The Carbon Border Adjustment Mechanism (CBAM) is no longer a future regulation but today’s business reality. After two years of quarterly reporting, EU importers, their suppliers abroad, and traders who manage cross-border flows are entering the critical phase where CBAM stops being a reporting exercise and becomes a direct financial adjustment.

The transitional period (2023–2025) gave companies breathing space to learn the rules, test reporting systems, and identify weak points. But from January 2026 onward, importers of CBAM goods will be required to buy and surrender CBAM certificates mirroring the EU Emissions Trading System (EU ETS) price. With carbon trading hovering between €70 and €90 per tonne this summer, the cost implications are no longer theoretical, they are a line item CFOs must budget for.

This article looks at the current challenges and strategic responses for suppliers, traders, and declarants, based on the latest EU Commission guidance, the July 2025 implementing acts on verification and indirect emissions, and trade partner reactions across key regions.

The CBAM Shift: From Reporting to Real Costs

During the transitional period, importers only had to submit quarterly reports covering:

• Quantity of imported CBAM goods,

• Embedded direct and indirect emissions,

• Any carbon price paid in the country of origin.

Non-compliance led to penalties between €10 and €50 per tonne of unreported emissions. That seemed manageable for many firms. But from January 2026, CBAM certificates must be purchased and surrendered, with costs linked to the EU ETS allowance price.

Key change: reporting errors that were once administrative risks now translate into real financial exposure. If suppliers cannot provide verified emissions data, declarants will fall back on EU “default values”, usually far higher than actual plant performance. That gap directly increases costs for EU buyers, putting supplier relationships under strain.

Pain Points Emerging in 2025

1. Data Gaps and Verification Bottlenecks

The July 2025 implementing acts specify stricter rules for emissions verification. From 2026, independent accredited verifiers must confirm data submitted in CBAM declarations. Many suppliers in developing and middle-income countries lack established monitoring systems. For traders and importers, this means higher reliance on default values unless suppliers invest quickly in measurement and auditing capacity.

2. Carbon Price Volatility and Budgeting

With ETS prices fluctuating between €60 and €100 in 2024–2025, finance teams struggle to forecast exposure. Analysts project prices could climb towards €200 per tonne by 2030 as free allowances phase out. For importers handling steel, aluminium, or fertiliser flows worth millions, small changes in the carbon price translate into major swings in landed cost.

3. Supplier Readiness and Cost Pass-Through

Suppliers face a new commercial dilemma: whether to absorb part of the CBAM cost to remain competitive or pass it through in higher prices. Negotiations in 2025 have already shifted. Traders report EU clients demanding transparent emissions data as a pre-condition for contracts, and some buyers insist suppliers share the burden of CBAM costs upfront.

4. Uncertain Treatment of Carbon Prices Paid Abroad

Article 9 of the CBAM regulation allows deductions for carbon prices already paid in the exporting country. But July 2025 discussions revealed that the EU will only recognize “effective” payments, excluding rebates or weakly enforced schemes. For exporters in countries with nominal carbon taxes, this limits the expected benefit.

5. Diplomatic Pushback and Market Diversion

South Africa, India, and others have signaled intentions to challenge CBAM at the WTO, while some exporters are diversifying away from EU markets. Yet with the US, UK, Canada, and Japan considering their own border carbon adjustments, the space to avoid CBAM-like rules is narrowing.

Strategic Imperatives for Declarants, Suppliers, and Traders

The regulatory logic is clear: CBAM is designed to close the carbon cost gap between EU and non-EU producers. The challenge is to turn compliance into a competitive advantage rather than a drag on margins. Four imperatives stand out.

1. Secure Supplier Data and Verification

• Invest in supplier relationships: EU importers must actively support non-EU suppliers in building emissions measurement capacity. Templates and communication protocols exist, but suppliers often need training and technical support to implement them correctly.

• Plan for independent verification: By 2026, only verified data will count. Declarants should identify verifiers early, establish audit cycles, and avoid being caught in the expected “last-minute rush” for verification services.

2. Integrate CBAM into Financial Planning

• Scenario analysis: Companies should run cost models using ETS price forecasts at €80, €120, and €200 per tonne. This ensures procurement and finance teams understand potential swings in landed cost.

• Hedging and contractual clauses: Traders can negotiate contracts that share CBAM price risk or include clauses linked to verified emissions performance.

3. Re-engineer Supply Chains Around Carbon Intensity

• Benchmark suppliers: Importers increasingly choose suppliers not only on price and quality but also on emissions intensity. For example, Moroccan fertiliser producers moving to green ammonia are positioning themselves as “CBAM-ready” suppliers, while South African steel exporters risk losing share without decarbonisation.

• Reward lower-carbon producers: Traders can secure long-term supply contracts with suppliers who demonstrate credible decarbonisation strategies.

4. Leverage CBAM as a Trigger for Transformation

• Supplier readiness training: Non-EU producers that invest now in data systems, emissions reduction, and cost transparency may gain a competitive edge.

• Industrial strategy alignment: For countries and companies, CBAM compliance can align with broader shifts to green hydrogen, renewable energy, and circular economy practices.

The Role of Traders in the CBAM Era

Traders often sit between EU importers and third-country suppliers, managing flows, logistics, and customs. Under CBAM, they face dual pressure:

• Importers demand verified data to avoid paying inflated certificate costs.

• Suppliers rely on traders to interpret EU rules and facilitate compliance.

This intermediary role gives traders leverage but also responsibility. The most successful will reposition from pure logistics providers to compliance enablers, offering bundled services that cover data collection, emissions reporting, and certificate management.

Risks of Inaction

For declarants and suppliers, the cost of inaction is stark:

• Default values: Using EU default emissions factors often doubles or triples reported emissions compared to plant-specific data.

• Lost competitiveness: EU buyers already signal they will switch to suppliers with verified low-carbon products.

• Regulatory penalties: Beyond certificate costs, failure to submit accurate CBAM declarations can trigger fines and damage trade relationships.

The message is clear: waiting until 2026 to act is not an option.

Entrenovu’s View: Hands-On Support Over Generic Advice

At Entrenovu, we see CBAM not as a theoretical policy but as an operational and financial challenge playing out in procurement, trade negotiations, and supplier management. Our work with manufacturing companies, exporters, and project developers shows that success requires more than reading EU guidance notes. It requires:

• Practical training for declarants and supplier teams on data collection, cost calculation, and registry navigation.

• Supplier readiness programs that embed CBAM processes into daily operations, not just quarterly reporting exercises.

• Strategic market insights that help companies turn compliance into a competitive edge by aligning procurement with low-carbon supply chains.

CBAM compliance is no longer about avoiding penalties, it’s about positioning in a decarbonising global market.

Conclusion

As of August 2025, the transitional reporting phase is almost over. The next 18 months will determine which suppliers and traders adapt and retain access to the EU market, and which fall behind under the weight of default values and rising carbon costs.

Declarants must strengthen supplier relationships and invest in verification systems now. Suppliers must integrate CBAM into production planning, pricing, and long-term competitiveness strategies. Traders must evolve into compliance partners rather than intermediaries.

CBAM is not going away. It is the new baseline for trading with Europe. Companies that act today can not only protect market share but also turn regulatory pressure into strategic advantage.