CBAM Regulation (EU) 2023/956: Complete Legal Reference Guide

Regulation (EU) 2023/956 establishes EU CBAM as a certificate-based mechanism requiring EU importers of carbon-intensive goods to cover the embedded greenhouse gas emissions of those goods at the EU ETS carbon price, effective January 1, 2026 in its definitive phase. The CBAM regulation now governs 6 sectors, is supported by 13 implementing and delegated regulations, and was substantially amended by Regulation (EU) 2025/2083 before its first financial obligations took effect. Understanding the full legal architecture of EU CBAM legislation is essential for every importer subject to its obligations in 2026 and beyond.

Image brief: Layered diagram of Regulation (EU) 2023/956 and its 13 implementing regulations. Text overlay: "CBAM Legal Architecture 2026". Branded cbamguide.com logo.

What Is the CBAM Regulation and What Does It Require?

Regulation (EU) 2023/956 is the primary CBAM legislation establishing a mechanism that requires authorized EU importers to purchase and surrender CBAM certificates corresponding to the embedded CO₂e emissions of goods they import from non-EU countries, priced at the EU ETS carbon price. The regulation entered into force on May 17, 2023, following publication in the Official Journal (OJ L 130, 16 May 2023, pp. 52–104), and its definitive financial phase began on January 1, 2026.

EU CBAM's legal basis is Article 192(1) TFEU, which anchors the mechanism in EU environmental policy rather than trade policy. This legal basis distinction matters: it affects how WTO dispute panels evaluate the regulation's compatibility with international trade rules, because GATT exceptions for environmental measures under Article XX apply more readily to genuine environmental instruments than to disguised trade restrictions.

The CBAM regulation covers 6 sectors: iron and steel, cement, aluminium, fertilizers, electricity, and hydrogen. All 6 sectors entered the definitive phase simultaneously on January 1, 2026. Goods subject to CBAM are identified by their CN codes listed in Annex I of the regulation, and the CN code governs scope, not the commercial description of the product.

The primary obligation under Regulation (EU) 2023/956 runs in three sequential steps. First, only an authorized CBAM declarant (Article 5) may import CBAM goods. Second, that declarant must hold CBAM certificates equal to at least 50% of cumulative embedded emissions at the end of each calendar quarter (Article 22(2), as amended). Third, by September 30, 2027 (covering calendar year 2026), the declarant submits an annual CBAM declaration and surrenders certificates equal to the total verified embedded emissions for that year.

The broader context of EU CBAM policy, including how the mechanism interacts with EU climate targets and the Fit for 55 package, is covered in the EU CBAM guide.

Legal Structure of Regulation (EU) 2023/956

Regulation (EU) 2023/956 contains 41 Articles and 7 Annexes. The CBAM regulation's architecture separates substantive obligations from technical implementation: the 41 articles establish the framework, obligations, penalties, and institutional roles, while the 7 annexes define the product scope, greenhouse gas scope, and exempt countries. The 13 implementing and delegated regulations then operationalize each technical dimension in detail.

Image brief: Visual map of the 41 articles of Regulation (EU) 2023/956, with Articles 4, 5, 6, 7, 8, 9, 22, 23, and 26 highlighted as primary obligation articles. Text overlay: "Key CBAM Articles at a Glance". Branded cbamguide.com logo.

Key Articles in Regulation (EU) 2023/956

The 10 articles most directly relevant to compliance obligations are listed below.

Annexes of Regulation (EU) 2023/956

The 7 annexes of the CBAM regulation define the specific goods, greenhouse gases, and countries subject to or exempt from CBAM obligations. Annex I lists all goods covered by CN code, which is the controlling legal instrument for scope determination. Annex II identifies sectors where only direct emissions are priced: iron and steel, aluminium, electricity, and hydrogen. Annex III lists exempt countries, currently Iceland, Liechtenstein, Norway, and Switzerland, whose electricity markets are integrated with the EU internal electricity market and which apply the EU ETS or an equivalent carbon pricing scheme.

The Omnibus Amendment: Regulation (EU) 2025/2083

Regulation (EU) 2025/2083 (the "Omnibus simplification") substantially amended the original CBAM regulation before its first financial obligations took effect. Published in the Official Journal on October 17, 2025, the Omnibus entered into force the same day.

The 6 most operationally significant changes introduced by Regulation (EU) 2025/2083 are listed below.

• De minimis threshold: Introduced at 50 tonnes annual mass per importer (Article 2(3a)), excluding electricity and hydrogen.
• Declaration deadline: Extended from May 31 to September 30 of the year following the import year (Article 6, as amended).
• Certificate sales start: Delayed to February 1, 2027, from the original January 2026 planned start.
• Quarterly holding requirement: Reduced from 80% to 50% of cumulative embedded emissions since the start of the calendar year (Article 22(2), as amended).
• Penalty harmonization: Standardized at €100 per tonne CO₂e for authorized declarants who fail to surrender sufficient certificates (Article 26(1), as amended).
• Verifier registration: Earliest opening set at September 1, 2026, providing clarity on the timeline for accreditation infrastructure.

The 13 Implementing and Delegated Regulations

EU CBAM legislation operates through a two-tier structure: the primary regulation establishes the framework, and 13 implementing regulations (IR) and delegated regulations (DR) fill in every technical detail. Without the 13 secondary acts, the primary CBAM regulation cannot function in practice.

The full list of implementing and delegated regulations under Regulation (EU) 2023/956 is presented below.

Four Implementing Regulations Most Relevant to Importers

Four of the 13 secondary acts govern the obligations most importers encounter first: authorization, verification, calculation, and default values.

IR (EU) 2025/486 governs the authorized CBAM declarant application process. Applications must demonstrate 5 years of customs and tax compliance history, and the competent authority has 120 days from receipt of a complete application to issue a decision. The authorization deadline for provisional importing during the definitive phase was March 31, 2026. Importers who submitted by that date may continue importing pending the decision.

IR (EU) 2025/2546 sets the verification standards for embedded emissions data. Physical site visits to non-EU production installations are mandatory for the first verification period (calendar year 2026), which means third-party verifiers must travel to facilities in countries including Turkey, India, China, and the UAE to conduct the assessments underlying the September 30, 2027 declaration.

IR (EU) 2025/2547 establishes the calculation methodology that production installations must use to quantify embedded emissions. The regulation specifies system boundaries, requires monitoring plans at the installation level, and provides the mathematical formulas (including Equation 11 for the standard method and Equation 12 for mass balance) that form the basis of all verified emissions data.

IR (EU) 2025/2621 publishes the definitive-phase default values. Default values carry a punitive mark-up: 10% above the country-specific average in 2026, rising to 20% in 2027 and 30% from 2028 onward. Fertilizers are subject to a 1% mark-up in recognition of food security concerns, rather than the 10–30% schedule applied to other sectors.

Free Allocation Phase-Out Schedule Under the CBAM Regulation

EU CBAM's financial significance grows in direct proportion to the phase-out of EU ETS free allocation for CBAM sectors. Regulation (EU) 2023/956 coordinates with Article 10a(1a) of EU ETS Directive 2003/87/EC to phase out free allocation from 2026 to 2034 as CBAM phases in.

The CBAM factor is the percentage of the embedded emissions for which no free allocation offsets the certificate obligation. The CBAM regulation's phase-out schedule is as follows.

The steepest acceleration in the schedule occurs between 2029 and 2030, when the CBAM factor jumps from 22.5% to 48.5%. This 26-percentage-point increase in a single year represents the critical window for supply chain decarbonization planning. Decisions made in 2026 and 2027 about which suppliers to retain, which emissions data to measure, and which verification partnerships to establish directly determine compliance cost exposure during this 2029–2030 cliff.

To illustrate the practical effect: blast furnace steel (BF-BOF) carries an embedded emissions factor of approximately 2.0 tCO₂ per tonne. At the current EU ETS price of approximately €70/tCO₂ (as of late March 2026, noting that ETS prices fluctuate daily, with a Q1 2026 range of €66–90), gross CBAM cost is €140 per tonne of BF-BOF steel. The net 2026 cost is €140 × 2.5% = €3.50 per tonne. By 2030, the same tonne carries a net cost of €140 × 48.5% = €67.90 per tonne. By 2034, the full €140 per tonne applies.

The free allocation adjustment is calculated using the SEFA (Specific Embedded Free Allocation) methodology established in IR (EU) 2025/2620. SEFA reduces the certificate obligation to reflect free allocation received by competing EU producers, ensuring that EU importers are not disadvantaged relative to domestic producers who still receive some free allowances during the phase-out period.

Key Deadlines and Milestones Under EU CBAM Legislation

The CBAM regulation establishes a compliance calendar that runs across multiple years. The 8 deadlines most directly affecting importers operating under EU CBAM in 2026 and 2027 are listed below.

• January 1, 2026: Definitive phase begins. Financial obligations commence for all 6 sectors simultaneously.
• March 31, 2026: Final date for provisional authorization applications, allowing continued importing pending authorization decision.
• September 1, 2026: Earliest date third-party verifiers can register in the CBAM Registry under DR 2025/2551.
• February 1, 2027: Certificate sales begin via the Common Central Platform (certificate price method: quarterly average of EU ETS auction clearing prices for 2026, switching to weekly average from 2027).
• September 30, 2027: First annual CBAM declaration due, covering calendar year 2026 imports. First certificate surrender required.
• October 31, 2027: Deadline to request buyback of up to 50% of certificates purchased in 2026.
• November 1, 2027: Cancellation of unused 2026 certificates.
• September 30 each year thereafter: Annual CBAM declaration deadline for subsequent calendar years.

The CBAM declaration requirement and its Article 6 obligations, including the content requirements for the declaration and the certificate surrender process, are covered in detail in the CBAM declaration guide.

CBAM Legal Basis and WTO Compatibility

EU CBAM's legal basis in Article 192(1) TFEU, rather than Article 114 TFEU (the internal market harmonization basis), is not a drafting choice. The European Parliament's legal service and the Commission both analyzed the basis options before the regulation was proposed. Article 192(1) TFEU requires qualified majority voting in the Council and co-decision with the Parliament, which is the standard legislative procedure for environmental measures.

The WTO compatibility of the CBAM regulation is actively contested. As of April 2026, Russia's WTO dispute DS639 is the only formally filed challenge. Russia filed the consultation request on May 12, 2025, and the EU formally declined consultations on May 22, 2025. Russia may request panel establishment, though the WTO's non-functional Appellate Body limits enforceability of any ruling, and a timeline of years is realistic before any decision.

The EU's legal defense rests on two GATT exceptions from Article XX: Article XX(b), covering measures necessary to protect human, animal, or plant life; and Article XX(g), covering measures relating to the conservation of exhaustible natural resources. India has signaled a formal challenge may follow. Turkey argues the CBAM regulation conflicts with the 1995 EU-Turkey Customs Union Agreement, contending that Turkish exporters should not be treated identically to non-Union third countries. No formal WTO filing by Turkey exists as of April 2026; the dispute runs through bilateral channels.

Image brief: World map highlighting countries with active or expected WTO challenges to Regulation (EU) 2023/956, annotated with DS numbers and challenge basis. Text overlay: "CBAM WTO Status April 2026". Branded cbamguide.com logo.

How the CBAM Regulation Connects to EU ETS Legislation

The CBAM regulation does not stand alone. EU CBAM is structurally linked to the EU Emissions Trading System through 3 primary connections: legal basis, pricing, and free allocation phase-out.

The legal connection is explicit: Article 1 of Regulation (EU) 2023/956 states that CBAM complements the EU ETS by preventing carbon leakage. The free allocation phase-out in EU ETS Directive 2003/87/EC (Article 10a(1a), as amended) is the mechanism through which CBAM phases in from 2026 to 2034. Without the simultaneous reduction in free ETS allowances, CBAM would result in double pricing for EU producers who receive both free allowances and CBAM protection.

The pricing connection is direct: CBAM certificate prices are set by reference to EU ETS auction prices. In 2026, the certificate price equals the quarterly average of EU ETS auction clearing prices (Article 22(1a), inserted by Regulation (EU) 2025/2083). From 2027, the price switches to the weekly average of EU ETS auction closing prices (Article 22(1)). Because CBAM and EU ETS prices are mathematically linked, any EU ETS reform, including changes to the Market Stability Reserve or carbon price stabilization measures, directly affects CBAM certificate costs.

The institutional connection is structural: the EU ETS registry infrastructure (UUM&DS authentication system) is the same system used for CBAM Registry access, and DG TAXUD operates both the CBAM Registry and coordinates with the EU ETS central administrator. This shared infrastructure reduces onboarding friction for companies already registered in the EU ETS.

How Regulation (EU) 2023/956 Defines Key CBAM Terms

The CBAM regulation provides 28 legally binding definitions in Article 3. These definitions control interpretation across all 13 implementing regulations, all 27 national competent authority procedures, and all CBAM declarations. The 8 definitions most frequently relevant to compliance are as follows.

Embedded emissions (Article 3(4)) are defined as the direct and, where applicable, indirect greenhouse gas emissions emitted during the production of goods. The phrase "where applicable" is operative: indirect emissions (from electricity consumption) are priced only for cement and fertilizers, not for steel, aluminium, electricity, or hydrogen.

Specific embedded emissions (Article 3(5)) are the embedded emissions per tonne of goods, expressed in tCO₂e per tonne (or per MWh for electricity). This is the number that appears in CBAM declarations and verification reports.

Precursor (Article 3(7)) is a good listed in Annex I used as an input in the production of another Annex I good. Precursor emissions carry through as part of the finished good's embedded emissions. Steel billets used to produce steel pipes are a precursor; cement clinker used to produce Portland cement is a precursor.

Complex goods (Article 3(8)) are goods produced using one or more precursors. The embedded emissions of complex goods include the precursor's embedded emissions plus the direct production emissions of the final processing step.

Authorized CBAM declarant (Article 3(15)) is a person established in the EU customs territory who has been granted authorization by the competent authority to make CBAM declarations. Only authorized declarants may legally import CBAM goods during the definitive phase.

CBAM certificate (Article 3(10)) is a certificate in electronic format corresponding to one tonne of CO₂e of embedded emissions in goods covered by the regulation. Certificates are issued, held, surrendered, and cancelled exclusively through the CBAM Registry.

Carbon price (Article 3(25)) is the monetary amount paid in a third country as a carbon tax or under an ETS in respect of greenhouse gas emissions covered by that tax or ETS. This definition governs what qualifies for the Article 9 deduction: the price must be legally binding and effectively enforced.

Competent authority (Article 3(19)) is the authority designated by each EU member state to carry out obligations under the regulation. All 27 member states have designated competent authorities: 20 designated environment or energy departments, and 7 designated financial or tax departments, reflecting CBAM's hybrid environmental-fiscal character.

How Regulation (EU) 2023/956 Penalizes Non-Compliance

Regulation (EU) 2023/956 and its amendment, Regulation (EU) 2025/2083, together define all CBAM legislation penalty provisions.

The CBAM regulation establishes 2 categories of financial penalty under Article 26, as amended by Regulation (EU) 2025/2083.

Authorized declarants who fail to surrender sufficient certificates by the annual declaration deadline face a penalty of €100 per tonne CO₂e not covered. This rate is inflation-adjusted from a base year and applies per tonne of the shortfall, not as a flat fee. The €100/tCO₂e rate is approximately 1.4 times the current EU ETS price of approximately €70/tCO₂ (market data, fluctuates daily), meaning the penalty consistently exceeds the market price of the obligation.

Persons who import CBAM goods without authorization face penalties of €300–500 per tonne CO₂e, representing 3–5 times the authorized declarant rate. This elevated rate reflects the severity of bypassing the authorization requirement entirely.

During the transitional period (October 1, 2023 to December 31, 2025), the non-reporting penalty under IR 2023/1773 was €10–50 per tonne CO₂e. These lower transitional penalties no longer apply in the definitive phase and should not be referenced for 2026 compliance planning.

The financial obligation attached to CBAM certificate surrender is addressed in detail in the CBAM certificates guide.

Pending Proposals That May Expand the CBAM Regulation

The CBAM regulation's current scope covers 6 sectors. Two Commission proposals published on December 17, 2025 would, if adopted, substantially expand EU CBAM legislation.

COM(2025)989 proposes adding approximately 180 downstream steel- and aluminium-intensive products from January 1, 2028. Product categories under discussion include vehicle parts and automotive components, white goods such as washing machines and dishwashers, machinery containing significant steel or aluminium content, and industrial radiators. COM(2025)989 also proposes strengthened anti-circumvention provisions under a new Article 27a and would classify pre-consumer scrap as a CBAM precursor. The proposal requires co-decision between the European Parliament and the Council and, as of April 2026, remains in the ordinary legislative procedure.

COM(2025)990 proposes a Temporary Decarbonization Fund for EU exporters, funded by 25% of CBAM revenues in 2028–2029, covering the 2026–2027 production period. The fund addresses concerns from EU manufacturing exporters who face CBAM-driven cost increases without equivalent protection in export markets.

How Does the CBAM Regulation Interact with National Competent Authorities?

The CBAM regulation interacts with national competent authorities through the authorization and enforcement framework established in Articles 16 and 17, creating a two-level system where EU-level rules are implemented at national level.

What Is a Competent Authority Under the CBAM Regulation?

A competent authority under the CBAM regulation is the national body designated by each EU member state to authorize CBAM declarants, manage national CBAM Registry accounts, conduct inspections, and impose penalties. The authorization decision (Article 17) belongs to the member state of the applicant's establishment, meaning a company established in Germany applies to DEHSt (the German competent authority), while a company established in the Netherlands applies to the NEa.

Competent authorities do not operate autonomously. The European Commission, through DG TAXUD, provides guidance, operates the central CBAM Registry, and coordinates the customs-to-registry data exchange established under IR (EU) 2025/2619. National competent authorities feed into and access the same central registry infrastructure.

Does the CBAM Regulation Apply to Goods Processed in Third Countries?

Yes. The CBAM regulation applies to goods classified under the CN codes listed in Annex I at the point of entry into the EU customs territory, regardless of where the goods originated before processing. The country of origin for CBAM purposes follows EU customs origin rules, not the last country of shipment. Anti-circumvention provisions in Article 27 explicitly address minor processing and artificial rerouting designed to change the declared origin of goods.

Can a Non-EU Company Apply for Authorized Declarant Status?

No. Under Article 5 of the CBAM regulation, authorization is available only to persons established in the customs territory of the Union. A non-EU exporter cannot become an authorized CBAM declarant. The exporter's role under EU CBAM is limited to providing verified emissions data (through the operator disclosure in IR (EU) 2025/2547) and optionally registering as a production installation operator in the CBAM Registry to pre-populate emissions data for EU importer use. The full obligations of the authorized declarant role under Article 5 are covered in the CBAM authorized declarant guide.

Is the CBAM Regulation the Same as a Carbon Tax?

No. The CBAM regulation is not a carbon tax, a border tariff, or a customs duty. The mechanism requires purchase and surrender of CBAM certificates, which are electronic instruments priced at the EU ETS market rate and cancelled after surrender, creating no government revenue from the certificate price itself (revenues come from certificate sales, which are then allocated 75% to the EU budget and 25% to member states). Calling EU CBAM a "carbon tax" or "border tax" is legally inaccurate: it is a certificate-based compliance mechanism linked to an existing domestic carbon pricing system.

Does the CBAM Regulation Apply to Imports Below 50 Tonnes?

No. Imports aggregating to 50 tonnes or less of CBAM goods per importer per calendar year are exempt from CBAM obligations under the de minimis threshold in Article 2(3a), as inserted by Regulation (EU) 2025/2083. Electricity and hydrogen have no de minimis threshold and are subject to CBAM regardless of import volume. The 50-tonne threshold is measured across all CBAM good types combined for a single importer in a given year.

CBAM Regulation Legislative Timeline

The legislative history of CBAM regulation spans from the 2021 Fit for 55 proposal to the January 1, 2026 definitive phase start and beyond. The 10 most significant milestones in the CBAM legislation timeline are as follows.

1. July 14, 2021: Commission proposes CBAM as part of the Fit for 55 package (COM(2021)564).
2. December 13, 2022: Trilogue provisional agreement reached between Commission, Parliament, and Council.
3. April 18, 2023: European Parliament plenary adopts the text (487 votes in favor, 81 against, 75 abstentions).
4. May 16, 2023: Regulation (EU) 2023/956 published in the Official Journal (OJ L 130, pp. 52–104).
5. October 1, 2023: Transitional period begins; quarterly reporting obligations commence with no financial obligation.
6. October 8, 2025: Regulation (EU) 2025/2083 (Omnibus simplification) signed, amending 8 key provisions.
7. December 10–16, 2025: Package of 10 implementing regulations adopted, completing the secondary legislation framework.
8. January 1, 2026: Definitive phase begins; financial obligations commence across all 6 sectors.
9. February 1, 2027: Certificate sales begin; CBAM certificate purchases first become possible.
10. September 30, 2027: First annual CBAM declaration due; first certificate surrender required.

The CBAM omnibus regulation page covers the Regulation (EU) 2025/2083 amendment in full detail, including a before-and-after comparison of every provision changed.

The calculation methodology for embedded emissions under Articles 7 and 8, and the implementing rules in IR 2025/2547, are the technical foundation of every CBAM declaration. The CBAM embedded emissions guide covers the calculation approach in detail, including how direct and indirect emissions are treated differently across the 6 sectors.

Image brief: Horizontal timeline graphic showing key CBAM legislative milestones from July 2021 to January 2026 and forward to September 2027 first declaration deadline. Text overlay: "CBAM Regulation Timeline". Branded cbamguide.com logo.