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The CBAM Transitional Phase 2023–2025: Lessons for Full Implementation

5 min readFLAT LAW FIRM

Industrial factory with emissions against a blue sky
Photo: Pexels (free to use under the Pexels License)

Short answer: From 1 October 2023 to 31 December 2025, the EU’s CBAM (Regulation (EU) 2023/956) only required EU importers to report embedded emissions in imported goods — no payment. From 1 January 2026, the definitive regime began: covered goods may only be imported by an authorised CBAM declarant, and CBAM certificates must be surrendered against embedded emissions. The transitional phase was a “semester with no grades” — and its biggest lesson is: companies that cannot measure their own emissions will pay with somebody else’s numbers.

1. How the transitional phase worked

The only duty: quarterly reporting. During 1 October 2023–31 December 2025, EU importers filed quarterly CBAM reports on embedded emissions (direct and indirect) in imported goods — with no financial obligation. The phase was designed to let importers and non-EU producers learn the measurement methods, forms and the CBAM registry.

Goods in scope. Six groups: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen (Annex I of the Regulation) — all sectors at high risk of “carbon leakage”, where production could shift to jurisdictions with weaker climate standards to dodge EU carbon costs.

A notable simplification (October 2025 amendment). The EU added a de minimis threshold: importers with total CBAM-covered goods below 50 tonnes per year are exempt from CBAM obligations (electricity and hydrogen excluded). For Vietnamese exporters shipping small lots, this is a threshold worth planning around.

2. The definitive regime from 1 January 2026: what changed

Only authorised declarants may import. From 1 January 2026, CBAM-covered goods may enter the EU only through an authorised CBAM declarant — importers had to register and obtain the status in advance. (The application window for importers wanting uninterrupted 2026 imports closed on 31 March 2026.)

CBAM certificates and the phase-in. Declarants must buy and surrender CBAM certificates matching embedded emissions; certificate prices track average EU ETS allowance auction prices (around EUR 75.36/tCO₂ in Q1 2026, around EUR 82.32/tCO₂ in Q3 2026 per the European Commission). The financial bite phases in via the “CBAM factor”: 2026 counts only 2.5% of embedded emissions, rising to 100% by 2034 as free EU ETS allowances disappear.

The first annual declaration. The first CBAM annual declaration (for 2026 imports) falls due in 2027; buying and surrendering certificates for 2026 imports also happens in 2027. So 2026 is the year obligations accrue — the real bill lands in 2027.

3. Five lessons from the transitional phase

Lesson 1 — Emissions data is an asset, not paperwork. During the transition, many non-EU producers let importers report using EU-published “default values”. Defaults usually exceed the real emissions of an efficient plant — in the definitive phase, every tonne of CO₂ gap becomes real money. Vietnamese producers need to measure actual plant-level emissions (per the Regulation’s methodology) instead of accepting defaults.

Lesson 2 — Indirect emissions (electricity) count too. CBAM covers direct production emissions and indirect emissions from consumed electricity. A plant on carbon-intensive power faces higher CBAM costs — a variable outside the production line but within control through power sourcing choices.

Lesson 3 — Supply chains must “speak carbon”. EU importers will favor suppliers that deliver complete, verifiable emissions data. Carbon reporting capability is becoming a commercial term, not just compliance.

Lesson 4 — The 50-tonne threshold cuts both ways. The sub-50-tonne exemption helps small shipments, but a company growing past the threshold without a measurement system will be caught unprepared.

Lesson 5 — EU carbon prices move. CBAM certificate prices track the EU ETS and rose from around EUR 75 to over EUR 82/tCO₂ across the first three quarters of 2026. Long-term export contracts into the EU need carbon cost pass-through or price adjustment clauses, or margins will erode.

4. Checklist for Vietnamese steel and aluminium exporters to the EU

  1. Check whether your product codes fall under Annex I of Regulation (EU) 2023/956.
  2. Measure actual embedded emissions (direct + indirect) per the Regulation’s methodology instead of using default values.
  3. Work with your EU importer to confirm their authorised CBAM declarant status.
  4. Model the 50-tonne annual threshold for your export plan and over-threshold scenarios.
  5. Put carbon terms into long-term contracts (cost sharing, price adjustment linked to the CBAM certificate price).

Frequently asked questions

Is CBAM an import tariff?
No. CBAM is not a customs duty but a carbon-pricing mechanism: it makes imports bear carbon costs equivalent to EU-produced goods (which face the EU ETS), to prevent carbon leakage.

How long did the CBAM transitional phase last?
From 1 October 2023 to 31 December 2025. EU importers only had to report embedded emissions quarterly; no certificates were purchased.

Which goods are covered by CBAM?
Cement, iron and steel, aluminium, fertilisers, electricity and hydrogen under Annex I of Regulation (EU) 2023/956.

Must Vietnamese companies buy CBAM certificates?
Not directly. The buy-and-surrender duty sits with the authorised CBAM declarant in the EU (usually the importer). But part of the cost will flow back to exporters through price negotiation.

How does the 50-tonne exemption work?
An EU importer with total CBAM-covered goods below 50 tonnes in a calendar year is exempt from CBAM obligations (electricity and hydrogen remain fully covered). The threshold counts per importer, not per exporter.

This article has been quality-reviewed by the FLAW AI Legal Council

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