What Is Embedded Carbon? The Complete Guide for CBAM Compliance
Embedded carbon is the total greenhouse gas emissions generated during the production of a good — the figure non-EU manufacturers must document under CBAM Regulation 2023/956.
Find an Accredited Verifier in Your Country →Embedded carbon refers to the total greenhouse gas emissions generated during the production of a good, from raw material extraction through to factory gate, expressed in tonnes of CO2 equivalent (tCO2e) per tonne of product. Under CBAM Regulation 2023/956, non-EU manufacturers must provide this figure to their EU buyers or EU default emission values apply.
Truth Anchor: CBAM Regulation 2023/956 Article 7 requires that the embedded emissions of goods imported into the EU customs territory are calculated using the methods set out in Annex III of the Implementing Regulation 2023/1570, which defines both actual and default emission values for each covered sector. Source: EUR-Lex: Regulation 2023/956.
Why Does CBAM Require Embedded Carbon Data?
The Carbon Border Adjustment Mechanism (CBAM) is the EU's policy tool to prevent carbon leakage — the risk that EU manufacturers relocate production to countries with weaker climate rules, or that EU importers substitute EU-made goods with cheaper, carbon-intensive imports from outside the EU. CBAM addresses this by placing a carbon price on imports of certain goods equivalent to the price EU manufacturers pay under the EU Emissions Trading System (EU ETS).
To calculate the correct CBAM certificate cost, the EU importer (the "authorised declarant") must report the embedded carbon in every tonne of goods they import. That embedded carbon figure must come from the non-EU manufacturer. If the manufacturer cannot provide a verified actual figure, the EU importer must use EU Commission default emission values — which are set deliberately high to create a financial incentive for manufacturers to document their actual, typically lower, emissions.
The financial phase of CBAM began in January 2026. The first CBAM certificates must be surrendered by 30 September 2027 for goods imported during 2026. From that date, every EU importer of CBAM-covered goods needs verified embedded carbon data from their non-EU suppliers — or they pay the default rate.
Direct vs Indirect Embedded Emissions
CBAM distinguishes between two types of embedded emissions, and both must be calculated for most covered sectors.
| Emission Type | Definition | Example — Steel | CBAM Scope |
|---|---|---|---|
| Direct emissions (Scope 1) | GHG emissions from the production process itself — fuel combustion, chemical reactions, process gases | CO2 from coke combustion in blast furnace; CO2 from electric arc furnace electrode consumption | Required for all CBAM sectors |
| Indirect emissions (Scope 2) | GHG emissions from electricity consumed during production, based on the grid emission factor of the country of production | CO2 equivalent from electricity used to power electric arc furnace, rolling mills, and auxiliary equipment | Required for steel, aluminium, hydrogen; optional for cement and fertilisers under certain conditions |
For an electric arc furnace (EAF) steel producer, indirect emissions from electricity can represent 40–60% of total embedded carbon depending on the national grid emission factor. A producer in a country with a high-carbon grid (coal-heavy electricity) will have significantly higher indirect emissions than one in a country with a low-carbon grid (hydro or nuclear-heavy). This is why the country of production matters enormously for CBAM calculations — and why a South African EAF producer using Eskom's coal-heavy grid has a very different embedded carbon profile from a Turkish EAF producer using a more diversified grid.
What Happens Without Documented Embedded Carbon?
If a non-EU manufacturer cannot provide a verified actual embedded carbon figure, the EU importer must use EU Commission default emission values. These defaults are set at the 90th percentile of EU production emissions for each sector — meaning they assume your facility is dirtier than 90% of European facilities. For most non-EU manufacturers using modern equipment, actual emissions are significantly lower than these defaults.
The financial consequence is substantial. For EAF steel, the EU default value is 2.18 tCO2 per tonne of steel. A modern EAF producer typically achieves 0.60 tCO2 per tonne. At the current EU ETS price of EUR 65.42/tCO2, the difference is EUR 102.86 per tonne — or EUR 1,028,600 per year on 10,000 tonnes of exports. That is the annual cost of not documenting actual embedded carbon.
| Sector | EU Default (tCO2/t) | Realistic Actual (tCO2/t) | Saving per tonne at EUR 65.42 | Annual saving on 10,000t |
|---|---|---|---|---|
| Steel — BF-BOF | 2.18 | 1.80 | EUR 24.86 | EUR 248,600 |
| Steel — EAF | 2.18 | 0.60 | EUR 102.86 | EUR 1,028,600 |
| Primary Aluminium | 12.40 | 8.00 | EUR 287.85 | EUR 2,878,500 |
| Cement | 0.81 | 0.65 | EUR 10.47 | EUR 104,700 |
| Ammonia Fertilisers | 2.33 | 1.80 | EUR 34.67 | EUR 346,700 |
| Hydrogen (SMR) | 5.28 | 2.00 | EUR 214.58 | EUR 2,145,800 |
Use the CBAM Savings Calculator to calculate your specific saving based on your sector, export volume, and actual embedded carbon intensity.
Embedded Carbon vs Carbon Footprint vs Scope 3
These three terms are frequently confused. The distinction matters for CBAM compliance because CBAM uses a specific definition that is narrower than a full lifecycle carbon footprint.
| Term | Scope | Relevant to CBAM? | Standard |
|---|---|---|---|
| Embedded carbon (CBAM) | Scope 1 direct process emissions + Scope 2 electricity emissions during production (cradle to factory gate) | Yes — this is the CBAM calculation | CBAM Implementing Regulation 2023/1570 Annex III |
| Product carbon footprint | Full lifecycle — from raw material extraction through use and end-of-life disposal (ISO 14067) | Partially — ISO 14067 methodology is used for CBAM calculations but the scope is narrower | ISO 14067:2018 |
| Scope 3 emissions | All indirect emissions in a company's value chain — upstream and downstream — not included in Scope 1 or 2 | No — CBAM does not require Scope 3 reporting | GHG Protocol Corporate Standard |
| Organisational carbon footprint | All GHG emissions from a company's operations across all sites and activities | No — CBAM is product-level, not company-level | ISO 14064-1:2018 |
How Embedded Carbon Is Calculated
CBAM embedded carbon calculations follow the methodology in Annex III of Implementing Regulation 2023/1570. The calculation has four components:
- Direct process emissions: Fuel consumption (tonnes) × fuel emission factor (tCO2/tonne fuel) + process emissions from chemical reactions (e.g., CO2 from limestone calcination in cement production)
- Electricity consumption emissions: Electricity consumed (MWh) × grid emission factor (tCO2/MWh) for the country of production
- Production volume: Total tonnes of product produced during the monitoring period
- Embedded carbon intensity: (Direct emissions + Indirect emissions) ÷ Production volume = tCO2e per tonne of product
The monitoring period must be at least 60 days of continuous production data. The calculation must be validated by an ISO 14065 accredited third-party verifier before it can be used as an actual emission value for CBAM purposes. For a full technical explanation of the calculation methodology, see CBAM Embedded Carbon Calculation Methods.
Who Must Calculate Embedded Carbon?
The obligation to calculate and document embedded carbon falls on the non-EU manufacturer — not the EU importer. However, the EU importer (the authorised declarant) is legally responsible for reporting the correct embedded carbon figure in their CBAM declaration. In practice, this means EU importers must request verified embedded carbon data from every non-EU supplier of CBAM-covered goods.
The six CBAM-covered sectors and the goods within each sector are defined in Annex I of CBAM Regulation 2023/956. The key sectors are:
| Sector | Key goods covered | Annual threshold | Spoke page |
|---|---|---|---|
| Iron & Steel | Pig iron, direct reduced iron, flat-rolled products, bars, rods, wire, tubes | 50 tonnes/year | Steel embedded carbon → |
| Aluminium | Unwrought aluminium, aluminium alloys, aluminium products | 50 tonnes/year | Aluminium embedded carbon → |
| Cement | Clinker, cement, aluminous cement | 50 tonnes/year | Cement embedded carbon → |
| Fertilisers | Ammonia, nitric acid, urea, ammonium nitrate, mixed fertilisers | 50 tonnes/year | Fertilisers embedded carbon → |
| Hydrogen | Hydrogen (all production routes) | 50 tonnes/year | Hydrogen embedded carbon → |
| Electricity | Electricity imports into EU | Any volume | All sectors → |
The 50-Tonne Threshold — What It Means in Practice
The 50-tonne annual threshold applies per CN code (Combined Nomenclature code — the EU's product classification system), not per company. A manufacturer exporting 30 tonnes of one steel product and 30 tonnes of another steel product under different CN codes has two separate obligations, each below the threshold individually. However, most commercial exporters to the EU exceed 50 tonnes per CN code easily — the threshold is designed to exclude very small consignments, not to exempt significant industrial exporters.
The Embedded Carbon Record — What It Is and Why You Need One
An Embedded Carbon Record for CBAM Compliance is a verified, permanently stored document proving the greenhouse gas emissions generated during production of a good. It is the output of the verification process — the verification statement issued by an ISO 14065 accredited verifier — stored in a permanent, cryptographically hashed vault so that it can be produced on demand by the EU importer, the EU customs authority, or a CBAM audit.
The record must be producible for any import during the three-year audit window that CBAM authorities can exercise. A manufacturer who verified their embedded carbon in 2026 but cannot produce the verification statement in 2028 during an audit faces the same penalty as one who never verified at all. Permanent storage is not optional — it is the difference between a compliant record and a liability.
embeddedcarbonrecord.com stores your verified embedded carbon calculation permanently. The SHA-256 hash is computed in your browser — the document itself is never transmitted to our servers. Only the hash and metadata are stored. The permanent verification URL resolves in under 2 seconds every time your EU buyer or a CBAM authority checks it — for the life of your product.
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Frequently Asked Questions
What is embedded carbon?
Embedded carbon refers to the total greenhouse gas emissions generated during the production of a good, from raw material extraction through to factory gate, expressed in tonnes of CO2 equivalent per tonne of product.
Does CBAM require embedded carbon documentation?
Yes. Non-EU manufacturers must provide embedded carbon data to their EU buyers under CBAM Regulation 2023/956, or EU default emission values apply — which are set at the 90th percentile of EU production and cost significantly more.
What is the difference between embedded carbon and carbon footprint?
Embedded carbon covers Scope 1 and Scope 2 emissions during production only (cradle to factory gate). Carbon footprint typically includes Scope 3 downstream emissions. CBAM uses embedded carbon — not full lifecycle carbon footprint.
Who must calculate embedded carbon for CBAM?
Non-EU manufacturers in six CBAM sectors — steel, aluminium, cement, fertilisers, hydrogen, and electricity — exporting above the 50-tonne annual threshold to the EU must calculate and document their embedded carbon.
What happens if I do not document my embedded carbon?
EU default emission values apply. These are set at the 90th percentile of EU production emissions — typically 2 to 3 times higher than actual values for modern non-EU facilities — dramatically increasing CBAM certificate costs.
What is the CBAM financial phase start date?
The CBAM financial phase began January 2026. First CBAM certificates must be surrendered by September 30, 2027 for 2026 imports.
Can I calculate my own embedded carbon without a verifier?
Self-declaration is not accepted for actual emission values under CBAM. An ISO 14065 accredited third-party verifier must validate your calculation. Default values do not require verification but cost significantly more.
What is the GHG Protocol and how does it relate to embedded carbon?
The GHG Protocol provides the internationally recognised methodology for quantifying greenhouse gas emissions. CBAM embedded carbon calculations follow GHG Protocol principles for Scope 1 direct emissions and Scope 2 electricity consumption emissions.
Store Your Verified Embedded Carbon Record
Once your ISO 14065 accredited verifier has completed your embedded carbon calculation, store the verification statement permanently at embeddedcarbonrecord.com. SHA-256 hashed. Permanent URL. Instant resolution for your EU buyer.
Store Your Verified Embedded Carbon Record for CBAM Compliance →