CBAM for GCC exporters: aluminium, steel and fertiliser

The EU Carbon Border Adjustment Mechanism moved from reporting to paying on 1 January 2026. Every tonne of covered goods that enters the EU now carries a carbon cost based on its embedded emissions. The legal obligation sits with the EU importer. The data, and in most contracts the commercial pressure, sits with the producer.

For GCC exporters of aluminium, steel and fertiliser, that makes emissions data a sales document. This guide explains how CBAM works now, what it costs, and what to do.

The legal basis

CBAM was established by Regulation (EU) 2023/956. A transitional period ran from 1 October 2023 to 31 December 2025, when importers reported embedded emissions but paid nothing. The definitive period began on 1 January 2026.

Regulation (EU) 2025/2083 amended the regime to simplify it. The most important change for most traders is a mass-based de minimis threshold. Importers bringing in less than 50 tonnes of covered goods per year are exempt. That removes many small importers but leaves almost every industrial-scale buyer in scope.

Goods covered

CBAM covers six sectors: cement, iron and steel, aluminium, fertilisers, hydrogen and electricity. Within each sector, specific products are listed by Combined Nomenclature (CN) code in Annex I of the regulation. Some downstream products are included, such as certain steel and aluminium articles.

For the GCC, three sectors matter most:

Sector	Typical GCC exports	Emissions counted
Aluminium	Primary unwrought aluminium, billets, some semi-finished products	Direct emissions
Iron and steel	Direct reduced iron, billets, rebar, flat products, pipes	Direct emissions
Fertilisers	Ammonia, urea, nitric acid, mixed fertilisers	Direct and indirect emissions

Indirect emissions are those from the electricity used in production. Under the regulation, they count for cement and fertilisers. For aluminium and steel, only direct emissions count in the current scope. Check Annex II of the regulation for the current list, since the Commission can review it.

Key dates

Date	What happens
1 Jan 2026	Definitive period begins. Imports from this date carry a certificate obligation.
1 Feb 2027	Sale of CBAM certificates begins.
30 Sep 2027	First annual CBAM declaration and surrender of certificates, covering 2026 imports.

Importers must hold authorised CBAM declarant status to import covered goods above the threshold. Without it, the goods cannot clear in the normal way.

How the cost is calculated

The core logic is simple.

Embedded emissions per tonne of product, times tonnes imported, gives total embedded emissions. From that, an adjustment is made for the free allocation EU producers still receive under the EU Emissions Trading System. The importer then surrenders CBAM certificates for the remainder. The certificate price follows the EU ETS price. Any carbon price effectively paid in the country of origin can be deducted, if it is properly evidenced.

The free allocation adjustment matters a lot in the early years. Under the EU ETS Directive as amended in 2023, free allocation for CBAM sectors phases down from 2026 to 2034. The adjustment is not a flat share of your emissions. It is the EU product benchmark times a CBAM factor, which falls from 97.5 percent in 2026 to zero in 2034. Everything above that deduction is charged from day one. So a plant well above the EU benchmark pays a real cost even in 2026. Our CBAM cost estimator uses the official default values for GCC countries and the Column B benchmarks.

That is why year one costs look small. They will not stay small. A contract signed today for multi-year supply should price the full curve.

Actual values versus default values

Importers can declare embedded emissions in two ways:

1. Actual values, based on the producer’s monitored data at installation level, following the EU methodology and verified by an accredited verifier.
2. Default values, published by the Commission. These are set conservatively and are designed to be less favourable than good actual data.

For an efficient GCC producer, default values will often overstate emissions. An aluminium smelter running on gas-fired power, or a DRI-based steel plant, has a specific emissions profile that a generic default will not reflect. The commercial advantage of measuring is often large. The exact gap depends on your plant and on the default value for your product and country, so calculate it rather than assume it.

What the producer must provide

To support actual values, a GCC producer needs to give its EU buyers:

• Installation details and production routes for each CBAM good.
• Monitored direct emissions for the installation, by fuel, process and material input, under the EU monitoring rules.
• Attribution of emissions to products, using the system boundaries in the methodology.
• For fertilisers, electricity consumption and the emission factor applied.
• Embedded emissions of relevant precursors, such as purchased ammonia, alumina or pig iron, where they are themselves CBAM goods.
• Evidence of any carbon price paid.
• Verification by an accredited verifier.

Most of this goes beyond a corporate GHG inventory. A Scope 1 total for the company does not answer it. The data must be at installation and product level.

Sector notes

Aluminium

Primary aluminium has two big direct sources: anode consumption and perfluorocarbon emissions from anode effects. Indirect emissions from electricity are large, but are outside the current CBAM scope for aluminium. Good PFC monitoring is the main lever on direct emissions per tonne. Downstream products such as extrusions or foil must trace the embedded emissions of the primary metal used.

Steel

GCC steel production commonly uses gas-based direct reduction followed by electric arc furnaces. The DRI step dominates direct emissions. Track gas use, carbon content of inputs and outputs, and any purchased DRI or scrap. Purchased precursors bring their own embedded emissions into the calculation.

Fertilisers

Ammonia synthesis drives direct emissions. Part of the CO2 from ammonia production is often captured and used in urea production. How that CO2 is treated in the calculation needs care and follows specific rules in the methodology. For fertilisers, indirect emissions count, so electricity data and the factor used also matter. Nitric acid production may carry nitrous oxide emissions, which are covered.

Contract and pricing questions

CBAM is an importer obligation, but it changes commercial terms. Questions to settle with buyers:

• Who provides and pays for verification?
• What happens if your data is late and the importer must use default values?
• Is the CBAM cost shared, passed through or priced into the base price?
• How are changes in the EU ETS price handled in long-term contracts?
• Who owns the data, and can the buyer share it with its own customers?

Producers that can provide verified, low-emission data on time become easier to buy from. That is the commercial point of preparing early.

A practical plan

1. Map your exposure. List EU shipments by CN code, volume and buyer. Use the CBAM estimator for a first view of cost by year.
2. Set up installation-level monitoring that follows the EU methodology, not only your corporate inventory method.
3. Calculate actual embedded emissions per product and compare with default values.
4. Prepare for verification. Document data sources, meters, sampling and calculations.
5. Agree commercial terms with buyers before the first declaration in 2027.
6. Plan reductions. Every tonne cut reduces a cost that rises every year to 2034.

Next step

Run the CBAM cost estimator, then read the CBAM regulation summary. Our CBAM readiness service covers exposure mapping, embedded emissions calculation and verification readiness.

Sources

1. European Commission, Carbon Border Adjustment Mechanism
2. Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism
3. Regulation (EU) 2025/2083 amending Regulation (EU) 2023/956
4. Directive 2003/87/EC (EU ETS), consolidated, Article 10a

This article is general information, not legal or regulatory advice. Check the current text of each rule with the issuing authority.