January 1, 2026, marked the end of CBAM's transitional period. The EU's Carbon Border Adjustment Mechanism moved from a reporting-only exercise to a mechanism with real financial consequences for aluminum importers. Carbon costs are now accruing. The first CBAM certificates for 2026 imports will be purchased starting February 1, 2027 — but the liability is building from today. For any manufacturer or supplier exporting aluminum products into Europe, the cost structure has permanently changed.
What CBAM Is and What Changed in January 2026
CBAM is the EU's mechanism to prevent "carbon leakage" — the risk that European industries lose business to competitors in countries with lower carbon costs, while global emissions stay the same or worsen. It applies a carbon cost to imports of six categories of goods: cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.
The transitional phase ran from October 2023 through December 2025. During that period, EU importers were required to report embedded emissions from their imports — but paid nothing. From January 1, 2026, the definitive phase began. Emissions are now financially priced. Importers accumulate certificate obligations throughout 2026 and must surrender those certificates by September 30, 2027.
Key changes that took effect in 2026:
- Third-party verification of embedded emissions is now mandatory — EU-accredited verifiers only, with physical on-site inspections required in year one
- Only Authorized CBAM Declarants can import covered goods
- Default values (used when suppliers cannot provide verified data) are set above average emissions intensity — a built-in financial penalty for non-reporting
- A 50-tonne annual exemption threshold was introduced, which exempts approximately 90% of importers by volume but covers 99% of embedded emissions by weight
- Failure to surrender required certificates triggers a statutory penalty of €100 per excess tonne
The Carbon Price Gap: What It Costs
The practical cost exposure comes from the gap between EU and Chinese carbon pricing. In 2025, the EU Emissions Trading System (ETS) averaged approximately US$80 per tonne of CO₂ equivalent. China's national ETS, by comparison, hovers near US$11 per tonne. CBAM allows importers to deduct carbon costs already paid domestically — but China's low ETS price offsets only a small fraction of the EU obligation.
| Carbon Market | 2025 Price (approx.) | Projected 2030 |
|---|---|---|
| EU ETS | ~US$80/tonne CO₂ | >EUR 100/tonne (institutional projections) |
| China ETS | ~US$11/tonne CO₂ | ~US$25/tonne (market estimates) |
| Net gap (China exporters) | ~US$69/tonne | Widening unless China ETS accelerates |
For Chinese aluminum exporters, analysts estimate annual CBAM costs in the range of RMB 2–2.8 billion during this early phase. Aluminum importers collectively could face EU-side liabilities near €500 million in 2026 alone. If the EU later expands CBAM to include indirect electricity emissions (currently excluded), total compliance costs for aluminum could increase by 500–800%, given China's coal-heavy electricity grid.
What Aluminum Products Are Covered
The current CBAM scope covers primary aluminum and certain semi-finished products — ingots, billets, sheets, wire rod, and a defined list of basic downstream forms. This directly affects aluminum raw material trade. Die cast and machined finished parts are not yet in scope under the 2026 regime.
However, the European Commission proposed in December 2025 to expand CBAM to approximately 180 downstream steel and aluminum products from 2028. The stated purpose is to prevent circumvention — preventing exporters from moving carbon-intensive aluminum upstream, then assembling it into finished goods to avoid the mechanism. The 2028 expansion list is expected to include industrial supply chain components used in machinery and certain household goods. Once finalized, this would bring a much broader range of manufactured aluminum parts into CBAM coverage.
The practical implication: manufacturers supplying European OEM customers with aluminum die cast components are not yet subject to CBAM certificate obligations for their finished parts, but should plan for the 2028 expansion and start building the emissions data infrastructure required for compliance.
China's Response: ETS Expansion in 2025
In March 2025, China added steel, cement, and aluminum to its national ETS — bringing approximately 3 billion tonnes of CO₂ under regulatory coverage. Phase 1 uses an intensity-based allocation mechanism. Phase 2, scheduled post-2027, is intended to move toward an absolute emissions cap, which is a prerequisite for the EU to recognize China's domestic carbon costs as an offset against CBAM obligations.
Until that absolute cap is in place, the recognition of Chinese ETS prices against CBAM certificates remains limited. The carbon cost gap between China and Europe is therefore a medium-term structural variable rather than a short-term adjustment.
Compliance Requirements for Exporters to the EU
For aluminum producers and manufacturers exporting to Europe, the current practical requirements are:
- Emissions data: Calculate embedded direct emissions using EU-prescribed methodology (not Chinese ETS MRV methodology — the two frameworks conflict in several calculation boundaries and must be reconciled separately)
- Verification: Engage EU-accredited third-party verifiers; in 2026, this requires physical on-site inspection
- Importer obligation: Your EU customer must hold Authorized CBAM Declarant status (deadline: March 31, 2026); if they do not, imports are blocked
- Default value risk: If you cannot provide verified actual emissions data, EU default values apply — and defaults are set above industry average intentionally to incentivize transparency
For manufacturers producing custom metal components for European supply chains, the most important near-term action is to start building plant-level emissions accounting capability. Even if your specific products are not yet in scope, your EU customers are increasingly evaluating suppliers on carbon data readiness as they prepare for the 2028 downstream expansion.
What Comes Next
- February 1, 2027: First CBAM certificate purchases begin (covering 2026 imports)
- September 30, 2027: Deadline to surrender CBAM certificates for 2026
- 2027: UK launches its own CBAM; weekly ETS price linkages replace quarterly averages
- 2028 (proposed): CBAM scope expands to ~180 downstream steel and aluminum products including industrial components
- Post-2027: China's ETS Phase 2 — absolute cap implementation; EU recognition of China carbon costs under review
Sources
China Briefing — "EU CBAM 2026: What It Means for China-Based Manufacturing" (March 12, 2026)
https://www.china-briefing.com/news/eu-cbam-2026-china-based-manufacturing-impact-investment-strategy/
European Commission — Carbon Border Adjustment Mechanism (official page)
https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
Fastmarkets — "CBAM regulation report: navigating the EU's new carbon border rules for metals" (March 2026)
https://www.fastmarkets.com/insights/cbam-regulation-report-navigating-the-eus-new-carbon-border-rules-for-metals/
Shanghai Metal Market — "Impact of EU's CBAM on the global aluminum industry" (October 2025)
https://www.metal.com/en/newscontent/103561181
Light Metal Age — "European Union's CBAM and Its Impact on Global Aluminum" (October 27, 2025)
https://www.lightmetalage.com/news/industry-news/european-unions-cbam-and-its-impact-on-global-aluminum/
Acquis LP — "Your Guide to CBAM: Implications for EU importers and non-EU producers" (January 12, 2026)
https://www.acquislp.eu/your-guide-to-cbam-implications-for-eu-importers-and-non-eu-producers-12-january-2026
