The European Commission has confirmed that actual emissions from precursors produced at another installation can be used to calculate embedded emissions for a complex good under the Carbon Border Adjustment Mechanism (CBAM). The use of those precursor values is conditional on support from a verification report that the downstream installation’s verifier can rely on. This links acceptance of upstream emission figures to the availability of verified documentation.
The requirement increases the role of verified carbon information across supply chains. Producers in steel, aluminium, cement and fertiliser 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 information. In such cases, the embedded-emissions calculation depends on whether the required evidence is available.
Default values apply when verified precursor evidence is missing
Where required evidence cannot be obtained, producers may use applicable default values. For most non-fertiliser goods, those default values 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 scheduled increases in mark-ups are described as creating stronger commercial incentives to secure verified actual-emissions data. This effect is tied to situations where a supplier’s real emissions are below the applicable default value. In those circumstances, using default values would raise the embedded-emissions basis compared with verified figures.
Verified precursor information exchange expands from 2027 to 2028
From 2027, operators will need to exchange verified precursor information outside the CBAM Registry. The expected availability of direct operator-to-operator sharing of actual verified precursor emissions through the Registry is set for 2028. This timeline affects how companies plan for data handling during the transition period.
Companies are therefore expected to put in place controlled contractual arrangements for exchanging emissions data before the planned digital infrastructure is fully available. These arrangements must enable downstream producers and their verifiers to obtain evidence needed for actual-emissions calculations. The scope includes access to verification-supported precursor information rather than only internal monitoring results.
Financing and procurement impacts tied to upstream evidence quality
The financing implications stem from how missing precursor data can affect a manufacturer’s CBAM costs. Weak upstream evidence can result in higher and less predictable liabilities, which can put pressure on gross margins from EU sales and increase working-capital requirements. The impact is therefore connected to both cost level and cost predictability.
Banks assessing industrial borrowers may need to review 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 approach links supplier documentation capacity to borrower risk assessment.
Long-term procurement contracts may increasingly include obligations related to maintaining verified emissions data. Such clauses could cover provision of supply verification reports, identification of the installation of origin, and compensation to buyers where failure to provide evidence leads to use of a higher default value. Contract terms would thus reflect documentation requirements that influence CBAM calculations.
MRV-capable suppliers may become preferred partners for EU-bound goods
For Southeast European exporters supplying the EU market, the requirements are described as creating both compliance costs and commercial opportunities. Suppliers with robust monitoring, reporting and verification (MRV) systems and independent verification may become preferred partners for manufacturers. This preference could apply even when competing materials have similar physical characteristics.
The CBAM framework is also described as adding an additional dimension to industrial credit quality through suppliers’ ability to substantiate the carbon content of goods they provide. Verified precursor information supported by verification reports therefore functions as a key input for downstream embedded-emissions calculations under CBAM rules.