CBAM embedded emissions are the direct process emissions plus the indirect emissions from electricity used to make a good, calculated across an Annex IV system boundary from either actual monitored installation data or country-of-origin default values, with iron and steel, aluminium and hydrogen priced on direct emissions only.
Direct plus indirect emissions
Embedded emissions under CBAM combine two components. Direct emissions are released during production itself, such as the calcination of limestone and fuel combustion in a cement kiln. Indirect emissions come from the electricity consumed in production. Which components are priced depends on the good, so classifying the product correctly is the first task in any CBAM advisory engagement. For Annex II products, namely iron and steel, aluminium and hydrogen, only direct emissions are counted, whereas cement, fertilisers and electricity carry both direct and indirect emissions.
Scope by product group
| Product group | Direct emissions | Indirect (electricity) |
|---|---|---|
| Iron and steel | Counted | Not priced |
| Aluminium | Counted | Not priced |
| Hydrogen | Counted | Not priced |
| Cement | Counted | Counted |
| Fertilisers | Counted | Counted |
| Electricity | Counted | Counted |
System boundaries and monitoring
The methodology and system boundary sit in Annex IV of Regulation (EU) 2023/956 and in the operational rules of Implementing Regulation (EU) 2025/2547. The boundary aggregates the production process together with the embedded emissions of relevant precursors used to make the good. Direct emissions are monitored through either a calculation-based approach, which includes a mass-balance method, or a measurement-based approach relying on continuous emission monitoring. Supporting records must be kept for four years.
Specific values versus default values
The definitive regime, live since 1 January 2026, is built on specific, actual embedded emissions from the producing installation, and CBAM reporting has required actual rather than estimated data since 1 August 2024. Where actual data is not used, country-of-origin default values from Implementing Regulation (EU) 2025/2621 apply, carrying an escalating mark-up of 10 per cent in 2026, 20 per cent in 2027 and 30 per cent from 2028, with a flat 1 per cent for fertilisers. A limited tolerance still allows up to 20 per cent of a complex good’s embedded emissions to rest on default or estimated values. The declared figure is confirmed by an independent verifier accredited under Commission Delegated Regulation (EU) 2025/2551, for example a body accredited to ISO 14065 and ISO/IEC 17029, and not by a consultant. GreenSutra’s consultants often see exporters treat electricity emissions as an afterthought rather than a monitored input. A step-by-step walk-through sits in the CBAM guide.
Sources: Regulation (EU) 2023/956 · IR (EU) 2025/2621 · European Commission CBAM