EU climate policy has helped reduce greenhouse gas emissions over the past two decades, but emissions linked to importing goods into the bloc have continued to rise, according to the Belgrade Open School (BOŠ). That divergence is now being addressed through the Carbon Border Adjustment Mechanism, a trade compliance tool designed to connect carbon costs at the border with the EU’s internal emissions pricing system. BOŠ says the mechanism is also intended to encourage trading partners to reduce dependence on fossil fuels while supporting domestic competitiveness under the European Green Deal’s 2050 climate-neutrality objective.
CBAM’s carbon-cost logic and the sectors in scope
CBAM—Carbon Border Adjustment Mechanism—requires exporters to the EU to pay when production releases too many greenhouse gases, particularly where output is linked to energy-intensive activities. The regulation covers carbon dioxide emissions and, where relevant, nitrogen oxide emissions, which are described as dominant in the transport sector. BOŠ notes that CBAM defines coverage for products including iron and steel industry goods, cement, aluminium, hydrogen, fertilisers, and electric power when they enter the EU customs territory.
The policy rationale set out by EU lawmakers is to ensure fair competition by charging imported products in a way that reflects what EU producers already pay when producing comparable goods under existing carbon rules. For exporters, BOŠ characterises this as a factor that can complicate business operations by adding a new cost and compliance layer tied to embedded emissions.
Implementation is underway: transitional reporting began in 2023
CBAM has entered its operational phase earlier than many outside specialist circles may have expected. BOŠ says the transitional implementation period started on October 1, 2023, with comparatively low financial penalties for improper reporting during the early stage. The adjustment window is set to last three years, after which full implementation begins in 2026.
From 2026 onward, BOŠ reports that emissions will be taxed at rates aligned with those applied within the European Union. This sequencing matters for importers and exporters because obligations are being built up during the transition while the definitive cost-reflection approach is scheduled for later.
Why exporters face new compliance pressure
BOŠ argues that CBAM’s market impact will be significant for countries whose exports are concentrated in high-emissions industries. The mechanism is expected to affect EU importers’ costs, which in turn can influence demand for imported products from external suppliers. In this context, BOŠ highlights Serbia’s exposure particularly in sectors with high greenhouse gas emissions.
The same analysis points to a compliance gap: Serbian companies—especially small and medium-sized enterprises—are said not to know their obligations under the initial phase of CBAM or the ultimate effect on business performance and financial outcomes. BOŠ frames adaptation as necessary because decision-makers will need to prepare for how embedded emissions data and reporting requirements translate into border charges.
Deadline focus: February 1 for exporter environmental reporting
As the February 1 deadline approaches for exporters’ reporting on environmental impact from production emissions, companies preparing CBAM submissions face a practical test of data readiness. The transitional period already requires attention to how emissions are accounted for and reported, even if penalty levels are described as low early on. For importers inside the EU customs chain, timely and accurate documentation also becomes a risk-management issue tied to downstream commercial outcomes.
Broader implications across carbon pricing and industrial decarbonisation
CBAM sits alongside the EU ETS framework and broader European Green Deal objectives by extending carbon-cost signals beyond EU borders toward covered sectors such as cement, steel-related products, aluminium, hydrogen, fertilisers and electricity. While CBAM’s border charges are designed around embedded emissions from production rather than transport alone, BOŠ notes that nitrogen oxide emissions may be relevant where applicable. Overall compliance pressures are therefore likely to intensify across supply chains as firms align reporting practices with carbon pricing logic and accelerate decarbonisation efforts in energy-intensive industries.