U.S. industry continues to pay a steep price for the federal government’s failure to implement a national carbon price or adopt a carbon accounting standard aligned with the EU’s. According to Niskanen’s U.S. Carbon Exposure Calculator, the carbon charge on U.S. goods entering the European Union will reach roughly $231 million this year. If trade patterns hold, it will top $250 million in 2027 and approach $300 million in 2028.
The projected increases are written into the EU’s carbon-tariff schedule. Each year, Europe charges for a larger share of the emissions embedded in every shipment, and each year it raises the penalty it applies to exporters who cannot or will not document what they actually emit.
None of that money has to leave this country. The United States could collect the same revenue itself by pricing carbon at home or by adopting a way of measuring product emissions that European regulators would accept. In June, we introduced the U.S. CBAM Exposure Calculator, which tracks what the EU’s Carbon Border Adjustment Mechanism costs American exporters.
Two numbers drive the bill. The first is the price of a CBAM certificate, which reflects what European factories pay for their own emissions. In July, the European Commission published the price for the first two quarters of 2026: €75.36 ($86.92 today) and €75.28 ($86.82 today) per metric tonne of CO₂e, the unit that converts each greenhouse gas into the amount of carbon dioxide with the same warming effect.
The second number is the emissions figure the EU applies to each shipment. Exporters who cannot document their own emissions are charged on a default value instead, a standard figure the EU deliberately sets high so that reporting real data is always the cheaper option. Almost every U.S. exporter will be charged at the higher default rates in 2026.
Congress, however, can take steps to shrink the bill from 2027 on.
Heavy is the penalty that bears the iron, steel or fertilizer invoice
The EU’s CBAM assessment affects export sectors unevenly. As shown in Figure. 1, Iron and steel leads the table at a projected 2026 levy of $121.6 million, with fertilizers close behind at $103.9 million. Together the two account for nearly the entire 2026 cost projection. Aluminum ($5.3 million), hydrogen ($0.4 million), and cement ($0.1 million) round out the sectors.
Priced at verified actual emissions instead of the EU defaults, the same trade flows would owe on the order of $55 million to $65 million, all sectors combined, roughly one-fourth of the projected default cost, with most of the difference coming from iron ore pellets and nitrogen fertilizers.1
Figure. 1 Projected 2026 CBAM exposure by sector
Iron and steel have the most to gain from proving their numbers
Verification of actual emissions would matter most in the Iron and steel sector. Of the sector’s projected total cost, about 90 percent falls on iron ore pellets, a mining product used as feedstock in steelmaking. Dividing the emissions data that the seven operating U.S. pellet plants currently report to the Environmental Protection Agency’s Greenhouse Gas Reporting Program by total U.S. iron ore production yields an average emission — known as the “direct intensity” — of 0.08 tonnes of carbon dioxide equivalent per tonne of product (tCO₂e/t). That’s about one-eighth of the EU’s default rate.1
Steel shows a similar gap: 70 percent to 75 percent of U.S. steel is made in electric arc furnaces, which emit about 0.1 tonnes of CO₂ per tonne of steel during processing when running on scrap. The default value the EU assigns is over 2 tCO₂/t, 20 times higher than the actual value. As a result, an American mill that can document its actual emissions could cut its CBAM liability substantially.
Fertilizers have the second highest CBAM exposure due to volume of sales. The EU slashed the sector’s markup value, the noncompliance surcharge, from 10 percent to 1 percent through 2028 because the high prices led to increased production costs and food security concerns. Nonetheless, U.S. shipments of ammonia, urea, ammonium nitrate, and compound fertilizers are still large enough to represent a nine-figure exposure.
Why 2026 is already locked in
Most analysts expect default values to be unavoidable in 2026 because of how the EU has designed its verification rules. Third-party verifiers must be accredited for CBAM work specifically by an EU member state’s national accreditation body, such as Germany’s DAkkS or France’s COFRAC. In practice, verifiers are the same testing and certification firms, such as SGS, Bureau Veritas, and RINA, that already verify emissions reports under the European Union Emissions Trading System and have a global footprint.
Even these incumbents need their accreditation extended to cover CBAM, and analysts note that the national bodies granting extensions are operating at capacity. As a result, even if U.S. exporters began providing their emissions data today, there aren’t enough EU-accredited verifiers to confirm their documentation?
Timing compounds the bottleneck. Actual values must be built from emissions data averaged over a calendar year — in this instance, calendar year 2026 — so the data for a verifier to review won’t even exist until the year ends and would require an in-person site visit. In all, verification could not begin in earnest until January 2027, nine months before certificates are surrendered in September. Many exporters are expected to miss that window in the first cycle and fall back on defaults.
How U.S. manufacturers can close the ‘readiness gap’
U.S. exporters’ 2026 costs, then, are locked in; their 2027 costs are not. Most U.S. plants covered by CBAM already report emissions under EPA’s Greenhouse Gas Reporting Program. Still, that report is one number for the whole plant, and Europe charges by the item. An exporter must attribute a facility’s emissions to a metric tonne of pellets or a tonne of urea under methods the EU recognizes, then have an accredited verifier attest to the result shipment by shipment. No U.S. reporting scheme produces that today.
Workable models exist. E-ledgers frameworks track emissions as auditable transactions at the product level across supply chains, which mirrors CBAM’s technical requirements. The EFI Foundation, a clean energy think tank based in Washington, D.C., has proposed a Comprehensive Carbon Accounting System built on the same principles.
Congress has taken a first step toward closing the readiness gap: The FY2026 appropriations bill directed the Department of Energy’s National Energy Technology Laboratory to study the carbon intensity of U.S. products covered by CBAM. The study, which should be done in a year, can seed the data infrastructure for a carbon accounting standard aligned with the EU’s, although it would not give an exporter a way to verify the emissions in a specific shipment.
The private sector, meanwhile, is not waiting. In steel alone, the Global Steel Climate Council’s Steel Climate Standard and ResponsibleSteel already certify carbon intensity. However, it does so under different system boundaries and thresholds, and a common standard is harder to establish once competing ones take root.
Congress should go one step further and designate an agency to establish or endorse a single product-level emissions accounting standard that EU-accredited verifiers can work from. Two agencies are the obvious candidates. The National Institute of Standards and Technology already writes and maintains the country’s measurement standards, which precisely relate to the problem here. The other is the International Trade Commission. The ITC already completed a comprehensive report on the greenhouse gas intensities of the U.S. steel and aluminum industries last year. With these existing capacities, a credible standard for the emission-intensive sectors is within reach. Congress should not wait until exporters are left guessing which standard Europe will accept.
- This estimate re-runs the calculator’s 2026 projection line by line, holding trade volumes, the certificate price, and each product’s benchmark deduction constant, and replacing each default value (with mark-up) with an estimate of actual U.S. emissions intensity. Where actual emissions exceed the default, as with direct reduced iron, the default is retained, since no exporter would verify against interest. Key inputs: iron ore pellets at 0.08 tCO₂/t, the production-weighted average of the six Minnesota pellet plants’ 2023 filings under EPA’s Greenhouse Gas Reporting Program (against a default of 0.68), which alone reduces the iron and steel line from $121.6 million to roughly $5–10 million; EAF steel at about 0.1 tCO₂/t per the JRC; and ammonia at roughly 2.0 and UAN at 1.0–1.5 tCO₂e/t. The range mainly reflects uncertainty about N₂O abatement at U.S. nitric acid units. ↩︎
