CBAM Actual vs Default Values: Which Should You Use?

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CBAM Actual vs Default Values: Which Should You Use?

CBAM Actual vs Default Values

Key Takeaways

  • CBAM default values simplify compliance, while actual emissions require installation-level data and accredited verification.
  • Actual emissions can reduce CBAM exposure when verified values are significantly lower than the applicable defaults.
  • The choice between actual and default values depends on the emissions gap, import volume and verification costs.
  • Importers should prioritise high-volume suppliers with the greatest potential for emissions-related cost savings.
  • Non-EU manufacturers can strengthen their competitiveness by proving lower actual emissions through reliable data and verification.

One of the important decisions under the definitive CBAM regime is whether to use the European Commission’s default emissions values or collect actual emissions data from suppliers. Both routes are available, but they create very different amounts of work and may ultimately result in different CBAM costs. Default values are operationally easier because companies do not need to establish the actual emissions intensity of every production installation. Actual values require considerably more effort because the underlying emissions must be calculated according to CBAM methodology and, where used for the declaration, verified by an accredited verifier.

There is therefore no reason to assume that actual data is automatically the better option. The useful question is whether obtaining better data changes the outcome enough to justify the work. If a supplier’s actual emissions are significantly below the applicable default, using verified actual data may reduce the embedded emissions attributed to those goods and consequently affect the number of CBAM certificates associated with them. If the difference is negligible, spending substantial time collecting and verifying primary data may accomplish very little.

This makes the choice between actual and default values more than a carbon-accounting decision. It is increasingly an economic one.

What are CBAM default values?

CBAM default values are emissions values established by the European Commission that can be used instead of actual installation-level emissions when determining the embedded emissions of imported CBAM goods. The definitive regime has its own set of default values, which means companies should not simply continue using values or assumptions carried over from the 2023–2025 transitional period.

For goods other than electricity, the methodology generally establishes default values using emissions intensity associated with the relevant exporting country and goods, with the applicable adjustment or mark-up under the CBAM rules. Where sufficiently reliable country-specific information is not available, other prescribed default approaches can apply. Companies therefore need to identify the correct value for the particular goods and origin rather than treating “the CBAM default” as one generic emission factor.

The logic behind the system is worth understanding. Defaults make CBAM workable when actual installation-level information is unavailable, but they are not intended to systematically make avoiding primary data more attractive than demonstrating real emissions performance. This becomes important for producers whose installations are substantially cleaner than the benchmark represented by the applicable default.

What are CBAM actual values?

Actual values are calculated using information from the installation where the CBAM goods were produced. Instead of applying a standard Commission value, the producer monitors the relevant production processes and emissions according to CBAM methodology and determines the embedded emissions associated with the goods.

Depending on the sector and production route, this can involve production quantities, direct emissions, electricity and other energy inputs, applicable emission factors, indirect emissions where relevant and emissions associated with precursor materials. The calculation requirements for steel, aluminium, cement, fertilisers and hydrogen are not identical, so an existing generic product carbon footprint cannot simply be assumed to satisfy CBAM requirements.

This distinction is particularly important for supplier data collection. Asking a supplier for “the carbon footprint of this product” may produce a perfectly legitimate carbon number calculated under another methodology, but that number is not automatically a CBAM embedded-emissions value. Companies using actual data need to understand the methodology behind the information rather than simply storing the final figure.

Actual values also bring verification requirements

The most important operational difference between the two approaches is verification. Where actual emissions values are used under the definitive CBAM regime, the relevant emissions information from the non-EU installation needs to be verified by an accredited CBAM verifier.

Verification occurs at the production-installation level. The operator establishes its monitoring methodology and calculates the embedded emissions, while the verifier assesses the monitoring approach, calculations and supporting evidence before issuing the required verification report. The process therefore depends on much more than obtaining a number from a supplier. Production information, calculation methodology, supporting documentation and the history behind the reported emissions all become relevant.

For companies considering actual values, it is useful to think of the process as a chain rather than a data request: production data leads to a CBAM calculation, the calculation needs supporting evidence, and the resulting information needs to withstand independent verification before it becomes verified actual emissions data that can support the declaration. The administrative cost of creating and maintaining that chain is part of the economics of choosing actual values.

When do default values make sense?

The obvious advantage of default values is simplicity. An importer can use the applicable Commission value without requiring every supplier to establish a complete installation-level CBAM monitoring and verification process. For companies with many small suppliers, limited import volumes or suppliers that are not yet capable of producing reliable CBAM information, this can remove a considerable amount of work.

Consider an importer buying a relatively small quantity of a CBAM-covered product from a supplier. Establishing the installation data, helping the supplier interpret the methodology, collecting supporting evidence and arranging verification all have a cost. If the difference between the supplier’s actual emissions and the Commission default changes the eventual CBAM exposure by only a small amount, the importer may quite rationally decide that the default is good enough.

This is why primary data should not become an objective in itself. Sustainability programmes sometimes develop an instinct that more granular data must always be better. Economically, better information is valuable only when the benefit of having it exceeds the cost of obtaining, checking and maintaining it. CBAM makes that trade-off unusually visible because emissions information can eventually be translated into a financial consequence.

When do actual values become valuable?

The economics change when a supplier is significantly cleaner than the default. A manufacturer may have invested in a lower-carbon production route, cleaner electricity, more efficient processes or other measures that materially reduce the emissions intensity of its product. If the importer continues using a higher default value, those improvements may not be fully reflected in the embedded emissions used for CBAM.

The effect becomes more significant as import volumes increase. A difference of a few tenths of a tonne of CO2 per tonne of product may seem small when looking at an individual shipment. Across tens or hundreds of thousands of tonnes of material, however, that difference can become commercially meaningful, particularly as the CBAM financial obligation phases in and carbon prices remain significant.

Actual emissions data therefore behaves differently from much of the sustainability information companies have historically collected from suppliers. The supplier is not providing the information only because a customer needs another ESG disclosure. A lower verified emissions intensity can potentially improve the economics of the supplier’s product in the European market. For genuinely lower-carbon producers, the ability to substantiate actual emissions may eventually become part of their competitive position.

The real decision is the size of the gap

Rather than asking whether actual data should be collected from every supplier, importers should identify where the difference between likely actual emissions and the applicable default is large enough to justify the additional effort. This immediately changes how a supplier-data programme should be designed.

Imagine an importer has 150 suppliers of CBAM-covered goods. Perhaps 15 suppliers account for 80% of its total CBAM exposure, and only five of those use production routes that are expected to have emissions significantly below the applicable default. Treating all 150 suppliers identically would create a large data-collection exercise while spreading employee attention across suppliers that have very different economic significance.

A more sensible approach would be to use the available import data and default values to establish a baseline exposure, then investigate where actual emissions could materially change that baseline. High-volume suppliers with potentially favourable actual emissions move to the top of the list. Smaller suppliers or suppliers whose actual emissions are unlikely to differ substantially from the default can remain on defaults until there is a reason to revisit them. In this model, supplier engagement becomes a prioritisation exercise rather than a campaign to achieve 100% primary-data completeness.

An illustrative example

Suppose an importer purchases 10,000 tonnes of a CBAM-covered material and the applicable default value is 2.0 tCO2e per tonne of product. Applying the default would result in 20,000 tCO2e of embedded emissions. Now suppose the producer believes its actual emissions, calculated and verified according to CBAM requirements, are 1.4 tCO2e per tonne. Using actual emissions would result in 14,000 tCO2e, a difference of 6,000 tCO2e.

At an illustrative carbon price of €75 per tonne of CO2, that difference represents €450,000 of gross carbon-price exposure. This is deliberately a simplified example rather than a calculation of final CBAM liability, because the actual obligation also depends on the CBAM phase-in, the adjustment corresponding to EU ETS free allocation and any eligible carbon price already paid in the country of production.

The example is still useful because it shows how the decision should be approached. If collecting, calculating and verifying the actual emissions costs €20,000 and could materially reduce the emissions basis associated with a large import flow, the exercise deserves attention. If the potential difference is only a few thousand euros, the same verification effort may make little commercial sense. The value of better emissions data therefore depends on both the emissions gap and the volume of goods to which that gap applies.

What if actual emissions are higher than the default?

There is an uncomfortable mirror image to this argument: actual emissions are not necessarily lower than default values. A carbon-intensive installation may have actual emissions above the applicable default. Producing primary data does not magically improve the carbon performance of the product.

This is another reason to model likely outcomes before launching a large actual-data programme. Companies should understand their suppliers’ production routes and likely emissions intensity before deciding where detailed monitoring and verification are worth pursuing. In some cases, the commercial incentive to establish actual emissions will be obvious. In others, using the applicable default may remain the more practical route.

The comparison can also change over time. Production processes improve, electricity mixes change, suppliers decarbonise and the Commission can update default values. A supplier that has little reason to demonstrate actual emissions today may have a much stronger case after investing in lower-carbon production. Companies should therefore treat the actual-versus-default decision as something to review periodically rather than a permanent classification assigned to each supplier.

What should non-EU manufacturers do?

For non-EU manufacturers, the starting point should be understanding how their actual CBAM emissions intensity compares with the default values their European customers could otherwise use. A manufacturer that has no idea whether its actual number is better or worse than the default is not yet in a position to decide how much effort verification deserves.

Where actual emissions are materially lower, building the monitoring and evidence infrastructure required for verification can have commercial value. The manufacturer may be supplying several European importers, so the same underlying installation-level information can support multiple customer relationships rather than being recreated independently for every shipment. The CBAM Registry and its functionality for third-country installation operators are intended to support this type of information sharing.

This creates an interesting competitive dynamic. European customers have historically compared suppliers on variables such as purchase price, product quality, reliability, logistics and lead time. CBAM introduces embedded carbon into that calculation. A producer that can credibly demonstrate lower emissions may be able to show that a nominally more expensive product creates a lower total carbon-related cost for the importer. Carbon data, in that case, becomes part of the commercial information attached to the product.

What should EU importers do?

EU importers should begin with their own exposure rather than immediately sending detailed questionnaires to every supplier. The first step is to map CBAM imports by product, CN code, country, supplier, installation where known and volume. Applying the relevant default values to that dataset provides an initial view of where embedded emissions and therefore potential CBAM exposure are concentrated.

The next step is to investigate the suppliers that matter most. Import volume is one factor, but the likely difference between actual and default emissions is equally important. A very large supplier with emissions close to the default may offer less opportunity than a somewhat smaller supplier whose production route is substantially cleaner. Verification cost, supplier readiness and the expected duration of the commercial relationship can also influence the decision.

This naturally produces a tiered strategy. Some suppliers justify detailed engagement and verified actual data. Others may require further assessment before the company invests in verification.