On January 1, 2026, the EU Carbon Border Adjustment Mechanism (CBAM) entered the formal implementation period.
For many Chinese export companies, the first form it appears is not a “tariff”, but an English form sent from European customers.
The form requires suppliers to provide embedded emissions data at the product level: where the raw materials come from, how much energy is used in the production process, and how much carbon emissions are inherent in the upstream materials themselves.
According to CBAM rules, EU importers are the subject of statutory declaration and certificate settlement. However, importers are usually unable to independently complete emission accounting and can only obtain carbon emission information on products, raw materials and production processes from upstream suppliers.
Data responsibility is thus passed along the supply chain to Chinese factories and traders.
This means that after the implementation of CBAM, the first challenge faced by Chinese export companies is not just the increase in compliance costs, but whether they can establish a set of compliance capabilities that are acceptable to European customers – accurately reporting the carbon emissions hidden in the raw materials, parts and production processes behind the products.
Li Chuanyou, deputy general manager of Nanjing Carbon Technology, said that the current motivation for export companies to deal with CBAM is first of all to retain the EU market and customers; once this market is lost, the cost of re-establishing trade relations will be very high.
In the past two years, Zhu Qingxuan, a carbon consultant based in the Yangtze River Delta, has come into contact with a large number of export factories and foreign trade companies rushing for help.
Most of the anxiety of these companies comes from the urging of European customers: What data should be submitted?
Where should this data be collected?
In what format should it be provided?
The confusion is not limited to Chinese suppliers.
Zhu Qingxuan found that many EU importers themselves did not really understand CBAM and were unclear about the timeline for data submission, verification and payment.
Some directly send the reports of suppliers from other countries to Chinese companies for “reference”, while others mistakenly believe that CBAM report certification must be completed this year, so they urge Chinese suppliers to submit emission data as soon as possible, which in turn exacerbates the confusion of suppliers.
Not all companies exporting to Europe will immediately feel the pressure brought by CBAM.
According to arrangements by the European Commission, CBAM currently covers high-carbon commodities such as steel, aluminum, cement, fertilizers, electricity, and hydrogen, as well as some downstream products.
After subsequent simplification, the EU has also set an annual import exemption threshold of 50 tons, and EU importers below this threshold can be exempted from relevant obligations.
Therefore, those who are really under pressure are those European buyers who continue to import related goods in large quantities and the global supply chain that supplies them.
During the previous transition period, EU importers were mainly responsible for quarterly reporting obligations. They only needed to declare the embedded emissions of imported goods and did not need to purchase and clear CBAM certificates.
After the official period begins, CBAM moves from “reporting data” to the “cost calculation” stage: importers must not only declare the emissions corresponding to the imported goods, but also purchase and pay the corresponding number of CBAM certificates based on the emissions.
For Chinese suppliers, the real question arises: Where do these emissions data come from?
If the real data cannot be obtained, under what caliber should it be submitted?
Zhang Yige, founder and CEO of financial technology company Smartesg, pointed out that more refined management measures and establishing data management capabilities that meet CBAM requirements are more critical challenges for Chinese companies.
Under the CBAM framework, importers declare “embedded emissions” of imported goods, and their accounting boundaries are related to industry rules.
For complex products such as steel and aluminum, the emissions of upstream raw materials often determine the emissions of the final product.
Li Chuanyou pointed out that this is the weakest point of a large number of domestic small and medium-sized processing plants and foreign traders.
In the past, many small and medium-sized processing plants did not record the raw material information used in products batch by batch. Even if they could trace the source of procurement, they may not be able to obtain the corresponding actual emission data from upstream.
If suppliers are unable to provide verifiable actual emissions data, the CBAM rules provide an alternative path for missing data: using default values set by the EU.
But the default could put Chinese companies at a disadvantage in cost comparisons with European customers.
Zhang Yige observed that in order to quickly adapt to market demand and reduce carbon compliance costs, some large international companies are already adjusting their internal governance structures.
However, even if companies start collecting data this year, there will still be a time mismatch between midstream and downstream processors and upstream raw material plants.
Uncertainty about the details of EU rules also amplifies this pressure.
The Institute for Green Innovation and Development (iGDP) report pointed out that the EU still needs to further clarify the implementation details on issues such as how the carbon price that has been effectively paid by a third country will be deducted from CBAM.
This will make Chinese companies face higher compliance risks in the early stages of formal operation.
CBAM will promote the transmission of carbon emission costs along the industrial chain, eventually penetrating into upstream links such as raw material mining and smelting processing.
From the perspective of trading partners such as China, CBAM also means that EU rules extend outside the supply chain.
Chinese companies face many difficulties under CBAM, such as inconsistent data standards and difficulty in obtaining carbon price deductions recognized by the EU.
In response to market pain points, some consulting agencies are trying to break the opacity of carbon emission data in the raw material market by establishing quantitative indicator systems, helping export companies to reselect suppliers, adjust procurement strategies, and even reorganize supply chains.
This change will promote the differentiation of enterprises. Enterprises that cannot produce verifiable scope three data may not only bear higher compliance costs, but may also be at a disadvantage in quoting and supplier selection.
At the same time, the impact of CBAM may continue to expand downstream.
In the future, the EU may include more downstream industrial products with high steel and aluminum content within its coverage.
Coupled with the gradual reduction of EU free quotas from 2026 to 2034, exporters’ compliance costs may rise year by year.
However, rules cannot only be defined unilaterally by the EU.
In fields such as new energy, energy storage, and low-altitude economy, Chinese companies also have advantages in global competition. Leading companies such as CATL are not only participants but also one of the setters of standards.
They have actively begun to use digital tools such as “battery passport” to turn green barriers into competitive advantages, and even established a set of unique Chinese overseas service plans.
“The EU may not have the right to speak. When Chinese companies can actively respond to changes and build full life cycle standards in the ecological chain, challenges may become new opportunities.”
