mid-market enterprises should do to stay ready.

CBAM overview: Why the two phases?

CBAM is being rolled out in two phases to give businesses time to build internal systems, like mapping supply chains and collecting emissions data from suppliers, and to adapt to the new reporting requirements. It also gives the EU some space to fine-tune the framework before financial obligations kick in.

As explained on the EU CBAM official website “The gradual phasing in of CBAM allows for a careful, predictable, and proportionate transition for EU and non-EU businesses, as well as for public authorities.”

From 1 October 2023 to 31 December 2025, CBAM is in its transitional phase. Importers of covered goods must submit quarterly emissions reports via the CBAM Transitional Registry, but no certificates are required yet.

Starting 1 January 2026, the definitive phase begins. Importers will need to buy and surrender CBAM certificates based on reported emissions. Reporting becomes annual, with stricter verification and audit requirements.

The phased approach is designed to prevent carbon leakage without disrupting trade. It gives businesses time to prepare while aligning with EU climate goals.

Key CBAM deadlines and phases: Transitional vs. definitive phase

As we’ve learnt, CBAM is structured in two phases to ease the compliance burden and allow time for adjustment, both for businesses and the EU. Here’s how the timeline breaks down:

Transitional phase (1 October 2023 – 31 December 2025)

During this period, importers of CBAM-covered goods must report the embedded emissions of their imports on a quarterly basis through the CBAM Transitional Registry. 

Quarterly reports are due one month after the end of each quarter:

• Q1 2025: due by 30 April 2025
• Q2 2025: due by 31 July 2025
• Q3 2025: due by 31 October 2025
• Q4 2025: due by 31 January 2026

Between October 1, 2023 and June 30, 2024, companies could use default values provided by the European Commission to estimate emissions without any quantitative limit. 

Starting from July 1, 2024 (Q3 2024), importers are expected to report actual emissions data, verified and calculated in accordance with the EU's CBAM methodology. For complex goods, the use of default values is limited to a maximum of 20% of total emissions reported. This requires importers to establish robust data collection processes with their non-EU suppliers well in advance of the reporting deadlines.

Importers are not yet required to purchase or surrender CBAM certificates during this phase, but these reports lay the foundation for future financial obligations.

Definitive phase (from 1 January 2026 onward)

The definitive phase of CBAM comes into effect, requiring importers to purchase and surrender CBAM certificates corresponding to the embedded emissions of their imported goods. Reporting shifts to an annual basis, with the first report due by May 31, 2027. Third-party verification of emissions data also becomes mandatory.

Failure to surrender the required number of certificates will result in a penalty of €100 per excess tonne of CO₂.

The scope of CBAM is also expected to grow. Sectors like chemicals and polymers are being considered for inclusion as early as 2027–2028, so companies importing carbon-intensive goods beyond the current list should start preparing now.

Timeline highlights: What to prepare for in each phase 

CBAM's preparation window is closing. Here’s what importers should prioritise now, and what to expect in the years ahead as reporting turns into financial enforcement.

2025: The final year of the transitional phase

This year is your last chance to stress-test emissions reporting processes before financial obligations begin. Use this time to improve data accuracy, align with the EU’s methodology, and close gaps in supplier reporting. 

If you’ve been relying on default values, you’ll need to switch to actual emissions data, collected and calculated according to CBAM rules. Cross-functional coordination across procurement, sustainability, and compliance is key.

2026–2030: Transition to definitive phase

From 1 January 2026, CBAM enters its enforcement phase. This means importers must purchase and surrender CBAM certificates annually, based on reported emissions. Third-party verification also becomes mandatory. 

Use your 2025 reports to budget for 2026 certificate purchasing. Add up embedded emissions per product category, monitor EU ETS prices, and factor in any carbon prices paid abroad. This gives you a working forecast to inform budgets, pricing, and leadership decisions.

Beyond 2030: Full integration with EU ETS

CBAM is designed to gradually mirror the EU Emissions Trading System (ETS). Free allowances for domestic producers will be phased out between 2026 and 2034. Expect further regulatory alignment and potential expansions to new product categories.

Real-world scenarios

Each importer’s CBAM path will vary based on their products and how prepared their suppliers are. Here are a few examples mid-market enterprises might face as they prepare for the definitive phase.

Example 1: An aluminium importer transitioning to actual emissions reporting

Say you’re an aluminium importer who used default values in 2024. From 1 July 2024, those estimates are limited, and by January 2025, you must use the EU’s official methodology. You start requesting emissions data from each supplier, but not all can deliver. Now you're weighing whether to switch suppliers or pay for third-party verification.

Example 2: A cement importer forecasting 2026 certificate costs

If you import cement, you know 2026 will come with real costs. You use your 2025 reports to estimate embedded emissions per product line, track EU ETS prices, and account for any carbon price already paid at origin. This gives you a rough idea of how many CBAM certificates you’ll need and helps you prepare your 2026 budget.

Example 3: A fertiliser distributor planning for third-party verification

Or imagine you distribute fertilisers sourced globally. Some suppliers still aren’t familiar with CBAM rules or don’t have internal verification processes. You begin identifying which suppliers need external support and prepare to engage an accredited verifier to ensure your 2026 data is compliant and audit-ready.

The takeaway? Start now to fix data issues, meet EU requirements, and avoid scrambling to comply when costs kick in.

What happens if you miss a deadline?

Missing a CBAM reporting deadline can lead to real financial consequences.

During the transitional phase (until end of 2025), failing to submit a report or submitting incomplete data may result in national fines ranging from €10 to €50 per tonne of unreported emissions, depending on the Member State.

From 2026 onward, the stakes are higher. If you don’t purchase and surrender enough CBAM certificates, you’ll face a penalty of €100 per excess tonne, with no cap.

The best way to avoid last-minute scrambling is to align early across procurement, sustainability, and trade compliance teams. Make sure supplier emissions data is collected on time and in the correct format to avoid bottlenecks at submission. 

To help with the collection of this detailed information, the European Commission has provided the CBAM Communication Template for Installations.

Next steps for compliance

With 2026 fast approaching, mid-market importers should focus on building solid CBAM reporting foundations now. Start by mapping which goods you import fall under CBAM and gathering accurate emissions data per product category. Engage suppliers early to ensure they can provide verified emissions data aligned with the EU methodology.

To stay ahead of reporting obligations and future certificate costs, many companies are turning to ESG software like Coolset to centralize emissions data and simplify compliance workflows. Acting early helps reduce last-minute stress and avoid costly penalties down the line.

Need help getting CBAM-ready?

Coolset helps importers streamline emissions tracking, engage suppliers, and stay compliant, without the headaches. Get in touch to learn more.