For manufacturers outside the EU exporting cement, steel, aluminum, fertilizers, or hydrogen, CBAM compliance is no longer optional—it's a market access requirement. Starting in 2026, EU importers will purchase CBAM certificates based on the embedded emissions of your products. If you cannot provide verified emissions data, your customers will face significantly higher costs due to default emission values.
Here's the reality: Default values are set at the 90th percentile of global emissions intensity. For most efficient manufacturers, this means being penalized for emissions you didn't produce—making your products less competitive than those from suppliers who provide verified data.
This guide walks you through:
Understanding Embedded Emissions: What You Must Measure
Definition of Embedded Emissions
Under CBAM, embedded emissions include:
Key principle: CBAM mirrors the EU Emissions Trading System (EU ETS) scope. It does not cover full lifecycle emissions (no downstream use or transport emissions).
What's Included vs. Excluded
|
Included in CBAM |
Excluded from CBAM |
|
Process emissions (e.g., calcination in cement) |
Emissions from raw material extraction (mining) |
|
Combustion emissions (fuel use in kilns, furnaces) |
Transport emissions between sites |
|
Electricity consumed during production |
Employee commuting |
|
Emissions from precursors (if CBAM goods) |
Downstream product use |
Example (Steel Manufacturing):
Step-by-Step: How to Calculate Embedded Emissions
Step 1: Define Your Production Process Boundaries
Identify all emission sources within your installation that contribute to producing CBAM goods:
System boundary rule: Include all processes from raw material input to the point where the good is ready for export (e.g., casting for steel, packaging for cement).
Step 2: Choose a Monitoring Methodology
The EU recognizes three methodologies:
Option A: Calculation-Based Method
Calculate emissions using:
Formula:
Emissions (tCO₂) = Activity Data × Net Calorific Value × Emission Factor × Oxidation Factor
Best for: Installations with accurate fuel metering and established calculation protocols.
Option B: Measurement-Based Method
Use Continuous Emission Monitoring Systems (CEMS) to directly measure:
Formula:
Emissions (tCO₂) = CO₂ Concentration × Flue Gas Flow × Time
Best for: Large installations with existing CEMS (common in EU ETS facilities).
Option C: Alternative Methods (Until 31 December 2024)
Until the end of 2024, you may use monitoring methods from:
Condition: The method must provide similar accuracy and coverage as EU methods.
After 2024: You must transition to EU-compliant calculation or measurement methods.
Step 3: Calculate Direct Emissions
Example: Cement Clinker Production
|
Input |
Quantity |
Emission Factor |
Emissions (tCO₂) |
|
Coal |
500 tonnes |
2.5 tCO₂/tonne |
1,250 |
|
Natural Gas |
10,000 m³ |
0.002 tCO₂/m³ |
20 |
|
Limestone (process) |
1,000 tonnes |
0.44 tCO₂/tonne |
440 |
|
Total Direct Emissions |
|
|
1,710 tCO₂ |
If you produced 2,000 tonnes of clinker, your specific direct emissions = 1,710 ÷ 2,000 = 0.855 tCO₂e per tonne.
Step 4: Calculate Indirect Emissions
Indirect emissions depend on your electricity source:
Grid Electricity:
Use the default emission factor for your country (published by the European Commission based on IEA data).
Example (Hypothetical Country):
On-Site Electricity Generation (Auto-Production):
Calculate emissions from your power plant using the same methodology as direct emissions, then determine the emission factor:
Emission Factor (tCO₂/MWh) = Total Emissions from Power Plant ÷ Total Electricity Generated
Power Purchase Agreement (PPA):
If you have a contract with a specific renewable energy producer, you may use their actual emission factor (often near zero for wind/solar) if they monitor emissions according to EU rules.
Step 5: Add Precursor Emissions (For Complex Goods)
If your product uses CBAM-covered materials as inputs, you must include their embedded emissions.
Example: Steel Manufacturing Using Pig Iron
|
Component |
Quantity Used |
Embedded Emissions |
Total (tCO₂) |
|
Pig Iron |
1.1 tonnes/tonne steel |
1.8 tCO₂e/tonne |
1.98 |
|
Own Process Emissions |
|
0.3 tCO₂e/tonne |
0.3 |
|
Total Embedded Emissions |
|
|
2.28 tCO₂e/tonne steel |
Data source: Request embedded emissions data from your precursor suppliers (same as what you provide to EU importers).
Step 6: Determine Specific Embedded Emissions
Formula:
Specific Embedded Emissions (tCO₂e/tonne) = Total Emissions ÷ Total Production (tonnes)
This is the key figure you report to EU importers quarterly.
Sector-Specific Calculation Requirements
Cement:
Steel:
Aluminum:
Fertilizers:
Hydrogen:
Preparing for Third-Party Verification (2026+)
Why Verification Matters
From 2026, unverified data = default values. Verification by an accredited third party ensures:
What Verifiers Check
|
Verification Area |
What's Assessed |
|
Monitoring Methodology |
Does it comply with EU Implementing Regulation 2023/1773? |
|
Data Quality |
Are activity data, emission factors, and calculations accurate? |
|
System Boundaries |
Are all relevant emission sources included? |
|
Documentation |
Are records complete and auditable (fuel invoices, meter readings)? |
|
Precursor Data |
Is embedded emissions data from suppliers verified? |
How to Prepare (2025 Action Plan)
Q1 2025:
Q2 2025:
Q3 2025:
Q4 2025:
Using the CBAM Operator Portal (Available from January 2025)
What is the Operator Portal?
A centralized platform where manufacturers can:
Benefits for Manufacturers:
✅ Report once, share many times (reduces admin burden)
✅ Data security (importers see only necessary info, not full plant details)
✅ Credibility (Commission-verified data increases trust)
✅ Streamlined updates (annual data updates, not quarterly)
How to Register:
Recommendation: Register early in 2025 to familiarize yourself with the system before mandatory verification begins in 2026.
Common Challenges and Solutions
Challenge 1: Missing Emission Factors
Issue: Your jurisdiction doesn't publish standard emission factors for local fuels.
Solution: Use IPCC default factors or factors from the EU MRV Regulation (Annex VI). Document your choice and justify it as the best available data.
Challenge 2: Precursor Suppliers Don't Provide Data
Issue: Your pig iron or clinker supplier cannot provide embedded emissions data.
Solution: Use default values published by the European Commission. However, this increases your product's total embedded emissions. Long-term: seek alternative suppliers who can provide verified data.
Challenge 3: Mixed Fuel Sources
Issue: You use a blend of coal, biomass, and waste-derived fuels.
Solution: Calculate emissions separately for each fuel type using:
Biomass note: Sustainable biomass is considered zero-emission under certain conditions (check EU sustainability criteria).
Cost-Benefit Analysis: Why Early Compliance Pays Off
Cost of Non-Compliance (Using Default Values):
Scenario: Steel Manufacturer
Extra cost to EU customer per year:
(2.5 - 1.5) × €80 × 50,000 = €4,000,000
This makes your product €80/tonne more expensive than a competitor providing verified data.
Cost of Compliance (Verification + Monitoring):
|
Item |
Estimated Cost (Annual) |
|
Monitoring equipment (meters, CEMS) |
€50,000 - €200,000 (one-time) |
|
Staff training |
€10,000 |
|
Third-party verification |
€20,000 - €50,000 |
|
Data management system |
€15,000 |
|
Total Annual Cost |
€45,000 - €75,000 |
ROI: Compliance costs are recovered in the first year if it prevents loss of EU market share or avoids default values.
Actionable Checklist: CBAM Compliance for Manufacturers
Immediate Actions (Q1 2025):
Quarterly (Throughout 2025):
By Q4 2025:
How WOLQE CBAM Can Help
Implementing CBAM-compliant monitoring and verification systems requires expertise in EU regulations and emissions accounting. WOLQE CBAM offers:
✅ Gap Analysis & Monitoring Plan Development – Align your systems with EU MRV rules
✅ Verification Partner Network – Connect with accredited verifiers globally
✅ Emissions Calculation Support – Ensure accurate data for all product categories
✅ Operator Portal Training – Maximize the benefits of centralized reporting
Ready to ensure compliance and protect your EU market access? Run the CBAM Checker to assess your readiness or Request a Free Consultation with our technical experts.
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For Manufacturers:
For Importers:
Legal Disclaimer
This article is for informational purposes only and does not constitute legal, tax, or regulatory advice. CBAM regulations are subject to updates by the European Commission. Manufacturers should consult the official EU CBAM Regulation (EU) 2023/956, Implementing Regulation (EU) 2023/1773, and seek guidance from qualified technical and compliance advisors.