EU CBAM enters definitive phase: Reshaping the supply chain for PV auxiliary materials

EU CBAM overview

The Carbon Border Adjustment Mechanism (CBAM), often referred to as a carbon border tax or tariff, is a levy imposed by the European Union (EU) on the carbon emissions embedded in certain imported goods. In essence, it is a mechanism that imposes a fee on imported high-carbon products based on their embedded carbon emissions, functioning in a manner similar to a carbon tariff. The mechanism serves three primary objectives: first, to prevent EU companies operating under stringent carbon constraints from losing competitiveness due to higher decarbonization costs—a problem commonly referred to as carbon leakage; second, to encourage global supply chains to reduce carbon emissions; and third, to ensure that products exported from non-EU countries bear carbon costs comparable to those of products manufactured within the EU.

Given the EU’s strict regulation of carbon emissions, energy-intensive industries within the EU are often required to pay substantial costs for their emissions. These costs are typically reflected in higher production expenses and product prices, weakening their competitiveness in international markets relative to peers operating under looser carbon constraints. The introduction of CBAM, therefore, serves a dual purpose: on the one hand, it aims to prevent carbon leakage and advance global decarbonization goals; on the other, it seeks to level the playing field between EU producers and their foreign competitors, thereby safeguarding the international competitiveness of EU industries.

In terms of scope, CBAM primarily targets carbon-intensive sectors, including cement, steel, aluminum, fertilizers, and electricity. Under this policy, EU importers are required to pay corresponding carbon costs when importing covered products. These costs are calculated based on the carbon price under the EU Emissions Trading System (EU ETS), ensuring that imported products face carbon costs equivalent to those borne by products produced within the EU.

Based on the EU’s roadmap, CBAM follows a phased implementation schedule:

• October 1, 2023: CBAM entered its transitional phase, during which importers are required to report embedded carbon emissions associated with covered products, but no actual payments are required.

• January 1, 2026: CBAM will formally enter the definitive phase. Importers will be required to pay for the embedded carbon emissions of imported products by purchasing CBAM certificates, with prices benchmarked to the EU ETS carbon price.

• By 2034: CBAM is expected to reach full implementation, with a broader scope of emissions coverage, potentially including indirect emissions and more comprehensive accounting requirements.

In other words, 2023–2025 constitutes a transition period, during which CBAM functions solely as a declaration-based mechanism; importers must disclose emissions data, while financial obligations are deferred. From 2026 onward, CBAM will become a fully fledged carbon pricing instrument, marking the shift from emissions reporting to actual carbon cost payment at the EU border.
 

CBAM’s impact on PV auxiliary materials

Although PV modules have not yet been explicitly included in the CBAM coverage list, their key upstream materials—such as aluminum, steel, and glass—are already classified as carbon-intensive products that fall either directly within CBAM’s scope or under heightened regulatory scrutiny by the EU. In other words, the PV industry has, in effect, already entered CBAM’s “quasi-impact zone.” 

Moreover, voices within the European industry have increasingly called for PV modules to be brought under CBAM, arguing that a framework that targets raw materials but not finished products could give rise to competitive distortions. Whether PV modules will ultimately be incorporated into CBAM remains an issue that warrants continued monitoring. A brief analysis of how major PV auxiliary materials are affected by CBAM is provided in the table below.

Aluminum frames are the first PV auxiliary material that warrants close attention under CBAM. While finished PV modules have not yet been explicitly included in the current scope of CBAM, the possibility of scope expansion remains. 

Crucially, aluminum and steel are already among the primary imported product categories directly covered by CBAM, with their embedded carbon costs aligned with those under the EU ETS framework. Starting in 2026, the EU plans to extend CBAM coverage to certain downstream products containing aluminum or steel. This expansion may include carbon levies on imported aluminum and steel frames themselves, as well as reporting requirements for energy consumption and carbon footprints associated with frame manufacturing processes. 

Looking ahead, not only will aluminum and steel raw materials continue to be exposed to carbon pricing, but downstream frame products may also be directly brought under CBAM’s charging scope.

According to research from the InfoLink Bill of Materials Market Report, carbon emissions associated with aluminum frames currently account for approximately 7% of a PV module’s total production-stage emissions. As illustrated in the figure above, a comparative assessment of frame-level carbon emissions is conducted using conventional aluminum frames as the baseline, with calculations based on current available market data.

Adopting recycled aluminum significantly reduces carbon emissions while also lowering frame costs. Similarly, composite frames and steel frames offer clear low-carbon advantages over conventional aluminum frames. Their generally lower costs make them an attractive option for some manufacturers; however, shipments of these alternatives to the EU market currently remain limited.

Given the discrepancies between manufacturer standards and EU standards, if frame products are brought under CBAM, the actual carbon charges would ultimately be determined in accordance with EU regulatory requirements or official EU calculation and verification methodologies, rather than manufacturer-specific estimates.

The potential CBAM implications for PV glass remain under close watch. Carbon emissions from PV glass production account for approximately 6%–7% of a module’s total production-stage emissions. While glass is not currently subject to CBAM charges in the same explicit manner as aluminum, it could be brought into CBAM’s scope in the future, given its highly energy- and carbon-intensive production process, which encompasses raw material extraction (such as silica sand), substantial fuel requirements for high-temperature furnaces, and significant electricity consumption.

In the short term, emissions data reporting requirements may be introduced ahead of any formal charging mechanism, indirectly increasing supply-chain management and traceability costs. Over the longer term, should PV glass be formally included under CBAM, such inclusion would directly raise the cost of exporting glass products to the EU market.
 

Proactive carbon-cost management as a sustained competitive advantage

For PV auxiliary material companies, CBAM is not merely a short-term compliance cost, but rather a catalyst for a medium- to long-term reshaping of competitiveness. Companies should shift as early as possible from a stance of passive policy compliance to one of proactive carbon-cost management, with particular focus on raw-material carbon intensity, supply-chain transparency, and data traceability.

This requires optimizing the energy mix at the raw-material stage, increasing the share of recycled and low-carbon materials, and progressively establishing quantifiable and auditable carbon footprint management systems. Especially for energy-intensive PV auxiliary materials such as aluminum frames and PV glass, low-carbon pathways are no longer solely a cost consideration. They will directly influence suppliers’ ability to secure long-term orders from European customers, and indirectly affect downstream customers’ competitiveness in module sales.

For European customers, CBAM is also reshaping procurement logic. Selection criteria that were previously driven primarily by price and delivery are increasingly shifting toward a parallel evaluation framework encompassing price, carbon emissions, and supply-chain transparency. A growing number of European module manufacturers and project owners are beginning to engage earlier in upstream auxiliary-material selection, seeking to lock in low-carbon, traceable supply chains through long-term partnerships. This approach aims to mitigate future uncertainty around carbon costs and compliance risks.

Ultimately, CBAM is driving not a simple transfer of costs, but a coordinated restructuring across the upstream and downstream segments of the value chain. PV auxiliary material suppliers that are able to strike a balance between cost control, carbon performance, and supply reliability will be better positioned to secure sustained competitive advantages in the solar PV market.