What Is the EU ETS and How Does It Determine CBAM Certificate Prices?

The EU ETS carbon price directly sets the cost of every CBAM certificate that EU importers must purchase, creating a mathematical link between Europe's internal carbon market and its border adjustment mechanism. As of late March 2026, the EU ETS trades at approximately €70 per tonne of CO₂ (tCO₂), though this figure fluctuates daily with auction clearing results. Understanding the EU ETS is not optional for any company importing steel, cement, aluminium, fertilizers, electricity, or hydrogen into the European Union: the price formed in ETS auctions is the price you pay per tonne of embedded emissions, calculated quarterly in 2026 and weekly from 2027 onward.

This article explains what the EU ETS is, how it has evolved since 2005, why its price signal propagates directly into CBAM certificate obligations, and what the free allocation phase-out schedule means for the growing financial exposure of importers through 2034.

Image brief: Diagram showing EU ETS cap-and-trade mechanism with auction clearing price feeding into CBAM certificate price calculation. Text overlay: "EU ETS Price → CBAM Certificate Price". Commission as branded illustration with cbamguide.com logo.

What Is the EU ETS?

The EU ETS is a cap-and-trade carbon market established in 2005 under Directive 2003/87/EC, covering approximately 40% of EU greenhouse gas emissions through a declining annual cap requiring covered installations to surrender one EU Allowance per tonne of CO₂e emitted.

The EU ETS operates across 3 core sectors: stationary industrial installations (including power generation, iron and steel, cement, aluminium, glass, paper, and chemicals), aviation within the European Economic Area, and maritime shipping added in 2024. A total of approximately 10,500 stationary installations participate, spanning all 27 EU member states plus Iceland, Liechtenstein, and Norway. The carbon price established in ETS auctions is the direct input to the CBAM certificate price formula, which is why the EU ETS carbon price and the CBAM certificate cost move together.

The "trading" element of cap-and-trade allows covered companies to buy and sell allowances among themselves. A steelmaker that reduces emissions below its allocation can sell surplus allowances to a power plant that exceeds its cap. This price discovery through trading determines the EUA market price, which feeds directly into CBAM certificate pricing.

The EU ETS functions on a four-phase cycle. Phase I ran from 2005 to 2007, Phase II from 2008 to 2012, Phase III from 2013 to 2020, and Phase IV began in 2021 and runs through 2030. Each phase introduced stricter caps and expanded auction-based allocation. In Phase IV, the annual cap reduction rate accelerated to 4.3% per year (up from 1.74% in Phase III), reflecting the Fit for 55 package's ambition to reach a 55% net emissions reduction by 2030 compared to 1990 levels.

The Market Stability Reserve (MSR), introduced in 2019, absorbs excess allowances when the total number of allowances in circulation exceeds 833 million units. The MSR has been the single most important structural mechanism supporting the price recovery from the near-collapse of the 2013 to 2017 period, when oversupply drove prices below €5/tCO₂. By removing surplus allowances from circulation, the MSR tightens effective supply and supports the price floor that makes CBAM financially meaningful.

How the EU ETS Determines the CBAM Certificate Price

The CBAM certificate price equals the weekly or quarterly average of EU ETS auction clearing prices, as set out in Article 22(1) and Article 22(1a) of Regulation (EU) 2023/956, as amended by Regulation (EU) 2025/2083. The link is not approximate or index-linked: it is a direct legal formula. No EU institution sets a separate CBAM price. The carbon price forms in ETS auctions, and that price automatically becomes the CBAM certificate price.

Two calculation periods apply, depending on the year. The 4 price calculation methods applicable in 2026 and 2027 onwards are defined below.

In calendar year 2026, the CBAM certificate price equals the quarterly average of EU ETS auction clearing prices, calculated over each calendar quarter (January to March, April to June, July to September, October to December). The Commission publishes the quarterly average price through the CBAM Registry. This method was inserted by Regulation (EU) 2025/2083 (the Omnibus Simplification) and confirmed in Implementing Regulation (EU) 2025/2548. Importers use the quarterly average price applicable to the quarter in which their imports occurred when calculating their certificate obligations.

From calendar year 2027 onward, the certificate price shifts to a weekly average of EU ETS auction closing prices, calculated every week and published by the Commission. The weekly calculation provides more granular price signals and aligns more closely with real-time ETS market conditions.

The practical consequence is that a company importing blast-furnace steel with an embedded emissions factor of approximately 2.0 tCO₂ per tonne of steel pays, per tonne of steel imported, the quarterly ETS average price multiplied by 2.0 tonnes, multiplied by the CBAM factor applicable that year. At €70/tCO₂ in 2026 with a 2.5% CBAM factor, the net cost per tonne of BF-BOF steel is approximately €3.50. That cost multiplies to €72.75 per tonne in 2030 when the CBAM factor reaches 48.5% and the consensus ETS price forecast reaches approximately €100 to €150/tCO₂.

The EU carbon border adjustment mechanism was designed specifically to use ETS prices rather than a fixed carbon tax rate. This design choice means CBAM automatically adjusts if ETS prices rise or fall, maintains consistency with EU domestic carbon costs, and avoids the legal classification as a customs duty or border tax that would trigger different WTO obligations.

The EU carbon border adjustment mechanism covers 6 product sectors, including iron and steel, cement, aluminium, fertilizers, electricity, and hydrogen, each with sector-specific embedded emissions calculation methodologies that determine how many tonnes of CO₂e are assigned per tonne of imported product.

EU ETS Price History and Context for CBAM Planning

The EU ETS carbon price in 2026 sits at approximately €70/tCO₂ as of late March 2026 (Q1 2026 range: €66 to €90/tCO₂), reflecting a market that has undergone transformational change since the system's inception in 2005. This price history matters for CBAM compliance planning because CBAM certificate costs are entirely dependent on where ETS prices land each quarter and each week.

The following table presents EU ETS carbon price history by period, with the key drivers that produced each price level.

The 2023 peak of approximately €100/tCO₂ represents the price level at which CBAM compliance costs become material even at low CBAM factors. Dr. Karsten Neuhoff at the German Institute for Economic Research (DIW Berlin), in his 2023 study "Carbon Border Adjustment and the EU ETS: Price Interdependencies," documented that ETS prices above €80/tCO₂ create a 15% to 20% cost disadvantage for non-EU producers in steel and aluminium relative to verified low-carbon alternatives, a threshold that activates genuine supply chain decarbonization decisions.

In Q1 2026, the EU ETS price sits below the 2023 peak due to two intersecting pressures. First, 10 EU member states formally submitted a joint declaration in February 2026 calling the EU ETS an "existential risk" for strategic industries and demanding Market Stability Reserve adjustments that would release allowances back into circulation. Second, industrial output across Germany, France, and Italy declined in late 2025, reducing demand for allowances from covered installations. Commission President von der Leyen acknowledged both pressures in her March 2026 statement, while stopping short of committing to MSR reform parameters.

The price reform risk is the most significant grey area for multi-year CBAM financial planning. If ETS prices fall due to MSR loosening or cap adjustment, CBAM certificate prices fall proportionally and automatically, because no floor exists in the certificate pricing formula.

Image brief: Line chart showing EU ETS carbon price from 2005 to 2026 with key milestones annotated: MSR introduction (2019), COVID dip (2020), Phase IV start (2021), historical peak (2023), and Q1 2026 level. Text overlay: "€70/tCO₂, April 2026". Commission as branded illustration with cbamguide.com logo.

What Is the Free Allocation Phase-Out and Why Does It Drive CBAM Costs?

Free allocation phase-out is the scheduled reduction in EU ETS allowances distributed without charge to EU producers in CBAM sectors, running from 2026 to 2034, with the CBAM factor determining what fraction of a gross CBAM certificate obligation actually becomes a net payment obligation. The phase-out timeline is established in Article 10a(1a) of Directive 2003/87/EC as amended by the Fit for 55 ETS revision.

The CBAM factor represents the percentage of free allocation that has been removed. In 2026, only 2.5% of free allocation is gone, meaning the net CBAM certificate obligation equals only 2.5% of the gross theoretical obligation based on full embedded emissions. By 2030, the CBAM factor reaches 48.5%, meaning nearly half of embedded emissions carry a real certificate cost. Free allocation disappears entirely on January 1, 2034.

The complete free allocation phase-out schedule, with net cost implications at a reference ETS price of €70/tCO₂, is presented below.

Net costs calculated as: Emission factor × ETS price × CBAM factor. BF-BOF steel emission factor = ~2.0 tCO₂/t. Portland cement emission factor = ~0.83 tCO₂/t. All costs are reference estimates that fluctuate with ETS price movements.

The steepest cost acceleration occurs between 2029 and 2030, when the CBAM factor jumps from 22.5% to 48.5%: a 26-percentage-point increase in a single year. This 2029 to 2030 cliff represents the critical financial planning horizon for EU importers and their non-EU supply partners. Companies that build decarbonization roadmaps starting in 2026 have 3 to 4 years to reduce embedded emissions before this cliff arrives.

The CBAM factor applies to CBAM certificates through the SEFA (Specific Embedded Free Allocation) methodology established in Implementing Regulation (EU) 2025/2620, which calculates the precise reduction in certificate obligations arising from the fraction of ETS free allocation that EU domestic competitors still receive. The SEFA calculation ensures that CBAM does not impose a greater carbon cost burden on importers than EU domestic producers bear.

The reason the CBAM factor was set at just 2.5% in 2026 rather than a higher initial level was political and transition-management logic: the Regulation (EU) 2023/956 drafters sought to avoid disrupting import supply chains in the first definitive year while still establishing the legal and financial infrastructure for the full system.

Image brief: Bar chart showing free allocation remaining (descending) and CBAM factor (ascending) from 2026 to 2034, with the 2029-to-2030 cost cliff highlighted. Text overlay: "CBAM Factor 2.5% to 100% by 2034". Commission as branded illustration with cbamguide.com logo.

EU ETS Scope Overlap With CBAM Sectors

The 6 CBAM sectors are all covered by the EU ETS as stationary industrial installations, which is the foundational reason the ETS price is the appropriate reference price for CBAM. A domestic EU steel producer pays ETS allowance costs for its CO₂ emissions. An imported tonne of steel, produced in a country with no equivalent carbon price, carries no equivalent cost. CBAM closes that asymmetry by charging imported goods at the ETS-equivalent rate.

The 6 CBAM sectors and their EU ETS coverage status are as follows.

• Iron and steel: Covered under EU ETS Phase I (2005 onward); Annex I installations include blast furnaces, electric arc furnaces, and hot rolling mills; direct CO₂ emissions priced only (indirect emissions excluded)
• Cement: Covered since Phase I; the most carbon-intensive major industrial sector at approximately 0.83 tCO₂ per tonne of Portland cement; both direct and indirect (electricity) emissions priced under CBAM
• Aluminium: Covered under EU ETS since Phase II (2008); primary smelters face both CO₂ costs from anode consumption and perfluorocarbon (PFC) emission costs; CBAM prices direct emissions only for aluminium
• Fertilizers: Ammonia production (the nitrogen fertilizer precursor) covered since Phase II; both direct CO₂ (from steam methane reforming) and nitrous oxide (N₂O) emissions from urea and ammonium nitrate production priced under CBAM
• Electricity: Power generation has been covered since Phase I and was the first sector moved to full auctioning (no free allocation) in 2013; CBAM for electricity imports applies to cross-border transmission
• Hydrogen: Added to CBAM scope under Regulation (EU) 2023/956; grey hydrogen production from steam methane reforming carries embedded emissions of approximately 9 to 12 tCO₂ per tonne of hydrogen; green hydrogen carries near-zero embedded emissions

The ETS coverage of all 6 sectors means that, when free allocation completes its phase-out in 2034, EU domestic producers and importers of the same goods face identical carbon costs per tonne of embedded emissions. This is the symmetry principle that forms the legal and policy foundation for CBAM's WTO defensibility under GATT Article XX.

EU ETS Reform in the Context of Fit for 55

The Fit for 55 legislative package, announced by the European Commission in July 2021 and substantially adopted through 2022 to 2023, restructured the EU ETS in three ways that directly affect CBAM certificate prices. The 3 major Fit for 55 ETS changes with CBAM relevance are as follows.

First, the Fit for 55 revision accelerated the annual cap reduction rate from 1.74% (Phase III rate) to 4.3% from 2024 onward, with a one-time rebasing of the cap in 2024 that removed 117 million additional allowances from total supply. This structural tightening represents the primary long-term upward pressure on ETS prices and, by extension, on CBAM certificate prices. The consensus analyst forecast of €100 to €150/tCO₂ by 2030 is premised on this cap trajectory being maintained.

Second, the revision introduced the ETS2 system (separate from ETS1) covering buildings and road transport from 2027, with a dedicated Market Stability Reserve. ETS2 does not directly affect CBAM because CBAM sectors fall under ETS1. However, the political debate around ETS2's consumer fuel cost implications has increased overall pressure on the Commission to reconsider ETS1 price levels as well.

Third, the revision mandated the phase-out of free allocation for CBAM sectors between 2026 and 2034 (the schedule detailed in the previous section), creating the direct linkage between ETS reform and CBAM financial exposure. Any acceleration of the free allocation phase-out would increase CBAM costs; any slowing would reduce them.

The reform risk identified in the grey area analysis of the EU ETS is real and structurally significant: in Q1 2026, ten member states, including Germany, Poland, Italy, and Austria, formally requested MSR parameter adjustments that would increase the threshold for automatic allowance absorption, effectively releasing more allowances into circulation. The Commission had not issued a formal response to this request as of April 1, 2026. If MSR reform proceeds, the ETS price could decline toward €50 to €55/tCO₂, reducing CBAM certificate costs proportionally but also weakening the economic incentive for non-EU producers to decarbonize.

How CBAM Uses the ETS Price to Prevent Carbon Leakage

Carbon leakage occurs when EU climate regulation raises production costs for EU industries, causing production to shift to countries with weaker or no carbon pricing, with the result that global emissions increase rather than decrease. The EU ETS creates this risk because it adds approximately €70/tCO₂ (at current prices) to the production cost of every tonne of CO₂ emitted by EU-based installations, while non-EU producers face no equivalent cost.

CBAM prevents carbon leakage by applying the ETS carbon price to the embedded emissions of imported goods, achieving cost parity between EU domestic production and imports. The mechanism operates as follows: an EU steelmaker producing 1 tonne of blast-furnace steel emits approximately 2.0 tCO₂ and must surrender 2.0 EUAs in the EU ETS, costing approximately €140 at €70/tCO₂ before free allocation adjustment. An importer bringing in 1 tonne of steel from a country with no carbon price faces a gross CBAM certificate obligation of 2.0 × €70 = €140, reduced by the CBAM factor of 2.5% in 2026 to approximately €3.50 net. As the CBAM factor rises to 100% in 2034, the full €140 carbon cost parity is achieved.

The design elegance of using ETS auction prices as the CBAM reference price, rather than a fixed administrative price, is that it maintains symmetry automatically. If the EU ETS price rises to €120/tCO₂, both EU domestic producers and importers face proportionally higher carbon costs simultaneously. No administrative review or political decision is required to keep CBAM and ETS costs in alignment.

Researchers at the Peterson Institute for International Economics, in their 2022 study "Carbon Border Adjustments and the WTO: Compatible Mechanisms," identified this automatic price-tracking feature as the strongest argument for CBAM's legal defensibility under GATT Article XX(b) and XX(g): the measure is not punitive or protectionist but merely replicates the carbon cost that EU domestic producers already face.

Image brief: Split diagram comparing EU domestic steel producer (pays ETS allowance cost) with non-EU steel importer (pays equivalent CBAM certificate cost), showing cost parity convergence from 2026 to 2034. Text overlay: "Carbon Leakage Prevention Through CBAM Certificate Parity". Commission as branded illustration with cbamguide.com logo.

What Is the Relationship Between EU ETS Auction Prices and CBAM Certificate Prices?

The relationship between EU ETS auction prices and CBAM certificate prices in 2026 is the quarterly average of clearing prices across EU ETS primary auctions conducted by the European Energy Exchange (EEX) on behalf of EU member states. The European Commission's DG TAXUD publishes this quarterly average through the CBAM Registry interface, and this published figure is the legally applicable certificate price for CBAM imports during that quarter.

EU ETS auctions occur on a published schedule: Germany, the UK (pre-Brexit, now separate), and the joint EU auction platform (EEX) each operate regular auction cycles. Primary auctions clear at a price determined by the intersection of bidder demand curves and the auction volume offered. The clearing price feeds directly into the published CBAM certificate price without adjustment, weighting, or modification.

The quarterly average smoothing effect matters practically. A company importing steel in a quarter where ETS prices spike due to a cold weather event or grid emergency does not pay the spike price for its CBAM certificates: it pays the average across all auctions in that quarter. This reduces volatility in CBAM certificate costs relative to a spot-price system.

From 2027, the shift to weekly averages removes the quarterly smoothing buffer. Companies planning certificate purchases will need to monitor ETS price developments weekly and time their purchases to manage cost. The transition from quarterly to weekly calculation is itself a compliance workflow change that authorized CBAM declarants need to incorporate into their treasury management practices.

EU ETS and CBAM: What the Connection Means for Importers and Exporters

The ETS-CBAM price link creates 4 direct financial and compliance obligations for companies in the supply chain. The obligations and their practical implications are as follows.

Quarterly monitoring of ETS auction clearing prices: EU importers (authorized CBAM declarants) must track ETS auction results each quarter to calculate their provisional certificate holding requirements. The quarterly holding requirement under Regulation (EU) 2025/2083 is ≥50% of cumulative embedded emissions since the start of the calendar year, priced at the quarterly ETS average.

Annual certificate reconciliation at surrender: The annual CBAM declaration, due September 30, 2027 for calendar year 2026, requires surrender of certificates equal to total embedded emissions in imported goods, priced at the weighted average of the quarterly prices applicable to each import quarter.

Article 9 deduction planning for exporters with existing carbon prices: Non-EU exporters whose home country operates an ETS or carbon tax can reduce the CBAM certificate obligation of their EU importer counterparts by providing documented evidence of the carbon price effectively paid. At current South Korean K-ETS prices of approximately €6.40/tCO₂ (as of Q1 2026), an Article 9 deduction on BF-BOF steel reduces the gross certificate obligation by 2.0 × €6.40 = €12.80 per tonne. The deduction value grows in absolute terms as CBAM factors increase post-2030.

Long-term supply chain decarbonization economics: The ETS price trajectory, projected at €100 to €150/tCO₂ by 2030 by consensus analyst forecasts from institutions including Goldman Sachs Energy Research and BloombergNEF, means that the net CBAM cost per tonne of BF-BOF steel could reach €100 to €145 per tonne by 2030 at full CBAM factor. This is a supply chain cost pressure sufficient to shift sourcing decisions from high-carbon to low-carbon producers.

Understanding how embedded emissions are calculated is essential for both importers and exporters because the total certificate cost is the product of the ETS price and the embedded emissions figure: errors in embedded emissions measurement compound directly into certificate cost errors.

The Contextual Border: How EU ETS Price Volatility Affects CBAM Compliance Planning

EU ETS price volatility creates a compliance planning challenge that CBAM importers must actively manage, because certificate purchase obligations are tied to a price that moves daily and is averaged over fixed calendar periods. The quarterly smoothing in 2026 provides a meaningful buffer, but the underlying ETS price can shift by €15 to €20/tCO₂ within a single quarter, as occurred in Q4 2021 and Q1 2022.

Does ETS Price Volatility Affect CBAM Certificate Costs in 2026?

ETS price volatility does affect CBAM certificate costs in 2026, but the quarterly averaging method specified in Article 22(1a) of Regulation (EU) 2023/956 substantially dampens the impact. The quarterly average is calculated across all EU ETS primary auctions held within the calendar quarter, typically 30 to 40 auctions, producing a stable average even when individual auction clearing prices fluctuate. A company importing goods in Q1 2026 pays the Q1 2026 average price, not the price on any single import date.

The practical implication is that CBAM certificate costs in 2026 are more predictable than ETS spot prices suggest. The Q1 2026 range of €66 to €90/tCO₂ produces a quarterly average in the range of €70 to €75/tCO₂, which is the actual basis for certificate cost calculation. Companies can model Q2 and Q3 2026 certificate costs by tracking running auction averages available from the EEX auction calendar.

Will EU ETS Reform Change CBAM Certificate Prices?

Any change to EU ETS prices, whether from Market Stability Reserve adjustment, cap revision, or structural reform, directly and immediately changes CBAM certificate prices, because CBAM has no independent price floor or ceiling. EU CBAM importers whose compliance cost projections are based on €70/tCO₂ must model the downside scenario of €50/tCO₂ and the upside scenario of €100/tCO₂ when preparing multi-year compliance budgets. The 10-member-state reform pressure documented in Q1 2026 makes the downside scenario non-trivial for 2027 to 2028 planning.

Is the EU ETS Scope the Same as the CBAM Scope?

The EU ETS scope and CBAM scope are not identical, but all 6 CBAM sectors fall within ETS coverage. The ETS covers a broader range of industries, including aviation, maritime, power generation (not covered by CBAM for imported goods), glass, paper, and chemicals beyond the 6 CBAM sectors. The CBAM scope is limited to the 6 sectors where carbon leakage risk from imports is highest, as determined by the product-specific trade volumes and emission intensities assessed during the regulation's legislative process. The proposed COM(2025)989 downstream expansion would add approximately 180 downstream steel and aluminium products to CBAM from January 2028, subject to legislative approval, but would not change the ETS price reference mechanism.

How Often Does the Commission Publish the CBAM Certificate Price?

The Commission publishes the CBAM certificate price quarterly in 2026, using the quarterly average of EU ETS auction clearing prices as calculated under Implementing Regulation (EU) 2025/2548. From 2027, publication shifts to weekly. These published prices appear in the CBAM Registry interface accessible to authorized CBAM declarants and are the legally applicable reference for certificate purchase calculations. The CBAM carbon price tracker at cbamguide.com provides an independent monitoring tool for tracking published certificate prices alongside real-time ETS auction data.

What Happens to CBAM Certificate Prices When Free Allocation Ends in 2034?

CBAM certificate prices in 2034 do not change structurally at the moment free allocation ends, because certificate prices have always been set at the full ETS auction average, regardless of free allocation levels. What changes in 2034 is the net obligation: the CBAM factor reaches 100%, meaning the full gross certificate obligation (ETS price × embedded emissions) becomes a real payment obligation with no reduction. An importer of BF-BOF steel in 2034, at an assumed ETS price of €150/tCO₂ based on structural cap tightening forecasts, would face a gross and net certificate cost of approximately 2.0 × €150 = €300 per tonne. This is the end-state the entire CBAM architecture is designed to reach.

Who Needs to Act on EU ETS and CBAM Certificate Prices Now?

Three groups need to act on the EU ETS and CBAM certificate price connection in 2026 rather than waiting for the higher-obligation years of 2029 to 2034.

The first group is EU CBAM importers who have already obtained or are seeking authorized CBAM declarant status. These companies must build ETS price monitoring into their quarterly compliance workflows immediately, because the quarterly holding requirement (≥50% of cumulative embedded emissions) demands certificate purchases priced at the quarterly ETS average even in 2026, when the net financial obligation remains small. Building the monitoring and purchase infrastructure now, while costs are manageable, is operationally prudent.

The second group is non-EU exporters supplying goods to EU customers in the 6 CBAM sectors. Their EU importer counterparts face a growing cost that the exporters either absorb through price adjustments or reduce by demonstrating lower embedded emissions. Non-EU producers with actual embedded emissions below country-level default values have a direct financial incentive to invest in measurement, monitoring, and third-party verification now. The cost of verification (approximately €5,000 to €50,000 per installation for the first cycle) is recoverable through lower certificate obligations once CBAM factors exceed 10% from 2028 onward. CBAM compliance for exporters covers the data and documentation obligations that non-EU operators must meet.

The third group is compliance officers and treasury teams at companies with multi-year import contracts. ETS price forecasts of €100 to €150/tCO₂ by 2030 need to be incorporated into long-term cost models for any import contract extending beyond 2028. A 5-year supply contract for BF-BOF steel signed in 2026 at today's CBAM cost of €3.50/t will face a net CBAM cost of approximately €68 to €145/t in 2030 depending on ETS price outcomes, a 20-fold to 40-fold increase in carbon compliance costs within the contract period.

A CBAM carbon price tracker provides current and historical CBAM certificate prices alongside ETS auction data, supporting the monitoring workflow that all three groups need.

Frequently Asked Questions: EU ETS and CBAM Certificates

What Is the Current EU ETS Carbon Price for CBAM Certificates?

The EU ETS carbon price as of late March 2026 is approximately €70/tCO₂, with the Q1 2026 auction range spanning €66 to €90/tCO₂. This figure fluctuates with each auction and is not fixed. The CBAM certificate price for Q1 2026 will be the quarterly average of all EU ETS primary auction clearing prices from January 1 to March 31, 2026, published by the Commission through the CBAM Registry. Always verify current certificate prices through the official CBAM Registry, because market data sources may not reflect the precise auction-average calculation required for compliance.

Why Does CBAM Use ETS Auction Prices Instead of a Fixed Carbon Price?

CBAM uses ETS auction prices because the mechanism's legal design requires it to replicate, not approximate, the carbon cost borne by EU domestic producers. EU producers pay for ETS allowances at auction clearing prices: using those same prices for CBAM certificates creates symmetry and prevents both over-charging (which would be protectionist) and under-charging (which would fail to address carbon leakage). A fixed administrative price would decouple CBAM from ETS dynamics and undermine the mechanism's legal defensibility under GATT Article XX.

When Does the CBAM Certificate Price Calculation Change from Quarterly to Weekly?

The CBAM certificate price calculation changes from quarterly to weekly on January 1, 2027. For calendar year 2026, Article 22(1a) of Regulation (EU) 2023/956 (inserted by Regulation (EU) 2025/2083) mandates the quarterly average method. From January 1, 2027, Article 22(1) of the same regulation (in its original form as retained after the Omnibus amendment) mandates the weekly average of EU ETS auction closing prices. This means importers in 2027 need weekly price monitoring rather than the quarterly monitoring sufficient for 2026 compliance.

Does the EU ETS Price Affect All 6 CBAM Sectors Equally?

The same ETS auction average price applies to all 6 CBAM sectors as the unit price per tonne of CO₂e in certificate calculations. However, the total certificate cost per tonne of product varies enormously by sector because embedded emission factors differ by sector and production route. Grey hydrogen carries approximately 9 to 12 tCO₂ per tonne of hydrogen, making it the most ETS-price-sensitive CBAM good. Green hydrogen carries near-zero embedded emissions, making it effectively immune to ETS price movements in CBAM cost terms. BF-BOF steel at approximately 2.0 tCO₂/t sits between these extremes, while EAF scrap steel at approximately 0.5 tCO₂/t carries one-quarter of the BF-BOF certificate cost at the same ETS price.

Last updated: April 4, 2026. EU ETS prices and CBAM certificate prices change with each auction and quarterly/weekly calculation. Verify current prices through the European Commission's CBAM Registry before making compliance or commercial decisions.