EU CBAM in 2026: what Chinese exporters need to prepare

CBAM Transitional Phase Begins

Starting January 1, 2026, the EU Carbon Border Adjustment Mechanism (CBAM) officially entered a three-year transitional phase. During this period, six categories of goods imported into the EU—steel, cement, aluminum, fertilizers, electricity, and hydrogen—require quarterly carbon emission reports, though carbon tariffs are not yet levied.

For Chinese exporters, CBAM is not a distant policy concept but a real challenge already affecting quotations, contract terms, and supply chain arrangements. According to European Commission estimates, after the transitional phase ends, related Chinese exports to the EU could face billions of euros in additional carbon costs annually.

Reporting Obligations Explained

The core obligation during the transitional phase is quarterly reporting. Importers or their authorized customs representatives must submit CBAM reports to EU competent authorities within one month after each quarter ends. Report content includes direct emissions (Scope 1) and indirect emissions (Scope 2, electricity portion) of imported goods, as well as carbon prices already paid in the country of origin.

For Chinese enterprises, the biggest challenge lies in data collection. CBAM requires "actual emissions" rather than default values, meaning enterprises need to establish a full-chain carbon emission accounting system from raw material procurement to finished product dispatch. For most SMEs that have not yet established carbon accounting systems, this is undoubtedly a daunting task.

Carbon Cost Calculations

• Steel: Implied carbon emissions of approximately 1.5 to 2.5 tonnes CO₂ per tonne of crude steel; at EU carbon price of EUR 80/tonne, additional costs are approximately EUR 120 to 200/tonne

• Aluminum: Implied carbon emissions of approximately 8 to 16 tonnes CO₂ per tonne of primary aluminum; additional costs are approximately EUR 640 to 1,280/tonne

• Cement: Implied carbon emissions of approximately 0.6 to 0.9 tonnes CO₂ per tonne of clinker; additional costs are approximately EUR 48 to 72/tonne

• Fertilizers: Implied carbon emissions of approximately 1.5 to 3 tonnes CO₂ per tonne of ammonia; additional costs are approximately EUR 120 to 240/tonne

Enterprise Response Strategies

In response to the challenges posed by CBAM, Chinese exporters can formulate strategies across three dimensions:

First, build internal carbon accounting capabilities. Enterprises should engage professional carbon management consulting teams as soon as possible to establish carbon emission accounting systems compliant with ISO 14064 or GHG Protocol standards, ensuring data traceability and verifiability.

Second, optimize supply chain layouts. For production segments with high carbon emission intensity, consider shifting to regions with higher clean energy ratios, or securing green electricity supply through long-term power purchase agreements (PPAs). Some leading enterprises have already begun installing distributed photovoltaic systems at production bases to reduce Scope 2 emissions.

Third, actively participate in the domestic carbon market. China's national carbon market already covers the power sector and plans to gradually expand to steel, non-ferrous metals, building materials, and other industries. Carbon allowances purchased by enterprises in the domestic carbon market may potentially receive offset credits under the CBAM framework, provided that a mutual recognition mechanism for Chinese and foreign carbon prices is established.

Legal and Compliance Risks

Inaccurate or false CBAM reporting may result in substantial fines from EU member states. According to CBAM regulations, importers who fail to submit reports on time or submit false information will be fined EUR 10 to 50 per tonne of unreported emissions.

Furthermore, CBAM data may also serve as reference material in EU anti-dumping and anti-subsidy investigations. If Chinese enterprises' carbon emission data is significantly higher than the industry average, they may face additional trade remedy measures.

As CBAM moves from the transitional phase toward full implementation, Chinese exporters need to plan ahead and integrate carbon management into the core agenda of daily operations. This is not only to meet EU compliance requirements but also to secure favorable positions in global green supply chain competition.