CBAM and Building Materials: How the Carbon Border Mechanism Affects Construction

What Is CBAM and Why Does It Matter for Construction?

The Carbon Border Adjustment Mechanism, established by Regulation (EU) 2023/956, represents one of the most consequential pieces of EU climate legislation for the construction sector. CBAM is designed to prevent carbon leakage — the phenomenon where European manufacturers relocate production to countries with weaker climate policies, or where EU buyers simply switch to cheaper imports produced under laxer emission standards. By placing a carbon price on certain imported goods that mirrors the cost faced by EU producers under the EU Emissions Trading System (ETS), CBAM ensures that the carbon intensity of products is reflected in their price regardless of where they were manufactured.

For the construction industry, this is not an abstract policy concern. Construction is one of the largest consumers of carbon-intensive basic materials — cement, steel, and aluminium chief among them. When these materials cross the EU border, CBAM now applies. The mechanism fundamentally changes the economics of sourcing building materials from non-EU countries, and it creates new documentation requirements that touch every link in the supply chain from raw material extraction to the construction site.

Products Covered Under CBAM

CBAM applies to a defined set of product categories listed in Annex I of the regulation. The categories most relevant to construction are:

How CBAM Works: The Certificate System

CBAM operates through a certificate-based system that requires EU importers to purchase CBAM certificates corresponding to the embedded emissions of the goods they import. The price of these certificates is linked directly to the weekly average auction price of EU ETS allowances. This mechanism ensures that imported goods face the same carbon cost as goods produced within the EU under the ETS.

1. Register as an authorised CBAM declarant. Importers must register with the competent authority in their Member State.
2. Collect embedded emissions data. Gather verified emission data from non-EU suppliers for all CBAM-covered goods imported.
3. Submit an annual CBAM declaration. By 31 May each year, submit a declaration covering the previous calendar year with total quantities, embedded emissions, and certificates to surrender.
4. Account for carbon prices paid at origin. If the non-EU producer already paid a carbon tax or participated in an emissions trading scheme, claim a reduction in CBAM certificates required (with verified evidence).
5. Purchase and surrender CBAM certificates. Acquire certificates at the EU ETS-linked price and surrender them to cover the embedded emissions of imports.

The concept of a carbon price paid at origin is critical. If a steel producer in, say, South Korea has already paid a carbon tax or participated in an emissions trading scheme in their home country, the EU importer can claim a reduction in the number of CBAM certificates required. This prevents double-counting of carbon costs. However, the importer must provide verified evidence of such payments, and the adjustment is calculated according to rules set out in CBAM implementing legislation.

Transitional Period vs. Definitive Phase

The Transitional Period (October 2023 – December 2025)

The transitional period ran from 1 October 2023 through 31 December 2025. During this phase, importers were required to submit quarterly CBAM reports detailing the embedded emissions of their imported goods, but they did not need to purchase or surrender CBAM certificates. The purpose of the transitional period was to allow businesses, authorities, and third-country producers to adapt to the new system, establish reporting processes, and build the data infrastructure necessary for the definitive phase.

During the transitional period, importers could use several methods to calculate embedded emissions: actual emissions data from installations, default values published by the European Commission, or — until 31 July 2024 — other estimation methods including those based on the exporting country’s emission factors. After that date, only actual data or EU default values were permitted.

The Definitive Phase (January 2026 Onwards)

Since 1 January 2026, CBAM has entered its definitive phase. Importers must now hold sufficient CBAM certificates to cover the embedded emissions of their imports. The financial obligations are real: with EU ETS allowance prices having fluctuated between roughly 55 and 100 euros per tonne of CO₂ equivalent over the past two years, the cost of CBAM certificates for carbon-intensive imports can be substantial.

For a construction company importing 10,000 tonnes of steel with embedded emissions of 1.8 tonnes CO₂e per tonne of steel, at an ETS price of 70 euros per tonne, the CBAM cost would be approximately 1.26 million euros — a figure that cannot be ignored in project budgets. This cost pressure is precisely the mechanism’s intent: to incentivise either sourcing from lower-carbon producers or choosing EU-manufactured alternatives that already bear the ETS cost.

EPDs as Evidence of Actual Embedded Carbon

This is where Environmental Product Declarations become strategically important. Under CBAM, importers can use actual emissions data from the installation where the goods were produced to calculate embedded emissions. If actual data is not available or cannot be verified, they must fall back on default values published by the European Commission — and these default values are deliberately conservative, typically based on the average emission intensity of the worst-performing installations.

An Environmental Product Declaration (EPD) is a standardised, third-party verified document that reports the environmental impacts of a product across its life cycle, based on a Life Cycle Assessment conducted according to EN 15804+A2 and the relevant Product Category Rules. The Global Warming Potential (GWP) figures reported in an EPD’s modules A1–A3 represent precisely the kind of product-specific, verified emission data that can support CBAM calculations.

While a CBAM declaration and an EPD are different documents with different legal frameworks, the underlying data often overlaps significantly. A manufacturer that has already invested in developing an EPD has, in effect, already conducted much of the analytical work needed to report actual emissions under CBAM. The LCA data that underpins the EPD — energy consumption, process emissions, transport, raw material inputs — maps closely to what is needed for CBAM emission calculations.

There are important nuances, however. CBAM embedded emissions are calculated at the installation level and cover direct and certain indirect emissions, whereas EPDs report product-level impacts across a broader set of environmental categories. The system boundaries and allocation methods may differ. Nevertheless, the data collection processes are complementary, and a producer with a robust EPD programme is far better positioned to provide the verified emission data that its EU customers need for CBAM compliance.

Impact on Importers of Building Materials

For construction companies and building material distributors that source products from outside the EU, CBAM creates several new operational requirements and strategic considerations.

Documentation and Verification

Importers must establish systems to collect and verify embedded emission data from their non-EU suppliers. This requires new communication channels with producers, new internal processes for data management, and — in many cases — new contractual provisions requiring suppliers to provide emission data in specified formats. The administrative burden is not trivial, particularly for companies with complex, multi-country supply chains.

Cost Management

The financial impact of CBAM depends on two variables: the carbon intensity of the imported product and the price of EU ETS allowances. Importers can manage costs by preferentially sourcing from lower-carbon producers, by negotiating with suppliers to invest in emission reductions, or by shifting procurement toward EU-based manufacturers. Each strategy has trade-offs in terms of cost, availability, and supply chain resilience.

Competitive Dynamics

CBAM effectively levels the playing field between EU producers — who have long borne the cost of EU ETS compliance — and non-EU producers who previously competed on price partly because they faced no carbon costs. For EU cement and steel manufacturers, this is a welcome development. For importers, it means that the price advantage of non-EU materials may narrow or disappear, particularly for highly carbon-intensive products.

Supply Chain Transparency

CBAM is accelerating a broader trend toward supply chain carbon transparency in construction. Companies that previously paid little attention to the embedded carbon of their purchased materials are now compelled to understand and document these emissions. This dovetails with requirements under the Corporate Sustainability Reporting Directive (CSRD), where Scope 3 emissions from purchased goods must be disclosed, and with the evolving requirements of the Construction Products Regulation.

The Role of EPD Polska in CBAM Readiness

For manufacturers in Poland and Central Europe seeking to demonstrate their products’ actual carbon footprint — both for CBAM purposes and for broader market competitiveness — obtaining a verified EPD is a strategic priority. EPD Polska operates as a programme operator under the framework of EN 15804+A2, providing third-party verified declarations that are recognised across European markets.

Polish cement and steel producers, who are significant exporters to other EU Member States and beyond, can use EPDs published through EPD Polska to demonstrate their environmental performance with credible, standardised data. While CBAM applies to non-EU imports, the same EPD data is valuable for EU producers competing against imports: it provides evidence that their products’ carbon costs are already internalised through the ETS, and it supports customers’ sustainability reporting obligations.

CBAM and the Broader EU Green Deal Architecture

CBAM does not exist in isolation. It is one pillar of the EU’s comprehensive Green Deal architecture, which includes the EU ETS reform, the CSRD, the EU Taxonomy for sustainable finance, and the revised Construction Products Regulation. Each of these instruments creates demand for reliable, verified environmental data about construction products — and EPDs are the primary vehicle for delivering that data.

For construction sector stakeholders, the cumulative effect of these regulations is clear: environmental performance data, particularly carbon data, is becoming a non-negotiable element of doing business in the EU market. Companies that invest in LCA capacity, EPD development, and emission reporting infrastructure now will be better positioned to navigate not only CBAM but the full spectrum of upcoming regulatory requirements.

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