Executive Summary:
CBAM does not tax data centers directly, but it will increasingly affect the cost of steel, cement, aluminum, and electricity used in their construction and operation. As EU carbon pricing expands, operators must integrate embodied carbon into procurement, site selection, and financing decisions. This article explains how CBAM works and how data center developers can respond strategically.
In practice, that means you will increasingly pay a carbon price on the embodied emissions in the steel, cement, aluminium, electricity, and other CBAM‑covered inputs behind your facilities and hardware—not just on your direct power use. For operators and cloud buyers, the practical playbook is to measure full‑lifecycle emissions at the asset and supplier levels, switch to lower‑carbon materials and power, and use verified carbon credits only for hard‑to‑abate residuals—ideally through a platform like Zero Circle that links granular data, decarbonization plans, and sustainable finance.
Data centers account for roughly 1.5–2% of global electricity use today, and IEA projections suggest total demand could more than double by 2030 as AI and cloud workloads grow. That means any new carbon price applied to the materials and electricity behind those facilities shows up quickly in your capex, opex, and financing conversations.
The EU Carbon Border Adjustment Mechanism (CBAM) is a carbon pricing system applied to certain imports, so their embedded emissions face a carbon cost similar to those of production within the EU Emissions Trading System. Legally, it is set out in the CBAM Regulation and related implementing rules, which tie the CBAM certificate price to the average EU ETS allowance price, minus any explicit carbon price already paid in the country of origin.
Most data centers do not ship “data” under CBAM, but they depend heavily on CBAM‑covered materials and grid electricity, especially when building or expanding in Europe or serving EU‑linked demand. Because data centers are already a material share of global electricity use and are set to grow sharply, regulators, customers, and investors will closely track how CBAM‑driven costs influence your design and sourcing choices.
CBAM requires EU importers of covered goods to report product‑level embedded emissions during the transitional phase and, from the definitive phase onward, to buy and surrender CBAM certificates corresponding to those emissions. Reported emissions must generally be verified by accredited verifiers and included in an annual CBAM declaration, which determines the number of certificates to surrender.
Emissions can be calculated using actual data from manufacturers, approved equivalent methods, or default values published by the European Commission, but the default values are intentionally conservative to encourage the collection of real, verified data. CBAM applies at the level of the CN code of the imported good, and not all products in a sector are covered—for example, some aluminium car parts may be excluded, while simple aluminium fasteners or semi‑finished products under specific CN codes are included.
Over time, the EU has signalled its intention to expand CBAM to selected “downstream” steel‑ and aluminium‑intensive products (around 180 product lines) from 1 January 2028, subject to legislative approval. That potential expansion would bring more complex manufactured components closer to certain data center structural elements and hardware‑adjacent parts, thereby bringing them into direct CBAM scope.
This exposure translates into higher capex and opex for carbon‑intensive choices and better economics for low‑carbon alternatives (for example, low‑clinker cement, recycled steel, renewable‑heavy power contracts), especially for hyperscale builds and colocation campuses.
Carbon pricing is any policy that puts a monetary cost on greenhouse‑gas emissions, usually through either a carbon tax or an emissions trading system (ETS). A carbon tax sets a fixed price per tonne of CO₂ emitted, while an ETS (cap‑and‑trade) sets a cap on total emissions and lets companies trade allowances, with the market determining the carbon price.
The EU ETS is the EU’s main carbon pricing system, and CBAM extends that price signal to certain imported goods by requiring importers to buy CBAM certificates whose price mirrors the EU ETS allowance price. In practice, this means the embodied emissions in your cement, steel, aluminium, fertilisers, hydrogen, and electricity imports into the EU all carry an explicit carbon cost, on top of any national carbon taxes you might face in other jurisdictions.
For data center operators, carbon pricing affects cost structures through three primary channels:
| Lifecycle stage | CBAM‑sensitive inputs | Practical decisions you can change |
|---|---|---|
| Site selection and grid | Imported electricity into EU, carbon intensity of local grid, CBAM exposure on cross‑border power flows. | Choose regions with cleaner power, use PPAs or on‑site renewables, and factor CBAM‑linked costs into long‑term grid strategy. |
| Design and construction | Cement, iron and steel, aluminium products in structures and racks, under CBAM CN codes. | Specify low‑carbon concrete, high‑recycled steel, alternative materials, and suppliers with verified product‑level data to avoid conservative defaults. |
| Hardware and infrastructure | Metals and components in cabinets, frames, and support structures that may fall under CBAM‑covered downstream products in future phases. | Prefer vendors who disclose CBAM‑ready product footprints and whose manufacturing runs on low‑carbon power; monitor upcoming 2028 downstream‑scope changes. |
| Operations | Electricity consumption, cooling systems, and grid interactions, with EU data centers already facing efficiency and reporting obligations. | Improve energy efficiency (PUE), shift loads to low‑carbon hours, procure renewable electricity, and align with EU Energy Efficiency Directive reporting requirements. |
Voluntary carbon credits may play a role in neutralizing residual emissions after reduction efforts are exhausted, but they do not reduce CBAM certificate obligations.
For data centers affected by CBAM, a simple hierarchy works best:
This hierarchy is also what regulators, large customers, and lenders increasingly expect to see in sustainability disclosures and green‑finance applications.
Data centers are capital-intensive environments that rely heavily on materials covered under the initial CBAM scope. Understanding these impacts is critical for procurement and sustainability teams.
CBAM’s initial phase focuses on raw materials with high embedded emissions that are imported into the EU. Data centers use significant amounts of:
As of 2026, importers must report the embedded emissions in these goods. If the production of these materials exceeds EU carbon standards, importers must purchase CBAM certificates to bridge the gap. This effectively raises the CAPEX for new builds.
Operators must now track the "embedded emissions" of their hardware. This requires closer collaboration with vendors (like Schneider Electric or Vertiv) to obtain accurate carbon data rather than relying on industry averages.
It is a common misconception that voluntary carbon credits can offset CBAM obligations. They serve entirely different regulatory functions.
| Feature | CBAM Certificates | Voluntary Carbon Credits (VCC) |
|---|---|---|
| Purpose | Regulatory import tax to prevent "carbon leakage." | Offsetting operational emissions (Scope 1-3). |
| Authority | European Commission (EU). | Independent registries (Verra, Gold Standard). |
| Tradability | Non-tradable; purchased from a central authority. | Tradable on open markets. |
| Data Center Use | Mandatory for importing covered goods into the EU. Because: • Not all hardware is in scope. • It depends on CN codes. |
Optional for meeting "Net Zero" marketing goals. |
Beyond CBAM, EU data centers face a tightening regulatory environment around energy and transparency.
For operators, this means the same measurement, data‑collection, and efficiency improvements that CBAM pushes on the material‑import side are being reinforced by energy‑efficiency rules on the operations side.
To determine the financial impact on a project, data center developers can follow a three-step CBAM calculation framework:
Understanding exposure is only the first step. The strategic advantage comes from integrating carbon pricing into procurement, design, and financing decisions — rather than treating it as a late-stage compliance cost.
Zero Circle is partnered with Wasabi Technologies to support data centers in their decarbonization journey. Together, we're helping operators navigate the complexities of CBAM compliance, carbon pricing, and sustainable infrastructure design.
CBAM is not only a carbon price mechanism — it is a data regime. From 2026 onward, EU importers must submit verified embedded-emissions data for covered goods under specific CN codes and surrender CBAM certificates priced in line with the EU ETS.
For data center developers and operators, this means steel, cement, aluminium, and certain electricity imports must be traceable at the product and supplier level. Portfolio-level estimates or generic averages may trigger the use of conservative default values, increasing effective carbon exposure.
Zero Circle translates procurement and supplier data into CBAM-aligned embedded emissions calculations.
This ensures exposure is identified before procurement contracts are finalized.
By prioritizing actual product-level data over defaults, developers can reduce certificate obligations while strengthening audit defensibility.
Zero Circle operates as a regulatory translation layer between procurement systems, supplier disclosures, and EU carbon pricing rules.
From 2026 onward, CBAM certificates will be priced according to the weekly average EU ETS allowance price. This introduces carbon price volatility directly into capital allocation and procurement decisions.
A material choice made today may carry significantly different lifetime cost implications depending on EU ETS price trajectories.
Zero Circle models carbon as a financial variable.
This allows project teams to evaluate exposure under conservative, base, and high carbon price pathways.
The platform enables side-by-side modeling of:
Each option is assessed not only on upfront cost, but on projected carbon-linked cost under evolving EU pricing.
Site selection increasingly intersects with carbon pricing. The platform integrates:
By quantifying carbon pricing impacts before construction begins, developers can optimize design and location decisions in a structured way.
Carbon-intensive infrastructure increasingly faces scrutiny from lenders, investors, and enterprise customers — particularly in EU-linked markets where CBAM and energy-efficiency regulations intersect.
Lower-embodied-carbon design choices reduce certificate exposure and may strengthen financing eligibility.
Zero Circle connects carbon intelligence with capital strategy.
This supports eligibility for green loans, sustainability-linked debt structures, and climate-aligned infrastructure funds.
Projects can demonstrate:
This strengthens engagement with green lenders and institutional capital providers.
CBAM certificates are mandatory compliance instruments and cannot be replaced with voluntary carbon credits. However, after reduction pathways are optimized, high-integrity carbon credits may be used to neutralize residual operational emissions that remain hard to abate.
Zero Circle embeds carbon credits within a governance framework that:
This ensures credits complement — rather than substitute — disciplined decarbonization.
CBAM, carbon pricing, and carbon credits are becoming core design variables for data center development — influencing where you build, what materials you specify, and how you structure financing.
Treat CBAM and EU energy rules as structural inputs into procurement and site strategy. Tighten measurement at the supplier level, compare low-carbon material alternatives under EU ETS scenarios, and integrate financing considerations early in project design.
Organizations that can quantify exposure, model future carbon costs, and align with capital markets' expectations will convert regulatory pressure into competitive advantage.
Zero Circle’s platform is structured to address this intersection of regulation, carbon pricing, and finance — connecting granular emissions data with regulatory requirements, capital providers, and credible carbon governance so data center assets are CBAM-ready and resilient to future carbon pricing expansion.