By Sidley Austin LLP
Originally Published April 16, 2026
In January 2026, the EU’s carbon border adjustment mechanism (CBAM)—the world’s first carbon intensity fee on imports—went into effect. This analysis, prepared by Sidley Austin for the Climate Leadership Council, examines the CBAM’s implementing regulations and their implications for U.S. manufacturers of covered products (iron and steel, aluminum, fertilizers, cement, and hydrogen).
Key findings include:
- Emissions data: U.S. producers that can generate verified emissions data can avoid punitive default values that could make their products less competitive in the EU market.
- Evolving framework: Important elements, including default values and benchmarks, will be revised in 2026 or 2027. The EU also intends to expand CBAM coverage to certain downstream products and eventually products in all sectors covered under the EU’s ETS.
- A model for future policies: The EU’s CBAM is inspiring other countries—including the United Kingdom, Canada, and Australia—to consider similar policies.