The European Union (EU) has set as a strategic goal the drastic reduction of greenhouse gas emissions and the achievement of climate neutrality by 2050. To achieve this ambitious goal, it has for years been implementing a complex framework of environmental policy, with the Emissions Trading System (ETS – EU ETS) as a key pillar.
Within this framework, power generation units, airlines, shipping companies and large industries in specific sectors are required to purchase emissions allowances (EUAs) for every ton of carbon dioxide they emit.
These allowances are traded in organized markets and their price is directly affected by policy decisions that gradually limit their available quantity. As supply decreases, the cost of carbon increases, directly affecting energy prices and indirectly the cost of production and consumption throughout the economy.
However, the stricter implementation of climate policy highlighted a critical issue: the risk of so-called carbon leakage, namely the risk that European businesses may lose competitiveness or move their production to countries with looser environmental rules, where no corresponding carbon cost exists. Such a possibility would have negative consequences both for the European economy and for the global environment, as emissions would simply be shifted outside Europe.
To address this risk, the EU introduced the Carbon Border Adjustment Mechanism (CBAM – Carbon Border Adjustment Mechanism). This mechanism imposes a carbon cost on imported products from third countries as well, so that they pay approximately the same pollution price as products produced within the EU.
At the present stage, CBAM covers particularly energy-intensive and strategic sectors, such as iron and steel, aluminum, cement, fertilizers, electricity and hydrogen – sectors that lie at the base of many value chains and directly affect the cost of construction, infrastructure, industrial production and ultimately consumers and businesses.
The implementation of CBAM is taking place gradually. Specifically, from October 2023 until the end of 2025 the system is in a transitional phase, during which importers are not burdened with a financial cost, but are required to report the emissions embedded in their imported products. The full implementation of the mechanism began on 1 January 2026, with the price of the certificates resulting as a weighted average of the auction prices of EUAs within the framework of the EU ETS.
During 2026, CBAM certificate prices are published on a quarterly basis, while from 2027 onward they will be calculated and announced weekly by the European Commission and the European Energy Exchange (EEX).
For the first quarter of 2026, the CBAM price was set at €75.36 per metric ton of CO₂ equivalent. CBAM certificates will be purchased through a central platform, which will become available from February 2027, and must be surrendered within the same year, covering the obligations corresponding to imports from the previous year.
Identifying the research gap that exists around CBAM, a recent scientific study by the Center for Financial Studies and Education (KEMEX) of the National and Kapodistrian University of Athens, titled “Dynamic Spillovers across CBAM-Covered Commodity Markets” and authored by Dimitrios Kainourgios, Athanasios Katevatis and Alexandros Tsioutsios, focuses on analyzing the interaction among the key markets that compose it, namely the carbon, energy and industrial commodity markets.
Within this framework, daily data for the period May 2020 – March 2026 are used and the TVP‑VAR econometric model is applied in combination with Dynamic Connectedness Analysis (DCA). The results show that the European carbon, energy and industrial commodity system that comprises it is characterized by a high degree of interconnectedness.
Specifically, the electricity markets of Germany and France, together with the EU natural gas market, emerge as the main “transmitters” of disturbances, meaning that price changes in these markets are strongly transmitted to the rest of the system’s markets, while EUAs and industrial commodities function mainly as “receivers” of shocks, reflecting developments originating from the energy markets.
Of particular interest is the comparison of the period before and after the introduction of CBAM. After October 2023, when the transitional period began, the overall interconnectedness among the markets decreases slightly.
This development does not indicate a weakening of the markets, but a restructuring of risk transmission mechanisms. Natural gas further strengthens its role as a key factor in transmitting volatility, reflecting its importance as a transitional fuel in the energy transition.
The overall connectedness of the electricity markets decreases due to the increased penetration of Renewable Energy Sources in the energy mix, while the importance of carbon is gradually reduced as a result of lignite phase-out and the tightening of climate policy.
At the same time, EUAs become more sensitive to external factors, as their prices are influenced not only by market fundamentals, but also by expectations and regulatory developments directly linked to the EU ETS and CBAM.
Businesses that import products from countries outside the EU that fall under the CBAM regime are burdened both with the administrative cost of submitting reports and with the cost of purchasing the relevant certificates, while European businesses that do not make such imports enjoy greater protection against unfair competition.
For consumers, the decisive role of the electricity and natural gas markets in shaping the cost of living is highlighted, as the effects are indirectly passed on to construction, industry and final products.
At the policy level, the main conclusion is that the effectiveness and stability of CBAM depend to a large extent on the proper implementation and coordination of energy policy.
At the same time, CBAM acts as a lever for technological upgrading, encouraging investments in cleaner and more sustainable production processes. Finally, it is not merely a trade or tax tool, but a critical pillar in shaping the future European economy.
The Center for Financial Studies and Education Laboratory of the National and Kapodistrian University of Athens provides specialized analyses and studies tailored to the needs of businesses and investors, as well as advisory services to the private and public sectors. For more information, contact tel. 210-3689365/33/49 and e-mail [email protected]
* Dimitrios Kainourgios (photo center) is Professor of Finance, Member of the Administration Council of the National and Kapodistrian University of Athens, Director of the Center for Financial Studies and Education (KEMEX).
* Athanasios Katevatis (photo left) is a doctoral candidate in the Department of Economics of the National and Kapodistrian University of Athens and researcher at KEMEX.
* Alexandros Tsioutsios is a Postdoctoral researcher in the Department of Economics of the National and Kapodistrian University of Athens and researcher at KEMEX.