Lao Zhao has been exporting steel from Tangshan for fifteen years. A few days into January 2026, an email arrived from his long-standing Hamburg customer. The greetings were routine; then the tone shifted: “For your hot-rolled coil, can you provide embedded emissions data as CBAM requires? If we report on default values we will pay a much larger carbon bill — better to use actual measured values. And from 2027, carbon cost has to be part of our price talks.” Zhao stared at the screen. He had shipped through Russian payment channels and dodged US anti-dumping cases, but this was the first time the words “carbon emissions” had parked themselves in the middle of his quotation.
What Actually Changed: From Quarterly Reporting to Buying Certificates
Three things changed. First, who may import: an EU importer must hold “authorised CBAM declarant” status. Importers who filed their application by 31 March 2026 may keep importing while the application is assessed; without the status and above the threshold, goods can be stopped at customs release. Second, the instrument: from 1 February 2027, authorised declarants buy CBAM certificates in the CBAM Registry — one certificate per tonne of CO2 equivalent of embedded emissions — and at the end of every quarter their account must hold certificates covering at least 50% of the embedded emissions accumulated since the start of the year (this ratio was cut from 80% by the simplification rules of October 2025). Third, the settlement: by 30 September 2027 the declarant must file the first annual CBAM declaration, covering all 2026 imports, and surrender matching certificates. Excess certificates bought in a given year can be resold to the authorities at the purchase price for up to half of that year's purchases; failing to surrender is penalised at roughly EUR 100 per tonne of CO2e, with heavier penalties for unauthorised imports — check the latest implementing rules for exact figures.
The small-consignment exemption was also rewritten. The Omnibus simplification, Regulation (EU) 2025/2083, in force since 20 October 2025, scrapped the old rule that exempted consignments valued under EUR 150 and replaced it with a single mass-based threshold: if an importer's cumulative annual net mass of cement, iron and steel, aluminium and fertiliser does not exceed 50 tonnes, the authorisation, declaration and certificate obligations all fall away. Electricity and hydrogen never benefit from this exemption. The EU's own estimate is that the change exempts roughly nine in ten importers — mostly small firms — while still capturing more than 99% of embedded emissions. Lao Zhao's customers are traders and fabricators who buy thousands of tonnes a year, so the 50-tonne line has nothing to do with him. What he has to face is this: the cost conversation has started.
Which Goods, Who Pays, and How Much per Year
The CBAM list covers six categories: iron and steel, aluminium, cement, fertilisers, electricity and hydrogen — plus processed goods whose customs codes fall inside the annex, so products such as steel fasteners and aluminium structures cannot slip through either. The dullest and most reliable way to know whether your goods are in scope: check your HS codes against Annex I of the CBAM Regulation instead of guessing.
The party that pays is always the EU importer, never the Chinese exporter. But who writes the cheque and who actually carries the cost are two different things. Importers fold the carbon cost into their purchase price, press your FOB quote, or ask you to share part of the certificate bill — that negotiation has already started in 2026 enquiries. What the customer wants from you is not sympathy; it is data that makes his bill smaller.
How much it costs per year depends on three numbers: the embedded emissions in the volume, the certificate price, and the chargeable share. Certificate prices track the auction prices of EU ETS allowances and are published quarterly — the first price published for Q1 2026 imports was around EUR 75 per tonne of CO2e (each quarter, follow the Commission's official publication). What decides whether it hurts is the third number, and it does not start at 100%. In 2026 EU producers of the same goods still receive about 97.5% of their allowances for free under the EU ETS, so the effective CBAM chargeable share is only around 2.5%, rising year by year to 100% by 2034. In plain terms: for goods imported in 2026, certificates are bought from February 2027, and the first-year bill is a reminder — the real weight lands after 2030.
Run Lao Zhao's numbers. Say he exports 10,000 tonnes of hot-rolled coil to the EU a year. At a realistic industry level of around 2 tonnes of CO2e per tonne of steel, that is 20,000 tonnes of embedded emissions. Year one, at a 2.5% chargeable share, means roughly 500 tonnes to surrender — about EUR 37,500 at EUR 75, hardly frightening against a cargo value in the tens of millions of renminbi. The same order book at 100% in 2034 becomes an annual carbon bill on the scale of EUR 1.5 million. A variable of that size has to sit inside the price-adjustment formula of any long-term contract, not be negotiated when the customer happens to raise it. A sense of scale: in 2022 China exported about 3.89 million tonnes of steel to the EU — only about 5.8% of its total steel exports that year, worth about USD 6.44 billion. Early industry estimates under the then-current rules suggested a full-scale levy would raise the cost of steel exports by roughly 4-6%, or USD 200-400 million a year. With stricter default values and higher carbon prices now, the real figure will only be larger.
What Presses on Chinese Factories Is Not the Tax Bill — It Is the Data Bill
All the customs paperwork sits with the EU importer, but the emissions data lives at the Chinese factory — and that is the real working surface for Chinese exporters. CBAM is calculated on embedded emissions: across the production line from ore and scrap entering the plant to the finished product leaving it, direct emissions (coal, gas, smelting) plus indirect emissions (purchased electricity) are allocated to each product. The EU has published a methodology with process-specific parameters for steel and aluminium; the detailed execution rules follow the Commission's latest implementing regulations, so keep checking rather than relying on second-hand summaries.
There are only two routes for the data: actual values or default values. Default values are the easy route — your customer reports on the default basis and you hand over no factory data at all. But easy does not mean cheap. Defaults sit well above what Chinese mills actually emit. The China Iron and Steel Association has publicly argued that the transitional default values diverged sharply from real domestic emissions of around 1.8-2 tonnes of CO2e per tonne of steel; in the default-value tables updated in December 2025 for the definitive period, hot-rolled coil from a Chinese blast-furnace (BF-BOF) route carries a default near 3.5 tonnes of CO2e per tonne — close to twice the industry's measured level — and the default route comes with year-on-year mark-ups. In plain language: you save yourself the trouble of real accounting, and your customer pays nearly double the carbon bill for your convenience — and that money finds its way back out of your price, either as a discount you are forced to give or as a lost order.
If the buyer reports on actual values, what will he ask you for? List it out: basic installation information and the production route (long-process BF-BOF converter or short-process electric arc furnace); energy consumption and output data per process step; annual purchased electricity and the grid emission factor; input ratios of scrap, pig iron and other feedstocks; a description of how emissions are allocated across products; and a supplier declaration filled in on the EU template. Annual declarations on the actual-value route normally also need verification by an accredited independent verifier. All of these documents must be in place before the first annual surrender in 2027 — not discoverable at the last minute.
Who does the accounting? Most low-carbon consultancies and certification firms in China can take the job; teams that have done ISO 14064 greenhouse-gas inventories, EPD environmental product declarations or domestic carbon-market verification ramp up fastest. Fees are quoted per product line and by process complexity, broadly ranging from tens of thousands to well over one hundred thousand renminbi. Lao Zhao plans to spend that money in the first half of 2026, and he has done the arithmetic: if he does not, the default-value carbon cost will be clawed back from his quotes with interest, one way or another.
One more variable to watch: China's national carbon market is widening. In 2025 the iron and steel, cement and electrolytic aluminium sectors were brought under the national ETS, with 2024 emissions becoming their first compliance cycle. Under CBAM rules, carbon prices actually paid in the country of origin can be deducted from certificate obligations — but only when independently verified. For now these sectors still receive mostly free allowances, the cash actually paid out is limited, and the paperwork does not yet line up with what the EU requires, so the deductible amount in the near term is small. Do not build “offset by China ETS” into your pricing; wait until the money is really paid and the verification documents exist. Lao Zhao's friend Zhou, who makes aluminium profiles, spent 2025 being chased by a French customer for the carbon footprint of every kilogram of aluminium. He hired a Guangzhou firm to inventory one production line, discovered that his short-process electric-arc route was actually a selling point on the carbon ledger, and by spring 2026 had made per-unit carbon data a standard attachment to his EU quotations.
Key Dates for 2026-2027 and Five Things to Do Right Now
Pin the dates to the wall. Before 31 March 2026: the last grace window for EU importers to apply for authorised declarant status — it is your customer's application, but confirm he has not forgotten. From 1 February 2027: certificate sales open. End of each quarter from 2027: the account must hold certificates covering at least 50% of the year's cumulative embedded emissions. By 30 September 2027: file the 2026 annual declaration and surrender the certificates. Every data gap on your customer's side lands on your desk as either a cost or an opportunity. Five things to do now.
One: inventory your goods against the codes. Run every product you export to the EU through the CBAM list by HS code; record annual volume, supplying plant and customer per code; and separate out which goods and which customers sit above the 50-tonne line. This is the foundation of everything that follows.
Two: settle the terms with each major customer. Confirm three things with every large buyer: who is the declarant (the buyer himself or his customs broker); whether he intends to report on actual or default values; and who supplies the carbon data and who carries that cost. Put it in the contract or purchase confirmation, not in email small talk.
Three: build a data ledger. Archive, shipment by shipment, the plant, the process route, energy consumption per step, purchased electricity and the scrap-to-pig-iron ratios, so that every consignment is traceable back to a plant file. Reconstructing a year of data afterwards costs ten times more than recording it as you go — and reconstructed numbers do not survive verification.
Four: keep a price variable. Carbon prices, default values and the chargeable share all move every year. Write a carbon-cost adjustment parameter into long-term quotes — indexed to the quarterly CBAM certificate price or the EU ETS price — and review it once a year instead of locking a flat price for three to five years.
Five: watch the policy road. Someone in the company should track the quarterly certificate price, default-value updates and verifier rules from 2026 on. The bigger variable is expansion: in December 2025 the European Commission proposed extending the mechanism to around 180 steel- and aluminium-intensive downstream products — machinery, hardware and metal goods, vehicle parts, appliances such as washing machines, and construction equipment — to be phased in from around 2028. It is still in the legislative pipeline, but the direction is set. Factories exporting such parts to Europe should push their upstream steel mills to start accumulating product-line carbon data now, so that when the scope widens, you are not starting from zero.
FAQ
Q1: Is CBAM a tax on Chinese companies? Who actually pays?
It is not levied on you directly. The declaration, certificate-purchase and surrender obligations all sit with the EU importer — the authorised CBAM declarant — and Chinese companies are not the declarant. But the cost travels through the contract: customers will push down prices, ask you to share the cost, or demand actual measured data that lowers their bill. Your role is not “the payer” but “the data provider”, and neither is easy.
Q2: I only export a few dozen tonnes to the EU a year. Do I still need carbon data?
Look at your customer's volume first. Under current rules, an importer whose cumulative annual imports of cement, iron and steel, aluminium and fertiliser do not exceed 50 tonnes is exempt from authorisation, declaration and certificate obligations (electricity and hydrogen are never exempt). If your volumes are small but your customer is a large trader importing through consolidated shipments, the trader is the declarant and he will still ask you for data. Not sure? Ask the buyer one question — whether his annual imports pass the 50-tonne line and whether he reports on actual or default values. The answer decides whether you need to pay for accounting at all.
Q3: Can I just use the EU default values and skip paying for carbon accounting?
It is less work, but probably not cheaper. Default values are set well above what Chinese mills actually emit — for long-process steel products the default can be close to double the measured level — and they escalate year on year. The extra carbon money your customer pays comes back to you as price pressure or lost orders. In most cases actual values cost more up front and pay off over time; if you run an electric-arc (short-process) line, measured data is actually a bargaining chip.
Q4: I heard CBAM will expand to machinery and vehicle parts. Does that affect us?
On 17 December 2025 the European Commission published a proposal to extend the mechanism from basic materials to around 180 steel- and aluminium-intensive downstream products — machinery, hardware and metal products, vehicle parts, household appliances and construction equipment — to be phased in from around 2028. It is still in the legislative process, but the direction is essentially settled; only the pace is open. Companies exporting such downstream goods to Europe should push their upstream steel and aluminium suppliers to start accumulating product-line carbon data now, so the day the scope widens you are not empty-handed.