Deduction of carbon prices paid under CBAM

In May 2026, the EU Commission published an important building block on CBAM still missing until then. In the draft implementing act, detailed rules were laid down for the first time on how carbon prices already paid in the supply chain outside the EU can be taken into account and reduce CBAM costs for importers.

Why the new draft is important

The draft dated 13 May 2026 is considered a central building block for the practical implementation of the CBAM from 2026 onwards and could have a significant impact on international supply chains, carbon markets and the competitiveness of export-oriented industries. The EU Commission is collecting feedback on the proposed rules until 10 June 2026.

CBAM basically pursues a simple goal: imported goods should be subject to the same carbon costs as products from the EU that are already regulated under the EU Emissions Trading System (EU ETS). This is intended to prevent so-called “carbon leakage” – i.e. the relocation of emission-intensive production to countries with weaker climate regulations. Sectors such as steel, aluminium, cement, fertilisers, hydrogen and electricity are initially affected. Until now, it was provided by law that carbon costs already paid in the country of origin could be offset against CBAM certificates. However, no concrete calculation rules were in place. It is precisely this gap that the EU Commission’s draft now closes. The draft defines:

• which foreign carbon pricing systems are recognised,

• how companies have to prove payments,

• how emission allowances are treated on the voluntary market (carbon credits),

• which upper limits apply,

• and how default values can be used.

The new rules are to apply retroactively from 1 January 2026. Companies must therefore prepare for new compliance requirements now.

Which carbon pricing systems are recognised

The EU does not take a country-by-country approach. Instead of officially recognising systems of individual states, the draft defines general criteria for permissible carbon pricing mechanisms. In particular, carbon prices paid can be recognised as:

• Emissions Trading Systems (ETS),

• Direct carbon taxes,

• CO₂ taxes on fuels,

• and hybrid systems with multiple compliance options.

The decisive factor here is that the systems must be mandatory and actually incur costs for the embedded emissions of a product. Voluntary climate protection measures or purely voluntary carbon credit purchases are generally not deductible.

The EU is aiming to avoid double burdens without weakening the integrity of the EU ETS. An importer should therefore only have to bear the difference between the third country carbon price already paid and the carbon price under the EU ETS.

Two calculation methods for deductions of carbon prices

Particularly relevant is the introduction of two different calculation paths:

1. Default carbon prices

If companies use standard values to calculate embedded emissions, only standard carbon prices published by the EU of the respective third country may be taken into account. These standard values are updated annually by the EU Commission. This approach reduces the administrative burden for producers and importers, but is often likely to be less accurate.

2. Actual verified carbon prices

Alternatively, companies can claim actual carbon costs. However, verified evidence must be provided for this. Carbon prices must be determined at the installation level and for individual CBAM goods (according to CN codes). Only carbon costs actually paid for the embedded emissions of the imported product are recognised. Any refunds, compensations or free allocations within a carbon pricing system in the third country must be deducted from the carbon price paid. Especially for companies with complex supply chains, this is likely to mean considerable documentation and verification requirements.

In both cases, the operators in third countries must calculate the carbon prices actually paid per tonne of CBAM goods, then convert and aggregate them based on the annual average EURO exchange rate. The reduction in the number of CBAM certificates to be submitted by the CBAM declarant is calculated by dividing the effective carbon price paid per tonne by the annual reference price of CBAM certificates and multiplying it by the quantity of imported goods.

Upon payment of an effective carbon price in the supply chain of 10 EUR/t for a specific CBAM good and an assumed reference price of CBAM certificates of 80 EUR/t, the number of CBAM certificates to be submitted is thus reduced by 0.125 per tonne of imported good.

A key debate: Voluntary markets and Article 6 of the Paris Agreement

The treatment of international carbon credits under Article 6 of the Paris Agreement is particularly controversial. For the first time, the new draft explicitly allows the partial recognition of such carbon credits within the framework of CBAM. In concrete terms, however, only ITMOs (Internationally Transferred Mitigation Outcomes) should be able to be taken into account if they meet the requirements of Article 6.2 or 6.4 of the Paris Agreement. Here, too, the draft sets strict limits:

• Carbon credits must be part of the compliance options of the third country’s carbon pricing mechanism; purely voluntary use does not allow any deductions

• A maximum of 10% of reported emissions under a carbon price may be covered by international Article 6 credits, and credits used above this limit are assigned a value of zero

• Carbon credits under avoidance projects from the country of production itself can be credited without further qualitative or quantitative criteria. International carbon credits must be officially authorised and recorded via the UNFCCC Centralised Accounting & Reporting Platform (CARP) register

• There must be no significant audit objections in the verification by an independent third person

The EU Commission is thus pursuing several goals at the same time (Table 1).

Table 1: Objective for the crediting of carbon prices in a third country under CBAM

The debate is politically highly sensitive. The European Parliament’s Environment Committee (ENVI) had recently even described the inclusion of Article 6 credits as “too early and counterproductive”. The Commission is now pursuing a middle course: limited recognition instead of complete exclusion.

Practical challenges for companies

For importers and producers, the new rules create considerable operational requirements. Figure 1 illustrates the main challenges. In practice, many companies are still at the beginning of implementing internal processes.

Figure 1: Challenges in accounting for carbon prices paid in the supply chain (source: carboneer)

The situation is particularly complex for precursors and indirect emissions. Here, the draft partially allows the use of default values to limit the bureaucratic effort.

Conclusion and international implications

The draft has far-reaching geopolitical significance. Many countries are now developing their own carbon pricing systems to reduce greenhouse gas emissions and to spare their exporters disadvantages on the EU market. As a result, CBAM is increasingly becoming a global standard for carbon pricing. Countries without resilient carbon pricing systems could suffer competitive disadvantages when exporting to the EU in the future. At the same time, the recognition of high-quality Article 6 credits could strengthen the international carbon markets. Export-oriented economies in Asia, the Middle East and Latin America in particular are therefore watching the new rules very closely.

With the new draft on the crediting of carbon prices already paid, the EU is now concretising one of the most important pending building blocks of the CBAM regime. The draft creates more clarity for companies, but at the same time significantly increases regulatory complexity.

Particularly relevant is the cautious opening to international Article 6 credits. The EU is thus signalling that global and voluntary carbon markets could play a role in the CBAM system in the future – but only under strict quality and transparency requirements.

For companies, this means one thing above all: Anyone who wants to continue to export competitively to the EU from 2026 onwards must provide verified CBAM emissions data, transparent evidence of carbon costs and functioning compliance processes. CBAM is thus increasingly evolving from a pure climate instrument to a central factor in international trade and industrial strategy.

This article is also published on carboneer. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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