CBAM is entering a phase where it is no longer solely a compliance project, but rather a financial mechanism influencing margins, purchasing decisions, and supply chain architecture. In December 2025, the European Commission published a set of implementing acts and technical documents that finalize the model's key "open" elements: the methodology for calculating embedded emissions, verification and accreditation rules, default values with markup, the mechanics for determining the price of CBAM certificates, and the adjustment rules related to the phasing out of free ETS allowances (free allocation adjustment) and benchmarks.
Below I present a comprehensive description of the target shape of CBAM based on these publications and conclusions resulting from the system logic.
1. Starting point: what does the EC mean by “target” CBAM from 2026?
The Commission confirms that the CBAM will enter a "definitive regime" from 2026, after a transitional period from 2023 to 2025. The mechanism is deliberately synchronized with the phasing out of free ETS allowances to limit the risk of carbon leakage and maintain consistency in price incentives between EU production and imports.
In practice, this means moving from reporting to settlement:
- the importer (in practice: the authorized CBAM declarant) will be responsible for the annual CBAM declaration and the cancellation of CBAM certificates calculated based on embedded emissions,
- the price of the CBAM certificate will be derived from the EUA prices from the ETS, according to the defined publication and update methodology,
- where actual data is missing or its quality does not pass verification, the system defaults the import to conservative values with an additional mark-up that increases over time.
2. CBAM Nervous System: Registries, Portals and Customs Data Integration
During the target period, CBAM will not function without the registry infrastructure. The European Commission has published an act amending and clarifying the operating principles of the CBAM Registry, including:
- the scope of data stored in the register (CBAM accounts, declarations, status applications, operator registration, emission reports, verifier registration, verification reports, supporting documents),
- access and communication logic between the Commission, competent authorities, customs services and economic operators,
- interoperability elements with UUM&DS (user management and signature), EORI (identification verification), customs supervision and risk management systems.
An important detail that many companies overlook in their planning: the European Commission plans to provide certification report generation functionality in the register, which also requires access by an "independent person" (an independent person designated in the regulations). Such access is to be available no earlier than December 1, 2026, to allow time for a technical solution and consistency with verifier registration.
At the same time, in the registration act, the EC indicates that the CBAM Registry also includes the function of monitoring circumvention of regulations (circumvention monitoring) and is to support validation processes on the customs side.
3. Embedded emissions methodology: EC standardizes counting logic and "closes" the field for interpretation
3.1. Reporting period – default assumptions and the right to rebut the presumption
One of the most important technical changes affecting how data is obtained from manufacturers concerns the reporting period. EC:
- establishes the principle that the reporting period corresponds to the calendar year,
- introduces a presumption that the goods were produced in the calendar year of import (administrative simplification),
- allows the presumption to be rebutted if the applicant provides proof of the actual period of production,
- clearly indicates that the monitoring, calculation and verification methodology starts from 2026, so the reporting period cannot cover periods before 2026.
The EC also specifies the operational rule at the start – for imports in 2026, the reporting period is "fixed" to 2026, while for subsequent years it is the year of import by default, unless there is evidence of a different production period.
The EC applies a similar mechanism to precursors in complex goods – by default, it is assumed that the precursor was produced in the same period as the complex good, but the operator can rebut this evidence to the verifier.
3.2. Producers, Installations, and System Boundaries
In its annexes, the EC clarifies the system boundaries and the rules for allocating emissions to products. For example, it explicitly excludes the purchase and maintenance of infrastructure and equipment from the system boundaries, which is important in disputes over what constitutes the emissions footprint.
3.3. Simple and complex goods – precursor, indirect emissions and inclusion rules
The EC distinguishes between complex goods and rules regarding precursors and indirect emissions. The methodological annex contains a key decision regarding when indirect emissions from precursors are included in a complex good and when they are not – depending on whether the good and precursor are included in specific lists (Annex II) and the production process. This element will, in practice, determine whether the importer "pays" for indirect energy at the precursor level or only at the final good level.
3.4. Indirect Emissions and Electricity – When Can Actual Values Be Used?
The EC does not leave indirect emissions as an "optional addition." In the methodology, it indicates that the use of actual values for electricity and indirect emissions requires meeting the criteria from the base regulation, and in the implementing act, it specifies the catalogue of evidence to confirm that these criteria have been met (references to specific points in the annexes and evidence).
This translates into a very simple business consequence – where there is no hard measurement data and a consistent evidence trail, the “safe” scenario of the system will be default values.
4. Verification and accreditation – the EC is building CBAM as an auditable system
4.1. Verification – consistency with ETS, but with a hard requirement at the start
The EC emphasizes that the verification should be as consistent as possible with ETS procedures, while taking into account the specificity of CBAM and minimizing administrative burdens. At the same time, it explicitly introduces a principle that will have a significant impact on the availability of verified data in 2026:
- in the first year subject to verification, a physical visit to the installation is to be required in all cases,
- Only in the following year, if the quality and credibility criteria are met, the verifier can replace the physical visit with a virtual visit or skip it.
Additionally, the verification annex specifies the scope of information reported and verified (e.g.. method for determining the indirect emission factor and data source, production quantities in a functional unit, direct and indirect emissions attributed to goods, information on physical or virtual visits).
4.2. Verifier accreditation – minimizing the crossover between CBAM and ETS
In the delegated accreditation act, the EC once again emphasises the need for synergies with the ECJ and the principle that CBAM verification cannot lead to more favourable treatment of imports compared to goods EU.This there is a clear design signal – CBAM is to act as an "audit-based trust" mechanism, not as a declaration of intent.
5. Default values and mark-up – a tool for disciplining the data market
The EC published both the act establishing the default values and an extensive tabular annex including default values for individual CN codes and countries, broken down into direct, indirect and total emissions.
5.1. Markup Growing Over Time – A Deliberately Designed “Missing Data Penalty”
In the EC tables, default values appear in three horizons with increasing mark-up:
- 10% mark-up for 2026,
- 20% mark-up for 2027,
- 30% mark-up for 2028 and beyond.
This solution is not accidental – it is intended to reduce the attractiveness of remaining with defaults and move the market towards real, verifiable data.
5.2. Default revision – deadline and procedure
The EC indicates that default values and mark-ups are to be revised by December 2027 at the latest, with the announcement of public consultations under the Better Regulation procedure.
5.3. Products, Production Routes, and Benchmark Dependence
In the annex, the EC shows that for some CN codes, default values are linked to the "underlying production route determining CBAM benchmark," and where production routes are not specified, the CBAM benchmark is route-independent. This is important because, in practice, it shifts the focus of the conversation with the supplier from asking "provide a single emission figure" to asking "what is your technological route and what are the input data for the model?"
6. Price of CBAM certificates – quarterly in 2026, weekly from 2027, always linked to ETS
The EC clearly defines the method of calculating the price of CBAM certificates:
- in 2026, the price is to be calculated as the quarterly average of auction clearing prices of the EUA auction, and the Commission publishes the quarterly price on its website and then makes it available in the register for authorized applicants (from Q3 2026).
- from 1 January 2027, the price is to be calculated weekly as the average of the EUA auction settlement prices, with rules regarding data range and rounding.
As a result, CBAM begins to behave like a settlement instrument based on the ETS market – and therefore with price risk and the need to manage exposure, especially in industries with high volumes and low margins.
7. Free allocation adjustment and benchmarks – how the EC “translates” the ETS into CBAM
In the final CBAM, the number of certificates to be surrendered is to be adjusted to reflect the extent to which EU production continues to benefit from free ETS allowances. The EC is publishing an implementing act on free allocation adjustment and defining:
- that the correction takes into account the amount of imports, the cross-sectoral correction factor (CSCF), the CBAM factor and the value combining the ETS benchmarks in the form of the CBAM benchmark.
- that CBAM benchmarks are to be set at the level of individual commodities (commodity code), even though ETS benchmarks are by their nature assigned to installations and sub-installations.
In the annex, the EC provides the basic formula:
- FAA_g = SEFA_g,y * M_g, where SEFA is specific embedded free allocation in tCO2e per tonne, and
- that's a lot of imports.
The EC also clarifies that:
- the reporting period for the free allocation adjustment must be consistent with the reporting period in the actual emissions methodology, i.e. it cannot cover the period before 2026.
- for electricity (CN 2716 00 00) the free allocation adjustment is zero.
A very important sectoral detail appears in the EC justification – in the steel scope of CBAM "as of today" it covers direct emissions, which influences the method of constructing benchmarks and the share of indirect emissions in the correction mechanics.
8. Carbon price paid deduction – CBAM as a catalyst for carbon prices outside the EU
Fundamental to the CBAM's logic is that the mechanism should take into account the carbon price actually paid in the country of origin, which is intended to prevent double burdening while simultaneously encouraging the introduction of pricing systems outside the EU. The EC Review Report indicates that the prospect of a target period from 1 January 2026 has begun to act as an incentive to reduce embedded emissions imported into the EU and a catalyst for carbon pricing thanks to its design that includes the possibility of deducting the carbon price actually paid.
In practice, this means that the importer not only collects emission data, but also should be able to document the "carbon price paid" component in a manner acceptable in the CBAM system, otherwise the deduction effect will not materialize in the declaration.
9. Policy direction for 2026+: closing gaps, scope extension and downstream products
In parallel with implementing acts, the EC is working to strengthen the effectiveness of the CBAM. Reuters describes EC projects that extend the scope of the CBAM to downstream products, particularly those with a significant share of steel and aluminum (e.g., automotive components, household appliances such as refrigerators and washing machines, selected construction materials, transformers, cables, and agricultural machinery), in order to limit the bypassing of the mechanism by transferring added value to further stages of the chain.
In the same materials, Reuters also indicates the concept of allocating part of the revenues from CBAM to support EU producers investing in decarbonization (conditional support in 2028-2029) and estimating the revenues until 2030. Regardless of the final legislative shape, the direction is clear: CBAM is to be tighter, more resistant to avoidance and more "chain-based", and not limited to semi-finished products.
10. What does this mean for businesses – operational and financial implications for 2026?
From the perspective of companies importing CBAM goods, the EC publications from December 2025 close the three areas that were the greatest source of uncertainty during the transition period:
- Data and methodology The European Commission is standardizing the reporting period, rules for precursors, indirect emissions, and the evidence catalog. As a result, companies can finally build a process for obtaining data from suppliers based on a stable set of requirements.
- Quality control and auditability The requirement for a physical visit in 2026 and strict verification rules mean that some "market" data will fail the first attempt, especially in complex supply chains. This isn't a system error—it's a feature.
- Cost risk The price of the CBAM certificate is formally linked to the ETS, and the default markup values are expected to increase over time. As a result, the cost of the CBAM becomes quantifiable and manageable, but also more difficult to conceal in purchasing budgets.
11. Minimum Readiness Standard for 2026 – What should be in the green before the first settlement
If I were to boil down the target CBAM to a practical definition of readiness, it would be readiness in three layers:
- Legal and registration layer: status, access to the CBAM Registry, correct identification and management of users, consistency with EORI and customs processes.
- Data layer: supplier data model, simple-complex product distinction, precursor identification, reporting period rules, evidence trail for energy and indirect emissions, default vs actual strategic decision.
- Financial layer: certificate price mechanics (quarter 2026, week 2027+), benchmarks and free allocation adjustment, "default with mark-up" scenarios as a conservative variant and the process of showing the carbon price paid.
Following the EC publications from December 2025, CBAM in the 2026+ target period is an ETS-based settlement system, auditable and evidentiary, with a built-in mechanism for disciplining the data market (default values with increasing mark-up), and with an increasingly clear direction of expanding the scope to downstream products in order to close the risk of circumventing regulations.
