Please note that this FAQ document focuses on the transition period of the Carbon Border Adjustment Mechanism (CBAM) that came into effect on October 1, 2023. However, some questions addressing the definitive period (starting from January 2026) have also been answered.

Why is the European Union (EU) establishing a Carbon Border Adjustment Mechanism (CBAM)?

The EU is a pioneer in international efforts to combat climate change. The European Green Deal explicitly sets the target of a 55% net reduction in greenhouse gas emissions by 2030 compared to 1990 levels and aims for climate neutrality by 2050. In July 2021, the Commission presented the Fit for 55 policy proposals to make this target a reality, further reinforcing the EU as a global climate leader. Since then, these policies have been shaped through negotiations with the co-legislators, the European Parliament and the Council, and many are now incorporated into EU law. The CBAM, among other measures, is intended to prevent the risk of carbon leakage and reinforce the EU's climate action.

What is the current stage of CBAM implementation?

The European Parliament and the Council of the European Union, acting as co-legislators, signed the CBAM Regulation (EU) 2023/956 on May 10, 2023. The CBAM started to be applied in a transitional period from October 1, 2023, with the first quarterly reports due by January 31, 2024. The rules and requirements for reporting emissions under the CBAM during the transition period are detailed in the Implementing Regulation (EU) 2023/1773. The Commission has established the CBAM registry for the transitional period, is preparing additional secondary legislation, and is conducting planned analyses. The definitive period of CBAM will commence in January 2026. The European Commission has provided detailed guidance for the implementation of CBAM during the transitional period. This guidance includes detailed guides, webinars, e-learning materials, and other resources. Access to all supporting information is available on the Commission's CBAM webpage.

How does CBAM work?

CBAM is designed to align with the EU's international commitments and obligations, including the rules of the World Trade Organization (WTO). The CBAM system works as follows, reflecting the EU ETS:

• CBAM applies to the real value of embedded emissions in products imported into the EU, determined by a method consistent with reporting emissions under the EU ETS for similar production within the EU.
• From the start of the definitive period in 2026, EU importers will purchase CBAM certificates equivalent to the carbon price that would have been paid if the products were produced under the EU's carbon pricing rules.
• Conversely, if a producer outside the EU has already paid a carbon price on the emissions embedded in the production of imported products in a third country, the relevant cost can be fully deducted from the CBAM obligation.
• Therefore, CBAM aims to reduce the risk of carbon leakage and encourage greener production processes outside the EU, as well as incentivize countries to introduce carbon pricing measures.
• To provide legal certainty and stability to businesses and other countries, CBAM is being implemented gradually and initially applies only to certain products from sectors at high risk of carbon leakage: iron/steel, cement, fertilizers, aluminum, hydrogen, and electricity production. The transition period starting on October 1, 2023, involves a reporting system for these products, aiming for a smooth transition and facilitating dialogue with third countries. Importers will begin paying the CBAM financial adjustment in 2026.

How does CBAM interact with the EU Emissions Trading System (ETS)?

The EU Emissions Trading System (ETS) is the world's first major carbon market and a cornerstone of the EU's policy to combat climate change. It sets a cap on the total amount of greenhouse gases that can be emitted by installations covered by the system. While allowances must be purchased on the carbon market, a certain number of free allowances are distributed to industries at risk of carbon leakage. To increase the incentive to reduce carbon intensity, CBAM will be phased in as the number of free allowances decreases over time. For all sectors under the EU ETS, the number of free allowances will gradually decrease. For sectors covered by CBAM, this reduction will accelerate from 2026 onwards, allowing the ETS to have the most significant impact in meeting the EU's ambitious climate targets. Simultaneously, the financial adjustment under CBAM will be applied according to a phased calendar.

How does the CBAM interact with the EU Emissions Trading System (ETS)?

The EU Emissions Trading System (ETS) is the world's first major carbon market and a cornerstone of the EU's policy to combat climate change. It caps the amount of greenhouse gas emissions that can be emitted from energy production and large industrial plants. Emissions trading means that permits must be bought, but to prevent carbon leakage, a certain number of free allowances are distributed to industries. As an incentive to reduce carbon intensity, the Carbon Border Adjustment Mechanism (CBAM) will be progressively introduced as free allowances decrease. Over time, the number of free allowances in the EU ETS for all sectors decreases. For CBAM sectors, this decrease will accelerate from 2026, allowing the ETS to have the greatest possible impact in meeting the EU's ambitious climate goals. Meanwhile, the CBAM financial adjustment is applied according to a gradual schedule. The CBAM will be based on a system of certificates corresponding to the carbon emissions embedded in CBAM goods imported into the EU. The CBAM diverges from the ETS in certain limited areas, as it is not a 'cap and trade' system. Unlike the EU ETS, an unlimited number of certificates can be purchased. However, the price of CBAM certificates will reflect the ETS permit price. When the full CBAM regime becomes operational in 2026, the system will be aligned with the revised EU ETS, especially in terms of reducing free allowances for sectors covered by the CBAM. This means that the CBAM will only be applied to covered products and proportional to the reduction of free allowances allocated for those sectors under the EU ETS. Simply put, CBAM will only apply to the proportion of emissions not benefiting from free allowances under the EU ETS until free allowances for CBAM sectors are completely phased out by 2034, ensuring that importers are treated fairly compared to EU producers.

How does the CBAM work in harmony with other ETS systems outside the EU?

The CBAM will ensure that products imported into the EU receive "no less favorable treatment" than EU products, thanks to three design features of the CBAM: - The CBAM takes into account the "actual values" of embedded emissions, meaning that companies exporting to the EU that decarbonize their production will face lower CBAM payments; - The price of CBAM certificates for the import of CBAM products will be the same as the price applicable to EU producers under the EU Emissions Trading System (EU ETS); and - Effective carbon prices paid outside the EU will be deducted to avoid double pricing. This external carbon price could be through an emissions trading system, for example. The Commission will adopt secondary legislation before the end of the transition period to design the rules and processes for taking into account the effective carbon price paid abroad. During the transition period, reports should include the carbon price paid in the country of origin for the embedded emissions in imported products, taking into account any discount or other forms of compensation for informational purposes.

Which sectors does the new mechanism cover and why were these sectors chosen?

Initially, the CBAM will apply to the import of the following products: Cement Iron and Steel Aluminum Fertilizers Hydrogen Electricity These sectors were selected based on specific criteria, particularly high carbon leakage risk and high emissions intensity, and will represent over 50% of the emissions of industrial sectors covered by the EU ETS when fully implemented. The CBAM may be extended to other ETS sectors in the future.

What products does the CBAM Regulation apply to?

The CBAM Regulation applies to CN codes (Combined Nomenclature) that add two digits to the HS code and are used as a product code for export outside the EU. All products for which embedded emissions must be reported are listed in Annex I of the CBAM Regulation. These are referred to as 'CBAM products'. Sectors like 'iron and steel' are only indicated for informational purposes. For example, this means that the import of ammonia (under the CN code 2814 in the fertilizer sector) falls under the CBAM Regulation, even if it is not used for fertilizer production.

Does the CBAM apply to 'second-hand' products?

The CBAM Regulation applies to all products imported into the EU, that is, put into free circulation in the EU single market.

Does the CBAM apply to 'returned goods'?

Returned goods are products put into free circulation that were previously EU goods, either because they originate from EU-produced goods or were previously put into free circulation and meet certain conditions (e.g., if they are put into free circulation within three years after being previously exported). The CBAM applies only to the import of products originating from third countries. Therefore, if the products are of EU origin, the CBAM does not apply to them.

Does the CBAM apply to the outermost regions of the EU, such as Mayotte or La Réunion?

The CBAM Regulation applies only to CBAM products originating from third countries and imported into the Union customs territory. The list of regions forming the EU customs territory is in Article 4 of the Union Customs Code (Regulation EU 952/2013). La Réunion and Mayotte are part of the EU customs territory, and therefore the CBAM Regulation does not apply to products produced in La Réunion and Mayotte.

Which third countries are covered by the CBAM?

In principle, products from all non-EU countries are covered by the CBAM. However, some third countries with an emissions trading system linked to or participating in the EU ETS are excluded from the CBAM to avoid double carbon pricing for the same product. This applies to members of the European Economic Area (EEA) and Switzerland. The CBAM applies to electricity produced in third countries and imported into the EU, including countries seeking to integrate their electricity markets with the EU. When these electricity markets are fully integrated and specific strict obligations and commitments are implemented, the relevant countries could be exempted from the CBAM. In this case, the EU will review exemptions by 2030, by which time these partners should have implemented the decarbonization measures they committed to and established an emissions trading system equivalent to the EU's.

Do I need to report the import of CBAM products originating from the United Kingdom? Embedded emissions in products originating from the UK will need to be reported during the transition period.

What happens during the transition period?

Starting from 1 October 2023 and ending at the end of 2025, the transition period requires declarants (who can be importers or indirect customs representatives) to report the embedded emissions in imported CBAM products every quarter, but without a financial correction, giving time for the final system to be put in place. Declarants should contact the national competent authority in the country where they are established to access the CBAM Transition Guidance, which will be used to submit CBAM quarterly reports. The first CBAM quarterly report must be submitted by 31 January 2024 and will cover the notification period from 1 October 2023 to 31 December 2023.

Are there penalties for not complying with the CBAM Regulation?

Yes. Reporting the embedded emissions in CBAM products is mandatory from 1 October 2023. Declarants may face penalties ranging from EUR 10 to EUR 50 per unreported ton of emissions. Penalties are applied in cases where a) the declarant has not taken the necessary steps to comply with the obligation to submit a CBAM report, or b) the CBAM report is incorrect or incomplete and the declarant has not taken the necessary steps to correct the CBAM report after the competent authority has initiated a correction procedure.

Where can I find detailed information on how to report embedded emissions?

All the information needed to make the declaration is specified in the Implementing Regulation (EU) 2023/1773, which sets out the notification rules for the transition period. The Commission services have published (and will periodically update) a guide document for importers and a separate one for third-country producers, as well as an optional communication template to facilitate information exchange between producers and importers. These documents can be found on the CBAM website: https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en. The guide document for EU importers will be available in all 24 official EU languages. For third-country producers, the Guide document will be available in English, French, German, Polish, Spanish, Italian, Arabic, Korean, Mandarin, Hindi, and Turkish.

Is it mandatory to use the communication template Excel file?

No, using the communication template is not mandatory, but it is recommended. The communication template allows businesses to identify the embedded emissions in CBAM products according to the method specified in Implementing Regulation (EU) 2023/1773. The template takes into account all relevant source flows and emission sources, electricity consumption, and related precursors for the calculation. The template includes a worksheet called 'Summary_Communication' containing all the information needed by the declarant, thus facilitating communication between third-country producers and importers (or their representatives).

Who is responsible in cases of false or insufficient information provided?

The responsibility lies with the declarant, which can be either the importer or an indirect customs representative. The national competent authority is responsible for establishing appropriate dialogue with the declarant and applying penalties.

Who can I contact if I have more specific questions?

The relevant national competent authorities and ultimately the Commission are at your service to clarify any doubts related to the implementation of CBAM. A list of national competent authorities is published and continuously updated on the Commission's dedicated CBAM website: Carbon Border Adjustment Mechanism (europa.eu).

Who is responsible for reporting?

Customs authorities will inform the persons making the customs declaration about their obligation to report information during the transition period. The responsibility for reporting depends on who makes the customs declaration, being either the importer or the indirect customs representative. Customs authorities have the freedom to choose how to inform about reporting obligations. The responsible party for the reporting obligation can be one of the following:

• The importer, if (i) the importer makes the customs declaration in their own name and on their own behalf for the release of the product into free circulation; and (ii) if the importer is also the person who has the permission to make the customs declaration and reports the import of the product;
• The indirect customs representative, if the customs declaration is made by an indirect customs representative appointed in accordance with Article 18 of Regulation 952/2013; if the importer is established outside the European Union; or if the indirect customs representative has accepted the reporting obligations under Article 32 of Regulation 2023/956 and the importer is established within the European Union. The appointed indirect customs representative must be established within the European Union and meet the conditions for customs representatives determined by the relevant Member State (see Article 18 of Regulation 952/2013).

Is it possible for an importer to have more than one indirect customs representative?

An importer is free to use different indirect customs representatives, each responsible for the specific CBAM products they include in their customs declaration. Each representative will present their own EORI number at customs, which serves as proof of who is responsible for the embedded emissions. Therefore, double counting of embedded emissions is not possible.

Will companies be allowed to report centrally at a group level when subsidiaries in different Member States have different Economic Operators Registration and Identification (EORI) numbers?

As a principle, CBAM products are attributed to a CBAM declarant through the EORI number presented to customs authorities. This means that, by default, CBAM reports for different subsidiaries (with different EORI numbers) would be made separately. However, since importers are allowed to appoint an indirect customs representative to undertake their CBAM obligations, a single indirect customs representative can be appointed to represent all subsidiaries and report centrally at a group level.

What are the reporting obligations? When should I submit the report?

During the CBAM transition period, from 1 October 2023 to 31 December 2025, the importer must submit a CBAM report every quarter. This report should contain information about the products imported during the previous quarter and must be submitted no later than one month after the end of that quarter. The reporting schedule for the transition period is outlined below:

The report must contain information as specified in Article 35 of the Regulation:

• The total quantity of each type of CBAM product;
• The total of actual embedded emissions;
• The total of indirect emissions;
• The carbon price paid in the country of origin for the embedded emissions in the imported product (including the relevant precursors, where applicable), taking into account any discount or other types of compensation.

Do products imported in small quantities fall under the CBAM Regulation?

Products imported in small quantities that fall under the CBAM can be automatically exempted from the CBAM Regulation under the condition of a de minimis exemption. This exemption means that shipments of CBAM products with a total intrinsic value of less than 150 euros are exempted from the CBAM Regulation. Therefore, the overall value of CBAM products within a shipment should be considered, and if this value exceeds 150 euros, the de minimis exemption does not apply. Consider the following two scenarios for illustration:

• Scenario 1: My shipment contains X number of non-CBAM products, each with a nominal value of Y euros. These are not relevant for the application of the de minimis exemption. Additionally, one package of Portland cement (CN code 2523 21 00) not exceeding the value of 150 euros is included. The de minimis exemption applies.
• Scenario 2: My shipment contains X number of non-CBAM products, each with a nominal value of Y euros. These are not relevant for the application of the de minimis exemption. Additionally, I am carrying one ton of Portland cement (CN code 2523 21 00) and one ton of Other Portland cement (CN code 2523 29 00). The value of each CBAM product is 120 euros. The total value of CBAM products in my shipment exceeds 150 euros, and therefore, the de minimis exemption does not apply.

If I did not import any CBAM goods during a specific reporting quarter, should I submit a CBAM report? If you did not import (i.e., did not release into free circulation) any CBAM goods during a specific quarter, you are not required to submit any CBAM report for that particular quarter.

Reporting: Responsibilities and Procedures

• What is the role of the European Commission during the transition period?

• During the transition period, the Commission's responsibilities include managing the CBAM Transition Record, transmitting a list of reports where the reporting commitment has not been met to the national competent authorities, monitoring the implementation and progress of CBAM, and analyzing its impact on exports, downstream products, trade flows, and Least Developed Countries (LDCs). The Commission will also prepare secondary legislation in the form of implementing acts regarding transition period (article 35), reporting obligations, and reporting infrastructure, among other responsibilities.

• What is a National Competent Authority (NCA)?

• Each Member State has designated a National Competent Authority (NCA) responsible for performing duties outlined in Regulation 2023/956. NCAs are tasked with ensuring the quality of the CBAM quarterly report (with support from the Commission) and communicating with declarants who fail to meet reporting commitments. They ensure compliance with CBAM rules and can impose penalties. Starting from 2025, they will also grant the status of "authorized CBAM declarant" for the definitive period.

• Do importers of CBAM products need to be 'authorized' to import these products into the EU during the transition period? Importers of CBAM products do not need to be authorized to import these products into the EU during the transition period. Customs will inform importers of CBAM products about their reporting obligations at the time of import.

• Are there verification obligations during the transition period?

• No, an external independent organization's verification obligation will only be mandatory from 2026 onwards. Secondary legislation for the definitive period will define the rules for the verification of emissions based on data collected from EU importers during the transition period.

Do products imported in small quantities fall under the CBAM Regulation?

Products imported in small quantities that fall under the CBAM can be automatically exempted from the CBAM Regulation under the condition of a de minimis exemption. This exemption means that shipments of CBAM products with a total intrinsic value of less than 150 euros are exempted from the CBAM Regulation. Therefore, the overall value of CBAM products within a shipment should be considered, and if this value exceeds 150 euros, the de minimis exemption does not apply. Consider the following two scenarios for illustration:

• Scenario 1: My shipment contains X number of non-CBAM products, each with a nominal value of Y euros. These are not relevant for the application of the de minimis exemption. Additionally, one package of Portland cement (CN code 2523 21 00) not exceeding the value of 150 euros is included. The de minimis exemption applies.
• Scenario 2: My shipment contains X number of non-CBAM products, each with a nominal value of Y euros. These are not relevant for the application of the de minimis exemption. Additionally, I am carrying one ton of Portland cement (CN code 2523 21 00) and one ton of Other Portland cement (CN code 2523 29 00). The value of each CBAM product is 120 euros. The total value of CBAM products in my shipment exceeds 150 euros, and therefore, the de minimis exemption does not apply.

If I did not import any CBAM goods during a specific reporting quarter, should I submit a CBAM report?

If you did not import (i.e., did not release into free circulation) any CBAM goods during a specific quarter, you are not required to submit any CBAM report for that particular quarter.

Reporting: Responsibilities and Procedures

• What is the role of the European Commission during the transition period?

• During the transition period, the Commission's responsibilities include managing the CBAM Transition Record, transmitting a list of reports where the reporting commitment has not been met to the national competent authorities, monitoring the implementation and progress of CBAM, and analyzing its impact on exports, downstream products, trade flows, and Least Developed Countries (LDCs). The Commission will also prepare secondary legislation in the form of implementing acts regarding transition period (article 35), reporting obligations, and reporting infrastructure, among other responsibilities.

• What is a National Competent Authority (NCA)?

• Each Member State has designated a National Competent Authority (NCA) responsible for performing duties outlined in Regulation 2023/956. NCAs are tasked with ensuring the quality of the CBAM quarterly report (with support from the Commission) and communicating with declarants who fail to meet reporting commitments. They ensure compliance with CBAM rules and can impose penalties. Starting from 2025, they will also grant the status of "authorized CBAM declarant" for the definitive period.

• Do importers of CBAM products need to be 'authorized' to import these products into the EU during the transition period? Importers of CBAM products do not need to be authorized to import these products into the EU during the transition period. Customs will inform importers of CBAM products about their reporting obligations at the time of import.

• Are there verification obligations during the transition period?

• No, an external independent organization's verification obligation will only be mandatory from 2026 onwards. Secondary legislation for the definitive period will define the rules for the verification of emissions based on data collected from EU importers during the transition period.

• What embedded emissions must be reported by each CBAM sector?

• The table below shows specific emissions and greenhouse gases for each sector covered by CBAM, detailing how direct and indirect emissions for each sector are determined. The specific characteristics of each sector have been considered in designing the reporting and calculation methods for embedded emissions in these products, reflecting the EU Emissions Trading System.

What are the original documents in the quarterly CBAM report?

No original document submission is required. The reporting declarant must only submit the information required for the quarterly CBAM report via the CBAM Transition Record. According to the transparency principle stated in section A.2 of Annex III of the Implementing Regulation, complete and transparent records of all data required to determine the embedded emissions of the produced products, including necessary supporting documents, must be kept at the organization's location for at least four years after the report period. These records can be disclosed to the reporting declarant and may be requested by EU Member States in case of a review of the quarterly CBAM report.

If I am both an importer and an indirect customs representative filling in CBAM reports on behalf of another importer, will I submit a single CBAM report or two separate CBAM reports? 

A reporting declarant acting both as an importer (Company A, importing steel) and as an indirect customs representative (importing aluminum for Company B) is required to submit a single quarterly CBAM report covering all CBAM products involved in the customs declarations they have processed.

What is the 'effective carbon price' I report as?

The carbon price refers to the monetary amount paid in a third country under a carbon emission reduction scheme for the greenhouse gases released during the production of products, and it can take various forms such as taxes, fees, charges, or under a greenhouse gas emission trading system. During the transition period, reporting declarants must report the effective carbon price paid in the jurisdiction where the CBAM product was produced. In the definitive period, disclosing this information will provide an offset to importers to avoid double pricing of embedded emissions.

Who will check the accuracy of the submitted data and reports?

During the transition period and as per Article 11 of the Implementing Regulation, the Commission will perform the initial screening of CBAM reports and transmit a list of incomplete or suspicious reports (i.e., reports the Commission believes are non-compliant with the CBAM Regulation) to the competent national authority. The competent national authority then decides to initiate a review and potentially a correction procedure, which ultimately could lead to penalties.

Is it possible to correct a CBAM report that has already been submitted? Article 9 of the Implementing Regulation allows for a CBAM report that has already been submitted to be corrected within two months after the end of the report period. For the first two-month report, the Implementing Regulation provides for a longer period for corrections, enabling corrections to be made until January 31, 2024. This allows reports for the periods up to January 31 and April 30 to be subsequently corrected until July 31, 2024.

Must the report be only in English, or is reporting in other languages possible?

Reporting is possible in all 24 EU languages.

CBAM Transition Record: What is it?

To ensure effective implementation of reporting obligations, the Commission has developed an electronic database to collect information reported during the transition period. The CBAM Transition Record is a standardized and secure electronic database containing common data elements for reporting during the transition period and provides access, file processing, and confidentiality. It forms the basis for developing and establishing the CBAM Record as per Article 14 of Regulation 2023/956. Importers can connect to the CBAM Transition Record through this link: https://customs.ec.europa.eu/taxud/uumds/cas

What will the CBAM Transition Record be used for?

The CBAM Transition Record will facilitate communication among the Commission, competent authorities, customs authorities of member states, and reporting declarants. It will be used for collecting and analyzing information and not for enforcement purposes.

Is the CBAM Transition Record the same as the EU Customs Trader Portal?

The CBAM Transition Record operates independently for reporting declarants from the EU Customs Trader Portal (EUCTP). However, existing importers, who will also act as CBAM Declarants and if permitted by the Member State, may use their existing user accounts. Depending on the Member State, specific access to the CBAM module may be required.

Will the data shared in the CBAM Transition Record be kept confidential?

According to Article 14 of the CBAM Regulation, information in the CBAM record, except for "names, addresses, and contact details of businesses and the location of facilities in third countries," will be "kept confidential." Articles 13 of the CBAM Regulation and Article 15 of the Implementing Regulation for the Transition Period, which set out the reporting obligations, include a duty of professional secrecy regarding the information obtained by the competent national authority. Some information requested by the importer, especially when not verified by external and independent auditors, is necessary to verify the level of emissions. However, it's important to remember that there are optional sensitive details that can be used for exchange between operators and importers. For instance, Annex IV of the Implementing Regulation includes "communication from history operators to reporting declarants," but only the information listed in Annex I should be provided. The CBAM Transition Record defines mandatory and optional entries.

How many CBAM Transition Record environments are there?

There is a production and a conformity CBAM record environment available for CBAM reporting declarants. The conformity environment can be used as a test environment to familiarize with the CBAM quarterly report form and CBAM Record user interface. Due to security reasons, separate registration is required for each environment (the same email can be used). The relevant NCA provides access details for both environments to reporting declarants. Connection to the production CBAM Transition Record: https://CBAM.ec.europa.eu/declarant Connection to the conformity CBAM Transition Record: https://conformance.CBAM.ec.europa.eu/declarant

Who is authorized to register a company as a CBAM Declarant?

Any natural person able to prove they represent the company can apply to the national competent authorities (NCAs) of the Member States where the company is established and request access to the CBAM Record as a CBAM Declarant. The NCAs are responsible for verifying the legitimacy of requests and granting CBAM Declarant access permissions. The account holder granted CBAM Declarant access by the NCA is responsible for keeping the account confidential and granting access to additional company accounts (employees).

Can companies not directly subject to CBAM also access the CBAM Transition Record?

No, access to the CBAM Transition Record is limited to reporting declarants, competent authorities in Member States, customs authorities, and the European Commission.

How should data be filled in the CBAM Transition Record?

Quarterly reports should be filled in per importer, CN code, and installation. There are two ways to fill in data in the CBAM Transition Record:

• Reporting declarants can manually fill in the data within the CBAM Transition Record interface.
• Alternatively, reporting declarants can use an XML structure to upload their CBAM quarterly reports. Once an XML file is successfully uploaded, a new draft quarterly report is created and can be submitted via the CBAM Record user interface. A supporting XLS file that can be used to fill in the quarterly report using XML will soon be published on the Commission's CBAM website. There are mandatory and optional fields. Mandatory fields in the CBAM Transition Record are marked with an asterisk (*). Mandatory fields are also indicated in the supporting XLS file. Detailed information on how to fill in the report and use the XSD file can be found in the CBAM Transition Record User Guide for Declarants. A draft report can be saved even if all mandatory elements are not provided. However, all mandatory elements must be provided to submit the report.

What is the methodology for calculating embedded emissions in CBAM products during the Transition Period?

• The relevant reporting period, or reference period for operators to determine embedded emissions, is a calendar year. However, other periods providing a similar scope and covering at least 3 months (e.g., fiscal year) can be justified. More details can be found in the Guide documents Section 4.3.4 (for EU importers) / Section 4.3.3 (for non-EU installations).
• For the CBAM report due in the first quarter of the year, previous year's data should be used. If such data is not yet available by the end of January/February, data from the preceding year may be used.

What are simple and complex products?

• "Simple products" are those produced from input products whose embedded emission is considered zero according to the CBAM reporting methodology. Hence, the embedded emissions of simple CBAM products are based solely on emissions occurring during their production.
• For "complex products," embedded emissions of relevant precursor materials used in the production process must also be included. Precursor materials refer to raw materials used in the production of complex CBAM products that are themselves CBAM products. In the cement sector, an example of a precursor is cement clinker, the main component of Portland cement.

What are direct and indirect emissions?

• Direct emissions cover emissions occurring during the production processes of CBAM products, including the production of heating and cooling, and emissions from heating and cooling production are considered direct emissions regardless of where the production takes place.
• Indirect emissions cover the production of electricity consumed during the production of CBAM products.
• Embedded direct and indirect emissions of relevant precursor materials are also considered when determining the embedded direct and indirect emissions of CBAM products.
• During the Transition Period, for monitoring purposes, importers are required to report both direct and indirect emissions for all products under CBAM. Starting 1 January 2026, in the definitive period, the scope of CBAM will be limited to direct emissions for iron/steel, aluminum, and hydrogen, while importers of cement and fertilizers will have to report both direct and indirect emissions.

What is the "bubble approach," and how does it work?

• If an installation is producing a complex product and its precursor, and the precursor is used solely for the production of the complex product, a combined (single) production process system boundary within the installation can be defined (see guidance documents for explanations).

If an imported CBAM product is produced using precursors (e.g., pig iron) produced within the EU, should this be considered in the calculation?

Yes, relevant precursors produced within the EU should also be considered in determining the embedded emissions of an imported CBAM product. However, if a precursor originates from EU production, the carbon price already paid in the EU can also be reflected in the CBAM report. (More information can be found in Section 6.10 of the Guide for Non-EU Installations).

Will the European Commission officially or informally validate the "equivalence" of alternative methods?

The transition period is a learning period for everyone, including the services of the EU Commission and national competent authorities. Alternative methods may be rejected, especially after 31 July 2024, if they do not meet the standards laid out in Article 4(2) of the Implementing Regulation. The national competent authority initiates communication with the reporting declarant to obtain more accurate data.

How are indirect emissions determined in the production of CBAM products?

Indirect emissions are determined by multiplying the electricity consumed to produce a CBAM product by a relevant emission factor. The emission factor may be based on the electricity grid or represent a real emission factor.

Which emission factors should be used for electricity to determine indirect emissions during the transition period?

For the transition period, default emission factors for electricity are based on International Energy Agency (IEA) data covering a 5-year average data and are provided by the Commission in the CBAM Transition Record by country. Alternatively, any emission factor of the country's electricity grid can be used if available and based on publicly available data. Both emission factors for electricity and CO2 emission factors can be used. Real electricity emission factors can be used if there is a direct technical connection between the electricity production source and the installation producing the CBAM product, or an electricity purchase agreement between the electricity producer and consumer.

Can market-based certificates (Guarantee of Origin, Renewable Energy Certificates, etc.) justify the use of real emission factors? During the transition period, the general rule for the emission factor for electricity is to use default values provided by the Commission. However, real electricity emission factors can be used when relevant conditions are met (i.e., the existence of a direct technical connection or electricity purchase agreement, as explained above). Specific market-based emission factors, such as those determined by Guarantees of Origin or Green Certificates, cannot be used to justify the use of real emission factors. More information can be found in Annex III, Section D.2 of the CBAM Implementing Regulation, and Section 6.7.3.2 of the guide for non-EU installations.

Should emissions from transportation within the facility be included in the calculation?

Emissions from transportation using conveyor belts, pipes, and other stationary equipment are included. Emissions from the use of mobile machinery (trucks, forklifts, etc.) are excluded. These rules are the same as in the EU Carbon Trading System.

Can carbon capture and use/storage (CCU/CCS) be used to offset emissions for determining embedded emissions?

Carbon capture and use/storage (CCUS) techniques, increasingly present in markets to reduce carbon dioxide emissions, can be considered when determining embedded emissions, but certain criteria must be met. These conditions are laid out in Annex III, Section B.8.2 of the Implementing Regulation (further explained in guide document Section 6.5.6.2). Conditions primarily involve the use of captured carbon dioxide in the production of products where it is chemically bound permanently or the transfer of captured carbon dioxide to a long-term geological storage site.

What should I do if my supplier does not send the required information before the report submission date?

Good cooperation between third-country producers and declarants is very important. The Commission has published guidance and templates to help producers determine the embedded emissions of the products they produce. Ultimately, the reporting declarant is responsible for ensuring the completeness and accuracy of CBAM reports. The declarant is responsible when CBAM reporting obligations are not respected and may be subject to penalties. During part of the transition period (until mid-2024), declarants can use other methods, including default values provided and published by the Commission, for every import of products for which they do not have all information. The use of default values for reporting purposes during the transition period is possible without quantity limitations for the first three reporting periods. Furthermore, estimated values (including default values) can be used for processes or subprocesses contributing a relatively small portion to the total embedded emissions of input products or complex products (e.g., <20%) throughout the reporting period. In other words, this means that up to 100% of the total embedded emissions can be determined using default values until 31 July 2024. For the remainder of the transition period (i.e., 1 July 2024 - 31 December 2025), estimated values can be used but with a quantity limitation: for complex products, up to 20% of the total embedded emissions can be estimated based on the entire production chain (default values provided by the Commission are considered "estimated"). At the end of 2025, the Commission will review the default values based on the data collected. During the transition period, only general default values (for every CN code under CBAM) will be available. In the definitive period, default values will be provided by country or even by region.