Regulation (EU) 2023/956: The CBAM Legal Foundation, Read for Exporters

An article-by-article walk-through of the primary CBAM regulation, framed from the exporter's perspective

The Carbon Border Adjustment Mechanism is established by Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023. This is the primary legal text. Every operational rule, every implementing act, every guidance document — including the Omnibus amendment of October 2025 — flows from articles in this regulation.

For exporters, the regulation is rarely read directly. Importers' compliance teams and legal advisors typically work from it; exporters usually receive its consequences second-hand, in the form of data requests, contractual clauses, or certificate cost discussions. But understanding the legal foundation matters, because the structure of the regulation determines which obligations are negotiable, which are not, and which fall on which party in the trade.

This article walks through the operative articles of the regulation, in order, with an exporter-side reading of each.

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1. Article 2 — Scope: which goods are in, which are out

Article 2 defines what CBAM applies to. The regulation lists six sectors in Annex I: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. Each sector is identified by specific combined nomenclature (CN) codes — the eight-digit customs classification numbers that appear on every shipping document.

For exporters, the central question raised by Article 2 is whether your product is identified by an Annex I CN code. If yes, CBAM applies. If no, it does not. There is no judgement involved — the CN code is the test.

Article 2 also defines the territorial scope. CBAM applies to goods originating outside the EU customs territory. It does not apply to goods originating in EFTA countries with linked emissions trading systems (Iceland, Liechtenstein, Norway, Switzerland) or to certain EU special territories. Originating means the country where the production process took place — not the country where the goods were last shipped from.

The Omnibus amendment added a de minimis exemption to this article: importers bringing 50 tonnes or less of CBAM goods into the EU per year, summed across all consignments, are exempt from CBAM obligations entirely. Hydrogen and electricity are excluded from this de minimis relief.

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2. Article 3 — Definitions: emissions, installations, embedded

Article 3 establishes the vocabulary of CBAM. Two definitions matter most for exporters.

"Embedded emissions" are the direct emissions from production processes, plus, for cement and fertiliser sectors, the indirect emissions from electricity consumed in production. For iron and steel, aluminium, and hydrogen, indirect emissions are excluded from embedded emissions and the regulation prices only direct emissions. This distinction is important because it determines what an exporter needs to monitor and report. A steel producer does not need to provide indirect electricity emissions data for CBAM purposes; a cement producer does.

"Installation" is the production unit at which embedded emissions are calculated. The regulation operates at the installation level, not the company level. A producer with three plants has three installations, and each may have different emission intensities depending on its specific production route, energy mix, and process configuration. CBAM does not average across a company's plants — each installation is reported separately.

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3. Article 4 — Calculation of embedded emissions

Article 4 sets out how embedded emissions are to be calculated. The formula has two parts: attributed emissions divided by activity level, plus the contribution of any precursor materials.

The first part captures the production process at the installation itself. Attributed emissions are the emissions of the production process for the relevant goods, measured according to the rules in the implementing regulation. Activity level is the volume of goods produced. The ratio is the specific embedded emissions per tonne of product.

The second part captures the production chain upstream. If your steel mill uses pig iron from a different installation, the embedded emissions of that pig iron must be included in the embedded emissions of your steel. This is the precursor mechanism. It pushes CBAM accountability back through the supply chain — exporters whose customers in turn export to the EU need to be prepared to provide their own embedded emissions data, even if they are not directly shipping to the EU.

Article 4 is also where fertiliser exporters encounter the nitrogen attribution rule. Fertiliser embedded emissions are attributed based on nitrogen content, not on the mass of the fertiliser product. A urea producer reports emissions per tonne of nitrogen, not per tonne of urea.

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4. Articles 5–7 — Authorisation of CBAM declarants

These articles establish that only authorised CBAM declarants — registered EU importers — may import CBAM goods. The authorisation is granted by the competent authority in the importer's member state, on application that must be filed in advance.

For exporters, the practical effect is that your EU buyer must hold a valid CBAM authorisation before they can lawfully import your goods. The Omnibus amendment set the deadline for authorisation applications at 31 March 2026; transitional arrangements allow some importers to continue importing while their application is pending.

If your EU customer is not authorised, your goods cannot lawfully be imported into the EU customs territory. This is now a commercial due diligence item, not a regulatory abstraction.

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5. Article 8 — Verification of embedded emissions

Article 8 requires that embedded emissions reported in CBAM declarations be verified by an independent, accredited verifier. The verification follows principles set out in the implementing regulation, modelled on the ISO 14065 accreditation standard used for EU ETS verification.

Verification can be performed by accredited verifiers in either an EU member state or a third country, provided the verifier is accredited under a recognised scheme. The verifier examines monitoring plans, sample-tests data, and issues a verification statement that the importer attaches to the CBAM declaration.

For exporters, verification is the moment at which actual emissions data — typically lower than the EU default value — becomes legally usable by the importer. Without verification, the importer must use the default value, which carries a mark-up penalty designed to make it commercially unattractive. With verification, the importer uses the actual value, and the exporter has documented evidence of their carbon performance.

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6. Article 9 — Deduction for carbon price paid in the country of origin

Article 9 allows the importer to reduce the number of CBAM certificates surrendered by the amount of any carbon price effectively paid in the country of production. This is the single most consequential article for exporters in countries with operating carbon pricing schemes, and the single most disappointing article for exporters in countries without one.

Article 9 sets the principle. The detailed methodology — the list of recognised schemes, the documentation requirements, the conversion arithmetic — is to be specified in an implementing act that the Commission opened for stakeholder consultation in Q1 2026. The act is not yet adopted as of mid-2026.

A separate article in this Knowledge Hub covers Article 9 in detail.

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7. Articles 10–11 — Registration of operators of installations in third countries

These articles establish a voluntary registration system for non-EU producers. An operator who exports goods to the EU may register their installation in a public Commission database. The registration includes the installation's identification details, monitoring plan, and verified embedded emissions for the most recent reporting period.

For exporters, the practical value of voluntary registration is that registered data can be relied upon by any EU importer who buys from the same installation. Without registration, every importer must independently obtain and verify your emissions data, which is administratively burdensome and creates duplicative verification cost.

Registration is voluntary, but for exporters supplying multiple EU customers, it can simplify the data flow substantially.

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8. Article 20 — Calculation of CBAM certificate price

The price of CBAM certificates is determined by Article 20. For 2026, the price is the average of the EU ETS auction clearing prices over each calendar quarter. From 2027 onward, the price is calculated weekly. The Commission publishes the price for each period on its CBAM webpage and in the CBAM Registry.

For 2026, the official Q1 price was published on 7 April 2026 at €75.36 per tonne CO₂ equivalent. Quarterly prices for Q2, Q3 and Q4 2026 will be published on 6 July 2026, 5 October 2026, and 4 January 2027 respectively.

Exporters do not buy certificates. Importers do. But the certificate price is what determines how much CBAM costs per tonne of embedded emissions, and that cost is the centrepiece of every supplier-buyer negotiation involving CBAM goods.

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9. Article 22 — Surrender of certificates

Article 22 sets the annual surrender obligation. By 30 September of each year, the authorised CBAM declarant must surrender, in respect of the previous calendar year, a number of CBAM certificates equal to the embedded emissions of the goods they imported.

This is the moment of payment. The surrendered certificates are deducted from the importer's CBAM Registry account. If the importer holds insufficient certificates, the importer is liable for a penalty equivalent to three times the surrender shortfall.

The 30 September deadline applies to the first definitive-phase declaration, covering 2026 imports. The Omnibus amendment moved this from the originally scheduled 31 May to 30 September.

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10. Article 31 — Adjustment for free allocation of EU ETS allowances

Article 31 establishes the phase-in mechanism. The number of certificates that the importer must surrender is reduced by an adjustment factor reflecting the free allocation of allowances still granted to EU producers under the EU ETS. As EU free allocation is phased out, the adjustment factor decreases — meaning the proportion of embedded emissions that requires certificate coverage rises.

The phase-in schedule is locked: 2026 covers 2.5% of embedded emissions, 2027 covers 5%, 2028 covers 10%, 2029 covers 22.5%, 2030 covers 48.5%, 2031 covers 61%, 2032 covers 73.5%, 2033 covers 86%, and 2034 covers 100%.

For exporters, the phase-in is the reason why 2026 CBAM costs look small and 2030 CBAM costs look large. The same per-tonne embedded emissions, multiplied by the same EUA price, produces nineteen times the CBAM cost in 2030 as in 2026, simply because the phase-in factor has moved from 2.5% to 48.5%. Cost projections that focus only on the current year materially understate exposure.

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11. Article 36 — Entry into force

The regulation entered into force on 17 May 2023, three days after publication in the Official Journal. The transitional phase ran from 1 October 2023 to 31 December 2025. The definitive phase began on 1 January 2026.

Implementing regulations and delegated acts have been adopted progressively since 2023. The final cluster — covering verification, calculation methodology, certificate pricing, free allocation adjustment, and default values — was adopted in December 2025 and published in the Official Journal between 23 December 2025 and 21 January 2026.

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12. The reading for exporters

The regulation gives exporters a clear map of where their obligations sit and where they do not. Exporters do not file CBAM declarations. They do not purchase CBAM certificates. They are not subject to the EU's national competent authorities.

But exporters are the source of every piece of data on which CBAM operates. Embedded emissions data, verification statements, precursor traceability, and Article 9 carbon price evidence all originate with the producer. The regulation is constructed so that the importer holds the legal obligation and the exporter holds the data. The two parties are coupled — neither can discharge their CBAM obligations without the other.

Reading the regulation from the exporter side is therefore an exercise in identifying which articles affect what the exporter has to prepare, document, and provide. The articles that matter most are: Article 4 on calculation methodology, Article 8 on verification, Article 9 on carbon price deductions, and Articles 10-11 on voluntary installation registration. Everything else — authorisation, certificate purchase, surrender, penalties — is the importer's problem.

That said, the importer's problem becomes the exporter's problem the moment the importer's CBAM cost shows up in a price negotiation. And it always does.

If you want to understand how the regulation applies to your specific installation, sector, and country of origin, the DeCarbonPro Country Exposure Assessment service translates the legal framework into a verified, installation-specific compliance roadmap.