Intensity times certificate price times the CBAM factor, year by year, and why a supply contract priced on 2026 is priced on the cheapest year there will ever be.
The CBAM cost per tonne of imported steel is embedded emissions per tonne, times the certificate price, times the CBAM factor for the year. At an illustrative 2.0 tonnes of CO2 per tonne of steel and 80 euros a certificate, it is 4.00 euros a tonne in 2026, 77.60 in 2030 and 160.00 in 2034. The intensity and the price stay the same throughout; only the factor moves, and it multiplies the 2026 cost by 19.4 by 2030.
Worked in full in The CBAM Compliance Handbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
The definitive period of the Carbon Border Adjustment Mechanism, Regulation (EU) 2023/956, began on 1 January 2026. Importers pay for the embedded emissions of covered goods, including iron and steel, by surrendering CBAM certificates, whose price follows the EU ETS auction price. Certificates for 2026 imports cannot be bought before 1 February 2027, and the 2026 obligation is surrendered by 30 September 2027. What the importer pays for, though, is not all the embedded emissions: CBAM charges only for the share that EU producers of the same goods no longer receive free, and that share is phased in from 2026 to 2034 in step with the phase-out of free allocation under the EU ETS.
| Input | Value |
|---|---|
| Imports a year, tonnes of steel | 12,000 |
| Supplier's verified embedded emissions, tCO2 per tonne | 2.0 |
| Embedded emissions a year, tCO2 | 24,000 |
| Certificate price, euros, held flat (illustrative) | 80.00 |
| Steel price, euros a tonne (illustrative) | 600.00 |
Cost per tonne = intensity × certificate price × CBAM factor
2026: 2.0 × 80 × 2.5% = 4.00 euros. At the full rate, 2.0 × 80 = 160.00.
In Excel, with intensity in B2, price in B3 and the year's factor in a row from D5: =$B$2*$B$3*D5
A simplification to state up front. This is the obligation as the book's own worked example computes it: the factor applied to embedded emissions, with the free-allocation adjustment as its complement. The regulation sets that adjustment by reference to the free allocation EU installations receive for the product, using benchmarks set in implementing acts. For goods whose embedded emissions sit above the benchmark, the obligation per tonne is higher than this formula gives. A word on terms: the book calls the phased-in share (2.5 per cent in 2026) the CBAM factor, while the ETS Directive uses that name for the share of free allocation retained (97.5 per cent in 2026); the arithmetic is the same. A carbon price effectively paid in the country of origin can be deducted, which is not modelled here. Confirm every parameter against the consolidated text before budgeting on it.
| Year | CBAM factor | Certificates | Cost per tonne, € | Annual cost, € | % of steel price |
|---|---|---|---|---|---|
| 2026 | 2.5% | 600 | 4.00 | 48,000 | 0.7% |
| 2027 | 5.0% | 1,200 | 8.00 | 96,000 | 1.3% |
| 2028 | 10.0% | 2,400 | 16.00 | 192,000 | 2.7% |
| 2029 | 22.5% | 5,400 | 36.00 | 432,000 | 6.0% |
| 2030 | 48.5% | 11,640 | 77.60 | 931,200 | 12.9% |
| 2031 | 61.0% | 14,640 | 97.60 | 1,171,200 | 16.3% |
| 2032 | 73.5% | 17,640 | 117.60 | 1,411,200 | 19.6% |
| 2033 | 86.0% | 20,640 | 137.60 | 1,651,200 | 22.9% |
| 2034 | 100.0% | 24,000 | 160.00 | 1,920,000 | 26.7% |
| Nine years | 7,852,800 |
The factor doubles twice, more than doubles in 2029 and again in 2030, then rises by 12.5 or 14 points a year. Of the 7,852,800 euros paid over the nine years, 90.2 per cent falls from 2030 onwards. An importer whose first two years cost less than one per cent of the steel price is looking at the cheapest years the mechanism will ever have.
A five-year supply contract signed for 2026 to 2030 carries 1,699,200 euros of CBAM cost on these volumes, an average of 28.32 euros a tonne. A budget built on the 2026 figure, 48,000 euros a year, would carry 240,000 over the same five years, short by 1,459,200. The question for the contract is not what CBAM costs today but who bears the factor in 2029 and 2030, and whether the price clause refers to the supplier's verified intensity, the certificate price, or both.
| Certificate price | 1.6 tCO2/t | 2.0 tCO2/t | 2.4 tCO2/t |
|---|---|---|---|
| 60 euros | 46.56 | 58.20 | 69.84 |
| 80 euros | 62.08 | 77.60 | 93.12 |
| 100 euros | 77.60 | 97.00 | 116.40 |
The two inputs matter about equally. Moving the certificate price from 80 to 100 euros adds 19.40 euros a tonne in 2030; moving from a supplier at 2.0 to one at 2.4 adds 15.52. The intensity is the input the importer controls, through supplier choice and through the quality of the verified data, which is why the data request belongs in the contract and not in a later email. Default values, used when verified data is missing, are set to be unfavourable.
The common mistake is to compute the cost at the full rate, 160.00 euros a tonne, and conclude that CBAM is unaffordable, or at the 2026 rate, 4.00 euros, and conclude that it is negligible. Both are wrong for every year except one. The second mistake is to treat the factor as a fixed parameter of the product. It is a calendar: the same tonne of the same steel from the same mill costs 19.4 times more to import in 2030 than in 2026.
The same phase-in, run on the book's Northbeck imports with your own quarters, intensity and prices, is in the free workbook for this case. What to hold above the obligation, and what that buffer costs, is in what a CBAM certificate buffer costs to hold.
As used here and in the book, it is the share of EU free allocation phased out in a given year, and so the share of embedded emissions an importer pays for. The ETS Directive uses the term for the complement, the share retained: 97.5 per cent in 2026, falling to zero in 2034. On the phased-out reading it is 2.5 per cent in 2026, 48.5 in 2030 and 100.0 in 2034: 4.00 euros a tonne in 2026 and 160.00 in 2034 at 2.0 tonnes of CO2 and 80 euros.
Because EU producers still receive 97.5 per cent of their free allocation in 2026, and CBAM is designed to charge importers only for the part EU producers pay for. On 12,000 tonnes of steel at 2.0 tonnes of CO2 a tonne, that is 600 certificates and 48,000 euros. By 2030 the same imports need 11,640 certificates and cost 931,200 euros at the same price.
No. It scales with the supplier's embedded emissions. In 2030 at 80 euros a certificate, a supplier at 1.6 tonnes of CO2 a tonne costs 62.08 euros a tonne and one at 2.4 costs 93.12, a gap of more than 30 euros on the same product. Where verified actual data is not available, default values apply, and they are set to be unfavourable.
This article is one calculation from The CBAM Compliance Handbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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