Under CBAM, the carbon footprint of imported goods can be calculated in two ways, depending on the availability of emissions data: ๐ฉ๐ฒ๐ฟ๐ถ๐ณ๐ถ๐ฒ๐ฑ ๐ฒ๐บ๐ถ๐๐๐ถ๐ผ๐ป๐ Importers may use emissions data shared by the exporter, as long as it is independently verified in line with EU requirements. This approach allows companies with lower-carbon production to report their actual emissions and benefit from reduced CBAM costs. ๐๐ฒ๐ณ๐ฎ๐๐น๐ ๐ฒ๐บ๐ถ๐๐๐ถ๐ผ๐ป๐ ๐๐ฎ๐น๐๐ฒ๐ If verified emissions data is unavailable, incomplete, or cannot be validated, importers must apply EU-defined default values. These defaults are set according to the product type and country of origin and are generally higher than average emissions levels. This approach is designed to prevent under-reporting and to encourage exporters to disclose and verify real emissions data. While benchmarks reflect typical emissions by production method, default values apply when verified supplier data is unavailable. ๐๐ฐ๐ต๐ฆ: ๐๐ฉ๐ช๐ญ๐ฆ ๐ต๐ฉ๐ช๐ด ๐ข๐ณ๐ต๐ช๐ค๐ญ๐ฆ ๐ง๐ฐ๐ค๐ถ๐ด๐ฆ๐ด ๐ฐ๐ฏ ๐ด๐ต๐ฆ๐ฆ๐ญ, ๐๐๐๐ ๐ข๐ญ๐ด๐ฐ ๐ข๐ฑ๐ฑ๐ญ๐ช๐ฆ๐ด ๐ต๐ฐ ๐ฐ๐ต๐ฉ๐ฆ๐ณ ๐ฉ๐ช๐จ๐ฉ-๐ค๐ข๐ณ๐ฃ๐ฐ๐ฏ ๐ฑ๐ณ๐ฐ๐ฅ๐ถ๐ค๐ต๐ด ๐ด๐ถ๐ค๐ฉ ๐ข๐ด ๐ค๐ฆ๐ฎ๐ฆ๐ฏ๐ต, ๐ข๐ญ๐ถ๐ฎ๐ช๐ฏ๐ถ๐ฎ, ๐ง๐ฆ๐ณ๐ต๐ช๐ญ๐ช๐ป๐ฆ๐ณ๐ด, ๐ข๐ฏ๐ฅ ๐ช๐ฎ๐ฑ๐ฐ๐ณ๐ต๐ฆ๐ฅ ๐ฆ๐ญ๐ฆ๐ค๐ต๐ณ๐ช๐ค๐ช๐ต๐บ. ๐๐ต๐ฆ๐ฆ๐ญ ๐ณ๐ฆ๐ค๐ฆ๐ช๐ท๐ฆ๐ด ๐ต๐ฉ๐ฆ ๐ฎ๐ฐ๐ด๐ต ๐ข๐ต๐ต๐ฆ๐ฏ๐ต๐ช๐ฐ๐ฏ ๐ฃ๐ฆ๐ค๐ข๐ถ๐ด๐ฆ ๐ช๐ต๐ด ๐ฑ๐ณ๐ฐ๐ฅ๐ถ๐ค๐ต๐ช๐ฐ๐ฏ ๐ฎ๐ฆ๐ต๐ฉ๐ฐ๐ฅ๐ด ๐ข๐ฏ๐ฅ ๐ฆ๐ฎ๐ช๐ด๐ด๐ช๐ฐ๐ฏ๐ด ๐ฅ๐ข๐ต๐ข ๐ข๐ณ๐ฆ ๐ธ๐ฆ๐ญ๐ญ-๐ฅ๐ฆ๐ง๐ช๐ฏ๐ฆ๐ฅ, ๐ฎ๐ข๐ฌ๐ช๐ฏ๐จ ๐ฃ๐ฆ๐ฏ๐ค๐ฉ๐ฎ๐ข๐ณ๐ฌ๐ด ๐ข๐ฏ๐ฅ ๐ฅ๐ฆ๐ง๐ข๐ถ๐ญ๐ต ๐ท๐ข๐ญ๐ถ๐ฆ๐ด ๐ฆ๐ข๐ด๐ช๐ฆ๐ณ ๐ต๐ฐ ๐ช๐ฎ๐ฑ๐ญ๐ฆ๐ฎ๐ฆ๐ฏ๐ต ๐ข๐ฏ๐ฅ ๐ต๐ณ๐ข๐ค๐ฌ. For example, Under the CBAM default framework, steel slabs imported from different countries are assigned different emissions values based on each countryโs average carbon intensity: โข ๐๐ต๐ถ๐ป๐ฎ: 3.167 tonnes of COโ per tonne of steel โข ๐๐ป๐ฑ๐ถ๐ฎ: 3.000 tonnes of COโ per tonne of steel โข ๐๐ฟ๐ฎ๐๐ถ๐น:1.800 tonnes of COโ per tonne of steel These differences show that CBAM places a higher cost on steel produced using more carbon-intensive methods. Importers will have to pay CBAM based on these higher default values unless exporters provide verified emissions data. This system encourages exporters to report real emissions and promotes cleaner, more transparent production practices. To further incentivize reporting and gradually phase in the cost of carbon, CBAM applies annual mark-ups on these default values. The mark-ups increase over time: โข 2026: +10% โข 2027: +20% โข 2028 onward: +30% This approach ensures that the longer importers rely on default values instead of verified data, the higher their CBAM costs. Over time, it encourages suppliers to report real emissions and rewards cleaner, more transparent production methods.
In CBAM, a benchmark is a reference value for the typical carbon emissions of a steel product. Benchmarks vary by production method, as different steelmaking processes generate different amounts of COโ:
1.
Blast Furnace: Basic Oxygen Furnace (BF/BOF): 1.370 tCOโe per tonne, traditional method using coal, with high emissions.
2.
Direct Reduced Iron: Electric Arc Furnace (DRI/EAF): 0.481 tCOโe per tonne, cleaner method using gas or hydrogen, with moderate emissions.
3.
Scrap-based: Electric Arc Furnace (Scrap EAF): 0.072 tCOโe per tonne, uses recycled steel, with very low emissions.
Benchmarks serve as a yardstick for importers. If a supplierโs verified emissions are lower than the benchmark, importers pay less CBAM. This creates a strong incentive for producers to adopt green steel technologies. If emissions are higher or unverified, default values apply, increasing costs. By using such benchmarks, the EU encourages cleaner production and motivates importers to source from low-carbon suppliers.
Following its transitional reporting phase (2023โ2025), CBAM will impose financial obligations from January 2026. With CBAM taking full effect from the said date, both importers and exporters must take proactive steps to manage costs and remain competitive in the EU market.
โข Implement robust carbon accounting practices to measure and verify COโ emissions for their products, ensuring accurate data for EU importers. โข Submit verified emissions data to reduce CBAM liabilities for buyers. โข Adopt cleaner production methods where possible, lowering carbon intensity and making products more competitive.
โข Check supplier emissions data before purchasing to avoid high default CBAM costs. โข Factor CBAM costs into pricing and contracts, ensuring financial risks are managed. โข Adjust sourcing strategies to favor suppliers with verified low-carbon emissions.
Early preparation is key for companies that measure, report, and verify emissions now can reduce CBAM costs, maintain competitiveness, and prevent supply chain disruptions. Those who delay may face higher costs and limited access to the EU market.
The introduction of CBAM brings significant challenges, from measuring and verifying emissions to calculating costs and ensuring compliance. Managing all of this manually can be time-consuming and risky, especially when default values and annual mark-ups can dramatically increase costs. Cognitud provides digital solutions for trade compliance and supply chain transparency, helping businesses manage CBAM requirements efficiently and accurately. With Cognitud, companies can: โข Collect, track, and verify carbon emissions from suppliers, ensuring reporting under CBAM is reliable. โข Calculate potential CBAM liabilities for different products and countries, including future mark-ups, enabling proactive cost planning. โข Monitor supplier compliance, reducing the risk of default values and unexpected CBAM charges. โข Support strategic decision-making, helping importers optimize sourcing and supply chains to minimize CBAM costs. By leveraging these capabilities, companies can reduce financial risks, stay competitive in the EU market, and transition toward lower-carbon supply chains. Cognitud transforms CBAM compliance from a regulatory challenge into a strategic advantage, giving businesses the insights and control they need in a carbon-conscious global trade environment.
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Abhigyan Gupta
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The Carbon Border Adjustment Mechanism (CBAM) is an EU policy that ensures imported goods entering the EU account for the greenhouse gas emissions generated during their production. Its goal is to protect European industries from unfair competition, encourage global emissions transparency, and integrate the cost of carbon into international trade.
CBAM will take full effect on 1 January 2026. From that date, importers must either report verified emissions from their suppliers or apply EU-defined default emissions values.
If verified emissions data cannot be provided, importers must apply the default emissions values set by the EU. Default values are generally higher than average emissions to incentivize reporting and prevent under-reporting.
Yes, CBAM applies to steel as well as other high-carbon products, including cement, aluminum, fertilizers, and imported electricity. Steel receives particular attention because production methods and emissions data are well-defined, making it easier to implement benchmarks and default values.
Importers into the EU of goods covered by CBAM must comply. They are responsible for reporting verified emissions or applying default emissions values and paying CBAM costs. Exporters can support compliance by providing accurate, verified emissions data.
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