CBAM Embedded Emissions: How Are They Calculated?

At the centre of the Carbon Border Adjustment Mechanism (CBAM) lies a single figure that determines how much a business pays: embedded emissions. This number reflects the greenhouse gases released during the production of imported goods and directly decides how many CBAM certificates need to be surrendered. Understanding how this figure is calculated is essential for any organisation importing carbon-intensive goods into the EU.

What Embedded Emissions Actually Measure

Embedded emissions refer to the total greenhouse gas emissions generated while producing a CBAM covered good, currently cement, iron and steel, aluminium, fertilisers, hydrogen, and electricity. The result is expressed as specific embedded emissions (SEE), measured in tonnes of CO2 equivalent per tonne of product. This figure, multiplied by the quantity imported and adjusted by a phase-in factor, determines the number of certificates required under the CBAM's definitive phase, which began on 1 January 2026.

Unlike broader carbon footprinting exercises, CBAM's system boundaries are narrower. Raw material extraction, transport, and product use after import are excluded. Only emissions occurring within the defined production process aligned with EU Emissions Trading System (EU ETS) monitoring rules are counted.

Two Categories of Emissions

CBAM calculations separate emissions into two types:

• Direct emissions — released at the production site itself, including fuel combustion, process emissions, and heating or cooling used in manufacturing. These are counted for every CBAM sector.
• Indirect emissions — linked to the electricity consumed during production. These currently apply to cement, fertilisers, and hydrogen, but are not yet factored in for iron, steel, and aluminium, though this is expected to evolve as the mechanism matures.

The weight of each category varies significantly by sector. For cement and fertilisers, indirect emissions can account for roughly 10–30% of the total. For aluminium, where electrolysis drives much of the process, indirect emissions can represent 60–80% of total emissions, a detail that could have major cost implications if indirect emissions are brought into scope for that sector in future updates.

How Is CBAM Emissions Calculation Done?

The European Commission's methodology broadly follows a process-based approach.

1. Measure Emissions at the Installation

The starting point is the industrial installation where the goods are produced.

The operator monitors relevant greenhouse gas emissions generated by the installation according to the CBAM methodology. These emissions are then linked to the production processes that manufacture CBAM-covered goods.

This means emissions data needs to come from the production facility and not simply from the exporter or logistics provider.

2. Attribute Emissions to the Production Process

An installation may manufacture multiple products or use several production processes.

Therefore, total installation emissions need to be appropriately attributed to the relevant production process. This allows the calculation to move from overall factory emissions to emissions associated with a particular CBAM product.

The resulting figure is used to determine the specific embedded emissions of the goods.

3. Account for Precursor Materials

Another important part of the CBAM embedded emissions calculation is precursor materials.

For certain goods, the production process uses intermediate materials that themselves have embedded emissions. These relevant precursor emissions need to be incorporated into the calculation.

For example, emissions associated with an input material used to manufacture a CBAM-covered product may form part of the product's overall embedded emissions. The European Commission's methodology specifically requires relevant precursor materials to be considered.

4. Calculate Specific Embedded Emissions

Once the relevant emissions have been attributed to a production process and applicable precursor emissions have been included, the figure is related to the quantity of goods produced.

This results in specific embedded emissions, generally expressed as tonnes of CO₂e per tonne of goods.

In simplified terms:

Specific embedded emissions = Relevant embedded emissions ÷ Quantity of goods produced

The actual calculation can be considerably more detailed depending on the sector, production route and applicable CBAM methodology.

Actual Data vs. Default Values

Two approaches exist for arriving at embedded emissions figures:

• Actual emissions data, collected directly from the producing installation and verified by an accredited third party. This is the preferred and most accurate method, particularly since production routes vary widely, steel from a blast furnace carries a very different emissions profile than steel from an electric arc furnace, and the same applies to aluminium produced with hydroelectric power versus coal-based electricity.
• EU default values, applied automatically when actual, verified data isn't available. These are set conservatively, which generally results in higher certificate obligations compared to using verified actual data.

This is precisely why early engagement with non-EU suppliers matters. Installation-specific, verified data typically produces a more favourable and often lower emissions figure than relying on defaults.

Getting the Data Foundation Right

Because embedded emissions calculations directly determine certificate costs, building a reliable data collection process with suppliers, covering production data, fuel and electricity consumption, and precursor sourcing has become a core part of import planning rather than a compliance afterthought.

Supporting Import Compliance Beyond the Calculation

Navigating CBAM's technical requirements alongside day-to-day customs clearance and freight forwarding adds a layer of complexity to import operations. Babaji Shivram works with businesses to keep shipment documentation, compliance planning, and regulatory readiness aligned as EU requirements continue to evolve. Further details are available through Babaji Shivram's team for organisations managing CBAM-covered imports.