CBAM embedded emissions determine how many certificates an EU importer must purchase, surrender, and pay for under Regulation (EU) 2023/956. The number that matters in every CBAM declaration is specific embedded emissions (SEE): the tonnes of CO₂e emitted per tonne of goods produced, expressed as a single figure at the level of the production installation. Get this number right, and your certificate obligation follows. Get it wrong, or default to the Commission's published fallback values, and you pay a penalty surcharge of 10% in 2026, rising to 30% from 2028 onward.
Understanding how embedded emissions are structured, measured, and verified is the operational core of CBAM compliance. This guide covers the legal definition of embedded emissions, the distinction between direct and indirect emissions (and which sectors include both), the step-by-step calculation methodology under Implementing Regulation (EU) 2025/2547, a worked numerical example, and the financial consequences of using default values versus actual data. For a plain-English explanation of what CBAM is and why embedded emissions are central to the mechanism, what is CBAM provides the foundational overview. The EU CBAM guide provides the regulatory foundation; this article focuses on the calculation mechanics.
Caption: Embedded emissions flow from the production installation to the CBAM certificate obligation. Direct emissions (Scope 1) apply to all six sectors; indirect emissions (Scope 2 electricity) apply only to cement and fertilizers.
What Are CBAM Embedded Emissions?
Embedded emissions are the greenhouse gas emissions associated with the production of goods, expressed per unit of output and attributed to those goods for the purpose of CBAM certificate calculation. The legal definition appears in Article 3(4) of Regulation (EU) 2023/956: embedded emissions are the combination of direct embedded emissions and, where applicable, indirect embedded emissions from the production of CBAM goods.
Two components exist: direct emissions come from the production process itself (fuel combustion, chemical reactions, heat generation within the installation), and indirect emissions come from the electricity consumed during production. The scope of which component counts depends entirely on the sector. Cement and fertilizers include both direct and indirect emissions. Iron and steel, aluminium, and hydrogen include direct emissions only. Electricity is its own category, priced per MWh at the point of generation.
The unit of measurement is always tonnes of CO₂ equivalent (tCO₂e) per tonne of goods. For electricity, it is tCO₂e per MWh. This ratio, the specific embedded emissions figure, is what appears in CBAM declarations and in the verification reports that accompany them.
CBAM applies to six sectors: iron and steel, cement, aluminium, fertilizers, electricity, and hydrogen. Every import declaration for these goods must report specific embedded emissions for each production installation supplying the goods. The full CBAM calculation process translates these emission figures into a certificate obligation.
Direct vs. Indirect Embedded Emissions: The Legal Distinction
Direct embedded emissions (Article 3(4)) are greenhouse gas emissions released during the production process at the production installation, including emissions from combustion of fuels, process chemistry, and the generation of heat and cooling consumed at the site. These are Scope 1 emissions in standard carbon accounting terminology.
Indirect embedded emissions (Article 3(4)) are emissions from the production of electricity that is consumed during the production of the goods. These are Scope 2 emissions. Their inclusion in CBAM depends on sector designation, not on how much electricity a facility actually uses.
The sector-by-sector breakdown is fixed by Annex II of Regulation (EU) 2023/956:
| Sector | Direct Emissions | Indirect Emissions | GHGs Covered |
|---|---|---|---|
| Iron and steel | Priced | Not priced | CO₂ |
| Cement | Priced | Priced | CO₂ |
| Aluminium | Priced | Not priced | CO₂ + PFCs (CF₄, C₂F₆) |
| Fertilizers | Priced | Priced | CO₂ + N₂O |
| Electricity | Priced | N/A | CO₂ |
| Hydrogen | Priced | Not priced | CO₂ |
Cement and fertilizers include indirect emissions because their electricity consumption is material to their total carbon footprint and because the Commission determined that omitting electricity-related emissions would create a significant pricing distortion for these sectors. For steel and aluminium, the regulation excludes indirect emissions at the CBAM level, though default values for these sectors do reflect electricity intensity in country-specific benchmarks.
Why the Production Installation Is the Unit of Analysis
CBAM calculates embedded emissions at the production installation level (Article 3(3)), not at the company or country level. A production installation is the specific facility where the goods are manufactured. This matters because two plants owned by the same company in the same country can have very different emission intensities depending on their technology, fuel mix, and energy efficiency.
An EU importer sourcing from five different steel mills in Turkey must obtain separate specific embedded emissions data for each mill. A single country-level average figure is not acceptable for actual data submission. Only for default values does the Commission publish country-level or product-level averages.
The Specific Embedded Emissions Formula
Specific embedded emissions (SEE) equals total embedded emissions divided by the quantity of goods produced, stated as tonnes CO₂e per tonne of goods. The core formula, established in Implementing Regulation (EU) 2025/2547, is:
SEE = (Direct Embedded Emissions + Indirect Embedded Emissions) / Net Production (tonnes)
For sectors where indirect emissions are not priced (steel, aluminium, hydrogen), the indirect component is zero. The formula reduces to:
SEE = Direct Embedded Emissions / Net Production (tonnes)
For cement and fertilizers, both components apply:
SEE = (Direct Embedded Emissions + Indirect Embedded Emissions) / Net Production (tonnes)
The indirect embedded emissions component is itself calculated as:
Indirect EE = Electricity Consumed (MWh) × Emission Factor of Electricity (tCO₂/MWh)
The electricity emission factor is the carbon intensity of the grid or power source actually used at the installation. Measured actual electricity emission factors are preferred. Where a production installation uses grid electricity, the country's published grid emission factor applies. Where dedicated renewable electricity supply is demonstrable (with documentation showing temporal and geographic correlation), a lower factor applies.
Calculating Direct Embedded Emissions
Direct embedded emissions are calculated using one of three methods defined in IR (EU) 2025/2547: the calculation-based approach (Equation 11), the mass balance approach (Equation 12), or the measurement-based approach (continuous emission monitoring).
The calculation-based approach (most common for CBAM purposes) uses:
Direct EE = Activity Data × Emission Factor × Oxidation Factor
Where:
- Activity data is the quantity of fuel or material consumed (measured in tonnes, cubic meters, or GJ)
- Emission factor is the CO₂ released per unit of fuel or material (tCO₂/unit)
- Oxidation factor accounts for incomplete combustion (typically 0.99 to 1.0 for natural gas, 0.98 for coal)
For process emissions (not from combustion), such as limestone calcination in cement production, the formula uses stoichiometric factors. The calcination reaction CaCO₃ → CaO + CO₂ releases 0.785 tonnes of CO₂ per tonne of CaCO₃ decomposed, based on the molecular weight ratio (44/56 for the CO₂/CaO ratio, applied to the full CaCO₃ molecule of weight 100). The clinker-to-cement ratio is tracked via Equation 64 in IR 2025/2547.
Step-by-Step CBAM Embedded Emissions Calculation
The five steps below apply to any production installation supplying CBAM goods. Each step maps to a data collection or calculation action that the non-EU producer performs and the EU importer must verify.
Step 1: Identify the production route and system boundary
Identify which production route applies to the goods being manufactured. The production route determines which activity data, emission factors, and formulas apply. For steel, four routes exist: blast furnace and basic oxygen furnace (BF-BOF), electric arc furnace with scrap (EAF), direct reduced iron with electric arc furnace (DRI-EAF), and hydrogen-based direct reduction (H₂-DRI). Each route has a different emission profile. A BF-BOF steel plant starts by establishing its system boundary: the physical boundaries of the installation, including all fuel inputs, process emissions, and (for sectors with indirect pricing) electricity consumption.
Step 2: Collect activity data for all emission sources
Collect measured quantity data for every emission source within the system boundary. Emission sources in a BF-BOF plant include coke consumption in the blast furnace, coal injection, natural gas consumption, limestone added to the basic oxygen furnace, and electricity consumed. Each source requires metered or otherwise reliably measured data covering the full production period.
Step 3: Apply emission factors and calculate total direct CO₂e
Multiply each activity data value by the appropriate emission factor. Default emission factors for common fuels are published by the Intergovernmental Panel on Climate Change (IPCC) and adopted in EU implementing regulations. Installation-specific emission factors based on continuous fuel sampling and laboratory analysis are acceptable and often more accurate. For aluminium, perfluorocarbon (PFC) emissions from anode effect events must also be quantified, with CF₄ converted at a global warming potential (GWP) of 6,630 and C₂F₆ at 11,100.
Step 4: Calculate indirect embedded emissions (cement and fertilizers only)
For cement plants and fertilizer plants, measure or estimate the electricity consumed during the production period in MWh. Multiply by the applicable electricity grid emission factor in tCO₂/MWh. The Commission publishes grid emission factors by country; installation-specific factors from dedicated renewable power purchase agreements require documentary evidence of additionality, renewable certification, and geographic and temporal correlation.
Step 5: Divide by net production to obtain specific embedded emissions
Sum direct and (where applicable) indirect embedded emissions. Divide the total by the quantity of goods produced during the measurement period, expressed in net tonnes. This yields the specific embedded emissions figure in tCO₂e/t that appears in the CBAM declaration and verification report.
Worked Example: Portland Cement from Turkey
This example calculates specific embedded emissions for a Portland cement plant in Turkey supplying an EU importer. Portland cement (CN code 2523 29) is subject to both direct and indirect emission pricing.
Production parameters (calendar year 2026):
- Net cement production: 500,000 tonnes
- Clinker-to-cement ratio: 0.82 (82% clinker content)
- Clinker produced: 410,000 tonnes
- Fuel: coal (primary), natural gas (secondary)
Direct emission sources:
| Source | Quantity | Emission Factor | CO₂ (tonnes) |
|---|---|---|---|
| Limestone calcination (process) | 410,000 t clinker | 0.525 tCO₂/t clinker (IPCC stoichiometric) | 215,250 |
| Coal combustion (kiln fuel) | 55,000 t coal | 2.42 tCO₂/t coal | 133,100 |
| Natural gas (supplementary) | 8,500,000 m³ | 0.00202 tCO₂/m³ | 17,170 |
| Total direct CO₂ | 365,520 |
Indirect emission sources (electricity):
- Electricity consumed: 75,000 MWh
- Turkey grid emission factor: 0.452 tCO₂/MWh (published country average, 2025 data)
- Indirect CO₂ from electricity: 75,000 × 0.452 = 33,900 tonnes CO₂
Specific embedded emissions calculation:
SEE = (Direct + Indirect) / Production SEE = (365,520 + 33,900) / 500,000 SEE = 399,420 / 500,000 SEE = 0.799 tCO₂/t cement
This figure of 0.799 tCO₂/t is below the typical Portland cement default value of approximately 0.83 tCO₂/t. At the current EU ETS price of approximately €70/tCO₂, the gross CBAM cost on verified actual data is 0.799 × €70 = €55.93 per tonne of cement. Using the default value instead would yield 0.83 × €70 = €58.10 per tonne, plus the 10% mark-up in 2026 (= €63.91 per tonne). The financial incentive to use actual verified data rather than defaults is approximately €7.98 per tonne in this example, applied across 500,000 tonnes of annual imports.
Caption: Portland cement embedded emissions split by source. Limestone calcination (process CO₂) accounts for approximately 54% of total embedded emissions; fuel combustion approximately 37%; electricity approximately 9%.
Direct Emissions by Sector: Calculation Rules and Emission Factors
CBAM direct emissions cover all greenhouse gas releases occurring within the production installation boundary, from fuel combustion, process chemistry, heat generation, and (for aluminium) perfluorocarbon releases during smelting. The following emission factors apply across the six sectors.
Iron and Steel: Direct Emissions Only
Steel direct embedded emissions vary by production route. The blast furnace and basic oxygen furnace (BF-BOF) route, dominant in China, India, and Russia, produces approximately 2.0 tCO₂ per tonne of crude steel. The electric arc furnace (EAF) route using scrap steel produces approximately 0.4 to 0.6 tCO₂ per tonne, with a central estimate of 0.5 tCO₂/t used in Commission reference scenarios. The direct reduced iron with EAF (DRI-EAF) route using natural gas produces approximately 0.9 to 1.4 tCO₂ per tonne. Hydrogen-based DRI (green steel) produces 0.0 to 0.1 tCO₂ per tonne.
Electricity consumed in EAF steelmaking is significant (300 to 700 kWh per tonne of steel) but is not included in CBAM direct embedded emissions for steel. Steel's Annex II designation means only Scope 1 emissions count for the certificate obligation, though default values for EAF countries implicitly reflect electricity intensity.
Cement: Direct and Indirect Emissions
Cement's process emission from limestone calcination represents approximately 60% of total embedded emissions and is chemically unavoidable in conventional production. The calcination reaction converts calcium carbonate (CaCO₃) to calcium oxide (CaO) and CO₂, with no energy efficiency measure capable of eliminating it. Clinker substitution using blast furnace slag, fly ash, or calcined clay reduces the clinker-to-cement ratio and correspondingly reduces process CO₂ per tonne of cement.
Portland cement reference emission factor: approximately 0.83 tCO₂/t (direct + indirect combined). Clinker alone: approximately 0.85 to 0.87 tCO₂/t. Blended cement with clinker ratios of 50 to 70%: approximately 0.40 to 0.65 tCO₂/t.
Aluminium: Direct Emissions Including PFCs
Primary aluminium smelting through the Hall-Héroult electrolytic process produces direct CO₂ from anode consumption at approximately 1.5 tCO₂ per tonne of aluminium. PFC emissions (CF₄ and C₂F₆) from anode effect events add 0.3 to 1.5 tCO₂e per tonne depending on smelter age and control technology. Secondary aluminium (from recycled scrap) produces 0.05 to 0.10 tCO₂/t.
Electricity consumption in primary aluminium smelting runs 14 to 16 MWh per tonne. CBAM does not price this electricity-related Scope 2 emission for aluminium, but the electricity carbon intensity of the producing country's grid heavily influences default values. A smelter in the UAE using gas-fired power at approximately 0.55 tCO₂/MWh consumes 14 × 0.55 = 7.7 tCO₂/t in electricity-related emissions, none of which enters the CBAM direct calculation, but all of which the default value will reflect.
Fertilizers: Direct and Indirect Emissions Including N₂O
Nitrogen fertilizer production begins with the Haber-Bosch synthesis of ammonia from nitrogen and hydrogen. The hydrogen feedstock derives from steam methane reforming (SMR) of natural gas in 99% of global production, releasing approximately 1.3 tCO₂ per tonne of urea during reforming. Nitric acid production for ammonium nitrate generates N₂O, a greenhouse gas with a global warming potential of 265 (AR5, 100-year horizon). N₂O from nitric acid plants contributes approximately 0.3 to 0.8 tCO₂e per tonne of ammonium nitrate.
Total urea embedded emissions: approximately 2.3 to 2.6 tCO₂e per tonne. Ammonium nitrate: approximately 1.5 to 2.0 tCO₂e per tonne. The indirect electricity component for fertilizers adds approximately 0.1 to 0.3 tCO₂e per tonne depending on grid intensity.
CBAM Indirect Emissions: Cement and Fertilizers
CBAM indirect embedded emissions apply only to cement and fertilizers, covering the CO₂ released during the generation of electricity consumed in production. Two sectors include indirect emissions; four do not. This sector-specific scope is fixed by Annex II of Regulation (EU) 2023/956 and cannot be adjusted by national implementation.
Why Cement and Fertilizers Include Indirect Emissions
The Commission's rationale, set out in the Regulation's preamble, is that electricity constitutes a material share of total carbon cost for cement kilns and fertilizer plants, and excluding it would create a competitive distortion favoring producers in countries with carbon-intensive, low-cost electricity grids. A cement plant in Egypt burning coal-fired electricity would face a lower CBAM obligation than its actual carbon footprint warrants, undermining CBAM's carbon leakage prevention objective.
For steel and aluminium, the policy decision went the other way. Indirect emissions are not priced for these sectors in part because the primary emissions source (coking coal for BF-BOF steel, Hall-Héroult anode for aluminium) dominates the footprint, and in part because electricity pricing for aluminium in particular was judged too complex given the sector's deliberate relocation to low-electricity-cost regions.
Calculating Indirect Emissions in Practice
Indirect embedded emissions for a production installation are calculated as:
IEE = Q_electricity × EF_electricity
Where:
- Q_electricity = electricity consumed at the installation during the period (MWh)
- EF_electricity = carbon intensity of the electricity source (tCO₂/MWh)
Three sources of electricity emission factor apply in order of preference:
- Measured actual factor from a dedicated power plant with documented metering and fuel data
- Bilateral hourly matching from a renewable energy certificate or power purchase agreement demonstrating temporal and geographic correlation
- Country grid average published by the Commission for each third country in the implementing regulation data
Most production installations in Turkey, Egypt, India, and China use the country grid average because they consume electricity from the national grid without dedicated renewable sourcing. The country grid averages published by the Commission reflect generation mix data from the most recent year available, typically one to two years behind current conditions.
Default Values vs. Actual Data: The Financial Consequences
Using CBAM default values instead of actual verified emissions data costs more in every year from 2026 onward, with the penalty increasing annually. Default values are set at the country-specific average emission intensity for each product type, with a compulsory mark-up applied on top.
The mark-up schedule under Implementing Regulation (EU) 2025/2621 is as follows:
| Year | Mark-up for Steel, Cement, Aluminium, Hydrogen | Mark-up for Fertilizers |
|---|---|---|
| 2026 | +10% above country average | +1% |
| 2027 | +20% above country average | +1% |
| 2028 onward | +30% above country average | +1% |
Default values become increasingly punitive over time. Exporters with actual verified emissions below the national average gain a growing financial advantage from measurement. Exporters above the national average may prefer defaults, but this scenario narrows as default mark-ups increase.
One documented exception applies in 2026. Due to the interaction between SEFA methodology (the free allocation adjustment under IR 2025/2620) and how default benchmarks are structured in the first definitive year, some product-and-country combinations show lower CBAM liability under default values than under actual values. Industry associations have flagged this to DG TAXUD. No official clarification has been issued as of April 2026. This reversal does not persist beyond 2026 as mark-ups increase.
Worked Comparison: Default vs. Actual for BF-BOF Steel from India
A German importer sources 10,000 tonnes of hot-rolled coil (HRC) from a BF-BOF steel plant in India per year.
Scenario A: Actual verified data
- SEE (verified): 1.78 tCO₂/t (lower than Indian average due to newer plant technology)
- Gross CBAM cost: 10,000 × 1.78 × €70 = €1,246,000
- Net cost in 2026 (× 2.5% CBAM factor): €31,150
Scenario B: Indian default value (with 10% mark-up in 2026)
- Default SEE for Indian BF-BOF: approximately 2.10 tCO₂/t (country average)
- Default with 10% mark-up: 2.10 × 1.10 = 2.31 tCO₂/t
- Gross CBAM cost: 10,000 × 2.31 × €70 = €1,617,000
- Net cost in 2026 (× 2.5% CBAM factor): €40,425
Annual saving from actual data vs. default: €9,275 in 2026. At the 2030 CBAM factor of 48.5%, the same comparison yields annual savings of €179,715. The incentive to invest in measurement systems and verification grows by an order of magnitude between 2026 and 2030.
Complex Goods and Precursor Embedded Emissions
Complex goods carry the embedded emissions of their precursors, in addition to the direct (and indirect, where applicable) emissions from their own production process. Article 3(8) defines complex goods as those produced using one or more precursors listed in Annex I.
A steel pipe (CN code 7304) is a complex good. It carries the embedded emissions of the steel billet or hot-rolled coil used to make it, plus the emissions from the pipe-forming process. An importer of steel pipes must know both the specific embedded emissions of the steel input and the additional emissions from the tube-drawing or extrusion process.
The precursor chain can extend to two levels. Cement pipes contain cement (which itself embeds clinker emissions plus kiln fuel and electricity). Ammonia is a precursor for urea, which is a precursor for compound fertilizers. For each precursor level, the specific embedded emissions must be established, either by actual data from the precursor production installation or by the applicable default value.
Simple goods, defined in Article 3(9), are produced without precursors from Annex I. Primary steel from a blast furnace, starting from iron ore, is a simple good because iron ore is not an Annex I good. The embedded emissions consist only of the production process emissions at that installation.
How Embedded Emissions Are Verified
All embedded emissions data submitted in a CBAM declaration must be verified by an accredited third-party verifier under Delegated Regulation (EU) 2025/2551 and Implementing Regulation (EU) 2025/2546. Self-reported figures that have not been independently verified are not accepted.
Verifier accreditation requires recognition by a National Accreditation Body (NAB) that is a member of the European Accreditation (EA) network, under the standard EN ISO/IEC 14065. Verifiers register in the CBAM Registry from September 1, 2026 onward. The first CBAM declaration deadline is September 30, 2027. This creates a 13-month window to verify thousands of non-EU production installations globally, including mandatory physical site visits for the first verification period.
Verifier fees range from €5,000 to €50,000 per production installation, depending on complexity, number of product types, and installation size. An EU importer sourcing from 20 installations across 5 countries faces verification costs of €100,000 to €1 million in the first cycle. The CBAM default values guide explains when and how importers may rely on defaults in cases where verification is not yet complete.
How Embedded Emissions Affect Certificate Obligations
The specific embedded emissions figure from each import shipment feeds directly into the CBAM certificate calculation under Article 7 and Article 22 of Regulation (EU) 2023/956. The total certificates an authorized declarant must surrender equals the sum of (SEE × net tonnes imported) across all CBAM goods imported in the calendar year, reduced by any Article 9 deduction for carbon prices paid in the country of origin.
The quarterly holding requirement adds a cash-flow dimension. At the end of each calendar quarter, the declarant must hold certificates equal to at least 50% of cumulative embedded emissions from all CBAM imports since January 1 of that year (Article 22(2), as amended by Regulation (EU) 2025/2083). An importer who underestimates embedded emissions and purchases too few certificates during the year faces a shortfall at the quarterly checkpoint.
The annual certificate surrender deadline is September 30, 2027 for the 2026 import year. The penalty for insufficient surrender is €100 per tonne CO₂e not covered, plus the ongoing obligation to procure the missing certificates. The penalty does not replace the surrender obligation. Total non-compliance cost reaches approximately €170 per tonne CO₂e when both the penalty and the certificate purchase price are counted.
What Embedded Emissions Reporting Requires From Non-EU Exporters
Non-EU producers must establish a monitoring plan that describes how their embedded emissions are measured, calculated, and recorded across every production process within the installation boundary. The monitoring plan is required supporting documentation for the verification report submitted to the EU importer.
The monitoring plan specifies, for each emission source:
- Measurement method (metered fuel consumption, material balance, continuous emissions monitoring)
- Frequency of data collection
- Calibration schedule for measuring equipment
- Procedures for estimating data where direct measurement is unavailable
- Data management and records retention
Exporters who have not yet built emissions monitoring systems face the choice between investing in measurement (with verification costs) or accepting default values with mark-ups. The financial math increasingly favors measurement from 2027 onward. Exporters with actual emissions below the country-average default have the strongest incentive to invest immediately.
The CBAM sectors guide provides production-route-specific monitoring requirements for each of the six covered sectors.
Contextual Border: Where Embedded Emissions Connect to the Full CBAM Obligation
Specific embedded emissions are one input into a larger compliance calculation that transforms installation-level emission data into a financial certificate obligation denominated in euros. Understanding embedded emissions in isolation is necessary but not sufficient for compliance. Three further elements connect the SEE figure to the final financial position.
How the SEFA Adjustment Reduces the Net Certificate Obligation
The SEFA (Specific Embedded Free Allocation) methodology, established in Implementing Regulation (EU) 2025/2620, reduces the number of CBAM certificates an importer must surrender by an amount reflecting the free ETS allocation that competing EU domestic producers still receive. In 2026, EU domestic producers retain 97.5% of their free allocation, meaning CBAM-covered imports effectively face only 2.5% of their gross certificate obligation.
The SEFA calculation operates at the sector and product level, not at the installation level. It uses a benchmark free allocation figure for the EU sector, published annually. The practical effect is that the net CBAM cost in 2026 is approximately 2.5% of the gross cost calculated from the SEE figure. This fraction rises to 48.5% by 2030 and 100% by 2034 as free allocation phases out.
How the Article 9 Carbon Price Deduction Applies
A separate deduction under Article 9 applies when the non-EU producer has paid a carbon price in the country of origin for the embedded emissions of the goods. The deduction amount equals the product of the embedded emissions and the foreign carbon price, converted to euros. Only carbon pricing schemes recognized by the Commission as legally binding and effectively enforced qualify.
As of April 2026, no third-country scheme has received formal Commission recognition for Article 9 deductions. South Korea's K-ETS and Switzerland's ETS (linked to EU ETS) are under assessment and expected to qualify. China's national ETS covers the electricity sector only and does not yet cover steel or aluminium, meaning Chinese producers of these goods cannot claim an Article 9 deduction.
How CBAM Interacts With Customs Valuation
CBAM obligations run parallel to customs duties and do not replace them. A 25% customs duty on steel imports coexists with CBAM certificate obligations. The two costs are calculated separately, based on different metrics: customs duty on customs value (price of goods plus freight and insurance), CBAM on embedded emissions. Understanding both costs is part of a complete import cost analysis. The step-by-step CBAM calculation guide covers how to combine these figures into a total landed cost per tonne.
Frequently Asked Questions on CBAM Embedded Emissions
What is the difference between embedded emissions and carbon footprint?
Embedded emissions and carbon footprint overlap but are not identical. CBAM embedded emissions cover only Scope 1 (direct) and, for cement and fertilizers, Scope 2 electricity emissions from the production process. A full carbon footprint typically includes Scope 3 upstream and downstream emissions such as raw material extraction, transport, and end-of-life disposal, none of which CBAM captures. CBAM defines embedded emissions narrowly by statute, and the legal definition in Article 3(4) controls. Commercial carbon footprint disclosures use broader methodology standards such as ISO 14064 or the GHG Protocol Corporate Standard, which include emissions categories that CBAM explicitly excludes.
Does CBAM apply to all greenhouse gases, or only CO₂?
CBAM covers the greenhouse gases listed for each sector in Annex I of Regulation (EU) 2023/956. These gases are CO₂ for all sectors, plus N₂O for fertilizers and PFCs (CF₄ and C₂F₆) for aluminium. All non-CO₂ gases are converted to CO₂ equivalent using the global warming potential values established by the IPCC Fifth Assessment Report (AR5) with a 100-year horizon: N₂O at 265 and CF₄ at 6,630 and C₂F₆ at 11,100. Methane is not currently in scope for any CBAM sector, though the scope expansion proposal (COM(2025)989) does not add it to the covered gases.
Can a producer use actual emissions for some installations and defaults for others?
Yes. The choice between actual verified data and default values is made at the production installation level, not at the importer level or product level. An EU importer can use actual verified SEE figures for installations where data is available and default values for installations where verification has not yet been completed or where the producer does not cooperate with data sharing. The certificate obligation is then calculated separately for each category: actual emissions at the verified SEE figure, default emissions at the published default plus the applicable mark-up. There is no regulatory requirement to apply one approach uniformly across all sources.
Are transport emissions included in CBAM embedded emissions?
No. Transport and logistics emissions between the production installation and the EU border are not included in CBAM embedded emissions. The system boundary ends at the production installation gate. Fuel consumed by shipping vessels, rail freight, and trucks carrying CBAM goods to the EU adds to the goods' real-world carbon footprint but is not counted in the specific embedded emissions reported in CBAM declarations. This boundary choice reflects a practical measurement limitation and a deliberate regulatory scope decision.
What happens if the non-EU producer refuses to provide emissions data?
The EU importer must use default values for that installation. Default values do not require the producer's cooperation. The Commission publishes default values in Implementing Regulation (EU) 2025/2621 for each country and product category. The importer applies the relevant default value, adjusted with the applicable mark-up (10% in 2026, 20% in 2027, 30% from 2028). No penalty applies solely for using defaults, provided the declaration is otherwise complete and accurate. The financial consequence is that the importer pays a higher certificate obligation than if actual, lower emissions had been reported. The what is CBAM article explains the broader importer obligation framework.
Caption: The default value mark-up schedule under IR 2025/2621. Importers using defaults face an increasing surcharge: 10% in 2026, 20% in 2027, and 30% from 2028 onward, creating a growing financial incentive for actual data measurement.
Key Takeaways: CBAM Embedded Emissions in Practice
Three operational points define success or failure in embedded emissions compliance.
First, the specific embedded emissions figure is the foundation of the entire CBAM obligation. Errors at this stage cascade through the certificate calculation, the quarterly holding requirement, and the annual declaration. Establish data collection processes at the production installation level before the first declaration deadline of September 30, 2027.
Second, actual verified data almost always produces a lower certificate obligation than default values for producers using modern, efficient technology. The financial case for investing in monitoring systems and third-party verification is already present in 2026 and becomes compelling post-2028.
Third, indirect emissions apply only to cement and fertilizers and must be calculated separately using the appropriate electricity emission factor for the installation's power source. Confusing the sector scope of indirect emissions is a common error that produces either over-reporting (for steel and aluminium importers including electricity) or under-reporting (for cement and fertilizer importers omitting it).
Embedded emissions calculation sits at the intersection of environmental measurement, supply chain data collection, and financial compliance. The formula is straightforward. The operational challenge is obtaining reliable, verifiable input data from non-EU production installations that may never have measured or reported their emissions before.