The Problem With Default Emissions Values
With the enforcement phase of the Carbon Border Adjustment Mechanism now underway, companies importing carbon-intensive goods into the European Union face a new financial reality: the carbon intensity of their supply chain directly affects their costs. For many organizations, the biggest factor determining these costs is whether they rely on EU default emission values or primary emissions data from suppliers.
When suppliers cannot provide emissions data, CBAM regulations require importers to use default values published by the European Commission. These values are intentionally conservative. They represent worst-case assumptions for production emissions and are designed to incentivize companies to collect real data from their suppliers.
For many industries, especially iron and steel, these default values can be three to four times higher than actual production emissions. As carbon prices rise, this gap can translate into millions of euros in additional costs for large importers.
The Value of Primary Emissions Data
Primary emissions data reflects the real carbon intensity of a product’s manufacturing process. It is collected directly from production installations and calculated according to CBAM monitoring methodologies.
When verified, this data allows companies to replace default values with actual emissions measurements, significantly reducing the number of CBAM certificates required.
For example, a supplier exporting steel into the EU may appear highly carbon-intensive using default values. However, once real production data is collected, the emissions intensity could be much lower, reducing the importer’s carbon cost exposure.
The Role of Verification
Starting with the enforcement phase, primary data must be third-party verified before it can be used in CBAM reporting.
This verification process typically involves:
- An on-site audit of the production installation
- Review of energy and material inputs
- Validation of emissions calculation methods
- Certification by an accredited third-party auditor
While verification introduces additional complexity, it also ensures the credibility of emissions data used for compliance.
The Escalating Cost of Inaction
Another important factor is that default values increase over time. Under CBAM rules, default emissions factors will be adjusted upward annually, meaning companies relying on them will face progressively higher carbon costs.
In contrast, verified primary data stabilizes reporting and protects organizations from these escalating penalties. This dynamic makes supplier data collection not only a compliance necessity but also a financial optimization strategy.
Building a Data-Driven CBAM Strategy
To reduce CBAM exposure, organizations must focus on three priorities:
- Identifying suppliers associated with the highest carbon cost exposure
- Collecting primary emissions data from these suppliers
- Verifying emissions data through accredited auditors
By prioritizing high-impact suppliers, companies can quickly reduce their carbon costs while building long-term supply chain transparency.
Ultimately, data quality will define CBAM performance, separating companies that simply comply from those that strategically manage their carbon costs.
