The draft texts of the European Commission's plans for the implementation of the Carbon Boundary Adjustment Mechanism (CBAM) indicate a crucial step towards setting market prices for carbon and tightening emissions controls.
The move was expected to change trade flows, compliance strategies, and reduce the cost of carbon dioxide emissions for importers when the system becomes fully operational in 2026, according to Fastmarkets.
The two draft texts, which were published by Fastmarkets on Tuesday, November 12, but which are believed to have been made public last week, outline the methodology for calculating the cost of the CBAM certificate and the principles for verifying emissions related to imported goods such as steel, aluminum, fertilizers, cement, electricity and hydrogen. Together, they form the regulatory framework for the EU carbon boundary system ahead of its full implementation on January 1, 2026.
Prices for CBAM certificates
According to the pricing regulation, the prices of CBAM certificates will directly depend on the weighted average auction prices under the EU Emissions Trading System (ETS), ensuring that imports will incur carbon costs equivalent to those of EU-based producers.
The cost of the certificates will be calculated quarterly in 2026 and weekly from 2027 based on auction prices weighted by trading volume. By coordinating CBAM with ETS dynamics, Brussels hoped to close loopholes that could lead to carbon leakage or price distortion.
For market participants, this connection will mean greater exposure to ETS volatility. Considering that in October-November 2026, EU-approved CO2 prices (EUA) fluctuate around 70-85 euros (81-98 dollars) per ton, traders began to expect that the cost of the CBAM certificate will be about the same as in October.
"CBAM will effectively spread the ETS price signal to non-EU producers," said a trader from Germany. "This is a powerful incentive to reduce carbon dioxide emissions or lose market share. May the Hunger Games begin!"
Checking built-in emissions
The accompanying verification regulations, outlined in another draft reviewed by Fastmarkets, establish strict conditions for verifying emissions. Physical visits by accredited inspectors to facilities will be mandatory during the first year of CBAM operation, although virtual inspections or opt-outs may be allowed later under certain low-risk conditions.
A 5% materiality threshold will be applied during verification, but small discrepancies may still be considered significant depending on the risk assessment.
Industry sources warn that verification opportunities, especially in non-member jurisdictions
