What Embedded Emissions Are
Embedded emissions are the greenhouse gas emissions released during production of CBAM goods. They represent the carbon content of products entering the EU, which determines certificate obligations and compliance costs.
Calculations follow methodologies aligned with EU ETS monitoring rules. The approach combines direct emissions from production processes, indirect emissions from electricity consumption, and precursor emissions from input materials that are themselves CBAM goods.
Results are expressed in tonnes CO₂ equivalent per tonne of product. This specific embedded emissions figure determines how many CBAM certificates importers must purchase and surrender.
Why Calculation Is Complex
CBAM calculations differ from standard carbon footprinting. System boundaries exclude raw material extraction, transport, and product use. Only production process emissions matching EU ETS scope are included.
Production routes affect emissions dramatically. Steel from a blast furnace has different emission intensity than steel from an electric arc furnace. Aluminium produced using hydroelectric power differs from coal-powered production. Hydrogen from steam methane reforming differs from electrolysis.
Multi-product installations create attribution challenges. When one facility produces several products sharing equipment and utilities, emissions must be split between products. The methodology chosen significantly affects results.
Precursor materials add complexity. If your supplier uses CBAM goods as inputs, those input emissions must be included. This creates data dependencies through supply chains that may span multiple countries and suppliers.
Actual Data Versus Defaults
Two approaches exist for determining embedded emissions.
Actual emissions use primary data from production processes. This requires monitoring systems at supplier installations, calculation of direct and indirect emissions, and from 2026 onwards, third-party verification. Actual emissions typically result in lower certificate obligations but require supplier cooperation and verification costs.
Default values use Commission-published emission factors. These are simpler to apply but deliberately set higher than typical actual emissions to incentivise providing real data. From the definitive period starting January 2026, defaults include markup penalties making them significantly less favourable.
The choice between actual and defaults is strategic. If supplier emissions are below defaults, obtaining actual data saves certificate costs. If emissions equal or exceed defaults, using defaults may be economically rational despite avoiding verification effort.
Direct and Indirect Emissions
Direct emissions come from fuel combustion and chemical processes at the production installation. Burning natural gas in a cement kiln releases combustion emissions. Heating limestone releases process emissions from calcination regardless of heat source.
Indirect emissions come from electricity consumed during production. Electricity generation elsewhere released emissions attributed to production processes consuming that power. The emission intensity depends on the electricity generation mix of the supplier country.
Both direct and indirect emissions must be calculated and included. Some sectors currently cover only direct emissions but may expand to include indirect emissions in future regulatory updates.
Precursor Materials
Complex goods incorporate other CBAM goods as inputs. Steel bars use crude steel. Cement uses clinker. Nitric acid uses ammonia. The embedded emissions of these precursor materials must be included in final product calculations.
This creates supply chain data requirements. Your supplier needs emissions data from their suppliers. If those precursors came from installations that also used precursors, data chains extend further.
Missing precursor data is common. Suppliers may not know their supplier emissions. Default values can be used for precursors but increase overall embedded emissions and certificate costs.
Verification From 2026
Using actual emissions data from January 2026 requires third-party verification. Verifiers assess whether all emission sources are identified, whether activity data measurement methods are appropriate, whether calculations are performed correctly, and whether methodology is applied consistently.
Verification adds cost and time. International verification involves verifier travel, language considerations, and unfamiliarity with local contexts. Building verifier relationships and scheduling site visits takes months.
Many third-country suppliers are unprepared for verification processes. They have never been audited for emissions data. Their documentation may not meet EU verifier standards. This creates implementation challenges for companies relying on actual data approaches.
Common Calculation Challenges
Supplier engagement is the primary barrier. Many suppliers have never monitored emissions to EU standards. They do not understand why data is needed. They may claim emissions data is confidential or commercially sensitive.
System boundaries require technical interpretation. Which processes are included? Where do boundaries start and end? The regulations provide definitions but applying them to specific installations requires understanding production processes and regulatory intent.
Attribution methodologies vary. Time-based allocation, mass-based allocation, energy-based allocation produce different results. Choosing appropriate methodologies and documenting them for verification requires technical judgment.
Data quality varies enormously. Some suppliers have sophisticated monitoring systems. Others have never measured emissions. Validating supplier data accuracy without access to installations is difficult.
What Companies Need to Understand
Reading calculation methodologies in regulations shows what must be done. Understanding how to apply methodologies to your specific products, suppliers, and supply chain structures requires deeper analysis.
Which calculation method suits your situation? Which suppliers can provide actual data and which require defaults? How do you validate supplier calculations? Where are your specific products’ system boundaries? How should emissions be attributed at your suppliers’ multi-product facilities?
These questions have answers but the answers depend on your specific circumstances. Generic guidance explains principles. Implementation requires applying those principles to real production processes, real suppliers, and real supply chains.