The EU continues to refine its Carbon Border Adjustment Mechanism (CBAM) framework, introduced under Regulation (EU) 2023/956, with a new draft implementing act that focuses on how carbon pricing paid outside the EU is recognised. Published for feedback between 13th May and 10th June 2026, this draft act is a crucial piece of the CBAM puzzle, providing technical rules that will directly affect importers and exporters navigating carbon pricing across jurisdictions.
This blog explores the key elements of the draft act, why it matters, and what stakeholders should consider during the feedback period.
BACKGROUND: THE ROLE OF CBAM
CBAM is designed to prevent “carbon leakage”, the relocation of production to countries with less stringent climate policies, and to ensure that imported goods face a carbon cost equivalent to that borne by EU producers under the EU Emissions Trading System (ETS).
Under CBAM, importers must surrender CBAM certificates corresponding to the embedded emissions in imported goods. However, where a carbon price has already been paid in a third country, importers may be entitled to a reduction in the number of certificates required. The new draft act sets out how this adjustment works in practice.
KEY AREAS COVERED BY THE DRAFT ACT
1. Conversion of carbon price paid abroad
One of the most significant elements of the draft act is the methodology for converting a carbon price paid in a third country into a reduction in CBAM obligations.
The proposal seeks to:
- Establish a clear formula to convert foreign carbon costs into an equivalent number of CBAM certificates
- Ensure consistency with EU carbon pricing, preventing under- or over-compensation
- Address differences in:
- Carbon pricing systems (e.g. taxes vs. emissions trading schemes)
- Currency and exchange rates
- Coverage of emissions (direct vs. indirect)
This is critical for fairness. Without a robust conversion method, companies could either face double carbon costs or exploit gaps to reduce their obligations unfairly.
2. Evidence of carbon price payment
To claim a reduction in CBAM certificates, importers must provide credible evidence that a carbon price has been paid in the country of origin.
The draft act outlines requirements such as:
- Official documentation from authorities or recognised schemes
- Verified emissions data tied to the payment
- Proof linking the carbon price directly to the exported goods
This is intended to minimise fraud and ensure traceability. Companies will likely need to establish stronger data collection and reporting systems to meet these evidentiary standards.
3. Role and qualifications of the independent verifier
A central requirement of the draft act is the involvement of an independent person (or verifier) to validate the evidence of carbon price payments.
The act proposes criteria for:
- Professional qualifications, including expertise in:
- Emissions accounting
- Carbon markets and pricing systems
- Accreditation or certification under recognised frameworks
- Technical competence in assessing complex supply chains
These requirements align with existing verification practices under the EU ETS but extend them into the global supply chain context.
4. Ensuring independence of the verifier
Independence is a cornerstone of credible verification. The draft act introduces safeguards to ensure that the verifier:
- Has no conflict of interest with the importer or exporter
- Is not financially dependent on the entity being assessed
- Maintains objectivity throughout the verification process
This is particularly important given the financial implications of CBAM reductions. Even small discrepancies in verification could translate into significant cost differences.
IMPLICATIONS FOR UK AND EU BUSINESSES
Increased administrative burden
Companies importing CBAM-covered goods (such as steel, cement, aluminium, fertilisers, hydrogen, and electricity) should expect:
- More detailed reporting requirements
- Greater reliance on third-party verification
- Additional compliance costs
Need for stronger cross-border coordination
EU businesses will need closer collaboration with suppliers in third countries to:
- Obtain reliable emissions and carbon pricing data
- Ensure documentation meets EU standards
- Align verification processes
Strategic opportunities
On the positive note, companies operating in countries with robust carbon pricing systems may benefit from:
- Lower CBAM liabilities
- Enhanced competitiveness in EU markets
Why the feedback period matters
The consultation window from 13th May to 10th June 2026 provides stakeholders with an opportunity to influence how these rules are finalised.
Key issues stakeholders may wish to comment on include:
- The fairness and practicality of the conversion methodology
- The feasibility of documentation requirements
- The availability and accreditation of independent verifiers globally
- Potential risks of double counting or administrative duplication
Given the complexity of global carbon pricing systems, stakeholder input is essential to ensure the rules are both robust and workable.
FINAL THOUGHTS
This draft act represents an important step in operationalising CBAM and ensuring it functions effectively in a global context. By addressing how foreign carbon prices are recognised, the EU is attempting to strike a balance between environmental integrity and economic fairness.
However, its success will depend heavily on clear implementation rules, practical verification processes, and international cooperation.
For businesses affected by CBAM, now is the time to:
- Review supply chain emissions data
- Assess exposure to foreign carbon pricing
- Prepare for enhanced verification requirements
- Engage in the feedback process before 10th June 2026
Understanding these technical rules when implemented will be essential for staying compliant (and competitive) in the evolving carbon market landscape. If you think these changes will apply to you and your products are already within scope of EU CBAM, get in touch and we’ll be happy to help.
