EU CBAM Fully Implemented: Carbon Costs Now Fixed, Asian Steel Exports Face Dual Challenge of Volume and Carbon
As of January 1, 2026, the European Union's Carbon Border Adjustment Mechanism (CBAM) has officially ended its two-year transitional period and entered the substantive collection phase. With the finalization of key rules—including the first carbon certificate price, a sharp tightening of steel safeguard quotas, and intensifying debates over verification mechanisms—the export landscape for Asia's steel industry has been fundamentally reshaped in just a few months.
On April 7 this year, the European Commission officially announced the CBAM certificate price for the first quarter of 2026, setting it at €75.36 per tonne of CO2 equivalent (approximately $88.44/tonne). This price is anchored to the average auction price of EU Emissions Trading System (EU ETS) allowances over the same period, and will be updated quarterly; from 2027 onwards, the price will be adjusted on a weekly dynamic basis.
The figure, slightly below market expectations, reflects a weaker trend in EU ETS allowance prices amid growing concerns over industrial competitiveness. The €75/tonne level provides importers with a clear benchmark for carbon cost exposure, while also marking the first time CBAM has moved from policy concept to real financial calculation. Data shows that EU emission allowances for near-term delivery (December 2026 contracts) are trading near €77.24/tonne, while the carbon-accounted hot-rolled coil (HRC) price in Northwest Europe stands at 812.27/tonne,up812.27/tonne,up82.40/tonne since the start of the year.
Under the current timeline, importers must purchase CBAM certificates from February 2027 to cover embedded emissions from their full-year 2026 imports, thereby directly aligning carbon costs with domestic producers under the EU ETS.
Verification Uncertainty Remains Biggest Institutional Weakness
With the carbon price window now open, the first major challenge facing Asian producers is not the cost figure itself, but the institutional uncertainty surrounding emissions data and third-party verification.
Li Fang, a CBAM researcher at China's HiQLCD lifecycle assessment platform, noted that CBAM regulations are complex, and implementing rules continue to change, leading to confusion in data-sharing processes. Verification uncertainty is particularly acute—some European importers have already begun requesting officially recognized emissions reports from manufacturers, yet the European Commission has not yet published a list of accredited verification bodies.
Liu Jing, founder and principal advisor at China's Jingzhe Environment & Climate Company, was even more blunt: "The difficulty of CBAM is no longer about understanding the framework, but whether verification bodies have reliable execution capacity."
This gap cannot be bridged quickly. According to industry media reports, formal audits and final verification are not expected to begin until the EU publishes its list of approved certification bodies around August or September 2026. Until then, most compliance efforts remain in the "pre-verification" preparation stage.
Carbon accounting and emissions data service providers—such as China's HiQLCD, US-based Sphera, and London's CarbonChain—are rapidly rising to help exporters improve emissions transparency and strengthen carbon data management capabilities.
Safeguard Quota Tightening: A More Immediate Barrier Than CBAM
While CBAM is a central topic for the steel industry in 2026, regional suppliers widely report that trade safeguard quotas are having a more direct impact on market access.
On April 13, the EU reached a preliminary agreement to sharply cut tariff-free steel import quotas from 34.5 million tonnes in 2024 to approximately 18.3 million tonnes per year—a reduction of 47%—and to impose a 50% tariff on steel imports exceeding the quota, double the current 25% rate. The new measures will replace the existing safeguard mechanism, which expires at the end of June 2026. The EU's Industrial Accelerator Act (IAA), CBAM, and steel safeguard measures are forming a three-pronged policy loop of "demand-side access barriers, cost-side carbon taxes, and volume-side quota controls," systematically tightening the channel for Chinese steel products to enter the EU market.
The effect of the quota tightening was immediate. EU data show that just days after the new quota period began on April 1, India's 225,305-tonne quota for Category 1A hot-rolled coil was exhausted, and by the end of April, 349,580 tonnes of product were stuck awaiting customs clearance at EU ports. Multiple Chinese product categories—including coated sheet and certain seamless tubes—have also exceeded quota limits. With quotas being used up rapidly, new market behaviors have emerged.
One Indonesian mill source said shipments to the EU had been completed by the end of April, arriving before the new quota regime takes effect in July, and that demand from the EU is now slowing. He added that CBAM-related costs are borne entirely by buyers, and that no carbon risk premium is included in quoted prices.
Carbon Accounting Methodologies Under Scrutiny: "Greenwashing" Risks
Under pressure from carbon costs, some Asian mills have begun experimenting with different carbon accounting approaches, producing emissions data for certain export products that are significantly lower than standard default values.
Some companies calculate emissions based only on export volumes rather than total production, while others use a "mass balance accounting" method that allocates a mill's emissions reductions to specific export products instead of spreading them across the entire production line.
Climate group SteelZero has issued a clear warning: without sufficient rigor, such practices risk greenwashing—companies could assign their emissions reductions to products with which they have no direct connection, gaining an undue cost advantage in compliance. A Singapore-based trader also admitted that it is unclear whether these accounting methods will be accepted by CBAM authorities, saying, "Any ruling will become an important precedent."
Carbon Cost Gap: With or Without Data, Costs Can Differ Threefold
Suppliers lacking certified emissions data face the imposition of punitive default values under CBAM. When verified plant-level emissions data cannot be provided, importers must use higher default values—for example, the default emissions factor for Indian blast furnace/basic oxygen furnace hot-rolled coil is as high as 4.27 tonnes of CO2 per tonne of steel, while JSW Group's reported actual emissions intensity for HRC ranges from 1.8 to 2 tonnes CO2/tonne. The gap is enormous.
This means that simply due to a lack of verifiable emissions data, the CBAM cost per tonne of steel can differ by a factor of three or more, directly determining whether a product can remain viable in the EU market.
Market buyers are increasingly favoring lower-carbon suppliers, and carbon clauses and emissions benchmarks are appearing more frequently in contracts. As one trader in eastern China put it: "In the future, prices may diverge based on emissions intensity. The key is: who can reduce and verify emissions while still remaining competitive in the EU market?"
Market Self-Adjustment: Rising EU Domestic Demand Supports Imports in Turn
The combination of tighter EU safeguard quotas and CBAM carbon costs has indeed prompted many European buyers to shift to domestic supplies in the short term. But this has also driven up domestic prices in the EU—the carbon-accounted HRC price in Northwest Europe has risen $82.40/tonne since the start of the year—which, in turn, has reinvigorated the import market.
A Hong Kong-based distributor analyzed that as import quotas shrink, EU domestic steel production may accelerate to fill the gap, potentially pushing prices even higher. With carbon prices elevated and supply tightening, whoever can first clear the compliance hurdle of carbon data will seize the advantage in the next phase of competition in the EU market.