This post is the next instalment of our CBAM series, which explains how to measure and report greenhouse gas emissions for CBAM compliance. Today’s post will cover emission reporting after July 1st 2024.
Check out other posts in this series to learn how to calculate emissions for CBAM reporting.
The end of June 2024 marked the end of the last reporting period for which the use of default emission factors is allowed under CBAM regulations. For all reporting periods from 1st July 2024 onwards, the regulations state that importers must use emissions data provided by their suppliers and producers.
Many importers will not have access to this information, so what should they do?
In this article, Climatiq's head of carbon accounting, Tim Croker, covers frequently asked questions around this topic and outlines some recommendations on how to make your reporting as accurate as possible.
Any business that imports CBAM-regulated goods into the EU is affected by the regulations. Individual consignments of goods are exempt if they have a value of less than EUR150.
CBAM currently applies to iron and steel, aluminium, cement, fertilizers, hydrogen, and electricity. This may be extended to other goods in thefuture.
CBAM applies to raw or unfinished materials. Machinery and other finished goods are not covered by CBAM, even if they are partially or wholly made using CBAM goods. For example, the following product categories are not covered by CBAM reporting:
85: Electrical machinery and parts
86, 87, 88, 89: Vehicles
94, 95, 96: Miscellaneous manufactured articles
If you only import finished goods, then you are likely exempt from reporting obligations.
Imported goods are represented by CN (Combined Nomenclature) codes, which can be found in your import documentation. You can also find a CN code using this search function.
If you import goods with CN codes that begin with the digits listed in the table below, you likely have to report, though it depends on the exact code.
The table below sets out the reporting periods, deadlines, and concessions permitted under CBAM:
CBAM covers the embedded emissions from inputs (precursors), fuels, and other processes used to transform those inputs into CBAM goods.
If you cannot obtain actual data from your suppliers on emissions in your inputs then you can use estimates, including the CBAM default factors. You may also estimate emissions from your own production methods.
The 20% rule is that estimates may only contribute to 20% or less of the total emissions for a good; at least 80% of calculated emissions for a good must come from primary (actual) data.
Example:
An installation operator produces iron screws and nuts from iron rods. Almost all (>80%) of the emissions come from the precursors—the iron rods. If the operator gets actual emissions data from its supplier, calculated in accordance with CBAM requirements, then it can estimate emissions from its own operations (fuel combustion and electricity) that turn the rods into screws and nuts; it does not need to perform detailed calculations.
Yes. Climatiq offers country-specific emission factors for each CBAM good. These factors provide a more accurate estimate of emissions than the default factors, as they take into account the energy mix and production methods of each country. Read our guide here.
We recommend that you use the country-specific factors for estimating your own carbon footprint / greenhouse gas inventories and corporate (non-CBAM) reporting when you don’t have actual supplier data available. Using these factors for carbon estimations will give you a better idea of the likely cost of carbon certificates you may face when the definitive period starts in 2026, which is when you will need to purchase CBAM certificates.
The data necessary for emissions calculations is the same as that needed for creating a simplified product carbon footprint. The key data needed includes:
The EC has issued a template on their CBAM website that allows you to calculate your emissions.
When you report under CBAM, you report to the National Competent Authority (NCA) in your country. It is up to the NCA what action they take.
According to the CBAM FAQ:
“In the case of missing, incorrect, or incomplete CBAM reports, the NCA may initiate a correction procedure, granting reporting declarants the possibility to rectify potential errors. The NCA shall apply penalties (of between EUR 10 and EUR 50 per tonne) where a) the reporting declarant has not taken the necessary steps to comply with the obligation to submit a CBAM report, or b) where the CBAM report is incorrect or incomplete, and the reporting declarant has not taken the necessary steps to correct the CBAM report after the competent authority initiated the correction procedure.”
A large number of companies are expected to not meet the reporting requirements in 2024 as it is predicted that non-EU suppliers will not have the necessary data. This is compounded by the fact that many suppliers buy their materials from other producers and many are small-to-medium enterprises with limited capacity to deliver the required data.
While a large proportion of reports in the first periods are likely to be "incorrect", this does not automatically mean a penalty will be given—the National Competent Authority (NCA) in each country has discretion as to whether to issue requests for correction and / or penalties.
Climatiq contacted two NCAs to ask what actions they might take in practice and the responses restated what is already in the CBAM guidance summarized above.
Producers of carbon-intensive goods with installations in the EU are covered by the EU ETS and already have to buy carbon allowances or credits to cover the emissions they produce.
The EU ETS currently provides free emission allowances to certain industries deemed at risk of carbon leakage (where production might shift to countries with less stringent climate regulations). A free carbon allowance is a permit to emit greenhouse gases without cost. This helps these industries remain competitive while transitioning to a carbon-constrained economy.
The system of free allowances and the interplay between CBAM and the EU ETS is complex. The following paragraphs are our best understanding and interpretation of the regulations. See the CBAM website for the definitive guidance.
Each sector has a limit on the proportion of free allowances to total emissions. In 2026, the maximum free allowance for most sectors will be 30%, reducing to 0% in 2030. However, the majority of CBAM sectors are deemed as at high risk of production moving overseas (carbon leakage) and the maximum free allowance is being kept at 100% until 2030.
To ensure that importers are treated in an “even-handed way”, they will only need to buy CBAM certificates for the proportion of their emissions that is not covered by free allowances under EU ETS for their sector. See question 4 in the CBAM FAQ document for more details.
Historically, some industries (e.g. Pig Iron and Steel, Cement Clinker) have received more allowances than verified emissions from that industry. As the share of emissions covered is 100%, this would suggest that importers in these industries may not actually need to buy any carbon certificates if this same pattern of allocation continues.
The CBAM guidance explains that countries that participate in the EU ETS or have a linked emission trading system are excluded. This covers members of the European Economic Area (EEA) and Switzerland.
For other non-EU countries which already have carbon pricing schemes, the CBAM rules state that:
“If a non-EU producer has already paid a carbon price in a third country on the embedded emissions for the production of the imported goods, the corresponding cost can be fully deducted from the CBAM obligation.”
The omnibus proposal made by the European Commission at the beginning of 2025 proposes to change CBAM regulation by reducing the burden on small- and medium-sized importers. Under the new proposal, only importers who bring more than 50 tonnes of CBAM goods into the EU per year will be covered by the regulation. The Commission also now intends to postpone the sale of CBAM certificates until 2027. The European Parliament is expected to vote on the omnibus proposal in October 2025.
CBAM is designed to reduce emissions and this can only be achieved with accurate, consistent, and comparable data on which to base purchasing decisions. Even if the CBAM rules do change, stakeholder demand continues to fuel the expectation for emissions measurement and reduction, pushing companies to act on their carbon footprint.
.svg)
