CBAM Regulation

Article 1(1) — Subject matter

This Regulation establishes a carbon border adjustment mechanism (the ‘CBAM’) to address greenhouse gas emissions embedded in the goods listed in Annex I on their importation into the customs territory of the Union in order to prevent the risk of carbon leakage, thereby reducing global carbon emissions and supporting the goals of the Paris Agreement, also by creating incentives for the reduction of emissions by operators in third countries.

Article 2(1) — Scope

This Regulation applies to goods listed in Annex I originating in a third country, where those goods, or processed products from those goods resulting from the inward processing procedure referred to in Article 256 of Regulation (EU) No 952/2013, are imported into the customs territory of the Union.

Article 2(3)(a) — De minimis (as adopted)

By way of derogation from paragraphs 1 and 2, this Regulation shall not apply to: (a) goods listed in Annex I to this Regulation which are imported into the customs territory of the Union provided that the intrinsic value of such goods does not exceed, per consignment, the value specified for goods of negligible value as referred to in Article 23 of Council Regulation (EC) No 1186/2009.

Article 4 — Importation of goods

Goods shall be imported into the customs territory of the Union only by an authorised CBAM declarant.

Article 5(1) — Application for authorisation

Any importer established in a Member State shall, prior to importing goods into the customs territory of the Union, apply for the status of authorised CBAM declarant (‘application for an authorisation’). Where such an importer appoints an indirect customs representative in accordance with Article 18 of Regulation (EU) No 952/2013 and the indirect customs representative agrees to act as an authorised CBAM declarant, the indirect customs representative shall submit the application for an authorisation.

Article 6(1) — CBAM declaration

By 31 May of each year, and for the first time in 2027 for the year 2026, each authorised CBAM declarant shall use the CBAM registry referred to in Article 14 to submit a CBAM declaration for the preceding calendar year.

Article 6(2) — Content of the declaration

The CBAM declaration shall contain the following information: (a) the total quantity of each type of goods imported during the preceding calendar year, expressed in megawatt-hours for electricity and in tonnes for other goods; (b) the total embedded emissions in the goods referred to in point (a) of this paragraph, expressed in tonnes of CO2e emissions per megawatt-hour of electricity or, for other goods, in tonnes of CO2e emissions per tonne of each type of goods, calculated in accordance with Article 7 and verified in accordance with Article 8; (c) the total number of CBAM certificates to be surrendered, corresponding to the total embedded emissions referred to in point (b) of this paragraph after the reduction that is due on the account of the carbon price paid in a country of origin in accordance with Article 9 and the adjustment necessary to reflect the extent to which EU ETS allowances are allocated free of charge in accordance with Article 31; (d) copies of verification reports, issued by accredited verifiers, under Article 8 and Annex VI.

Article 7(1) — Calculation of embedded emissions

Embedded emissions in goods shall be calculated pursuant to the methods set out in Annex IV. For goods listed in Annex II only direct emissions shall be calculated and taken into account.

Article 9(1) — Carbon price paid in a third country

An authorised CBAM declarant may claim in the CBAM declaration a reduction in the number of CBAM certificates to be surrendered in order to take into account the carbon price paid in the country of origin for the declared embedded emissions. The reduction may be claimed only if the carbon price has been effectively paid in the country of origin. In such a case, any rebate or other form of compensation available in that country that would have resulted in a reduction of that carbon price shall be taken into account.

Article 22(1) — Surrender of CBAM certificates

By 31 May of each year, and for the first time in 2027 for the year 2026, the authorised CBAM declarant shall surrender via the CBAM registry a number of CBAM certificates that corresponds to the embedded emissions declared in accordance with Article 6(2), point (c), and verified in accordance with Article 8, for the calendar year preceding the surrender.

Article 22(2) — Quarterly holding requirement

The authorised CBAM declarant shall ensure that the number of CBAM certificates on its account in the CBAM registry at the end of each quarter corresponds to at least 80 % of the embedded emissions, determined by reference to default values in accordance with the methods set out in Annex IV, in all goods it has imported since the beginning of the calendar year.

Article 25(1) — Rules applicable to the importation of goods

The customs authorities shall not allow the importation of goods by any person other than an authorised CBAM declarant.

Article 26(1) — Penalties

An authorised CBAM declarant who fails to surrender, by 31 May of each year, the number of CBAM certificates that corresponds to the emissions embedded in goods imported during the preceding calendar year shall be held liable for the payment of a penalty. Such a penalty shall be identical to the excess emissions penalty set out in Article 16(3) of Directive 2003/87/EC and increased pursuant to Article 16(4) of that Directive, applicable in the year of importation of the goods.

Guidance No. 1, section 2.2 — key definitions (direct, indirect and embedded emissions)

'Direct emissions' means emissions from the production processes of goods, including emissions from the production of heating and cooling consumed during the production processes, regardless of the location of the production of the heating and cooling. 'Indirect emissions' means emissions from the production of electricity, which is consumed during the production processes of goods, regardless of the location of the production of the consumed electricity. 'Embedded emissions' means emissions released during the production of goods, including the embedded emissions of precursor materials consumed in the production process.

Guidance No. 1, section 2.4 — definitive period

Duration: From 1 January 2026 onwards. Between 2026 and 2033 the CBAM obligation is phased in in parallel with the phase-out of free allocation under the EU ETS. From 2034, embedded emissions of CBAM goods are fully covered by CBAM certificates, with no free allocation for those goods.

Guidance No. 1, section 2.4.1 — annual CBAM declaration deadline

Starting in 2027 for the emissions embedded in goods imported in 2026, the authorised CBAM declarant must submit an annual 'CBAM declaration', via the CBAM Registry, by 30 September of each year (starting in 2027), and covering the emissions embedded in goods imported in during the previous calendar year (starting in 2026).

Guidance No. 1, section 2.4.2 — calculation of the CBAM obligation

CBAM Obligation_g = max[0; (SEE_g - SEFA_g - SECPP_g / RP_CBAM)] x M_g — where SEE_g is the specific embedded emissions of good g, SEFA_g is the specific embedded free allocation, SECPP_g is the specific embedded carbon price paid, RP_CBAM is the reference price of a CBAM certificate, and M_g is the mass of the imported good.

Guidance No. 2, section 2 — what are embedded emissions

The 'embedded emissions' are defined in parallel to the emissions causing carbon costs in the EU ETS: they take into account the direct and indirect emissions of the production process as well as the embedded emissions of precursors, subject to the sector-specific rule on whether indirect emissions are in scope for the good and (where relevant) for its precursors. Embedded emissions are similar in concept to a carbon footprint of the goods.

Guidance No. 2, section 2 — CBAM Registry registration for non-EU operators

The recommended, but currently voluntary method is that you, as the operator, obtain a registration in the CBAM Registry … If you choose this approach, you need to upload your emissions data for each installation only once, and after verification, you will be able to share the relevant data with all declarants who import your goods into the EU.

Guidance No. 2, section 3 (Step 2) — reporting period

For your own installation's emission monitoring, in the definitive period, the reporting period corresponds always to the calendar year during which the goods are produced.

Guidance No. 2, section 3 (Step 5) — free allocation adjustment

As a new element in the definitive period of the CBAM, you as an operator must also determine the level of free allocation which you would receive for your production process if your installation were situated in the EU. This level of free allocation is deducted from the embedded emissions to determine the amount of CBAM certificates which the authorised declarant has to surrender upon the import of your goods ('the CBAM obligation').

Guidance No. 3, section 2 (Table 2-1) — reporting period and default production period

Definition of Reporting Period: Standardises the baseline calculation period to the calendar year of production for the definitive period, removing the operator's choice (e.g., fiscal year) allowed during the transition. — Reference: Article 1(5). Default Production Period (Imported Goods): Creates a legal presumption that imported goods were produced in the year of import (post-2026), moving from quarterly reporting to an annual model, with the option to rebut the presumption with evidence of actual production time. — Reference: Article 7(2).

Guidance No. 3, section 2 (Table 2-1) — data retention and monitoring improvement cost threshold

Data Retention Period: Increases the mandatory retention period for all monitoring records by 50% (from 4 to 6 years), ensuring data is available for extended audit cycles. — Reference: Annex II, Section A.2(4). Cost Threshold for Monitoring Improvement: Significantly increases the incentive for investment in accurate monitoring by quadrupling the reference price of carbon used to determine the benefit of improvements (from EUR 20 to EUR 80) and doubling the annual non-unreasonable cost limit (from EUR 2,000 to EUR 4,000). — Reference: Annex II, Section A.3(8).

Guidance No. 3, section 2 (Table 2-1) — functional units for cement and fertilisers

Functional Unit (Cement): Refines the measurement unit for cement calculation from simple mass (tonnes) to tonnes of clinker content, reflecting that clinker is the primary source of process emissions. — Reference: Article 4(5). Functional Unit (Fertilisers): Refines the measurement unit for key fertilisers to kilograms of nitrogen content or supplementary units (where applicable), as the nitrogen content is the compositional driver of emissions for these goods. — Reference: Article 4(4).

Guidance No. 3, section 2 (Table 2-1) — precursor data validity and averaging

Precursor Averaging (Multiple Suppliers): Changes the default rule from requiring separate tracking per supplier installation to requiring a weighted average across all suppliers of the same precursor type (CN code). — Reference: Article 14(2). Required Precursor Data Validity: Imposes new quality controls: actual data obtained for third-country precursors must be taken from a verification report issued by an accredited verifier and that report must cover the reporting period during which the precursor was produced. — Reference: Annex II, Section A.1(5).

Guidance No. 3, section 2 (Table 2-1) — documentation language and reporting documents

Operator Documentation Language: Introduces a mandatory requirement for the monitoring plan to be submitted in English, streamlining the verification and review process for EU authorities. — Reference: Article 5(5), (6). Operator Reporting Documents: Replaces the optional single electronic template with a mandatory structure of three documents: a full annual Emissions Report, a public-facing Summary (for declarants), and a confidential Declarant-Specific Addendum (for electricity data). — Reference: Article 10(1).

Guidance No. 3, section 2 (Table 2-1) — general rule for indirect emissions

General Rule for Indirect Emissions Inclusion: Clarifies that indirect emissions are only included for goods not listed in Annex II of the main CBAM Regulation (i.e., Cement, Fertilisers, agglomerated iron ores). Indirect Emissions for Iron and Steel Precursors: Confirms the calculation rule that precursors' indirect emissions must still be included for Iron and Steel goods (i.e. indirect emissions from agglomerated iron ores to be included for iron and steel goods), even though steel itself has no indirect emissions listed in Annex II. — Reference: Annex I, Section 3.1.

Guidance No. 4, section 2.2.1 — the free allocation adjustment and the CBAM factor

The free allocation adjustment (FAA) for an imported good is the specific embedded free allocation (SEFA) multiplied by the mass imported: FAA_g = SEFA_{g,y} · M_g (Equation 1). The process-level specific free allocation is SFA_{Proc} = CBAM_y · CSCF_y · BM*_g (Equation 2), where CBAM_y is the CBAM factor for the year, CSCF_y the (preliminary) cross-sectoral correction factor, and BM*_g the process-related CBAM benchmark. No calculation is needed for electrical energy (CN 2716 00 00): its FAA is zero. — Reference: Free Allocation Adjustment Act, Annex point 2; Article 1.

Guidance No. 4, section 2.2.1 (Table 2-1) — CBAM factor schedule

Table 2-1 lists the CBAM factor (the rate at which free allocation is phased out) and the preliminary cross-sectoral correction factor (CSCF) per year: 2025 — 100.0% / 1.0; 2026 — 97.5% / 1.0; 2027 — 95.0% / 1.0; 2028 — 90.0% / 1.0; 2029 — 77.5% / 1.0; 2030 — 51.5% / 1.0; 2031 — 39.0% / 1.0; 2032 — 26.5% / 1.0; 2033 — 14.0% / 1.0; 2034 — 0.0% / 1.0. At the time of publication the CSCF values had not yet been calculated by the Commission and are preliminary. — Reference: EU ETS Directive Article 10a(1a) and 10a(5).

Guidance No. 4, section 2.2.1.1 — SEFA of a complex good

For a complex good, only precursors that are themselves CBAM goods are taken into account. Precursors originating in the EU customs territory (or in exempted third countries/territories) have a specific free allocation of zero, though the quantity used must still be included in the operator's emissions report. The SEFA of a complex good is: SEFA_{g,y} = SFA_{Proc}_{g,y} + Σ_{i=1..n} m_{i,y} · SEFA_{i,yi} (Equation 4), where m_{i,y} = M_{i,y} / AL_{g,y} (Equation 5). Where precursors are themselves complex goods, the calculation is repeated recursively until no more precursors are relevant. — Reference: Free Allocation Adjustment Act, Annex points 3.3 and 3.

Guidance No. 4, section 2.2.1.2 and 2.2.1 (Equation 6) — default values and reporting period

Where default values are used for the specific embedded emissions of the imported good, the SEFA is SEFA_{g,y} = CBAM_y · CSCF_y · BM_g (Equation 6), with no distinction between simple and complex goods. The reporting period (y) under Article 7 of the Methodology Act is, by default, the year in which the good was imported; where there is sufficient evidence of the actual time of production it is the year of production; and for goods imported during 2026 the reporting period is always 2026, regardless of actual production time (so no earlier year than 2026 may be applied). — Reference: Free Allocation Adjustment Act, Annex point 4; Methodology Act Article 7.

Guidance No. 5a, section 2.2.1 — functional unit and emissions to be covered

The quantity of declared cement goods is expressed in metric tonnes; for cement goods (CN codes 2523 10 00, 2523 21 00, 2523 29 00 and 2523 90 00) the functional unit is the tonnes of clinker contained in the goods, while calcined clay, cement clinker and aluminous cement are reported in tonnes. Cement is not listed in Annex II to the CBAM Regulation, so both direct and indirect emissions must be taken into account, determined separately, under Article 3(2) and Annex IV. — Reference: Methodology Act Article 4(5), Annex I points 3.2 to 3.5.

Guidance No. 5a, section 3.1.2 — process emissions and clinker-to-cement ratio

Process emissions from cement clinker production may be determined using calculation Method A (carbonate content of the process input, adjusted for cement kiln dust or bypass dust leaving the kiln) or Method B (clinker output); both are equivalent and the operator chooses the more reliable. For discarded CKD/bypass dust, a minimum emission factor of 0.525 t CO2/t dust applies. The clinker-to-cement ratio (CCR, typically 80–95% for Portland cement) must be taken into account, and for CN 2523 10 00, 2523 21 00, 2523 29 00 and 2523 90 00 the functional unit is the tonnes of clinker contained: SEE_{g(cki)} = SEE_g · CK_i. Emissions for white cement clinker and other (grey) clinkers must be calculated separately. — Reference: Methodology Act, Annex II point B.5.4.

Guidance No. 5b, section 2.3.1 — unit and emissions to be covered

The quantity of hydrogen imported into the EU is expressed in metric tonnes (as pure hydrogen), reported separately by installation or production process. Hydrogen (CN 2804 10 00) is defined as a simple good with no possible precursors, and in the definitive period is listed in Annex II to the CBAM Regulation, so only direct emissions are taken into account; indirect emissions were reported during the transitional period but are not included in embedded emissions in the definitive period. — Reference: Methodology Act Article 1 and Annex I.

Guidance No. 5b, section 3.1.2 — attribution where different products are simultaneously produced

Where products are produced simultaneously as co-products of a single multifunctional production process, emissions must be attributed among the co-products (whether or not they are CBAM goods) on the basis of molar ratio: Em_i = Em_total · (m_{i,prod}/M_i) / Σ_j (m_{j,prod}/M_j) (Equation 43). If the molar mass of a co-product is not known, attribution is by mass. This is relevant in particular for the steam cracking route, where relevant co-products are hydrogen, acetylene, ethylene, propylene, butadiene and benzene (and, where separated and used, toluene, xylenes, butenes). — Reference: Methodology Act, Annex III.

Guidance No. 5c, section 2.2.1 — functional unit and emissions to be covered

Fertiliser CBAM goods are measured in the functional unit of kilograms of nitrogen contained in the goods (for CN codes 2808 00 00, 2814 and 3105, and the relevant supplementary units for other fertiliser CN codes). Fertilisers are not listed in Annex II to the CBAM Regulation, so both direct and indirect emissions and any precursor embedded emissions are taken into account under Article 3(2); where goods are sold with different nitrogen contents, emissions are averaged across composition ranges not exceeding 10%. Specific embedded emissions per nitrogen content are SEE_{g(Ni)} = SEE_g · N_i (Equation 65), and for custom-made compositions the operator must issue a declaration of nitrogen content for each consignment. — Reference: Methodology Act Article 4(4), Annex III Section B.

Guidance No. 5c, section 3.1.2 — N2O monitoring and special heat/electricity rules

Nitric acid producers must monitor N2O emissions from the process (not combustion) using a Continuous Emission Measurement System (CEMS) at a suitable measurement point; N2O emissions convert to CO2e using a GWP of 265 t CO2e/t N2O. For flue-gas flow rate, the mass balance method is preferred over continuous flow measurement. Measurable heat recovered from exothermic chemical processes (e.g. ammonia or nitric acid production) is determined separately and assigned zero CO2 emissions, and electricity from processes without combustion (e.g. expansion turbines in ammonia production) has an emission factor of zero. Additional parameters (concentration, nitrogen content) must be reported per good. — Reference: Methodology Act, Annex II Sections B and G.

Guidance No. 5d, section 2.2.1 — emissions to be covered and documentation rules

In the definitive period, in line with Article 7(1) and Annex II to the CBAM Regulation and Article 3(2) of the Methodology Act, only direct emissions are taken into account for iron and steel CBAM goods (except sintered ore, CN 2601 12 00, for which indirect emissions are included); where such goods are precursors, their indirect emissions are likewise not included. Operators must design a monitoring plan and submit it in English, and retain supporting records for at least 6 years. A claim that a determination methodology incurs unreasonable costs must be justified in the monitoring plan against a reference price of EUR 80 per tonne CO2e and an accumulated limit of EUR 4 000 per year. — Reference: CBAM Regulation Article 7(1), Annex II; Methodology Act Article 3(2).

Guidance No. 5d, section 2.2.1 and 3.1.2 — precursors and the joint production process

Where iron and steel goods are complex goods, the embedded emissions must include the full embedded emissions of precursors (e.g. sintered ore, pig iron, DRI, ferro-alloys), including indirect emissions where the precursor is not listed in Annex II (e.g. hydrogen). Actual data for externally produced precursors may only be used where taken from a verification report issued by an accredited verifier valid at issue for the sectoral scope of the precursor, covering the period in which the precursor was produced; otherwise default values apply. Where precursors are received from multiple installations or produced in different reporting periods, embedded emissions are by default determined using weighted-average rules. Installations producing two or more goods from the groups sintered ore, pig iron, FeMn, FeCr, FeNi, DRI, crude steel, iron or steel products may define one joint production process ('bubble') if no internally produced precursor is sold separately. — Reference: CBAM Regulation Article 8; Methodology Act Article 14.

Guidance No. 5e, section 2.2.1 — emissions to be covered

Aluminium CBAM goods are listed in Annex II to the CBAM Regulation, so in the definitive period only direct emissions are taken into account and indirect emissions of electricity are not included. Relevant greenhouse gases are carbon dioxide and perfluorocarbons (CF4 and C2F6). Unwrought aluminium is a simple good (raw materials such as carbon anodes and alumina, or scrap for secondary aluminium, are not treated as precursors), whereas aluminium products are complex goods including the embedded emissions of unwrought aluminium. Purchase and maintenance of infrastructure and equipment are excluded from the system boundaries. — Reference: CBAM Regulation Article 7(1), Annex II; Methodology Act Annex I point 3.1.

Guidance No. 5e, section 3.1.1 and 3.1.2 — PFC emissions, attribution and reporting

For primary aluminium, PFC emissions (CF4 and C2F6 only) formed during Anode Effects must be monitored; two equivalent calculation-based methods apply — Method A (slope method, using anode effect minutes per cell-day, AEM) and Method B (overvoltage method, using anode effect overvoltage, AEO) — and the operator chooses the method most appropriate to its process control equipment. Where primary aluminium is used as a precursor, the related PFC emissions form part of the final product's embedded emissions. Installations producing unwrought aluminium and/or aluminium products may define one joint production process if no intermediate product is sold or transferred out. Additional reporting includes tonnes of scrap used per tonne, the % of pre-consumer scrap, and total alloy content where non-aluminium elements exceed 1%. — Reference: Methodology Act Annex II Section B.7.

Guidance No. 5f, section 2 — electricity as a good and the emission factor options

Where electricity is imported into the EU as a good on its own, it is listed in Annex II to the CBAM Regulation (only direct emissions) and is the exception to the rule that actual emissions are monitored rather than default values. Emissions are Em_el = E_el · EF_el (Equation 35). Options for the emission factor are: (a) the specific IEA-based default value for the third country/group/region; (b) the EU CO2 emission factor where no specific default value exists; (c) an alternative default value where a country submits evidence by 30 June that its CO2 emission factor is lower, updated by the Commission by 30 June of the following year; or (d) actual embedded emissions where the requirements of section 2.2 are met. — Reference: Methodology Act Annex II Section D.2.

Guidance No. 5f, section 2.2 — criteria for using actual emissions

Under point 5 of Annex IV to the CBAM Regulation, actual emissions data for a specific electricity-producing installation may be used only if all criteria (a)–(e) are fulfilled: (a) the electricity is covered by a power purchase agreement between the authorised CBAM declarant and a third-country producer; (b) the installation is directly connected to the Union transmission system or there was no physical network congestion at export; (c) the installation emits no more than 550 g CO2 of fossil-fuel origin per kWh; (d) the amount of electricity has been firmly nominated to the allocated interconnection capacity by all responsible TSOs, with nomination and production in the same period of not more than one hour; and (e) an accredited verifier certifies fulfilment, receiving at least monthly interim reports. The installation's emission report must be supplemented by declarant-specific addendums containing the declarant's EORI number, confirmation of the criteria, and the quantity imported. — Reference: CBAM Regulation Annex IV point 5; Methodology Act Annex II Section D.2.4.

Guidance for importers, section 4.3 (table) and 4.1 — transitional period

The transitional period runs from 1 October 2023 to 31 December 2025. During it, MRV follows Implementing Regulation (EU) 2023/1773; reporting of indirect emissions is required for all CBAM goods; global default values may be used for precursors of complex goods contributing up to 20% of the total and must be used for imports of electricity and for indirect emissions unless certain criteria are met; reporting by importers is quarterly (due at the latest by the end of the month following the end of the quarter via the CBAM Transitional Registry); verification is not required and surrender of CBAM certificates is not required. — Reference: Implementing Regulation (EU) 2023/1773, Articles 2, 3 and Annex II.

Guidance for importers, section 4.1 and 3 — definitive period and de minimis

From 2026, the definitive period applies: importers must bear a CBAM obligation in the form of certificates purchased at the average price of EU ETS allowances for every CBAM good imported, with a phase-in of increasing coverage of embedded emissions, reaching full coverage from 2034, when no free allocation is given under the EU ETS for these goods and 100% of embedded emissions are covered by CBAM certificates. Paying a carbon price in the jurisdiction where the good and its precursors are produced allows a reduction of the CBAM obligation from 2026 onwards. Small quantities (de minimis) of imported goods are treated as exempt where the value does not exceed EUR 150 per consignment, which also applied during the transitional phase. — Reference: CBAM Regulation (EU) 2023/956, Articles 5, 17, 14, 16 and 22.

Guidance on verification and accreditation, section 1.1 — legal context and standards

The AVR-DA prescribes the application of the harmonised standard EN ISO 17029 ('Conformity assessment — General principles and requirements for validation and verification bodies') and, because that standard does not specifically address emissions verification, its sector-specific application under EN ISO 14065 ('General principles and requirements for bodies validating and verifying environmental information'). National accreditation bodies (NABs) must apply EN ISO/IEC 17011 and the CBAM-specific requirements in the AVR-DA, and must be members of the European Cooperation for Accreditation (EA). — Reference: AVR-DA; Verification Principles Act; Accreditation & Verification Requirements Act (EU) 2025/2551.

Guidance on verification and accreditation, section 2.5 — monitoring steps and indirect emissions

For its own installation the operator must, in the definitive period, always use the calendar year during which the goods are produced as the reporting period (except imported electricity, for which the reporting period is always the year of import). Indirect emissions must be included for goods listed in Annex I but not in Annex II, multiplying electricity consumed in each production process by the relevant emission factor; where electricity is received from multiple sources, indirect emissions are by default the average of the emission factors weighted by each source's share of total consumption, unless sufficient evidence shows a single source (or subset) was used for a given process. — Reference: Methodology Act Article 1(5) and Annex II Section D; CBAM Regulation Annex IV.

Guidance on verification and accreditation, section 3 — verification principles

Monitoring, reporting and verification must uphold the principles of completeness, consistency, comparability, accuracy, integrity of the methodology and continuous improvement, and the verified report must faithfully represent the emissions. The verifier must be independent of the operator (and of the Commission and the national competent authority), apply professional scepticism, and provide a reasonable level of assurance. Materiality is not a tolerance band: every identified misstatement and non-conformity must in principle be corrected by the operator before the verification is finalised; materiality only aids the verifier's judgment and conclusion on the verification opinion. — Reference: CBAM Regulation Annex VI point 1(a); AVR-DA Annex II section 1.7; EN ISO 14065.

Explanatory memorandum — scope of the downstream extension

The proposal will extend the scope of the CBAM to address the risk of carbon leakage for products further down the value chain of the steel and aluminium products currently in CBAM’s scope.

Proposed recital (20) — pre-consumer scrap as a precursor

emissions of pre-consumer aluminium scrap and pre-consumer steel scrap should be taken into account for the calculation of embedded emissions of goods. ... The emissions of pre-consumer aluminium scrap and pre-consumer steel scrap should only be taken into account when used as a precursor for goods listed in Annex I of this Regulation.

Proposed recital (42) — calculation of embedded emissions in downstream goods

Following the principles and calculation methods applicable to other goods, embedded emissions in downstream goods should be calculated on the basis of actual emissions verified by a verifier, or by reference to default values calculated and made available by the Commission.

Proposed recital (53) — application dates

To provide sufficient predictability, the extension of the scope of Annex I to Regulation (EU) 2023/956 and to input materials (precursors) listed in Annex VIII should apply from 1 January 2028