CBAM in Practice: Legal and Operational Challenges for Importers of Carbon-Intensive Goods

Carbon is no longer just an environmental metric; it is rapidly becoming a price component in international trade. With the EU’s Carbon Border Adjustment Mechanism (CBAM), businesses importing goods such as steel or aluminum must now account not only for cost and quality, but also for the embedded emissions in their supply chains. Recent updates under the “Omnibus” package aim to make this new regime more workable, but important challenges remain.

In essence, CBAM functions as a carbon pricing mechanism on imports, designed to mirror the costs faced by EU producers under the EU Emissions Trading System. Importers of certain carbon-intensive goods must report the embedded emissions of their goods and, over time, purchase CBAM certificates corresponding to those emissions. The objective is twofold: to prevent so-called carbon leakage and to ensure a level playing field between EU and non-EU producers, while at the same time incentivising global decarbonisation.

The Omnibus reform refines how companies comply with this framework. Most notably, a 50-tonne annual threshold now applies, meaning that companies importing below this level are exempt from CBAM obligations. This significantly reduces the administrative burden for smaller actors and allows regulators to focus on larger importers responsible for the majority of embedded emissions.

For companies that remain in scope, such as Swedish manufacturers importing aluminum from outside the EU, the system is still demanding, but somewhat more manageable. Businesses must register as authorised CBAM declarants, monitor and report embedded emissions and ensure that adequate documentation is in place. The Omnibus reform also allows for greater use of default emissions values where supplier-specific data is unavailable, easing compliance in the short term. In addition, the obligation to purchase and surrender CBAM certificates has been effectively deferred to 2027, providing companies with a transition period to build internal processes and assess financial exposure.

In practical terms, CBAM is already influencing commercial decision-making. Importing steel or aluminum into the EU is no longer purely a question of price and quality. The carbon intensity of production becomes a cost factor, meaning that goods produced with higher emissions may ultimately be less competitive. As a result, procurement strategies are beginning to shift towards suppliers that can demonstrate lower emissions or operate under comparable carbon pricing regimes.

That said, a central question for many businesses is whether CBAM is truly workable in practice, particularly where imported products consist of multiple materials or components.

For importers of basic materials, such as raw steel, compliance is relatively straightforward, albeit resource-intensive. However, the complexity increases significantly for more advanced or composite goods. In such cases, companies must isolate and quantify the emissions attributable to CBAM-covered inputs within a broader product, which can be challenging both technically and operationally.

A key difficulty lies in multi-tier supply chains. Many companies have visibility over their direct suppliers but limited insight into upstream production processes. CBAM effectively requires businesses to extend their due diligence several tiers upstream, including identifying where raw materials are produced and how they are manufactured. This level of transparency is not yet standard practice and may be difficult to achieve, particularly when dealing with suppliers in jurisdictions with less developed reporting frameworks.

In addition, data availability and reliability remain uneven. Suppliers may lack the capability to measure emissions accurately, apply different methodologies, or be unable to provide verified data. This creates compliance risks and may force importers to rely on default values, which are often conservative and can lead to higher effective costs.

There are also allocation challenges. Where production facilities manufacture multiple products, determining the emissions attributable to a specific batch of goods can be complex. These issues are not only technical in nature but may also give rise to contractual and legal considerations, particularly where responsibility for data accuracy and cost allocation must be agreed between commercial parties.

From a legal and strategic perspective, CBAM should therefore not be viewed solely as a reporting obligation. It is increasingly shaping contractual relationships, with businesses introducing more detailed provisions on emissions data, verification rights, and compliance responsibilities. Over time, CBAM may also influence pricing mechanisms, risk allocation, and dispute exposure in cross-border transactions.

The Omnibus package undoubtedly improves the usability of CBAM by reducing administrative burdens, introducing clearer rules, and allowing more time for implementation. However, it does not remove the underlying complexity of the regime. Rather, it confirms a broader structural shift: carbon transparency is becoming an integral part of doing business in the EU.

For Swedish and other EU-based companies, the key takeaway is clear. While CBAM is workable, it requires investment in supply chain visibility, data management, and legal structuring. Companies that take a proactive approach, engaging with suppliers, strengthening contractual frameworks, and integrating carbon considerations into procurement, will be better positioned to manage both compliance and competitiveness in an increasingly carbon-conscious market.