EU CBAM Definitive Phase 2027: Complete UK Exporter Preparation Guide
Key Takeaways
- The CBAM transitional phase ended December 2025 — the definitive phase is now live, with financial obligations commencing from 2027
- UK exporters of steel, iron, aluminium, cement, fertilisers, electricity, and hydrogen to the EU must calculate embedded emissions per tonne of product
- Using actual installation-level emissions data rather than default values can reduce your CBAM liability by 20–40%
- EU importers must purchase CBAM certificates at a price linked to the EU ETS — this cost will be passed back to UK exporters through commercial negotiation
- A structured 6-month preparation programme can have your data systems, supplier engagement, and financial modelling ready before obligations bite
CBAM: The Regulatory Timeline
The EU Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase on 1 October 2023. During this phase, EU importers were required to report the embedded emissions of covered goods but faced no financial obligation. That transitional period ended on 31 December 2025.
From 1 January 2026, the definitive phase applies. EU importers must now be authorised CBAM declarants. From 2027, they must surrender CBAM certificates corresponding to the embedded emissions of imported goods. The price of these certificates is linked directly to the EU Emissions Trading System (EU ETS) allowance price, which has fluctuated between €55 and €100 per tonne of CO2e over the past two years.
For UK exporters, this is not an EU-only concern. The financial cost of CBAM certificates will be borne initially by EU importers, but commercial reality dictates that this cost will be negotiated back through the supply chain. UK manufacturers of covered goods face either reduced margins or reduced competitiveness unless they can demonstrate lower embedded emissions than the default values the EU will otherwise apply.
Which Goods Are Covered?
CBAM currently covers six product categories, defined by their CN (Combined Nomenclature) codes:
Iron and steel: Including pig iron, ferro-alloys, crude steel, semi-finished products, flat and long products, tubes, pipes, and fittings. This is the broadest category and captures a significant volume of UK-EU trade.
Aluminium: Unwrought aluminium, aluminium powders and flakes, bars, rods, profiles, wire, plates, sheets, strips, foil, tubes, and pipes.
Cement: Portland cement, aluminous cement, slag cement, and clinker.
Fertilisers: Nitric acid, ammonia, potassium nitrate, and mineral or chemical fertilisers containing nitrogen.
Electricity: Relevant for interconnector flows, though this is less significant for most UK manufacturers.
Hydrogen: Added to reflect the EU’s hydrogen strategy and expected growth in hydrogen trade.
If your products fall within these CN codes and you export to the EU, CBAM applies to you. The European Commission has published a detailed CN code mapping in the CBAM Implementing Regulation that should be checked against your specific product specifications.
Calculating Embedded Emissions
This is where CBAM becomes technically demanding. Embedded emissions are defined as the direct emissions (Scope 1) from the production process of the covered good, plus in some cases the indirect emissions (Scope 2) from electricity consumed during production. For cement and fertilisers, only direct emissions are currently in scope. For aluminium, both direct and indirect emissions apply, reflecting the electricity-intensive nature of smelting.
The calculation must be performed at the specific installation level, not at a company average or sector benchmark level. This means you need to know, for each production facility that manufactures the goods you export to the EU:
- Total direct GHG emissions from the installation (tonnes CO2e)
- Total production output of the covered good (tonnes of product)
- The system boundary: which process steps are included (e.g., for steel, this covers coke production, sintering, blast furnace, basic oxygen furnace or electric arc furnace, and casting)
- Emission factors for each fuel and feedstock used
- Where applicable, electricity consumption and the emission factor of the electricity grid or direct supply
The resulting figure is expressed as tonnes of CO2e per tonne of product. This is your specific embedded emissions intensity.
Actual Emissions vs Default Values: Why Actual Is Better
If a UK exporter cannot provide verified actual emissions data, the EU importer will be required to use default values published by the European Commission. These default values are deliberately conservative — they are typically set at the average emission intensity of the worst-performing 10% of EU installations for the relevant product, or based on the exporting country’s average grid emission factor and available industry data.
For most UK manufacturers, actual emissions will be significantly lower than default values, because:
- The UK grid has decarbonised substantially (carbon intensity below 200g CO2/kWh on an annual average basis, compared to some default assumptions that are considerably higher)
- UK installations in sectors like steel and cement have invested in energy efficiency measures over the past decade
- The UK ETS already incentivises emissions reduction at covered installations
The financial difference is material. If your actual embedded emissions are 1.5 tonnes CO2e per tonne of steel but the default value is 2.1 tonnes, at a CBAM certificate price of €70/tonne, you save €42 per tonne of exported product. For a manufacturer exporting 50,000 tonnes per year, that is €2.1 million annually. Investing in accurate emissions measurement and verification is not a compliance cost — it is a competitive investment.
Supplier Engagement: Getting the Data
For UK exporters whose products incorporate materials from upstream suppliers, obtaining installation-level emissions data from those suppliers is essential. This is particularly relevant for fabricators, processors, and manufacturers who purchase primary metals, clinker, or chemical feedstocks.
A structured supplier engagement programme should include:
Supplier mapping: Identify which suppliers provide materials that fall within CBAM product categories. Map these back to specific production installations.
Data request templates: Provide suppliers with clear, standardised data request forms aligned with the CBAM Implementing Regulation’s data requirements. Specify the system boundary, emission factors expected, and the verification standard required.
Capacity building: Many suppliers, particularly SMEs, will not have experience calculating installation-level emissions to CBAM standards. Offer guidance, templates, or direct support.
Verification requirements: Under the definitive phase, emissions data must be verified by an accredited verifier. Ensure your suppliers understand this requirement and factor in the lead time for verification engagements.
Contractual provisions: Update supply agreements to include CBAM data provision obligations, data quality requirements, and timelines aligned with the annual CBAM declaration cycle.
Financial Impact Modelling
Every UK exporter of covered goods should build a CBAM liability model. The core calculation is straightforward:
CBAM Liability = (Embedded Emissions per tonne) × (Export Volume in tonnes) × (CBAM Certificate Price per tonne CO2e) − (Any Carbon Price Already Paid)
The final term is critical. If a carbon price has already been paid in the country of origin (e.g., through the UK ETS), this can be deducted from the CBAM liability. The European Commission has established rules for recognising carbon prices paid in third countries, and the UK ETS is expected to qualify. However, the deduction is based on the effective carbon price actually paid, not the market price of UK ETS allowances — meaning that free allocation reduces the deductible amount.
Model three scenarios: low EU ETS price (€55/tonne), central (€75/tonne), and high (€100/tonne). Factor in the phase-out of free allocation under the EU ETS (which increases the CBAM liability over time as free allocation to EU producers is reduced). Build sensitivity analysis around export volumes, emission intensity improvements, and UK ETS price trajectories.
UK ETS and Potential UK CBAM
The UK Government has been consulting on its own carbon border adjustment mechanism. A UK CBAM, if implemented, would apply to goods imported into the UK from countries without equivalent carbon pricing. For UK exporters to the EU, the interaction between UK ETS costs (deductible from EU CBAM liability) and any future UK CBAM on imports creates a complex but manageable regulatory landscape.
The key strategic implication: invest in actual emissions reduction. Regardless of how CBAM mechanisms evolve in the UK or EU, lower embedded emissions mean lower carbon border costs in either direction. Decarbonisation is the most robust hedge against regulatory uncertainty.
RSustain CBAM Tools
RSustain has developed two purpose-built digital tools to support UK exporters:
CBAM Compass — a comprehensive assessment tool that guides you through the full CBAM calculation methodology, from CN code identification through emission intensity calculation to financial liability estimation. It produces an installation-level embedded emissions profile that can be shared with your EU importers.
CBAM Pre-Check — a rapid screening tool that determines whether your products are within CBAM scope, estimates your likely exposure using sector benchmarks, and identifies the data gaps you need to close before the definitive phase obligations apply.
Group Experience: Industrial Decarbonisation
The RSustain group brings direct industrial decarbonisation experience to this advisory area, including CO2 compressor retrofit projects that have delivered measurable emission reductions at heavy industrial installations. This hands-on engineering experience — understanding process emissions, combustion optimisation, heat recovery, and the practical constraints of retrofitting operating plants — informs our CBAM advisory work. We do not approach embedded emissions as a purely accounting exercise; we understand the production processes that generate them and the engineering interventions that can reduce them.
Six-Month Preparation Timeline
Month 1 — Scope and Classify: Identify all products exported to the EU. Map CN codes to CBAM categories. Determine which production installations are relevant. Establish a CBAM project team with representation from trade compliance, sustainability, finance, and operations.
Month 2 — Data Inventory: Audit existing emissions data at each relevant installation. Identify gaps between what you currently measure and what CBAM requires. Commission additional monitoring or metering if needed. Begin supplier engagement for upstream materials.
Month 3 — Calculate: Perform installation-level embedded emissions calculations for each covered product. Document methodology, system boundaries, emission factors, and data sources. Compare results against EU default values to quantify the benefit of using actual data.
Month 4 — Model and Verify: Build financial impact models under multiple carbon price scenarios. Engage an accredited verifier to review your calculation methodology and data quality. Address any findings before submitting data to EU importers.
Month 5 — Supplier Integration: Collect and validate upstream supplier emissions data. Integrate into your product-level calculations. Update supply chain contracts with CBAM data obligations.
Month 6 — Operationalise: Establish annual data collection and reporting processes. Brief commercial teams on CBAM cost implications for pricing negotiations. Set emission reduction targets that will reduce future CBAM liability. Report to the board on financial exposure and mitigation strategy.
Assess Your CBAM Exposure Today
Use our free CBAM tools to screen your products, calculate embedded emissions, and model your financial exposure. Our advisory team can then support you through supplier engagement, verification, and ongoing compliance.