CBAM Cost Modelling 2026-2034: How Cost per Tonne Changes as Free Allocation Falls

How the scenarios are built

The model rests on four assumptions:

• Benchmark: 1.50 tCO₂ per tonne — illustrative; the real value varies by product group
• Certificate price: €75.30, close to the average of the €75.36 and €75.28 published for Q1 and Q2 2026, held constant across all years
• Third-country carbon price: zero
• Emissions performance: unchanged throughout

The formula is obligation = embedded emissions − (benchmark × free allocation factor). Holding the certificate price constant is deliberate: the purpose is not to forecast the price but to isolate the effect of the free allocation factor alone. Since the EU ETS price is under upward medium-term pressure, the tables below should be read as conservative.

Three scenarios

Year	Factor	A: 1.50 tCO₂/t (at benchmark)	B: 1.90 tCO₂/t (27% above)	C: 2.50 tCO₂/t (67% above)
2026	97.5%	€2.8	€32.9	€78.1
2027	95%	€5.6	€35.8	€80.9
2028	90%	€11.3	€41.4	€86.6
2029	77.5%	€25.4	€55.5	€100.7
2030	51.5%	€54.8	€84.9	€130.1
2031	39%	€68.9	€99.0	€144.2
2032	26.5%	€83.0	€113.1	€158.3
2033	14%	€97.1	€127.2	€172.4
2034	0%	€112.9	€143.1	€188.2

Figures are euro per tonne of product on the assumptions above.

Four conclusions

1. The low 2026 cost is not universal

In Scenario A the 2026 cost is €2.8 — negligible. In Scenario C, the same year, it is €78.1. The twenty-eight-fold gap explains why the generalisation that "2026 is barely payable" misleads. Because free allocation applies to the benchmark rather than to actual emissions, intensity above the benchmark generates a full obligation from the outset.

2. The critical step is between 2029 and 2030

The factor falls only 7.5 points across 2026-2028, then 26 points in the single year from 2029 to 2030. In Scenario A cost rises from €25.4 to €54.8 — more than doubling in one year. For investment planning the date that matters is therefore before 2029, not 2034.

3. The gap is constant in absolute terms

The difference between Scenarios A and C stays around €75 every year, because it derives from the difference in emissions intensity and is unaffected by the free allocation factor. The strategic implication is important: the CBAM return on abatement is the same in every year. Deferring abatement does not increase the return; it only accumulates the cost of the deferred years.

4. From 2034 the mechanism prices all emissions

With free allocation at zero, even an installation operating exactly at benchmark faces €112.9 per tonne. After 2034 CBAM no longer prices the efficiency gap but the entire emissions footprint.

Effect relative to product value

The commercial meaning of a euro-per-tonne figure depends on the product's unit price, so the same absolute cost lands very differently across sectors:

• Cement — lowest value per tonne, high emissions intensity. The highest cost-to-value ratio in the mechanism, and the place where the post-2030 effect on price competitiveness is most direct.
• Iron and steel — higher product value; where emissions intensity is low in scrap-based production the effect can stay contained. Extending indirect emissions to the sector would change that picture.
• Aluminium — high product value, but in processed goods the precursor dominates, so supplier choice can move the cost several-fold.
• Fertilisers — the 1% mark-up keeps the default-value route comparatively cheap, weakening the case for producing actual data.

Building the model for your own installation

The table above is illustrative. Three inputs are needed to build your own projection:

1. Embedded emissions per product, measured, per tonne.
2. The benchmark for the relevant product group. Separate benchmarks apply for actual-value and default-value calculations.
3. EU-bound volume, by CN code and by customer, excluding customers below the 50-tonne threshold.

The same three inputs are sufficient to price the CBAM side of an abatement investment: emissions avoided × certificate price × EU-bound volume. The formula is set out in the CBAM cost formula, and certificate pricing in CBAM certificates.

Frequently asked questions

Will the certificate price stay flat?

It is not expected to. The EU ETS price faces upward pressure from the phase-out of free allocation and supply-side mechanisms, so the figures above are conservative.

Will benchmarks change?

CBAM benchmarks are to be revised from 2027 in line with the EU ETS values for 2026-2030. Because ETS benchmarks tighten, such revisions generally raise the obligation.

How does a carbon price paid at home affect the table?

An amount actually paid and not refunded is deducted from the obligation, shifting the whole table downward. The conditions are in carbon price paid in a third country.

Why should a supplier care if the importer pays?

The cost enters the importer's accounts but appears as a line item in supplier comparison. A supplier with higher emissions intensity becomes more expensive at the same quoted price.

Sources

• European Commission — price of CBAM certificates
• European Commission — CBAM definitive regime

We work on building CBAM cost projections by product and customer and on pricing the payback of abatement investments, under our CBAM accounting and reporting service. You can contact us with your questions.