Preparing for CBAM: What Manufacturers and Exporters Need to Know

With the European Union’s Carbon Border Adjustment Mechanism (CBAM) entering into force, manufacturers and exporters outside the EU must prepare for a new era of climate regulation that will directly affect access to the European market. CBAM puts a price on the carbon embedded in certain goods imported into the EU, ensuring imported products face the same carbon costs as goods produced within the EU under the Emissions Trading Scheme (EU ETS).

This policy is a major step in global climate governance, aiming to reduce “carbon leakage”—the practice of shifting production to countries with less stringent climate policies. By aligning the carbon cost of imports with EU standards, CBAM aims to incentivize cleaner industrial production worldwide.

The Implications of CBAM

CBAM initially targets carbon-intensive sectors such as steel, cement, aluminum, fertilizers, hydrogen, and electricity. Over time, the list of covered goods is expected to expand. Importers into the EU will be required to report embedded emissions in covered products and purchase CBAM certificates to offset these emissions, reflecting the carbon price under the EU ETS.

This measure will lead to increased costs for certain commodities entering the EU—costs that may be passed down to exporters in markets like Latin America and Asia. For example, carbon-intensive industries such as cement and steel could face a cost increase of approximately 10% due to the additional carbon pricing burden.

Latin American and Asian exporters face a dual challenge: not only will they bear the direct financial impact of the CBAM, but many operate in emerging markets where high-emitting industries often lack access to decarbonization technologies. Without significant emissions reductions, these companies risk losing market share in the EU, as buyers increasingly seek lower-carbon or EU-based alternatives.

Strategic Preparation for CBAM Compliance

Companies aiming to remain competitive in the EU market must act now to measure and reduce their product-level emissions. This includes mapping supply chain emissions (Scope 1 and 2 at a minimum), implementing low-carbon technologies, and aligning operational strategies with EU climate expectations.

Key steps include:

• 2025 (CBAM Transition Period): Understand your exposure to CBAM by mapping emissions across product lines and supply chains. Establish emissions baselines and reporting capabilities.
• 2026: Implement emissions reduction plans and prepare disclosures aligned with EU requirements. Collaborate with EU buyers to align expectations.
• 2027 (Full Implementation of CBAM): Ensure continuous reduction of carbon intensity to minimize the cost of CBAM certificates and maintain EU market competitiveness.

Companies may also choose to adopt internal mechanisms—such as emissions accounting frameworks or pricing models—to better evaluate and manage the financial implications of CBAM. These tools can help prioritize low-carbon investments and prepare for future climate-related regulations globally.

CBAM as a Catalyst for Decarbonization

Though CBAM presents compliance and financial challenges, it also offers a powerful incentive for transformation. By pushing global industries toward more sustainable practices, the mechanism can help accelerate the decarbonization of hard-to-abate sectors. Exporters who respond early and decisively to CBAM will not only protect their market access but can also position themselves as leaders in the global low-carbon economy.

How ENGIE Supply & Energy Management (S&EM) Can Help

As carbon-related regulations gain momentum, businesses must take proactive steps to comply and adapt. This means reducing the emissions intensity of their operations. In many instances, for both economic and technological reasons, significantly decarbonizing their operational processes is still challenging. And in some sectors, there is currently no economically viable pathway to deep emissions cuts without the use of carbon credits.

ENGIE S&EM offers tailored carbon credit procurement solutions to help companies reduce their carbon footprints with confidence. With over 15 years of global experience supporting both renewable energy project developers and clients seeking access to carbon markets, we combine mature risk management capabilities with proven energy solutions. Contact us today to learn how we can help you navigate the energy landscape and stay competitive in a carbon-conscious world.