CBAM and the EU Emissions Trading System (EU ETS) in Interaction

European climate policy will enter a new phase in 2025: The Carbon Border Adjustment Mechanism (CBAM) has been in effect since October 2023 and will trigger mandatory payments starting in 2026. At the same time, the EU Emissions Trading System (EU ETS), which has set the central CO₂ pricing framework in the EU since 2005, continues to evolve.

The two mechanisms are interlinked: while the EU ETS sets a price on emissions within the EU, the CBAM ensures that imports of carbon-intensive products are subject to an equivalent levy. This is intended to prevent distortions of competition and so-called “carbon leakage.”

The Omnibus Package I, adopted in July 2025, along with other simplification initiatives by the European Parliament, makes it clear that these instruments are not being weakened, but rather clarified and made more manageable. Companies in the DACH region that rely on imports or actively trade in the EU ETS must now understand how CBAM and ETS interact, what obligations arise, and how CO₂ costs can be strategically managed.

What is the Carbon Border Adjustment Mechanism (CBAM)?

The CBAM is the EU’s carbon border adjustment mechanism. It is designed to ensure that EU companies that bear CO₂ costs under the ETS are not put at a disadvantage by imports from countries with lower climate standards. The core principle: Importers of certain goods will in the future be required to purchase CBAM certificates, the price of which is based on the average price in the EU ETS. This takes into account the carbon intensity of the imported goods—regardless of where they were produced.

Transition phase (2023–2025)

A reporting requirement has been in effect since October 2023: Companies must report quarterly on the number of CBAM-covered products they have imported and the associated CO₂ emissions. No financial charges apply at this stage.

👉 Relevant information is provided by the DEHSt.

Starting in 2026: Full implementation

Starting January 1, 2026, companies will be required to purchase and surrender CBAM certificates for their imports. This will introduce real costs associated with the carbon footprint of imports—with immediate price implications for industries such as steel, aluminum, cement, fertilizers, and electricity. In the future, other products such as hydrogen are expected to be included.

Strategic importance: CBAM is forcing companies to address the carbon intensity of their supply chains. Those who collect data and build transparent supplier relationships today will gain a competitive edge.

What is the EU Emissions Trading System (EU ETS)?

Since 2005, the EU Emissions Trading System (EU ETS) has been the world’s largest CO₂ trading system and a key instrument of European climate policy. It is based on the cap-and-trade principle: the EU sets an annual emissions cap that steadily decreases. Companies must hold one allowance (EUA) for every ton of CO₂ they emit. Those who operate efficiently can sell surplus allowances; those who emit more must purchase additional allowances.

The system currently covers about 40% of all EU greenhouse gas emissions. It primarily covers electricity and heat generation, as well as energy-intensive industries such as steel, cement, chemicals, refining, glass, paper, and aluminum. Aviation has been included since 2012, and maritime transport will be included starting in 2024.

To prevent carbon leakage, sectors such as steel and cement have so far received free allowances. However, this arrangement is set to expire: starting in 2026, free allocations will be gradually reduced until they are phased out entirely in 2034. At the same time, the Carbon Border Adjustment Mechanism (CBAM) will take effect, imposing CO₂ costs on importers to ensure a level playing field.

The certificate price fluctuates widely but follows a clear upward trend. While it remained mostly below €10/t until 2017, it reached over €50 in 2021, around €90 in 2022, and peaked at over €100 in 2023. In 2024, it temporarily fell to approximately €52 but then rose again. Currently, as of September 11, 2025, it stands at €77.36/t. Further increases are expected in the long term—many forecasts predict values exceeding €120 by 2030.

This means that the ETS is not merely a regulatory framework, but a key driver of costs and innovation: companies that invest in decarbonization early on gain clear competitive and cost advantages.

CO₂ Price Trends: What Companies Should Expect

The carbon price is the key variable that determines both the ETS and the CBAM. The evolution of this carbon price within the EU Emissions Trading System (EU ETS) is a key driver of the CBAM’s cost impact. For a long time, the price barely moved—until 2017, allowances often traded below €10 per ton. However, with the ETS reforms and a tightening of the cap, a significant rise began in 2018: by 2019, the price had already reached around €25/t, averaging over €50/t in 2021, and in 2022, levels exceeding €90/t were reached for the first time.

In 2023, the price even briefly climbed above the €100/t mark before falling sharply to as low as €52/t in 2024. These fluctuations reflect both the economic slowdown in Europe and adjustments in the supply of allowances. Since 2025, however, the market has begun to stabilize again: On September 11, 2025, the price stood at €77.36/t.

These developments highlighted two key dynamics:

1. The price of CO₂ is volatile and responds to economic fluctuations and energy policy conditions.
2. In the long term, the trend remains upward, as emission caps are being steadily lowered and additional sectors (such as shipping) are being included.
   

For companies, this means that the CBAM allowance price will continue to closely track the ETS price. When planning costs, companies should therefore use scenarios—for example, in the range of €70 to €120 per ton—as a realistic range for the coming years. Those who develop strategies today can mitigate volatility and use the expected price increase as a rationale for investing in decarbonization.

The Interplay Between CBAM and the EU ETS: Two Sides of the Same Coin

CBAM and ETS are not duplicate instruments; rather, they complement each other:

• Within the EU, the ETS serves as the primary climate policy tool.
• The CBAM ensures a level playing field for imports.
  

This creates a closed system: whether production takes place within the EU or goods are imported from outside, CO₂ is subject to a price everywhere.

Companies will therefore need to be twice as vigilant in the future:

• Manufacturing companies must manage their emissions under the ETS, while their imported competitors are subject to CBAM.
• Trading and import companies must prepare CBAM reports and factor the costs into their budgets.
  

This interplay becomes particularly relevant when the free ETS allowances expire. At that point, the price of CO₂ will be fully reflected in the market—and importers will pay the same price through CBAM.

Key Concepts: Allocation, Certificates, and Reports

Allocation

The free allocation of ETS allowances has so far served as a safeguard against carbon leakage. However, this will come to an end by 2034. Companies that currently benefit from free allocations must expect to bear the full cost of CO₂ in the future.

Certificates

Under the ETS, allowances are tradable—they form a market mechanism.

Under the CBAM, however, allowances are not tradable: companies purchase them directly from the EU at a fixed price. This makes the CBAM purely a levy-based mechanism.

Reports

Importers are already required to submit quarterly CBAM reports. These reports include:

• Quantity and type of imported products,
• direct emissions from their production,
• if applicable, information on foreign CO₂ pricing systems that can be taken into account.
  

👉 Companies should familiarize themselves with the official guidelines (Customs CBAM, European Commission).

Recent Developments in the Context of Omnibus I

With the Omnibus Package I (July 2025), the EU is pursuing two objectives:

1. Reducing the burden on businesses: cutting red tape and simplifying reporting.
2. Providing clarity at the same time: The guidelines will be worded more precisely so that companies can plan more effectively.
   

In May 2025, the European Parliament also approved a simplification of the CBAM. The goal: to structure the transition period in such a way that companies can set up their systems without being hindered by excessive bureaucracy (European Parliament press release).

Important: These simplifications should not be seen as a watering down of the goals. The climate targets remain unchanged—the aim is simply to make practical implementation easier.#

Practical Recommendations & Outlook: How Companies Can Strategically Implement CBAM and the EU ETS

The introduction of the CBAM and the reform of the EU ETS present companies with significant changes—yet they also offer an opportunity to take climate strategies to the next level. It is crucial that the CBAM and the ETS are not viewed as isolated regulations, but rather as two interlinked instruments that make the price of carbon binding for both emissions within the EU and for imports.

Companies that act early can minimize regulatory risks and secure a competitive advantage. Specifically, this means:

• Supply chain analysis: Companies should assess the carbon intensity of imported products and engage their suppliers.
• Data Quality & Compliance: Establishing robust systems for collecting and verifying CO₂ data is essential.
• Financial scenarios: Calculations based on different CO₂ prices (€70–120 per ton) provide planning certainty.
• Strategic integration: CBAM and ETS should be incorporated into climate strategies, transition plans, and ESG reporting.
• Regulatory Monitoring: Updates from Customs, the German Federal Ministry for Economic Affairs and Energy ( DEHSt), and the European Commission must be taken into account on an ongoing basis.
  

Recent political developments—from the Omnibus Package I and the Quick-Fix Package to the European Parliament’s simplification of the CBAM —make it clear: Ambitions remain high, but implementation is being made more practical. For businesses, this means:

• Those who prepare early can reduce cost risks and secure a competitive edge.
• Those who wait will come under significant pressure from CO₂ costs and reporting requirements by 2026 at the latest.
  

CBAM and ETS are not standalone tools—they are at the heart of a new European climate regime. Companies that understand this and use it strategically will have an advantage.