EU Finalizes Technical Rules for CBAM's Definitive Phase

In late August and early September 2025, the European Commission initiated a series of critical public consultations to finalize the technical rulebook for the Carbon Border Adjustment Mechanism (CBAM). These rules are essential for the transition to the "definitive period," which begins on January 1, 2026, when importers will be required to purchase and surrender CBAM certificates to cover the embedded emissions of their imported goods.

The consultations, which have now closed, focused on several key technical and administrative aspects of the regulation.

Key Consultation Areas

• Scope Extension and Anti-Circumvention (Closed August 26, 2025): This consultation gathered feedback on extending CBAM to cover "downstream" products (e.g., finished goods made from steel and aluminum) to prevent carbon leakage further down the value chain. It also sought input on measures to prevent businesses from circumventing the regulation, for instance by making minor modifications to goods just outside the EU border. Source: European Commission
• Definitive Period Rules (Closed September 25, 2025): A second set of consultations addressed the core mechanics of how CBAM will operate financially from 2026 onwards. The main topics included:
  • Calculation Methodology: Defining the precise methods for calculating both direct and indirect embedded emissions, and establishing the default values that will apply when an importer cannot provide actual emissions data. Source: European Commission
  • Credit for Carbon Prices Paid Abroad: Setting the rules for how importers can reduce their CBAM obligation by proving that a carbon price was already paid in the country of origin. This is to avoid "double pricing" on the same emissions. Source: European Commission
  • Adjustment for Free ETS Allowances: Detailing how the number of CBAM certificates required will be adjusted to mirror the gradual phasing out of free allowances given to EU producers under the EU Emissions Trading System (ETS) between 2026 and 2034. Source: European Commission

What This Means for Business

With the feedback periods now closed, the European Commission will proceed with drafting the final implementing regulations, with adoption expected in the fourth quarter of 2025.

While the core principles of CBAM are set, the final details established in these forthcoming acts will be critical for businesses. They will provide the legal certainty and technical specificity needed to prepare for the financial impact of CBAM. Companies should be prepared to:

• Monitor the final rules closely: The final methodologies will directly impact compliance costs and data collection requirements.
• Refine internal processes: Businesses will need to align their internal carbon accounting and reporting systems with the final, detailed EU methodology.
• Engage with supply chains: The rules on calculating embedded emissions and accounting for third-country carbon prices will require close collaboration with non-EU suppliers.