CBAM Certificates: Pricing and Surrender
What you will learn
CBAM certificates are the financial instrument through which CBAM obligations are discharged. Understanding how they are priced, purchased, held, surrendered, and potentially bought back is essential for any treasury or compliance function at a company importing CBAM-covered goods.
What Is a CBAM Certificate?
A CBAM certificate is a unit of account representing one tonne of carbon dioxide equivalent (tCO₂e) of embedded emissions in imported goods. It is not a financial instrument in the regulated sense - it cannot be traded on secondary markets between declarants, used as collateral, or pledged as security. It is a compliance instrument: purchased from a national competent authority (NCA), held in a CBAM account in the CBAM registry, and surrendered against an annual declaration of embedded emissions.
This design is a deliberate departure from EU ETS allowances, which are fully tradeable financial instruments. By restricting CBAM certificates to purchase from NCAs and preventing secondary trading, the European Commission limits speculation and ensures the certificate price tracks the EU ETS auction price rather than being subject to independent market dynamics.
Stamps, Not Shares
Think of CBAM certificates as postage stamps rather than company shares. You buy them at the post office (the NCA) at the official rate. You use them to "post" your carbon liability. You cannot sell them to other people or speculate on their future value - they are a compliance token, not a financial asset. By contrast, EU ETS allowances are more like shares: they trade on exchanges, have futures markets, and can be held as financial investments.
How the Certificate Price Is Calculated
Article 21 of the CBAM Regulation specifies the pricing mechanism. The price of a CBAM certificate is equal to the average closing price of EU ETS allowances on the common auction platform operated by the European Energy Exchange (EEX), calculated over the calendar week prior to the date of purchase. The European Commission calculates and publishes this weekly average price, which the NCAs use as the purchase price for CBAM certificates.
This weekly reference period (applicable from 2027; quarterly in 2026) means that the CBAM certificate price floats with the EU ETS market. In a period when the EU ETS price rises - as it has broadly done since 2021, climbing from below €25/tonne to sustained levels above €60/tonne - CBAM certificate costs rise accordingly. Conversely, if the EU ETS price falls (as occurred during the COVID-19 economic contraction), CBAM certificate costs fall too.
| Period | Price Reference Mechanism | Publication |
|---|---|---|
| 2026 (first year of definitive period) | Quarterly average of EU ETS auction closing prices | European Commission publishes quarterly |
| 2027 onwards | Weekly average of EU ETS auction closing prices | European Commission publishes weekly |
Purchasing CBAM Certificates
Authorised declarants purchase CBAM certificates directly from the NCA in the EU member state where they are established. The purchase can occur at any time during the reporting year - declarants are not required to purchase certificates at the moment of import. This provides flexibility to manage CBAM exposure over time, purchasing at moments when the certificate price may be more favourable, or building up holdings in advance of a predicted price rise.
However, Article 22 imposes a quarterly minimum holding requirement: by the end of each calendar quarter, the declarant must hold a number of CBAM certificates equivalent to at least 80% of the embedded emissions in all goods imported during that quarter. This prevents declarants from completely deferring all certificate purchases to year-end, ensuring the system remains liquid and the NCA can monitor compliance on an ongoing basis.
The 80% Quarterly Minimum in Practice
A Dutch importer brings in aluminium over Q1 2026, with a total of 200 tCO₂ of embedded emissions in their Q1 imports. By 31 March 2026, they must hold at least 80% of 200 = 160 CBAM certificates in their CBAM registry account. If they hold fewer, the NCA may impose corrective measures. By 31 May 2027 (the annual surrender deadline), they must surrender certificates covering 100% of the 2026 full-year embedded emissions.
Surrendering Certificates
The annual surrender process is the core compliance event. By 31 May of each year, the authorised declarant must surrender to the NCA a number of CBAM certificates equal to the total embedded emissions declared in the annual CBAM declaration for the preceding year. The NCA cancels the surrendered certificates and records the transaction in the CBAM registry.
Surrender is irreversible - cancelled certificates cannot be recovered or reused. If the declarant's annual declaration reveals that they imported less embedded carbon than the certificates they hold, the surplus is addressed through the buyback mechanism described below.
Certificate Buyback
Article 25 of the CBAM Regulation permits declarants to sell back to their NCA a limited number of unused CBAM certificates - up to one-third (33%) of the certificates purchased in the preceding year. This buyback facility serves two purposes:
- It allows declarants who over-purchased certificates (anticipating higher imports that did not materialise) to recover some of their outlay without stranding the cost of unused certificates.
- It prevents excessive certificate hoarding that could distort the relationship between CBAM certificate volumes and actual embedded emissions in imports.
Buyback occurs at the current weekly average EU ETS price at the time of the buyback request - not at the price originally paid. This means declarants bear the price risk of changes in the EU ETS between purchase and buyback. If the EU ETS price has fallen, they will recover less than they paid; if it has risen, they will recover more.
Penalties for Non-Compliance
Article 26 establishes financial penalties for failure to surrender the required number of certificates by the annual deadline. The penalty is set at three times the average CBAM certificate price for the year in question, per certificate that was not surrendered - a significant deterrent equivalent to three times the underlying carbon price. Additionally, the declarant's authorisation may be reviewed or revoked for serious or repeated non-compliance.
Although CBAM certificates are priced on the EU ETS, they differ from EU ETS allowances (EUAs) in several important respects:
- No secondary market: EUAs trade on regulated exchanges (ICE, EEX); CBAM certificates can only be purchased from and sold back to NCAs.
- No futures or options: There is no CBAM certificate derivatives market, unlike EUAs where a rich futures market exists.
- No banking across years: EUAs can be banked indefinitely for future use; CBAM certificates expire - unused certificates after the annual surrender window cannot simply be rolled forward as compliance instruments.
- Different cancellation: EUAs surrendered by ETS installations are cancelled from the EU cap; CBAM certificates surrendered are also cancelled, but they represent an additional economic cost placed on importers rather than a reduction in the overall ETS cap.
Key Takeaways
- 1A CBAM certificate represents one tonne of CO₂e of embedded emissions; it is a compliance instrument purchased from national competent authorities, not a tradeable financial instrument
- 2The CBAM certificate price tracks EU ETS auction prices: a quarterly average in 2026, then a weekly average from 2027, published by the European Commission
- 3Declarants must hold at least 80% of the CBAM certificates corresponding to their quarterly embedded emissions by the end of each quarter, preventing full deferral to year-end
- 4Annual surrender occurs by 31 May each year for the prior calendar year's embedded emissions; failure to surrender triggers a penalty of three times the average certificate price per missing certificate
- 5Up to one-third of certificates purchased in the prior year may be sold back to the NCA at the prevailing price, allowing declarants to recover costs from over-purchasing