The European Commission launched three public consultations to address key uncertainties ahead of the Carbon Border Adjustment Mechanism's (CBAM) compliance period, which starts on January 1.
These consultations will cover three upcoming implementing acts: adjusting for carbon prices already paid in non-EU countries, the methodology for the definitive period, which begins next year, and how to account for free allowances from the EU Emissions Trading System (ETS).
Implementing act on carbon price paid in a third country
The implementing act on carbon prices paid in a non-EU country is designed to outline the specific rules for converting those payments into a reduction of a company's CBAM certificate obligation. The consultation stresses that the calculation will include the conversion of the price paid in a foreign currency to euro and will specify the evidence required to adjust for the third country carbon pricing. It must also account for any rebates a company may have received, such as free allowances.
The Commission has stated that it plans to establish "clear eligibility rules for third parties certifying this evidence." While not explicitly mentioned in the consultation, it is expected that this act will also clarify which specific emission reduction schemes will be eligible for a CBAM obligation reduction. This includes determining how non-ETS schemes, such as those that are intensity-based or that feature compliance offsets, will be recognized.
Implementing act on free allocation
This implementing act is designed to clarify the rules for calculating the adjustment for free allowances within the EU Emissions Trading System (ETS), which will lead to a reduction in a company's CBAM obligation. The goal is to ensure equal treatment for industrial goods produced both within the EU and in non-EU countries.
The key values for this calculation will be CBAM benchmark values, which will be derived from the existing EU ETS benchmarks used to determine free allowances. While the European Commission is expected to release the new CBAM benchmark values, they are not anticipated before 2026. This is because the release of the EU ETS benchmarks for the 2026-2030 period is also not anticipated until that time.
Implementing act on methodology
The final implementing act focuses on revising the Carbon Border Adjustment Mechanism (CBAM) methodology. It will simplify the rules that were used during the 2023-2025 transitional period and make it easier for companies to use their actual emissions data for the compliance period. This act will be divided into four sections, covering how to calculate direct embedded emissions, embedded emissions for electricity, embedded indirect emissions and the default emissions values. The Commission will publish these default values, which will be categorized by product and country. However, they will be deliberately set with a markup, resulting in a higher CBAM obligation.
Next steps
The main stakeholders invited to provide feedback to these consultations are the EU and non-EU businesses affected by the CBAM, national competent authorities in charge of CBAM implementation and third-country authorities developing carbon pricing instruments.
The consultations will remain open until 25 September. Afterwards, the Commission plans to adopt the implementing acts still in Q4 2025.