CBAM Definitive Phase Q1 Review: Early Implementation Insights

CBAM Definitive Phase Q1 Review: Early Implementation Insights

As of 1 January 2026, the Carbon Border Adjustment Mechanism (CBAM) moved from a reporting-focused transitional period into its definitive phase, which carries financial obligations (Regulation (EU) 2023/956). Importers who, since autumn 2023, had only submitted quarterly embedded emissions reports now face an entirely different regime. After the first quarter, which changes took effect, where did deferrals occur, and what does it mean in practice for Turkish exporters? This article offers an early review.

From Transitional to Definitive: The Core Difference

The transitional period (1 October 2023 – 31 December 2025) was only a data collection and familiarization phase; it carried no financial cost. The definitive period ties the mechanism to a real carbon price:

• Imports can now only be made by authorised CBAM declarants.
• For the embedded emissions of covered goods (cement, iron and steel, aluminium, fertilisers, electricity, hydrogen), importers must purchase and later surrender CBAM certificates.
• The certificate price is indexed to the weekly average of EU Emissions Trading System (EU ETS) auction prices; in other words, the CBAM cost tracks the European carbon market directly.

This is a critical transition for exporters: embedded emissions are no longer merely a reported number, but a real cost line the buyer will pay.

How the Authorised CBAM Declarant Process Works

The most concrete structural change of the definitive phase is the authorised declarant status. The party wishing to import covered goods into the EU — the EU-established importer, or its indirect customs representative — must apply to the national competent authority in its member state to obtain this status. The authorisation is granted through an EU-wide CBAM registry; without it, covered goods cannot clear customs. The application is subject to a review that weighs the importer's financial standing, import history, and compliance capacity.

Why does this chain reach the Turkish producer? The declarant obligation sits with the EU importer, but the embedded emissions data it must declare does not sit in the importer's hands — that data exists only at the production facility, that is, with the Turkish exporter. So the EU buyer, in order to discharge its obligation as an authorised declarant, requests facility- and product-level emissions data from its supplier. The quality, format, and timeliness of that data directly affect the continuity of the commercial relationship.

Important: In the definitive phase, embedded emissions data shifts from a compliance document into a competitive factor. A supplier that can provide low, verified emissions data lowers its buyer's CBAM cost and strengthens its position as a preferred supplier.

Declaration and Surrender Mechanics: How the Timeline Flows

To understand how the definitive phase works, separate two distinct obligations: the obligation to determine and declare emissions, and the obligation to purchase and surrender certificates.

The authorised declarant submits an annual CBAM declaration for each calendar year. That declaration sets out the total embedded emissions of covered goods imported during the year and the number of certificates that must be surrendered against them; it is filed in the period following the relevant year. Alongside the declaration, the declarant surrenders the required number of CBAM certificates from its account in the registry. Each certificate represents one tonne of CO₂-equivalent emissions.

The subtlety introduced by the Omnibus simplification package sits exactly here. The package moved the effective start of certificate sales to 2027 (European Commission, Omnibus Simplification Package, 2025); in other words, the financial payment for 2026 emissions is deferred. But the obligation to determine and document 2026 emissions has not been deferred. The data-side work runs today; the payment follows later, against the accumulated obligation. A deferral of certificate purchases does not defer the emissions accounting — the deferred payment can only rest on an emissions base correctly calculated, retroactively, from the start of 2026.

How Is the Certificate Price Set?

CBAM aims to put EU producers and importers on an equal carbon-cost footing. The certificate price is therefore not arbitrary: it is indexed to the weekly average closing price of EU ETS allowance (EUA) auctions. The unit cost the importer pays thus tracks the price an EU-based producer would pay for the same emissions under the EU ETS.

A second, often-overlooked element is the phase-out of EU ETS free allocation. EU industry today still receives free allowances in certain sectors; those allowances will be reduced and eliminated over time. The CBAM obligation is reduced in proportion to the free allocation still granted to EU producers (sometimes referred to as the "CBAM factor"). In practice this means the full financial impact of CBAM phases in gradually over years, as free allocation declines — not all at once. For the exporter, the conclusion is clear: today's cost gap will widen as free allocation approaches zero.

An Illustrative Cost Example (For Illustration Only)

The table below is a purely illustrative example. It uses a hypothetical EUA price chosen to show how the mechanism works — not a real market price. Actual cost varies with the real EUA weekly average during the declaration period and the applicable free-allocation adjustment.

For one tonne of hot-rolled steel, compare the cost gap between facility-level actual data and the Commission default value. Hypothetical certificate price: €75 per tonne of CO₂e (example only).

In this illustrative example, simply providing facility-level verified data creates a difference of roughly €525,000 on a single 10,000-tonne shipment. The numbers are hypothetical, but the structural lesson is real: because default values are set conservatively (high), a supplier that cannot provide actual data carries a systematic cost disadvantage.

Embedded Emissions: Actual Data or Default Values?

The technical heart of the definitive phase is how embedded emissions are determined. There are two routes: the producer's facility-level actual (primary) data, or the default values published by the Commission (European Commission, Default Values, 2024). Default values are generally set conservatively — that is, on the high side — because the aim is not to penalize parties who cannot provide actual data, but to incentivize the transition to actual data.

What makes actual data defensible is verification. In the definitive phase, facility-level emissions data is expected to be checked by accredited independent verifiers; the EU declarant files its declaration relying on verified data. The exporter's monitoring system therefore has to do more than produce a low number — it has to be traceable enough to withstand a third party's audit.

The practical consequence is clear: an exporter producing facility-level, traceable, and verifiable emissions data can usually show lower embedded emissions than default values — and therefore a lower CBAM cost for its buyer. Where the transitional period's question was "has a report been filed?", the definitive phase's question becomes "is the data good enough?"

Sector Exposure for Turkish Exporters

CBAM's scope today covers cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. Given Türkiye's export profile to the EU, the highest exposure concentrates in iron and steel and aluminium. The EU is one of the principal markets for Turkish steel exports, which places steel producers directly on the front line of CBAM cost pressure. In aluminium, the electricity-intensive nature of production can make embedded emissions — and therefore the CBAM cost — particularly high; the carbon intensity of electricity is the decisive variable here.

Important: In high-exposure sectors, competition is no longer driven by production cost alone but increasingly by embedded emissions per tonne. A Turkish producer that can supply the same product with lower, verified carbon intensity reduces its EU buyer's total cost and gains a non-price competitive advantage.

For cement and fertilisers, exposure is less widespread than for steel because of these products' more regional trade patterns — but the same preparation logic applies to producers shipping regularly to the EU.

The De Minimis Threshold: Relief for Small Importers

The Omnibus simplification package adopted in 2025 introduced a new de minimis threshold to CBAM: importers whose annual imports fall below a defined mass threshold (50 tonnes) are exempt from the mechanism (European Commission, Omnibus Simplification Package, 2025). According to the Commission's rationale, this threshold relieves the large majority of importers from administrative burden while still keeping the overwhelming share of covered emissions within the mechanism.

For Turkish exporters, the implication is two-sided: small-volume, occasional shipments may fall within the exemption, while firms exporting regularly and at high volume remain under full obligation. One important subtlety: the threshold is assessed on the EU importer's total annual imports, not per individual exporter — so when shipments from several suppliers to the same buyer combine, the threshold is easily exceeded. Knowing which side you fall on matters — both to avoid unnecessary preparation cost and, conversely, to avoid being caught unprepared.

Early Lessons for Your Team

Practical lessons standing out after the first quarter:

• Decouple data infrastructure from the certificate timetable. The deferral of certificate sales is no reason to defer emissions data preparation; the data process is the precondition for payment.
• Understand your buyer's declarant obligation. Knowing what your EU customer needs lets you provide the right data in the right format and makes you a preferred supplier.
• Don't resign yourself to default values. Standing up facility-level monitoring may look costly at first, but the cost disadvantage of default values often justifies the investment quickly.
• Clarify your de minimis position. Where does your export profile sit relative to the exemption threshold? This determines your preparation priorities.

The CBAM definitive phase has turned the mechanism from a reporting exercise into a real commercial variable. While the first-quarter deferrals provide breathing room, the real preparation — verifiable, facility-level embedded emissions data — is work that begins today and matures over years.

To see how CBAM embedded emissions data is monitored at facility level and presented to your buyers in an auditable form, request a demo from Azalt.

References

1. European Parliament and Council, "Regulation (EU) 2023/956 establishing a Carbon Border Adjustment Mechanism," Official Journal of the European Union, 2023.
2. European Commission, "CBAM: Guidance for Importers of Goods into the EU," 2023–2024.
3. European Commission, "Omnibus I Simplification Package — CBAM Amendments," 2025.
4. European Commission, "Default Values for the Transitional and Definitive Periods of the CBAM," 2024.