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The European Union’s Carbon Border Adjustment Mechanism (EU CBAM)

The European Union’s Carbon Border Adjustment Mechanism (EU CBAM) underscores the importance of data, carbon accounting, and strategic trade policy for industrial innovation. These tools determine what gets measured, rewarded, and whether cleaner production in the United States (US) can compete globally. This high-level explainer captures what the EU CBAM is, how it works, and its implications for US industry and policy. It is also an example of why trade will be an important focus as the Initiative develops its 2026 Federal Policy Blueprint.

What is the EU CBAM?

The EU CBAM seeks to address carbon leakage by imposing a carbon price on imports based on embedded emissions of a particular good. Embedded emissions are the direct and indirect emissions associated with the production of a product. Carbon leakage occurs when companies relocate production to countries with less stringent regulations. This can lead to imports having higher embedded carbon than domestically produced goods. EU CBAM initially applies to imports of aluminum, cement, fertilizer, hydrogen, iron and steel, and electricity. The list of covered goods is expected to expand, potentially including all products covered by the European Union Emissions Trading System (EU ETS) by 2030.

Top suppliers of goods in EU CBAM scope, 2025 ($B), as of March 16, 2026

Source: S&P Global Energy

The CBAM was introduced in 2021 as part of a broader package of proposals aimed at reducing the EU’s net greenhouse gas emissions by at least 55 percent by 2030. In 2023, these proposals were approved and adopted as part of the “Fit for 55” package.

Implementation phases and CBAM calculation

Beginning January 1, 2026, EU CBAM entered the definitive phase, the second of three phases.

During the definitive phase, applicable industries that import more than 50 metric tons of covered goods must apply for “authorized CBAM declarant” status and purchase CBAM certificates. The auction price of the EU ETS allowances determines the price of the certificates. Prices will be quarterly averages in 2026 and weekly averages beginning in 2027. On April 7, the European Commission published the first quarterly CBAM certificate for Q1 2026 at 75.36 euros.

EU ETS allowances are a key “cap-and-trade” tool in the EU’s Green Deal, designed to reduce domestic emissions in the industrial and power sectors. An allowance acts as a permit to emit one metric ton of carbon dioxide. The total number of available allowances is capped and decreases each year. Companies surrender allowances equivalent to their emissions and can also buy and trade allowances. The EU allocates free allowances to sectors that compete internationally with non-EU companies to maintain global competitiveness.

As a carbon pricing tool, EU CBAM complements the EU ETS cap-and-trade system by ensuring that both domestic and imported goods are subject to an equivalent carbon price. Similarly, the phase-in of EU CBAM between 2026 and 2034 complements the phase-out of existing free allowances under the EU ETS. By 2034, CBAM will replace the protection that certain domestic EU sectors currently receive through free ETS allowances.

Source: International Carbon Action Partnership

An example of a CBAM calculation based on a carbon-intensity benchmark for Portland cement (grey cement) of 0.666 tons of carbon dioxide per ton of cement (tCO2/t) is shown below for 2026 and 2034. The EU CBAM price formula includes a deduction for importing jurisdictions with their own carbon price. This box is grayed out in the 2026 and 2034 examples below to reflect current US policy conditions.

Source: AJW, Inc. Presentation to the Industrial Innovation Initiative, January 2026

CBAM verification and default values

Facilities producing products covered under EU CBAM must undergo verification of reported embedded emissions by an accredited body in preparation for the collection of EU CBAM fees beginning in September 2027. Companies must calculate embedded emissions in accordance with the methods established in Annex IV and further specified in the Implementing Regulations adopted pursuant to Article 7(7). Companies will report 2026 emissions beginning January 1, 2027, and they must monitor emissions throughout 2026 in preparation.

When verified emissions data are not available, EU default values are applied. Default values are calculated and assigned according to the EU’s methodology rather than an individual product’s actual embedded emissions. In some cases, default values exceed a product’s actual carbon intensity, raising compliance costs, impacting competitiveness in the EU market, and underscoring the importance of reliable carbon data.

Implications for US policy

In addition to preventing carbon leakage, the EU CBAM aims to influence global trade and encourage other countries to adopt carbon pricing policies. While not enacted, several recent federal proposals related to carbon pricing and trade in the United States include the 2024 PROVE IT Act (S. 1863/ H.R. 8957), the 2025 Foreign Pollution Fee Act (S. 1325), and the 2025 Clean Competition Act (S. 3523 / H.R. 6787).

Notably, a recent Department of Energy (DOE) appropriations report included language similar to the 2024 PROVE IT Act. The National Energy Technology Lab is to conduct a study comparing the emissions intensity of certain goods produced in the US to those produced elsewhere, specifically goods covered under the EU CBAM. The Initiative will continue to monitor these developments closely.

Thank you to AJW, Inc. and the Bipartisan Policy Center for presenting on this topic during the Initiative’s January 2026 plenary.

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Labor Engagement Manager for Industrial Innovation and Carbon Management, GPI

Alejandro comes to GPI from Labor Union SEIU-United Service Workers West. He represented union workers from downtown Los Angeles and LA’s westside corridor of Century City, Westwood, and Beverly Hills. Alejandro enforced various collective bargaining agreements for union workers, ensuring annual wage increases, health insurance, and other benefits and protections. In addition, he worked with union leaders and outside stakeholders, such as community partners, public agencies, politicians, and industry experts, to develop and execute union campaigns. Alejandro was also part of the Los Angeles-Justice for Janitors 2021 union contract campaign—he helped execute and coordinate large-scale actions across LA’s metropolitan area. Previously, he served as the Nevada state canvassing director at For Our Future Action Fund. He holds a BA in international studies and Italian from the University of Kansas.

Senior Program Coordinator for Industrial Innovation and Carbon Management, GPI

Carrie Danner joined the Great Plains Institute in 2023 and serves as the operations coordinator for the Industrial Innovation and Carbon Management team. In her work, she supports all projects within the program to elevate operations, particularly in grant-making and event planning. Carrie earned a bachelor’s degree from Knox College in environmental studies. Prior to joining GPI, she supported programs at the Conservation Corps of Minnesota & Iowa as their member experience administrator.

Industry Program Coordinator, GPI

Alana joined GPI in 2024 as a program associate on the Industrial Innovation and Carbon Management team, specifically supporting the Industrial Innovation Initiative, where she helps to advance industrial decarbonization through GPI’s consensus-building approach. Alana previously worked as an account executive at Jamf, where she helped current K-12 education customers improve and scale the management and security of their Apple device deployments. Alana has spent most of her professional years working with Minnesota nonprofits, including two years as an AmeriCorps member with Twin Cities Habitat for Humanity. She holds a bachelor’s degree in community environmental studies from the University of Wisconsin-Eau Claire.

Zachary Byrum, Research Analyst, WRI

Zachary Byrum is a Research Analyst in WRI's U.S. Climate Program, where he provides technology and policy analysis for carbon removal and deep decarbonization. His work focuses on pathways to reduce industrial emissions as well as bolstering technological carbon removal. Prior to WRI, Zach was a research assistant in the Carbon Management Research Initiative at the Center on Global Energy Policy. In the preceding years, he served as White House Intern in the National Economic Council under the Obama Administration and then an assistant analyst at the Congressional Budget Office. Zach holds a Master of Public Administration in Environmental Science and Policy from the School of International and Public Affairs at Columbia University and a B.A. in Economics and Political Science from Goucher College.

Senior Advisor of Industrial Innovation, WRI United States

Angela Anderson is the Director of Industrial Innovation and Carbon Removal in the Climate Program. She leads WRI's growing portfolio of work in industrial decarbonization and carbon removal and aims to change narratives around “hard-to-abate” sectors and promote the natural and technological interventions required to achieve net-zero targets. Prior to joining WRI, Angela worked as a program director, coalition builder, international advocate, and campaign strategist. She led the Climate and Energy Program at the Union of Concerned Scientists for ten years; facilitated US-NGO engagement in the international climate negotiations while at US Climate Action Network and at the Pew Environmental Trust; and founded Clear the Air, a national coalition to reduce pollution from power plants. Angela holds a B.A. in political science from Colorado State University.

Vice President of Industrial Innovation and Carbon Management, GPI

Patrice Lahlum is the Vice President of the Industrial Innovation and Carbon Management program at the Great Plains Institute. The Institute, headquartered in Minneapolis, MN, works with diverse stakeholders and communities across the country to transform the energy system to benefit people, the economy, and the environment. We strive to combine our unique consensus-building approach, expert knowledge and analysis, and local action to promote solutions that strengthen communities, shore up the nation’s industrial base, and enhance domestic energy independence, all while eliminating carbon emissions. Patrice oversees several initiatives, including the Carbon Capture Coalition, Industrial Innovation Initiative, Carbon Action Alliance, and the Regional Carbon Capture Deployment Initiative.

Senior Content Specialist for Industrial Innovation and Carbon Management, GPI

Kate Sullivan joined the Great Plains Institute in 2019. As Senior Content Specialist, Kate uses her analytical and design skills to provide research, writing, and logistical support across the Industrial Innovation and Carbon Management team. Prior to joining GPI, Kate worked as an Energy Counselor in the Center for Energy and Environment’s residential department, assisting homeowners with their energy needs and providing resources for efficiency upgrades. Kate earned her BA in Biology from St. Olaf College with an emphasis in Environmental Studies.

Senior Program Manager for Industrial Innovation and Carbon Management, GPI

Jill Syvrud joined the Great Plains Institute in 2017 and serves as the program manager for the Industrial Innovation and Carbon Management Program. In addition to overseeing the overall program, Jill directly supports the Industrial Innovation Initiative, a coalition advancing decarbonization solutions for the Midcontinent region’s most important industrial sectors. Jill earned a bachelor of science in biology from the University of Wisconsin–Eau Claire and a master of science degree in science technology and environmental policy from the University of Minnesota’s Humphrey School of Public Affairs. Jill’s past experience includes multiple graduate research assistantships concentrating on technology innovation and sustainable megacities, as well as a previous position as an administrative and outreach coordination intern with the Midwest Renewable Energy Association.