Selling to Europe? What Australian Exporters Need to Know About CBAM
If your Australian business plans to export steel, aluminum, cement, fertilizer, hydrogen, or related products to the European Union, you'll likely encounter a new term: CBAM.
CBAM, or the Carbon Border Adjustment Mechanism, is the European Union's system for imposing a carbon cost on certain carbon-intensive imports from outside the EU. The comprehensive CBAM system came into effect on 1 January 2026.
The concept is straightforward. European manufacturers already incur carbon costs due to the EU Emissions Trading System. The EU aims to prevent European producers from paying for carbon emissions while allowing competing products from other countries to enter Europe without similar carbon costs.
CBAM is designed to create a more equitable competitive environment.
Does CBAM apply to Australian exporters?
Australia does not benefit from a general exemption to the CBAM.
The proposed Australia-EU Free Trade Agreement also does not eliminate the CBAM. According to the Australian Government, the CBAM is treated separately from the FTA provisions.
Currently, the CBAM does not apply to all Australian goods entering Europe.
The primary sectors currently affected include:
iron and steel, aluminum, cement, fertilizers, hydrogen, and electricity.
To determine applicability, businesses should verify the EU customs or CN code for their specific products. They should not assume coverage simply because their goods contain materials like steel or aluminum.
Who actually pays CBAM?
Many exporters find this surprising.
Typically, Australian manufacturers do not purchase CBAM certificates directly. The legal obligation usually lies with the EU importer or sometimes its customs representative. The European importer declares the carbon emissions embedded in the imported goods and eventually submits CBAM certificates that match those emissions. The price of these certificates is tied to the carbon price regulated by the EU Emissions Trading System. However, this does not mean that Australian exporters can ignore CBAM. Your European customer will want to know about the carbon intensity of your product. This figure could influence the import cost of your goods and consequently their competitiveness in the European market.
Is there an exemption for small volumes?
Yes, there is. For most CBAM goods, an EU importer bringing in no more than 50 tonnes over a calendar year generally falls outside the main CBAM obligations. However, this threshold applies at the importer level and does not provide a 50-tonne allowance for each Australian supplier.
If a European importer purchases CBAM products from several suppliers, those imports contribute to the importer's annual threshold. Electricity and hydrogen do not benefit from this mass-based exemption and are treated differently.
What happens if Australia already imposes a carbon cost on producers?
CBAM is designed to acknowledge an effective carbon price already paid in the production country. If the importer can prove that a legitimate carbon price was paid on the relevant emissions, it can potentially reduce the CBAM obligation. Nonetheless, this differs from Australia being completely exempt from CBAM.
The important message for Australian businesses
CBAM should not be seen merely as another layer of European environmental compliance. For companies in affected industries, carbon intensity is becoming a key component of the commercial cost of exporting goods.
Consider two Australian manufacturers offering seemingly identical products at the same factory-gate price. If one can prove significantly lower embedded emissions, its product might ultimately be less expensive for an EU customer once CBAM adjustments are applied.
This suggests that businesses aiming for the European market should begin handling carbon data with the same importance as they do for product specifications, customs classifications, quality certificates, and shipping documentation.
In Part 2, we explore a critical question for Australian exporters: should your European customer rely on the EU's default carbon value for your product, or is it better to provide your own verified emissions figure?
Sources
PwC: Understanding the CBAM and Omnibus Simplification for Australia
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