CBAM 2026: Preparing for the Shift from Transitional to Definitive Phase

What changes when CBAM moves from reporting-only to financial obligations, and how to prepare your organization for the definitive phase.

Pillar context

The Carbon Border Adjustment Mechanism is moving from theory to financial reality. Since October 2023, EU importers of covered goods have been filing quarterly CBAM reports. But reporting is about to become the easy part. The definitive phase introduces financial obligations that fundamentally change how importers manage their carbon-intensive supply chains. This article maps what changes, what you need to prepare, and how to avoid the most common pitfalls in the transition.

What the transitional phase taught us

The transitional period (October 2023 through December 2025) served as a learning exercise for both importers and regulators. During this phase, importers were required to report the embedded emissions in their CBAM goods but did not face financial consequences for those emissions.

Several patterns emerged that are directly relevant to the definitive phase:

  • Data quality varies enormously. Many importers relied on default emission values provided by the European Commission because their suppliers could not provide verified actual emissions data. Default values are conservative, meaning they overstate emissions. Under the definitive phase, this overstatement translates directly into higher certificate costs.
  • Supplier engagement is the bottleneck. Obtaining actual emission data requires cooperation from non-EU producers. Many suppliers, particularly in countries without carbon pricing mechanisms, have limited experience with emissions accounting and need significant support to provide the required data.
  • Internal coordination gaps are common. CBAM spans sustainability, finance, procurement, compliance, and logistics. Organizations that assigned CBAM to a single department during the transitional phase discovered that cross-functional coordination is essential.

What changes in the definitive phase

The definitive CBAM phase introduces several fundamental changes that transform CBAM from a reporting exercise into a financial obligation.

Financial obligation: CBAM certificates

Importers must purchase CBAM certificates corresponding to the embedded emissions in their imported goods. Each certificate covers one tonne of CO2 equivalent. The certificate price is linked to the EU Emissions Trading System (ETS) allowance price, calculated as the weekly average auction price.

With ETS prices fluctuating between EUR 55 and 80 per tonne in recent months, the financial exposure is significant. A steel importer handling 100,000 tonnes annually with embedded emissions of 1.8 tCO2e per tonne faces a certificate cost of EUR 9.9 to 14.4 million per year before any deductions.

Carbon price deductions

Importers can deduct the carbon price effectively paid in the country of origin. If a supplier's production is subject to a carbon tax or ETS equivalent in their home country, the importer can claim a deduction against their CBAM certificate obligation. However, proving that a carbon price was paid, and calculating the exact deduction amount, requires detailed documentation from the supplier and verification against the rules specified in the implementing regulation.

Authorized CBAM declarant status

Only authorized CBAM declarants can import CBAM goods and surrender certificates. Importers must apply for authorization through their national competent authority. The application requires demonstrating that the declarant has the systems and controls in place to accurately determine embedded emissions, purchase and manage certificates, and submit annual CBAM declarations.

Verified emission data requirements

During the transitional phase, default values were acceptable in many situations. Under the definitive regime, the use of default values is restricted. Importers are expected to obtain actual emission data from their suppliers, verified according to EU-approved methodologies. Where actual data is unavailable, the default values applied will reflect the worst-performing installations in the relevant sector, significantly increasing the financial burden.

Annual CBAM declaration

Instead of quarterly reports, authorized declarants must submit an annual CBAM declaration by May 31 of each year, covering the previous calendar year. This declaration must state the total quantity of each CBAM good imported, the total embedded emissions, the number of CBAM certificates surrendered, and the carbon price deductions claimed.

Five preparation priorities for 2026

1. Secure actual emission data from suppliers

This is the single highest-impact preparation step. Every tonne of embedded emissions where you rely on default values instead of actual data will cost you more in certificates. Start with your highest-volume suppliers and work down.

Practical approach:

  • Identify your top 20 suppliers by CBAM-relevant import volume. These typically represent 80% of your exposure.
  • Send a structured data request covering: production process, direct emissions, indirect emissions (electricity), emission intensity per product, and any carbon price paid.
  • Provide suppliers with the EU's standardized communication template for emission data.
  • Set a 60-day response window with follow-up at 14, 30, and 45 days.

2. Build your certificate budget model

CBAM certificates are a new cost line that needs to be reflected in product costing, pricing decisions, and cash flow planning.

Key modeling inputs:

  • Import volumes by CBAM product category (historical and forecast).
  • Embedded emissions per product (actual data where available, default values where not).
  • ETS price scenarios (low: EUR 50, mid: EUR 65, high: EUR 85).
  • Carbon price deductions from countries of origin.
  • Certificate purchase timing and cash flow impact.

Run three scenarios and present the mid-case to finance leadership with the range as context. Update quarterly as ETS prices and supplier data evolve.

3. Apply for authorized CBAM declarant status

Do not wait for the deadline. The application process requires demonstrating your operational readiness, and national competent authorities will face a surge in applications. Apply early to allow time for any clarifications or additional documentation requests.

Application readiness checklist:

  • Designated CBAM responsible officer with clear mandate.
  • Documented process for determining embedded emissions.
  • System for purchasing, holding, and surrendering certificates.
  • Internal controls and record-keeping procedures.
  • Process for verifying supplier emission data.

4. Align your internal organization

CBAM touches multiple functions. Define clear responsibilities before the obligations become binding.

Function CBAM responsibilities
Sustainability / ESG Manage supplier emission data collection, verify methodologies
Finance / Treasury Budget certificates, manage cash flow, handle certificate purchases
Procurement Include CBAM data requirements in supplier contracts, negotiate data sharing
Customs / Compliance Submit CBAM declarations, maintain audit trails, liaise with competent authority
IT / Data Integrate emission data into compliance systems, automate calculations

Establish a cross-functional CBAM working group that meets monthly during the transition and quarterly once processes stabilize.

5. Connect CBAM data to your broader compliance workflows

CBAM data does not exist in isolation. The supplier relationships, product classifications, and import transactions involved in CBAM overlap with preferential origin, LTSD management, and customs compliance more broadly.

Organizations that manage CBAM in a silo will duplicate supplier outreach, maintain parallel product databases, and create inconsistent audit narratives. Those that integrate CBAM into their existing compliance platform will capture synergies in supplier data collection, product classification, and evidence management.

Common pitfalls to avoid

Underestimating the data timeline. Obtaining verified actual emission data from non-EU suppliers typically takes 3 to 6 months, including back-and-forth on methodology and data quality. If you start in Q3 2026, you will be using expensive default values for your first annual declaration.

Treating certificates as a one-time purchase. CBAM certificate obligations are ongoing and price-volatile. Build a procurement strategy, not a one-off purchase order. Consider hedging approaches if your exposure is material.

Ignoring carbon price deductions. Deductions for carbon prices paid in the country of origin can significantly reduce your certificate obligation. But they require documentation. If your suppliers operate in countries with carbon pricing (UK, Canada, South Korea, China pilot regions), invest the effort to collect and verify the deduction evidence.

Assuming the transitional reports are sufficient. The data quality and granularity required for the definitive phase exceeds what was acceptable during the transitional period. Review your transitional reports critically and identify where data needs to be upgraded.

How PSRA supports the CBAM transition

PSRA integrates CBAM management with preferential origin, LTSD, and supplier compliance workflows. Supplier emission data is collected through the same portal used for origin declarations. Product classifications are shared across CBAM and origin determinations. Audit trails connect certificate purchases to import transactions to supplier evidence.

The result is a single compliance platform that eliminates the silos, reduces the duplicate effort, and produces consistent, audit-ready dossiers across all your trade compliance obligations.

Next step

Request the CBAM transition checklist to receive a structured preparation plan covering supplier data collection, certificate budgeting, declarant authorization, and organizational alignment. The organizations that prepare now will manage the definitive phase as a controlled process rather than an emergency response.

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Related definitions

  • CBAM: CBAM is the European mechanism linking emissions-related reporting and settlement to imported goods.
  • BOM: A BOM is the bill of materials: the structured composition of a product.
  • Audit trail: An audit trail records who did what, based on which source data, and with what decision logic.