CBAM Regulation: Registration, reporting obligations and standard values simply explained

The Carbon Border Adjustment Mechanism (CBAM) represents the European Union's most ambitious climate policy instrument for preventing carbon leakage whilst maintaining competitive fairness between EU businesses and international producers. As we approach the transition from the reporting-only transitional phase to full compliance in 2026, understanding CBAM reporting requirements has become critical for EU importers of carbon-intensive goods.

This comprehensive guide explains how to navigate CBAM registration, fulfil quarterly reporting obligations, calculate embedded emissions using approved methodologies, strategically manage default values, and prepare for the definitive period when CBAM certificates become mandatory. Whether you're importing cement, iron and steel, aluminium, fertilisers, hydrogen or electricity, you'll find practical guidance on building robust monitoring, reporting and verification (MRV) systems whilst minimising carbon costs and compliance risks.

Executive Summary: What EU Importers Need to Know

The Carbon Border Adjustment Mechanism introduces a carbon price on imported goods to prevent carbon leakage and ensure that carbon-intensive goods imported into the EU face comparable carbon costs to those produced domestically under the EU Emissions Trading System (EU ETS).

Transitional Phase (Until 31 December 2025):

• Quarterly reporting obligations without financial penalties

• Default values permitted (with increasing restrictions)

• Focus on data collection and system testing

• Penalties only for non-reporting or significantly incomplete CBAM reports

Definitive Period (From 1 January 2026):

• Only authorised CBAM declarants can import CBAM covered goods

• Annual declarations replace quarterly reports

• CBAM certificates must be purchased and surrendered

• Certificate prices align with EU ETS allowances

• Verified emissions data becomes mandatory

• First certificate purchases for 2026 imports due in autumn 2027

The border adjustment mechanism CBAM fundamentally reshapes supply chain management, requiring importers to establish comprehensive emissions data collection systems and verified emissions data from third-country installations. Companies that strategically invest in accurate emissions data and supplier engagement will significantly reduce carbon costs compared to those relying on default values.

Understanding the Carbon Border Adjustment Mechanism

The Strategic Purpose of CBAM

The EU's carbon border adjustment mechanism addresses a critical challenge: as the European Union strengthens its climate policies and increases carbon prices under the EU ETS, there's a risk that production simply relocates to countries with weaker environmental regulations. This phenomenon—carbon leakage—would undermine the EU's climate objectives whilst disadvantaging European industry.

CBAM creates a level playing field by ensuring that imported goods reflect similar carbon costs to those produced within the EU. By requiring importers to report embedded emissions and ultimately purchase CBAM certificates, the mechanism incentivises third-country producers to reduce greenhouse gas emissions whilst protecting EU businesses from unfair competition.

How CBAM Complements Free Allowances Phase-Out

The Carbon Border Adjustment Mechanism operates in synchronisation with the EU ETS. As free allowances for EU producers are progressively phased out between 2026 and 2034, CBAM ensures that importers face equivalent financial obligations. This coordinated approach prevents competitive distortions whilst maintaining pressure for decarbonisation across global supply chains.

Critically, CBAM is not a cap-and-trade system. Instead, it applies a carbon price paid mechanism aligned with EU ETS allowance prices to embedded carbon emissions in imported goods, creating financial obligations that mirror domestic carbon costs.

CBAM Covered Goods: The Six Categories

Current Scope of Carbon-Intensive Goods Imported

CBAM currently applies to six sectors identified through detailed carbon leakage risk assessment:

1. Cement: Including clinker and various cement products

2. Iron and Steel: Covering iron ore, pig iron, ferro-alloys and finished steel products

3. Aluminium: Both primary production and unwrought aluminium

4. Fertilisers: Ammonia, nitric acid, urea and nitrogen-based fertilisers

5. Hydrogen: For industrial applications

6. Electricity: Imported power generation

When importing into EU member states, companies must verify whether their goods fall under CBAM by comparing Combined Nomenclature (CN) codes with the list in Annex I of the CBAM Regulation.

Simple vs Complex CBAM Goods

Understanding the distinction between simple and complex goods is crucial for emissions calculations:

Simple Goods use input materials considered to have zero embedded emissions under CBAM methodology. Their embedded greenhouse gas emissions derive solely from production processes at the manufacturing installation. Examples include crude steel or primary aluminium.

Complex Goods incorporate relevant precursor materials—themselves CBAM goods—whose embedded emissions must be included. Portland cement, containing cement clinker as a precursor, exemplifies this category. Complex goods require tracking emissions through multiple production stages, significantly increasing data collection complexity and verification requirements.

This distinction profoundly affects reporting obligations. Complex goods demand detailed supply chain data and potentially multiple verifications, whilst simple goods allow more straightforward emissions calculations.

Direct and Indirect Emissions Coverage

During the transitional phase through 31 December 2025, importers must report both direct emissions (from manufacturing processes) and indirect emissions (from consumed electricity) for all CBAM goods.

From 1 January 2026, coverage becomes differentiated:

• Iron/Steel, Aluminium and Hydrogen: Only direct emissions subject to CBAM compliance

• Cement and Fertilisers: Both direct and indirect emissions remain in scope

This strategic focus reflects where carbon leakage risks are most acute and where the border adjustment mechanism can most effectively prevent them. The differentiated approach also reduces compliance burden for sectors where indirect emissions contribute less significantly to overall carbon intensity.

CBAM Registry Registration: Your First Compliance Step

Accessing the CBAM Transitional Registry

Registration represents the mandatory first step for all indirect customs representatives and importers subject to CBAM reporting requirements. EU importers must register through their national customs authority's portal. In Germany, access the Customs Portal (Zoll-Portal).

The CBAM Transitional Registry operates as a secure, centralised EU database managed by the European Commission, running independently from the broader EU Customs Trader Portal. This separation ensures data security whilst providing specialised functionality for emissions reporting and, from 2026, certificate management.

Required Documentation and Company Information

Registration demands comprehensive company details:

• Legal entity name and registered address

• VAT identification number

• EORI number (Economic Operators Registration and Identification)

• Contact details for CBAM compliance officers

• Details of imported CBAM goods categories by CN code

• Customs registration documentation

• For the definitive period: evidence of financial guarantee capability

For companies operating across multiple EU member states, registration requirements vary depending on customs declaration structures and import locations. Strategic planning around entity structure can optimise reporting efficiency.

Transition to Authorised CBAM Declarants

Whilst registration for the transitional phase has been widely adopted since late 2023, becoming an authorised CBAM declarant for the definitive period starting 2026 requires additional steps. National competent authorities now accept applications for authorised status, involving:

1. Initial registration in the CBAM Registry with enhanced documentation

2. Provision of financial guarantee evidence

3. Demonstration of MRV system capability

4. Approval by the national competent authority

5. Issuance of CBAM account number for customs declarations

Forward-thinking importers are already initiating this process to ensure seamless transition when CBAM certificates become mandatory. The approval timeline can extend several months, making early application strategically prudent.

Transitional Phase vs Definitive Period: Critical Differences

Transitional Phase Through December 2025

The transitional period serves multiple strategic purposes: testing reporting systems, enabling companies to develop monitoring capabilities, allowing the European Commission to assess implementation challenges, and gathering data for potential scope extensions.

Key characteristics of the transitional phase:

• No Financial Obligations: CBAM certificates are not required

• Quarterly CBAM Reports: Submissions required within one month after quarter end

• Default Values Permitted: EU-published default values can be used with increasing restrictions

• Learning Period: Penalties apply only for non-reporting or substantially incomplete reports

• Both Direct and Indirect Emissions: All sectors report both emission types

This reporting-only period provides crucial preparation time for building robust emissions data collection infrastructure and supplier engagement programmes.

Definitive Period From January 2026

Full CBAM compliance begins on 1 January 2026, introducing substantial operational and financial changes:

• Authorised Declarants Only: Only authorised CBAM declarants can import CBAM covered goods for free circulation

• Annual Declarations: Replace quarterly reports, due by 31 May each year

• CBAM Certificates Mandatory: Must be purchased and surrendered for embedded emissions

• Certificate Pricing: Aligned with weekly average EU ETS allowance prices

• Verified Emissions Data: Mandatory for actual emissions, with default values severely restricted

• Delayed Payment Timeline: First certificates for 2026 imports purchased and surrendered in autumn 2027

This timeline structure provides cash flow breathing room whilst requiring robust emissions tracking throughout the calendar year. However, the verified emissions data requirement means that companies relying on default values will face significantly higher carbon costs, creating strong incentives for investing in actual data collection systems.

Quarterly Reporting Obligations During Transition

Reporting Deadlines and Amendment Windows

Quarterly CBAM reports must be submitted no later than one month after each quarter's conclusion:

• Q1 (January–March): Report due by 30 April

• Q2 (April–June): Report due by 31 July

• Q3 (July–September): Report due by 31 October

• Q4 (October–December): Report due by 31 January following year

Under Article 9(1) of the CBAM Implementing Regulation, amendments to submitted reports can be made until two months after the quarter's end—effectively one month after the submission deadline. This provides flexibility for data corrections but demands robust initial submissions to avoid penalties.

Mandatory Information in Quarterly Reports

Each quarterly CBAM report must contain installation-level data for each CN code imported:

• Total Quantity: Each commodity type in megawatt hours (electricity) or tonnes (other goods)

• Actual Embedded Emissions: Tonnes of CO₂ equivalent per tonne or MWh, calculated per CBAM methodology

• Total Indirect Emissions: From consumed electricity (transitional phase)

• Carbon Price Paid: Any carbon pricing in country of origin, including export rebates or compensation

• Installation Identification: Location and operational details of production facilities

• Reporting Method: Specification whether actual emissions data or default values were used

• Precursor Materials: For complex goods, embedded emissions from relevant precursors

This granular, installation-specific approach aligns CBAM reporting requirements with the monitoring, reporting and verification (MRV) framework used in the EU ETS, ensuring methodological consistency whilst enabling accurate carbon price calculations.

Data Entry Methods: Manual vs XML Upload

The CBAM Transitional Registry offers two submission pathways:

Manual Entry: Direct input through the registry's user interface, suitable for importers with lower transaction volumes or straightforward supply chains.

XML Upload: Structured data file upload using the European Commission's published schema, significantly more efficient for high-volume importers managing multiple suppliers and installations.

The Commission provides a supporting XLS template for preparing quarterly reports before XML conversion, available on the Commission's CBAM guidance page. For companies managing hundreds or thousands of import transactions, investing in XML-based reporting systems substantially reduces administrative burden whilst improving data quality and creating robust audit trails.

Calculating Embedded Emissions: Methodology Requirements

CBAM's Narrower Scope vs Lifecycle Assessments

A critical distinction: CBAM's definition of embedded emissions is substantially narrower than comprehensive lifecycle assessments (LCA) or product carbon footprints. CBAM focuses specifically on emissions covered by the EU ETS—primarily direct production emissions and, in some cases, indirect emissions from consumed electricity.

Using emission factors from LCA databases significantly overestimates embedded emissions for CBAM purposes. This methodological distinction matters profoundly: in the definitive phase, importers using LCA-derived factors would be obliged to surrender too many CBAM certificates, creating unnecessary carbon costs.

Since mid-2024, it has been mandatory to use CBAM-prescribed methodologies for emissions determination. Freely chosen LCA methods are no longer considered equivalent for CBAM reporting requirements. This standardisation ensures comparability whilst aligning with EU ETS scope boundaries.

Approved Calculation Methods

The CBAM Implementing Regulation specifies acceptable calculation methods, listed in hierarchical preference:

1. Measurement-Based Methods: Direct monitoring of emissions through continuous emissions monitoring systems (CEMS) or periodic measurements

2. Calculation-Based Methods: Using activity data (fuel consumption, material inputs) and emission factors specific to the installation

3. Default Values: EU-published benchmarks for sectors and product categories

For actual emissions data, installations must follow monitoring methodologies aligned with EU ETS MRV requirements, ensuring consistency in carbon accounting across domestic and imported production.

Direct Emissions Calculation

Direct emissions encompass greenhouse gas emissions from production processes at the installation, including:

• Combustion emissions from fuel burning for energy generation

• Process emissions inherent to manufacturing (e.g., CO₂ release from limestone in cement production)

• Other direct emissions from chemical reactions in production

These emissions are calculated based on activity data multiplied by appropriate emission factors, with installation-specific factors preferred over generic default values.

Indirect Emissions from Energy Consumption

During the transitional period, indirect emissions from consumed electricity must be reported for all CBAM goods. From 2026, only cement and fertiliser imports retain indirect emissions in scope.

Indirect emissions are calculated based on:

• Electricity consumption (in MWh) at the installation

• Emission factor of the electricity source

• For grid electricity: country-specific or regional grid emission factors

• For direct procurement: actual emission factor of the specific generation source (where verifiable)

Market-based instruments like Guarantees of Origin cannot be used to justify lower emission factors under CBAM. Only actual physical connections or direct power purchase agreements with verified generation sources allow deviation from default grid factors.

Strategic Management of Default Values

The Role and Limitations of Default Values

Default values serve as fallback emission factors when actual emissions data from installations is unavailable or incomplete. The European Commission publishes these values for different sectors, product categories and countries, based on industry averages and technical assessments.

However, default values come with significant strategic implications:

During the Transitional Phase:

• Broadly permitted to facilitate reporting

• No direct financial penalty for their use

• Enable compliance when supplier data is unavailable

From 2026 Onwards:

• Severely restricted for most goods

• Set deliberately high (conservative) to incentivise actual data collection

• Use results in substantially higher carbon costs through increased CBAM certificate requirements

• For complex goods, only limited emissions may use estimated data

Escalating Costs of Default Value Reliance

The Commission has progressively adjusted default values upward for many product groups. This strategic tightening reflects two policy objectives: incentivising investment in actual emissions data collection, and ensuring that carbon costs reflect realistic upper bounds of production emissions.

Companies that persistently rely on default values will face considerably higher carbon costs compared to competitors providing verified emissions data. The financial differential can significantly impact import economics, particularly for carbon-intensive goods where emission variations between installations are substantial.

Strategic Imperative: Building Verified Data Systems

Forward-thinking importers are treating CBAM compliance as a strategic opportunity rather than merely a regulatory burden. By investing in supplier engagement programmes, contractual data-sharing arrangements, and verification systems, companies can:

• Significantly reduce carbon costs through accurate reporting of actual embedded emissions

• Gain competitive advantages in negotiations with end customers

• Build resilient supply chains with emissions transparency

• Prepare for CSRD integration and Scope 3 reporting requirements

The transition from default values to verified emissions data requires 12-18 months for robust implementation, making immediate action strategically prudent.

Verification Requirements and Accreditation

The MRV System for CBAM

From 2026, actual emissions data must undergo verification by accredited verifiers before inclusion in annual CBAM declarations. This verification requirement mirrors the monitoring, reporting and verification (MRV) system used for installations covered by the EU ETS, ensuring methodological consistency.

The CBAM Registry has been progressively expanded to support this verification infrastructure, now offering:

• Registered Installation Database: Third-country installations can register operational and methodological details

• Accredited Verifier Access: Separate portals for verification bodies

• Risk Analysis Features: Monitoring and compliance checking functionality

• National Authority Integration: Enabling oversight and enforcement

Companies should conceptualise their CBAM processes as establishing a comprehensive "MRV system for imports"—encompassing data governance, quality assurance and auditability alongside pure emissions calculations.

Verification Scope and Requirements

Verifiers must assess:

• Methodology Compliance: Whether emissions calculations follow CBAM-prescribed methods

• Data Reliability: Accuracy and completeness of activity data and emission factors

• Installation-Specific Factors: Appropriate use of site-specific versus default values

• Documentation Quality: Sufficient audit trails and supporting evidence

• Conformance with EU Method: Alignment with EU ETS monitoring approaches

Default values published by the European Commission do not require additional verification. However, any actual emissions data claimed by importers must undergo this verification process to be accepted for CBAM compliance.

Building Verifiable Data Collection Systems

To prepare for mandatory verification, importers should establish:

Contractual Frameworks: Supplier agreements specifying emissions data provision, verification access rights, and update frequency

Data Management Infrastructure: Systems for collecting, validating and storing emissions data with appropriate audit trails

Supplier Engagement Programmes: Training and support for third-country producers to implement CBAM-compliant monitoring

Internal Quality Assurance: Processes for reviewing submitted data before formal verification

These systems represent significant upfront investment but become essential infrastructure for CBAM compliance whilst delivering broader value for CSRD reporting and climate strategy development.

CBAM Certificates: Purchase and Surrender Obligations

How CBAM Certificates Function

From 1 January 2026, authorised CBAM declarants must purchase CBAM certificates corresponding to embedded emissions in imported goods. These certificates function as the financial mechanism for carbon pricing, with prices aligned to EU ETS allowance values.

The certificate system operates as follows:

1. Annual Declaration: By 31 May each year, declarants submit annual declarations quantifying total embedded emissions for previous calendar year

2. Certificate Purchase: Certificates can be purchased throughout the year via the CBAM Registry

3. Certificate Surrender: By the annual deadline, certificates corresponding to embedded emissions (minus any carbon price paid abroad) must be surrendered

4. Pricing Mechanism: Certificate prices reflect weekly average EU ETS allowance prices from preceding weeks

Calculating Required Certificates

The number of CBAM certificates to surrender equals:

Total Embedded Emissions (verified actual emissions or default values)
Minus Carbon Price Paid in Country of Origin (where demonstrable)
Minus EU ETS Free Allowances Equivalent (during phase-out period 2026-2034)

This calculation ensures that importers face carbon costs equivalent to EU producers, accounting for free allowances still allocated during the transition and avoiding double carbon pricing where producers have already paid carbon costs in their home jurisdictions.

Financial Planning for Carbon Costs

The introduction of CBAM certificates represents a significant new cost line for EU importers of carbon-intensive goods. Strategic financial planning should consider:

• Certificate Price Volatility: Aligned with EU ETS prices, which fluctuate based on market dynamics

• Volume Projections: Import quantity forecasts across product categories

• Default vs Actual Data Economics: Cost-benefit analysis of investing in verified data systems

• Currency Exposure: Certificates priced in euros regardless of origin country

• Cash Flow Timing: Annual declaration creates concentrated payment obligations

Companies should integrate CBAM costs into import pricing models, supplier negotiations and make-or-buy decisions for carbon-intensive inputs.

Penalties and Enforcement for CBAM Obligations

Penalty Structure During Transitional Phase

Article 16 of the CBAM Implementing Regulation establishes graduated penalties for non-compliance:

€10 to €50 per Tonne: Imposed when declarants fail to submit complete CBAM reports or when reports remain incomplete or inaccurate despite competent authority requests. Penalty level considers:

• Amount of information not reported

• Quantity of goods and associated emissions not reported

• Declarant's intent or negligence

• Level of cooperation with authorities

Exceeding €50 per Tonne: Possible when incomplete or inaccurate reports are submitted twice consecutively or when reporting is delayed beyond six months.

Critically, penalties during the transitional phase apply to reporting failures rather than emissions themselves, reflecting the learning period's focus on building compliance capability.

Enforcement in the Definitive Period

From 2026, enforcement mechanisms intensify:

• Certificate Surrender Failures: Significant penalties for insufficient certificate surrender

• False Reporting: Enhanced sanctions for deliberate misreporting or verification fraud

• Unauthorised Imports: Goods imported without authorised declarant status may face customs holds or seizure

• Cumulative Penalties: Multiple compliance failures can trigger compounded enforcement actions

The European Commission conducts initial reviews of submissions, flagging incomplete or suspect reports to national competent authorities. National authorities then determine whether to initiate formal review and correction procedures.

Building Compliance Assurance

To minimise penalty risk, importers should establish:

• Comprehensive training programmes for personnel managing CBAM reporting requirements

• Internal quality assurance processes before submission

• Regular audits of data collection and calculation methodologies

• Clear escalation procedures for identifying and resolving data gaps

• Proactive engagement with national competent authorities on interpretive questions

Robust compliance systems not only reduce penalty exposure but also improve data quality for strategic decision-making around carbon costs and supply chain optimisation.

Carbon Leakage Prevention and Carbon Price Deductions

The Carbon Leakage Challenge

Carbon leakage occurs when stringent climate policies in one jurisdiction lead to production relocation to regions with weaker environmental regulations, or when imports from those regions undermine domestic producers subject to carbon pricing. The EU's progressively tightening climate policies—particularly the EU ETS—create inherent carbon leakage risk.

CBAM directly addresses this challenge by ensuring that carbon-intensive goods imported into EU member states face carbon costs comparable to those applied to EU producers. By preventing carbon leakage, the mechanism protects the environmental integrity of EU climate policies whilst maintaining competitive fairness for European industry.

Deducting Carbon Prices Paid Abroad

To avoid double carbon pricing, CBAM allows deduction of carbon costs already paid in the country of origin. However, this deduction mechanism requires rigorous documentation:

Eligible Carbon Pricing Schemes: Only explicit carbon prices paid under formal carbon pricing mechanisms (carbon taxes, emissions trading systems) qualify for deduction. Indirect costs or voluntary offset purchases typically do not qualify.

Required Documentation: Importers must provide:

• Proof of carbon price payment at the installation level

• Official receipts or certificates from the carbon pricing authority

• Calculation demonstrating direct linkage between payment and specific goods

• Evidence that no export rebates or compensations were received

Deduction Calculation: The deductible amount equals the effective carbon price per tonne of CO₂ paid on embedded emissions in the goods, capped at the equivalent CBAM certificate price.

The European Commission continues refining detailed rules for recognising foreign carbon pricing schemes, with final implementing acts expected throughout 2025. Importers should monitor these developments closely, as effective deduction can significantly reduce carbon costs.

Strategic Implications for Global Supply Chains

CBAM creates powerful incentives for third-country producers to:

• Implement or join domestic carbon pricing schemes

• Invest in decarbonisation technologies to reduce greenhouse gas emissions

• Establish transparent MRV systems for reporting actual embedded emissions

• Engage with EU importers on data-sharing and verification arrangements

For EU importers, these dynamics suggest strategic opportunities in supplier selection and development. Companies that proactively engage suppliers on emissions reduction and MRV capability-building can secure competitive advantages through lower verified emissions data and reduced carbon costs.

Future Scope Extensions and Regulatory Developments

Implementing Acts and Delegated Legislation

Throughout 2024 and early 2025, the European Commission has adopted multiple implementing acts and delegated legislation clarifying CBAM's definitive period operation:

• Detailed verification requirements for accredited verifiers

• Refined methodologies for calculating total embedded emissions

• Enhanced guidance on default values application and restrictions

• Clarification of carbon price paid recognition criteria

• Operational procedures for the CBAM Registry and certificate management

These regulatory developments provide critical detail for companies building long-term CBAM compliance infrastructure. Forward-looking importers are incorporating these specifications into MRV system design and supplier engagement programmes.

Potential Scope Expansions Under Review

The European Commission is actively analysing potential expansions of CBAM coverage based on:

• Carbon leakage risk assessments across additional sectors

• Data collected during the transitional phase

• Technical feasibility of monitoring embedded emissions for complex value chains

• Trade impact analyses and WTO compatibility considerations

Sectors under particular scrutiny for potential inclusion include:

• Polymers and plastics

• Organic chemicals

• Glass and ceramics

• Refined petroleum products

• Paper and pulp

The Commission is expected to propose scope extensions by late 2025, with potential implementation in subsequent years. Companies importing goods in these sectors should monitor developments closely and begin preliminary assessments of CBAM exposure.

Minimum Thresholds and Small Importer Exemptions

Current CBAM regulations do not specify absolute minimum thresholds for coverage. However, discussions continue around potential exemptions for:

• Very small import volumes falling below de minimis thresholds

• Specific product categories with negligible carbon intensity

• Simplified procedures for SME importers with limited CBAM goods volumes

Any such exemptions would likely be defined in future implementing acts rather than core CBAM Regulation amendments. Importers should not assume exemption status without explicit regulatory confirmation.

Strategic Integration with CSRD and Scope 3 Reporting

Synergies Between CBAM and Corporate Sustainability Reporting

For companies subject to both CBAM and the Corporate Sustainability Reporting Directive (CSRD), significant synergies exist in data collection and reporting infrastructure:

Scope 3 Emissions Alignment: CBAM's focus on embedded emissions in imported goods directly overlaps with Scope 3 Category 1 (Purchased Goods and Services). Emissions data collected for CBAM compliance can inform CSRD reporting under ESRS E1.

Supplier Engagement Infrastructure: Systems developed for engaging third-country suppliers on CBAM emissions data serve broader supplier sustainability assessment and engagement requirements under ESRS E1.

Carbon Accounting Capability: MRV systems built for CBAM strengthen overall corporate carbon accounting, supporting climate-related disclosures across CSRD standards.

Verification and Assurance: Verification processes for actual emissions data prepare companies for the limited assurance requirements under CSRD.

Building Integrated Climate Data Systems

Rather than treating CBAM and CSRD as separate compliance exercises, strategic companies are developing integrated climate data infrastructures that:

• Consolidate emissions data collection across owned operations, supply chain and imported goods

• Standardise calculation methodologies aligned with GHG Protocol and CBAM requirements

• Create centralised data repositories supporting multiple reporting obligations

• Establish governance frameworks covering data quality, verification and disclosure

• Enable scenario analysis incorporating carbon costs, decarbonisation pathways and transition risks

This integrated approach reduces duplication, improves data quality and transforms climate reporting from pure compliance burden into strategic intelligence for business decision-making.

Climate Strategy Development Beyond Compliance

CBAM compliance creates natural impetus for broader climate strategy development:

Carbon Cost Forecasting: Understanding CBAM certificate requirements enables long-term carbon cost forecasting, informing product pricing, supplier strategy and investment decisions.

Decarbonisation Pathway Planning: Transparent embedded emissions data supports evaluation of decarbonisation options—whether through supplier engagement, technology transition or supply chain reconfiguration.

Climate Risk Assessment: CBAM exposes companies to carbon price risk and transition risk, driving more sophisticated climate risk assessment and management.

Competitive Positioning: Low-emission supply chains can become differentiators in markets increasingly valuing climate performance, supporting premium positioning or preferred supplier status.

Companies that leverage CBAM compliance as catalyst for comprehensive climate strategy development gain competitive advantages extending well beyond regulatory adherence.

Frequently Asked Questions About CBAM

What is the Minimum Threshold for CBAM?

Currently, CBAM does not establish absolute minimum thresholds for import volumes or embedded emissions. All imports of CBAM covered goods—cement, iron and steel, aluminium, fertilisers, hydrogen and electricity—fall within scope regardless of quantity, provided they are released for free circulation in EU member states.

However, goods in transit through the EU, temporarily imported for testing or repair, or held in customs warehouses without release for free circulation are excluded from CBAM reporting requirements. Additionally, the European Commission is examining potential de minimis thresholds for very small import volumes, but no formal exemptions have been established as of early 2025.

What are the CBAM Regulations?

The CBAM regulatory framework comprises:

Regulation (EU) 2023/956: The core CBAM Regulation establishing fundamental requirements, covered sectors, institutional arrangements and the transition timeline from 2023 through full implementation in 2026.

Commission Implementing Regulation (EU) 2023/1773: Detailed implementing regulation specifying reporting obligations during the transitional phase, calculation methodologies, default values, registry functionality and verification procedures.

Delegated and Implementing Acts: Ongoing regulatory developments clarifying definitiv

e period requirements, verification standards, carbon price paid recognition, and operational procedures.

Together, these instruments establish the complete CBAM requirements framework. Importers should monitor the European Commission's CBAM webpage for regulatory updates and guidance documents, as implementing acts continue refining operational details through 2025.

Is Scope 1 and 2 Reporting Mandatory Under CBAM?

CBAM's coverage of direct emissions (roughly equivalent to Scope 1) and indirect emissions (roughly equivalent to Scope 2) varies by sector and phase:

During the Transitional Phase (Through December 2025):

• Both direct and indirect emissions must be reported for all CBAM covered goods

• This comprehensive approach enables data gathering and system testing

From January 2026 (Definitive Period):

• Iron and Steel, Aluminium, Hydrogen: Only direct emissions are subject to CBAM certificates

• Cement and Fertilisers: Both direct and indirect emissions remain in scope

This differentiated approach reflects carbon leakage risk assessments and the relative contribution of indirect emissions to total carbon intensity across sectors. The restriction to direct emissions only for certain sectors reduces compliance burden whilst focusing on primary emissions sources.

What are the 6 Categories of CBAM?

CBAM currently covers six categories of carbon-intensive goods:

1. Cement: Including clinker, Portland cement, aluminous cement and other hydraulic cements

2. Iron and Steel: Encompassing iron ore, pig iron, ferro-alloys, crude steel, semi-finished and finished steel products

3. Aluminium: Covering unwrought aluminium and aluminium products

4. Fertilisers: Including ammonia, nitric acid, urea, ammonium nitrate and other nitrogen-based fertilisers

5. Hydrogen: For industrial use

6. Electricity: Imported power generation

These sectors were selected based on carbon intensity, exposure to international trade, carbon leakage risk and technical feasibility of monitoring embedded emissions. The European Commission continues assessing additional sectors for potential inclusion in future scope expansions, with decisions expected by late 2025 based on transitional phase data and leakage risk analyses.

What Happens After I Submit My CBAM Report?

After submission, quarterly CBAM reports undergo multi-stage review:

1. Automated Validation: The CBAM Registry checks for completeness and logical consistency

2. Commission Review: The European Commission conducts initial assessment, identifying potentially incomplete or suspect reports

3. National Authority Follow-Up: Flagged reports are forwarded to competent national authorities for detailed review

4. Correction Procedures: If deficiencies are identified, authorities may request corrections within specified timeframes

5. Penalty Assessment: Failure to correct may trigger penalties ranging from €10-€50+ per tonne of unreported emissions

Companies should maintain robust documentation supporting all reported data, as retrospective verification and audits are possible. Proactive quality assurance before submission significantly reduces correction procedure and penalty risk.

Can I Use Product Carbon Footprints for CBAM Reporting?

No. Comprehensive product carbon footprints or LCA-based emission factors significantly overestimate embedded emissions for CBAM purposes. CBAM's methodological scope is deliberately narrower, focusing on emissions covered by the EU ETS—primarily direct production emissions and, in limited cases, indirect emissions from consumed electricity.

Since mid-2024, CBAM-prescribed methodologies are mandatory for emissions determination. LCA-based approaches are no longer accepted as equivalent. This standardisation ensures comparability and prevents importers from inadvertently reporting inflated emissions that would require excessive CBAM certificate surrender in the definitive period.

However, existing LCA or PCF data can provide useful starting points for CBAM calculations, particularly for identifying emission hotspots and engaging suppliers. The key is recalculating embedded emissions using CBAM-specific scope boundaries and methodologies.

How Should I Prepare for Post-2025 CBAM Requirements?

Strategic preparation for full CBAM compliance should encompass:

Immediate Actions (2025):

• Apply for authorised CBAM declarant status with national authorities

• Establish financial guarantee arrangements

• Implement XML-based reporting systems for efficiency

• Engage suppliers on actual emissions data provision

• Map current reliance on default values and quantify potential cost implications

Medium-Term Development (2025-2026):

• Build comprehensive MRV systems aligned with EU ETS methodologies

• Negotiate contractual frameworks for supplier data provision and verification access

• Develop internal capability for emissions data quality assurance

• Integrate CBAM data with CSRD reporting and climate strategy

• Conduct supplier assessment and development programmes on emissions monitoring

Strategic Positioning:

• Evaluate decarbonisation versus carbon cost acceptance trade-offs

• Assess supply chain reconfiguration opportunities

• Develop long-term carbon cost forecasting models

• Identify competitive advantages from low-emission supply chains

Companies beginning this preparation now will be well-positioned for the January 2026 transition, whilst those delaying face compressed timelines and potentially significant carbon costs through reliance on default values.

About CBAM Compliance Support: Fiegenbaum Solutions provides strategic advisory on CBAM compliance, emissions data systems development, supplier engagement programmes, and integration with broader ESG and climate strategies. With experience across 300+ sustainability projects and deep expertise in EU climate regulations, we help companies transform CBAM compliance from regulatory burden into strategic advantage.