Regulation (EU) 2023/956: The CBAM Legal Foundation, Read for Exporters
By Ahmed MedhatPublishedUpdated
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.
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. Origin follows the non-preferential origin rules of Article 59 of Regulation (EU) No 952/2013 (Article 2(5)).
The Omnibus amendment added a new Article 2a, a de minimis exemption: 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.
2. Article 3 — Definitions: emissions, installations, embedded
Article 3 establishes the vocabulary of CBAM. Two definitions matter here.
"Embedded emissions" are the direct emissions released during the production of goods and, for goods not listed in Annex II — cement, fertilisers and agglomerated iron ore (CN 2601 12 00) — also the indirect emissions from the electricity consumed (Article 7(1)). The Annex II goods are the iron and steel goods it lists, aluminium, hydrogen and electricity; for them only direct emissions count, and electricity has its own default-value rules (Annex IV, point 4.2). This determines what an exporter monitors for its own goods, though the calculation rules of Implementing Regulation (EU) 2025/2547 can bring in the indirect emissions of relevant precursors that are not Annex II goods.
An "installation" is "a stationary technical unit where a production process is carried out" (Article 3(30)). 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.
3. Article 7 — Calculation of embedded emissions
Article 7 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 may be asked for their own embedded emissions data, even if they do not ship to the EU themselves.
Fertiliser exporters also meet the unit rule in Implementing Regulation (EU) 2025/2547, Article 4(4): for CN codes 2808 00 00, 2814 and 3105 the functional unit is the kilograms of nitrogen contained in the goods, and for other fertilisers it is the supplementary units of the Combined Nomenclature.
4. Articles 5 and 6 — Authorisation of CBAM declarants and the CBAM declaration
Above the Article 2a threshold, CBAM goods are imported only by an authorised CBAM declarant (Article 4): an importer established in a Member State, or an indirect customs representative (Article 5). The authorisation is granted by the competent authority of the Member State where the applicant is established.
For exporters, the practical effect is that an EU buyer importing above the threshold must hold a valid CBAM authorisation before it can lawfully import your goods. The Omnibus amendment did not set a deadline for applications: what it fixed at 31 March 2026 is the date by which an application must be in for an importer to keep importing above the mass threshold while the decision is pending (Art. 17(7a)). Applying later is permitted, but that cover is lost.
If your EU customer imports above the threshold and is not authorised, your goods cannot lawfully be imported by it into the EU customs territory.
5. Article 8 — Verification of embedded emissions
Article 8(1) requires that, where embedded emissions are determined on actual emissions, the total declared is verified by a verifier accredited pursuant to Article 18, on the principles in Annex VI.
Verifiers are accredited by a national accreditation body (Article 18(2)). The verifier issues a verification report, and the CBAM declaration includes copies of the verification reports where applicable (Article 6(2)).
For exporters, verification is the moment at which actual emissions data becomes legally usable by the importer. Without verification, the importer must use the default value, which from 2026 is increased by a mark-up (10 % in 2026 for cement, iron and steel, aluminium and hydrogen; 1 % for fertilisers; none for electricity; IR (EU) 2025/2621 recital 4 and Implementing Regulation (EU) 2026/1740, Annex I). With verification, the importer uses the actual value, and the exporter has documented evidence of their carbon performance.
6. Article 9 — Deduction for carbon price paid in the country of origin
Article 9 allows the authorised declarant to claim a reduction in the number of CBAM certificates surrendered, to take into account the carbon price effectively paid in a third country — where embedded emissions are determined on actual emissions (Article 9(1)), or by reference to yearly default carbon prices (Article 9(4)).
Article 9 sets the principle. The detailed methodology — the documentation format, the currency conversion, the conversion arithmetic — is to be specified in an implementing act under Article 9(5). No such act is held in this site's regulation set as at September 2026. Check the Official Journal before relying on any conversion detail.
A separate article in this Knowledge Hub covers Article 9 in detail.
7. Article 10 — Registration of operators of installations in third countries
Article 10 lets the operator of an installation in a third country ask the Commission to register it in the CBAM registry. The registration holds the operator's name, address, registration number and contact details, the location and geographical coordinates of each installation, and its main economic activity (Article 10(2)). A registered operator determines its embedded emissions and has them verified by an accredited verifier (Article 10(5)), and may disclose that verification information to an authorised declarant, who can use it to meet Article 8 (Article 10(7)). Registry information is confidential, with exceptions such as the operator's name and address and the installations' locations (Article 14(4)).
Registration is voluntary. For exporters supplying several EU customers, it lets each declarant use the same verified information.
8. Article 21 — Price of CBAM certificates
The price of CBAM certificates is determined by Article 21 (Article 20 governs their sale). For 2026, the price is the quarterly average of the EU ETS auction clearing prices, taken from the common and opt-out auction platforms and excluding cancelled auctions (Art. 21(1a); IR (EU) 2025/2548, Art. 1(1) and 1(3)). From 2027 onward the same basis is averaged weekly (Art. 21(1); IR 2025/2548, Art. 5). 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 the Commission's website on 7 April 2026 at €75.36 per tonne CO₂ equivalent (IR (EU) 2025/2548, Article 4(1)). Each later 2026 quarter's price is calculated in the first calendar week of the following quarter (IR (EU) 2025/2548, Article 1(2)).
Exporters do not buy certificates. Importers do. But the certificate price is what determines how much CBAM costs per tonne of embedded emissions.
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 corresponding to the embedded emissions of the goods they imported, adjusted under Article 31 for the free allocation in the EU ETS.
This is the moment of surrender; the certificates were bought earlier on the common central platform (Article 20). The surrendered certificates are deducted from the importer's CBAM Registry account. An authorised declarant that holds too few is liable under Article 26(1) for a penalty on each certificate not surrendered, identical to the Directive 2003/87/EC Article 16(3) excess-emissions penalty as increased under Article 16(4). The three-to-five times multiple is a different rule for a different person: Article 26(2) applies it to someone who brings goods in without being an authorised declarant, and Article 26(2a) extends that to importers who exceed the single mass-based threshold without holding the status.
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.
10. Article 31 — Adjustment for free allocation of EU ETS allowances
Article 31 establishes the adjustment, not its schedule. 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; the factor itself is the CBAM factor of Article 10a(1a) of Directive 2003/87/EC, which Article 31 refers to. As EU free allocation is phased out, the adjustment factor decreases — meaning the proportion of embedded emissions that requires certificate coverage rises.
The CBAM factor schedule is set in Directive 2003/87/EC, Article 10a(1a): 97.5% in 2026, 95% in 2027, 90% in 2028, 77.5% in 2029, 51.5% in 2030, 39% in 2031, 26.5% in 2032 and 14% in 2033, with no factor from 2034. The free allocation deducted from embedded emissions is the benchmark times that year's factor times the cross-sectoral correction factor (IR (EU) 2025/2620, Annex).
For exporters, the falling factor is why the same embedded emissions cost more each year: less of the benchmark is deducted. Cost projections that cover only the current year leave the later years out.
11. Article 36 — Entry into force
The regulation entered into force on 17 May 2023, the day following its publication in the Official Journal (Article 36). 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 implementing acts on verification (IR (EU) 2025/2546), the calculation methodology (IR (EU) 2025/2547), the certificate price (IR (EU) 2025/2548) and the free allocation adjustment (IR (EU) 2025/2620) were published in the Official Journal on 22 December 2025, and the act on default values (IR (EU) 2025/2621) on 31 December 2025. Implementing Regulation (EU) 2026/1740 later replaced its Annex I from 1 January 2026.
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 the data behind a declaration on actual emissions — embedded emissions, verification reports, precursor data and Article 9 carbon price evidence — originates with the producer. The importer holds the legal obligation; where it declares actual emissions, the exporter holds the data.
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 7 on calculation of embedded emissions, Article 8 on verification, Article 9 on the carbon price paid in a third country, and Article 10 on voluntary registration of operators and installations. Everything else — authorisation (Article 5), the declaration itself (Article 6), certificate purchase, surrender and penalties — is the importer's obligation.
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This content is for informational purposes only and does not constitute legal or compliance advice. Contact DeCarbonPro for tailored guidance.