The European Commission has confirmed that actual emissions from precursors produced at another installation can be used for embedded emissions calculations for a complex good under the Carbon Border Adjustment Mechanism (CBAM). The use of those values is conditional on support from a verification report that the verifier of the downstream installation can rely on. This approach links upstream evidence to how embedded emissions are determined for CBAM purposes.
The requirement increases the role of verified carbon information across supply chains. Steel, aluminium, cement and fertiliser producers may have internal monitoring systems, but they may still be unable to apply lower actual-emissions values if an upstream supplier cannot provide adequately verified precursor data. In such cases, the embedded-emissions basis for CBAM calculations may not reflect lower upstream performance.
Default values apply when verified precursor evidence is missing
When required evidence is not available, producers can use applicable default values. For most non-fertiliser goods, those defaults include a 10% mark-up in 2026, a 20% mark-up in 2027 and a 30% mark-up from 2028. Fertilisers face a lower 1% mark-up.
The schedule of increasing mark-ups creates a commercial incentive to obtain verified actual-emissions data when a supplier’s real emissions are below the relevant default value. As the mark-ups rise over time, the difference between verified figures and default-based calculations becomes more material for CBAM cost outcomes. This dynamic affects how companies manage upstream data availability.
Verified precursor data exchange expands beyond the CBAM Registry
During 2027, operators will need to exchange verified precursor information outside the CBAM Registry. Direct operator-to-operator sharing of actual verified precursor emissions through the Registry is expected to be available from 2028. The timeline requires interim arrangements before broader digital exchange becomes possible.
Companies therefore need controlled contractual arrangements for exchanging emissions data ahead of full digital infrastructure availability. These arrangements must enable downstream producers and their verifiers to obtain evidence needed to support actual-emissions calculations. The scope covers both the transfer of information and its verification use in embedded-emissions determinations.
Financing and procurement considerations tied to upstream verification
Financing implications arise from how missing precursor data can affect a manufacturer’s CBAM costs. Weak upstream evidence can result in higher and less predictable liabilities, which may put pressure on gross margins from EU sales. It can also increase working-capital requirements.
Banks assessing industrial borrowers may therefore consider more than the borrower’s own emissions reporting. They may also examine whether critical suppliers can substantiate the emissions assumptions used in financial forecasts and business plans. This extends due diligence beyond internal reporting to include supplier documentation capacity.
Long-term procurement contracts may increasingly require obligations related to maintaining verified emissions data and providing supply verification reports. Contracts may also require identifying the installation of origin and compensating buyers where failure to provide evidence leads to use of a higher default value. These contractual terms tie procurement performance directly to CBAM calculation inputs.
Potential supplier advantages for exporters supplying the EU market
For Southeast European exporters, the requirements create compliance costs alongside commercial opportunities. Suppliers with robust monitoring, reporting and verification (MRV) systems and independent verification may become preferred partners for manufacturers supplying the EU market. This preference could apply even when competing materials have similar physical characteristics.
The CBAM framework also introduces an additional dimension of industrial credit quality linked to suppliers’ ability to substantiate the carbon content of goods they provide. Verified precursor information supported by verification reports remains central to whether downstream installations can rely on actual-emissions values rather than defaults. The resulting emphasis on upstream substantiation carries through both compliance processes and commercial relationships.