EU's CBAM pressures boards
The EU's Carbon Border Adjustment Mechanism is imposing carbon-cost accountability on key imports, forcing boards to sharpen scenario analysis and disclosure around supply‑chain climate exposure — a material governance issue for firms with EU trade links. (jonesday.com)
The CBAM definitive phase requires importers to purchase and surrender CBAM certificates for embedded emissions on goods imported from 1 January 2026, with certificate prices calculated from the EU ETS auction price (quarterly in 2026, weekly from 2027). (taxation-customs.ec.europa.eu) The regulation currently targets six product groups: cement, iron & steel, aluminium, fertilisers, electricity and hydrogen, each defined by specific CN/HS product codes and production-route parameters in EU guidance. (taxation-customs.ec.europa.eu) Certificate pricing will mirror the EU ETS auction price and national competent authorities will sell certificates via the CBAM registry, creating direct carbon-cost exposure tied to ETS market movements. (taxation-customs.ec.europa.eu) Authorised declarants face an excess-emissions penalty regime aligned with the EU ETS — a headline sanction of €100 per tonne for failure to surrender certificates (with national regimes imposing additional fines during the transition). (gleisslutz.com) Companies report that ownership of CBAM implementation is frequently unclear—tax teams often defer responsibility while procurement, supply-chain and ESG functions are commonly pressed into leading compliance and supplier-data collection. (ey.com) Accurate CBAM declarations demand verified supplier emissions data and mapping to product codes; default emission values used during the transitional phase are being phased out, making supplier engagement and verification work immediately material to cost forecasts. (coolset.com) Regulatory risk is active: the Commission published operational implementing acts in December 2025 and has proposed expanding CBAM to downstream goods and anti‑circumvention measures, signalling further scope and compliance complexity for boards to track. (mayerbrown.com) Boards are reassessing oversight structures and director expertise — governance advisers and Big Four firms recommend clearer board ownership of CBAM risk, regular scenario modelling tied to EU ETS price paths, and committee refreshes to include supply‑chain and carbon‑pricing competence. (kpmg.com)
