The EU's Carbon Border Adjustment Mechanism, CBAM, entered its definitive phase on 1 January 2026, making it the world's first fully operational carbon border tax. Coverage in the sustainability press has been substantial, and the acronym has started appearing in boardrooms well beyond the sectors directly in scope.
Food businesses are among those paying attention, even though CBAM does not currently apply to food or agricultural products. Understanding why it still matters—and what the indirect implications are for supply chains, ingredient costs, and the broader carbon pricing landscape—is useful preparation for any food business with serious sustainability commitments.
The Carbon Border Adjustment Mechanism (CBAM) is an EU policy tool that puts a carbon price on certain goods imported into the EU, equivalent to the price EU producers pay under the EU Emissions Trading System (ETS). Its purpose is to prevent carbon leakage—the practice of relocating carbon-intensive production outside the EU to avoid domestic carbon costs, then importing the resulting goods back in.
Under CBAM, importers of in-scope goods must purchase CBAM certificates to cover the embedded greenhouse gas emissions in their imports. If a carbon price has already been paid in the country of production, that amount can be deducted to avoid double-charging.
CBAM entered a transitional reporting phase in October 2023. The definitive regime, with full financial obligations, began on 1 January 2026. The first CBAM declarations and certificate surrenders are due by 30 September 2027, covering 2026 imports.
CBAM currently applies to imports of six product categories identified as carbon-intensive and at high risk of carbon leakage:
• Cement
• Iron and steel
• Aluminium
• Fertilizers
• Electricity
• Hydrogen
Food and agricultural products are not in scope. This is an important clarification: despite significant awareness of CBAM across the sustainability community, food businesses do not currently face direct CBAM compliance obligations on their core product imports.
The 50-tonne threshold introduced under the EU Omnibus simplification means that importers bringing in less than 50 tonnes of covered goods per year are also exempt, excluding roughly 90% of importers by volume while still capturing 99% of embedded carbon emissions.
Despite food being out of scope, CBAM has meaningful indirect implications for the food sector across three areas.
Fertilizers are directly in scope under CBAM. Agricultural production across the EU and in supply chains exporting to the EU relies on nitrogen fertilizers, and the carbon price embedded in fertiliser production is now subject to a CBAM charge when those fertilizers are imported. This flows through into the cost of growing ingredients—potentially affecting commodity prices for wheat, rice, vegetables, and other fertilizer-dependent crops, particularly where production relies on imported fertilizers from outside the EU.
Food businesses with long supply chains and significant agricultural commodity exposure should monitor fertilizer CBAM costs as a factor in ingredient pricing, particularly for procurement from regions where fertilizer-intensive farming is common.
Steel and aluminium are in scope under CBAM. Food businesses importing food-grade steel packaging, aluminium containers, or processing equipment manufactured outside the EU may face CBAM-related cost increases on those imports. The exposure depends on the country of manufacture and whether those suppliers can demonstrate a carbon price already paid in their jurisdiction.
The EU has signalled an intention to expand CBAM's scope over time. Food and agricultural products—particularly those linked to deforestation and land use change—are discussed as potential future additions. The current CBAM regulation explicitly excludes food, but the policy architecture is designed to be extensible. Food businesses that build supply chain carbon data now will be significantly better positioned if scope expands to cover agricultural products.
Beyond direct compliance, CBAM represents something more significant for food businesses: the mainstreaming of carbon pricing as a trade instrument. The EU's move signals that embedded carbon in imported goods will increasingly carry a cost, and that trajectory is unlikely to reverse.
Several other jurisdictions are actively developing similar mechanisms. The UK has confirmed a CBAM launching in 2027, covering the same initial sector list. Canada and Australia are at various stages of consultation. The probability of a more extensive global carbon border adjustment landscape over the next decade is meaningful.
For food businesses, this broader signal reinforces the commercial rationale for building ingredient-level carbon data now—not because food faces immediate CBAM obligations, but because supply chain transparency and low-carbon sourcing are increasingly valued in procurement frameworks, investor expectations, and regulatory design. The same data that supports CSRD Scope 3 reporting positions a food business well for a world where carbon costs at the border become more common.
CBAM is a trade policy instrument, not a sustainability reporting framework, but it operates alongside CSRD and the GHG Protocol in ways that create data synergies.
CSRD requires large food businesses to disclose Scope 3 emissions, including Category 1 (purchased ingredients). The ingredient-level procurement data needed for CSRD Category 1 reporting—which maps purchases to emission factors at SKU level—is also the foundation for understanding carbon exposure across the supply chain more broadly. A food business that has built credible Scope 3 Category 1 data is in a much stronger position to assess indirect CBAM exposure through fertilizer-intensive agricultural supply chains, and to respond quickly if scope expands.
See Scope 1, 2, and 3 Emissions for Food Businesses for the full framework, and CSRD for the Food Industry for what ESRS E1 disclosure requires.
Q: What does CBAM stand for?
A: CBAM stands for Carbon Border Adjustment Mechanism. It is the EU's carbon border tax, designed to put a carbon price on imports of certain carbon-intensive goods equivalent to the price EU producers pay under the EU Emissions Trading System. The CBAM entered its definitive phase on 1 January 2026, with the first financial settlements due in September 2027. Its purpose is to prevent carbon leakage—the relocation of carbon-intensive production to countries with weaker climate policies—while encouraging cleaner industrial production globally. See the EU CSRD page for how CBAM sits alongside other EU climate regulations affecting food businesses.
Q: Does CBAM apply to food businesses?
A: Not directly. CBAM currently covers cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen. Food and agricultural products are explicitly excluded from the current scope. However, food businesses face indirect exposure through fertilizer costs (which affect ingredient pricing), steel and aluminium imports for packaging and equipment, and the broader trajectory of carbon pricing policy that CBAM represents. Future expansion to cover food and agricultural products has been discussed but is not confirmed. See Scope 1, 2, and 3 Emissions for how food businesses map their full emissions landscape.
Q: What is the CBAM regulation?
A: The EU CBAM was established under Regulation (EU) 2023/956, which entered into force in May 2023. A transitional reporting phase ran from October 2023 to December 2025. The definitive regime began on 1 January 2026, requiring importers of covered goods to register as authorized CBAM declarants, report embedded emissions, and surrender CBAM certificates annually. The first declaration and certificate surrender covering 2026 imports is due by 30 September 2027. The Omnibus simplification introduced a 50-tonne mass-based threshold, exempting the smallest importers while retaining coverage of 99% of embedded emissions.
Q: What is the EU CBAM and how does it work?
A: The EU Carbon Border Adjustment Mechanism works by requiring importers of covered goods to purchase CBAM certificates equivalent to the carbon price that would have been paid had those goods been produced under the EU ETS. The price of CBAM certificates is linked to the weekly average price of EU ETS allowances. If the exporting country already charges a carbon price on the goods, that amount is deductible to avoid double-charging. Importers must register in the CBAM registry, report embedded emissions annually, and surrender certificates to cover those emissions. The mechanism is designed to be compatible with WTO rules by applying equally to all importers regardless of origin.
Q: What does CBAM mean for food supply chains?
A: For food supply chains, CBAM's most direct impact is through fertilizers, which are in scope. Fertilizer-intensive agricultural production—common for grains, vegetables, and many commodity crops—may see cost increases where fertilisers are imported into the EU from non-ETS countries. This can flow through to ingredient costs for food businesses sourcing those commodities. Indirectly, CBAM signals a direction of travel in trade policy that makes supply chain carbon transparency increasingly valuable. Food businesses building ingredient-level Scope 3 data for CSRD reporting are also building the data foundation that would be relevant if CBAM scope expands to cover agricultural products.
Q: Will CBAM expand to cover food products?
A: Food and agricultural products are not currently in CBAM scope and no confirmed expansion timeline exists. However, the EU has indicated that CBAM scope may be reviewed and expanded over time. Products linked to deforestation and land use change—which include many agricultural commodities—have been discussed in the context of future trade-related carbon pricing. The EU Deforestation Regulation (EUDR) already addresses some of these supply chain concerns through a different mechanism. Food businesses should monitor regulatory developments and treat the current exclusion as subject to change rather than permanent. Building Scope 3 Category 1 data now is the most practical preparation for any future expansion.
Q: What is the difference between CBAM and the EU ETS?
A: The EU Emissions Trading System (ETS) is an internal carbon market that caps and prices the emissions of large industrial producers within the EU. Covered facilities must surrender allowances for their emissions, creating a carbon cost for domestic production. CBAM extends a parallel carbon cost to imports of equivalent goods from outside the EU, ensuring that foreign producers face the same carbon price as EU competitors. Where the ETS covers domestic production, CBAM covers imports. The two systems are designed to work in tandem: as the EU phases out free ETS allowances for covered sectors, CBAM takes over as the leakage protection mechanism for imports.
Q: Is there a UK CBAM?
A: Yes. The UK has confirmed a Carbon Border Adjustment Mechanism launching in 2027, covering the same initial sector list as the EU CBAM: aluminium, cement, ceramics, fertilizers, glass, hydrogen, iron and steel. The UK CBAM will apply to imports of those goods into the UK from countries without equivalent carbon pricing. Like the EU version, food and agricultural products are not in the initial scope. UK food businesses importing packaging materials or equipment in covered categories should monitor the UK CBAM implementation timeline and assess their exposure accordingly.
Gioia Zagni
Chief Science Officer, Klimato
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CBAM signals that carbon costs are becoming a feature of global trade, not just domestic regulation. For food businesses, the most practical response is building the ingredient-level Scope 3 data that makes supply chain carbon visible, auditable, and actionable. That same data foundation satisfies CSRD Category 1 requirements and positions you for whatever regulatory developments follow.