What Is CBAM?
The Carbon Border Adjustment Mechanism (CBAM) is an EU regulation — Regulation (EU) 2023/956 — that requires EU importers to pay for the embedded carbon emissions in certain goods they import from outside the EU. It functions like a carbon tax on imports.
The purpose of CBAM is to prevent "carbon leakage" — the risk that EU companies move production to countries with less stringent carbon rules to avoid the EU Emissions Trading System (ETS) carbon price. By applying a carbon cost to imports, CBAM creates a level playing field between EU-produced goods (which face the ETS carbon price) and imported goods.
Which Goods Does CBAM Currently Cover?
As of 2026, CBAM covers six sectors in its initial scope:
- Cement
- Steel and iron
- Aluminium
- Fertilisers
- Electricity
- Hydrogen
Textiles and garments are not yet in CBAM's mandatory scope. However, the regulation includes a review mechanism requiring the European Commission to assess expanding CBAM to additional sectors — including textiles and other manufactured goods — in subsequent phases.
How Does CBAM Work in Practice?
CBAM works through a system of CBAM certificates purchased by EU importers. Here's the process:
- An EU company imports goods covered by CBAM from a non-EU country
- The EU importer (your buyer) must declare the quantity and embedded carbon emissions of the goods imported
- They purchase CBAM certificates equal to the declared embedded emissions
- The CBAM certificate price tracks the EU ETS carbon price (currently €40–€80 per tonne of CO₂)
The critical step is declaring embedded carbon emissions. Your buyer can use one of two values:
- Default values set by the EU (conservative, typically much higher than actual factory emissions)
- Actual values from a verified carbon report provided by you, the exporter
The difference is significant. A factory exporting 500 tonnes of goods with actual emissions of 1.2 tCO₂e/tonne vs a default value of 2.0 tCO₂e/tonne would cause their buyer to pay for 400 extra tonnes of CO₂ — at €60/tonne, that's €24,000 in avoidable CBAM fees per year.
What Carbon Data Does Your Buyer Need from You?
For CBAM declarations, your EU buyer needs your embedded carbon emissions per tonne of goods exported — specifically:
- Direct embedded emissions — your Scope 1 emissions per tonne of product (from combustion at your factory)
- Indirect embedded emissions — your Scope 2 electricity emissions per tonne of product (where the goods fall under CBAM Annex II)
For CSRD supply chain disclosures (separate from CBAM), your buyer may also need your full Scope 1, 2 & 3 GHG inventory as part of their upstream supply chain emissions reporting.
| Data Required | Used For | Scope |
|---|---|---|
| Embedded emissions per tonne of goods | CBAM declaration | Scope 1 + Scope 2 |
| Full GHG inventory (tCO₂e/year) | CSRD supply chain disclosure | Scope 1, 2 & 3 |
| Emission intensity per unit produced | Buyer sustainability scorecard | Scope 1 & 2 |
| Year-over-year emission trend | Buyer decarbonization programs | All scopes |
The Timeline: CBAM Phase-In
CBAM has been phasing in gradually since 2023:
- October 2023 – December 2025: Transitional period. EU importers reported embedded emissions quarterly but did not yet pay for CBAM certificates. This was a data collection and capacity-building phase.
- January 2026: Full financial obligation begins. EU importers must purchase CBAM certificates for embedded emissions in covered sectors.
- 2027–2034: CBAM scope expected to expand. Review of additional sectors including textiles is scheduled under the regulation.
How to Prepare Your Factory for CBAM
The most effective preparation is to have a verified carbon report ready before your buyer's next data request deadline. Here's what to do:
- Calculate your Scope 1 & 2 emissions — at minimum, your factory's direct energy and electricity emissions in tCO₂e and per tonne of product
- Get verification evidence — collect your utility bills, fuel purchase records, and production data
- Generate a GHG Protocol-aligned report — structured to international standards, with emission factor citations your buyer's auditors can verify
- Share the report proactively — don't wait for your buyer to ask. Sending a verified carbon report without being asked positions you as a premium, compliance-ready supplier
Summary: Key Facts About CBAM for Textile Exporters
- CBAM applies a carbon cost to goods imported into the EU based on embedded emissions
- Without your verified carbon data, your buyer pays using conservative default values — which are typically 40–60% higher than actual factory emissions
- Textiles are not yet in CBAM's mandatory scope, but EU buyers require carbon data from suppliers for CSRD supply chain disclosures today
- Full CBAM financial obligations began January 2026 for currently covered sectors
- CBAM scope expansion to textiles is expected in subsequent phases; proactive compliance positions your factory ahead of competitors
- A verified carbon report from CarbonReport Pro gives your buyer the actual embedded emissions data they need — reducing their CBAM fees and strengthening your supply chain relationship