All information is accurate as of 27th June 2025
Author: Sawal Bacha
The EU CBAM: From regulation to revenue risk
The EU Carbon Border Adjustment Mechanism (CBAM) is intended to combat carbon leakage and create a level playing field for European industry. Carbon leakage occurs if, for reasons of costs related to climate policies, businesses transfer production to other countries with laxer emission constraints.
With the EU CBAM entering its definitive phase in 2026, entities will not only need to measure, report and verify emissions, but also purchase CBAM certificates equivalent to the embedded emissions of their imports in order to comply with the regime.
CBAM certificates will be available for purchase from February 2027 to cover 2026 emissions, and analysis suggests the price of those certificates could be close to €100 per tonne. This presents a significant financial risk that needs to be addressed proactively, starting now.
What happens if the risk is not managed?
The price of CBAM certificates will be based on underlying EUA prices which are volatile, therefore, it is difficult for businesses to budget for CBAM. Without a risk management strategy, the volatility in carbon prices will also lead to margin erosion for businesses. With the cost of carbon set to rise in the coming years, those risks are amplified further if a proactive approach to hedging CBAM risk is not taken. As a result, it is essential for companies to implement risk management strategies to ensure the financial risks associated with CBAM are understood and managed.
As the mechanism introduces a direct link between import costs and volatile EU carbon prices, businesses must shift from reactive compliance to active risk management.
To help companies navigate this shift, our new guide, “Carbon at the Border: The Critical Financial Risks”, breaks down the key exposures created by CBAM, from margin erosion due to EUA price swings to long-term strategic vulnerabilities. It also offers clear, actionable strategies to manage both immediate and future risks in an increasingly uncertain regulatory landscape.
Download the guide now to understand why CBAM is more than just a compliance issue, it’s a financial one.
Locking in carbon costs: A smarter financial move
While CBAM certificates are not yet available, Redshaw Advisors offers a simple, yet powerful way, to lock in your CBAM certificate costs now.
The VCC® is a forward-looking solution that lets you lock in your CBAM costs today.
- Secure your price in advance: Purchase VCCs today to fix your future CBAM certificate costs
- Seamless conversion: Each VCC is exchangeable for an official CBAM certificate exactly when needed
- Flexibility built in: Choose when you want to take delivery or resell based on your needs
Control the risk today
Faced with increasingly uncertain costs, companies need to shift from a reactive to proactive approach to CBAM. The VCC, Virtual CBAM Certificate acts as a financial safeguard, locking in CBAM costs to remove risk, uncertainty and profit erosion while also supporting reliable and accurate forward planning.
Partner with Redshaw Advisors and gain a proactive edge in navigating the evolving CBAM landscape.
Discover how our solutions can give your business an edge in a volatile landscape:
???? Explore the Carbon Support Program and the Virtual CBAM Certificate (VCC)®.
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