Under the definitive Carbon Border Adjustment Mechanism (CBAM), importers may apply default values for most covered goods when verified actual emissions are not available. The cost of using those defaults increases over time through a mark-up applied to country- and year-specific default values. The mark-up is set at 10% in 2026, 20% in 2027, and 30% from 2028.
The mark-up applies to default values for CBAM goods other than electricity under the definitive methodology. Fertilisers are treated differently, with a lower 1% mark-up. The approach is designed to reduce the risk of underestimating embedded emissions and to encourage the use of verified actual data.
Where a specific default value is not available for the relevant product or country, the methodology may require use of a value from other countries and territories. Those reference values can be based on high-emissions exporters. This structure is intended to address gaps in default coverage while maintaining a consistent basis for calculations.
Default-value exposure increases with higher CBAM mark-ups
The financial impact of missing or inadequate emissions data can rise even if a plant’s physical emissions do not change. For steel and aluminium suppliers, a producer whose actual emissions are below the applicable default may still increase its EU customer’s CBAM liability if it cannot substantiate performance through the required verification process.
As the mark-up increases, relying on defaults can become more commercially disadvantageous. Exporters are therefore expected to compare certificate costs calculated using applicable default values with expected costs based on verified actual emissions. This comparison is intended to show how much the difference in assumptions affects total liability.
For exporters in the Western Balkans, the gap between real production emissions and generic or conservative defaults can be particularly relevant. Establishing verified actual values can help prevent products from being assessed using less favourable assumptions when reliable market-specific data are not available.
CBAM data quality affects financing and compliance responsibilities
For EU importers, exposure to default values is described as more than an environmental cost. It can influence working capital, supplier concentration, inventory economics, and potential compliance liabilities linked to incorrect or insufficiently supported data.
Credit assessments are expected to examine how borrowers measure their CBAM exposure and whether contract terms allow costs to be passed through. The assessment also needs to consider what happens if suppliers do not provide verified emissions information. Companies with clear controls and credible fallback arrangements are positioned to explain and manage their financial exposure.
Importers remain responsible for substantiating figures used in CBAM declarations. Suppliers must keep records that buyers and accredited verifiers can trace back to the relevant installation and reporting period.
If commercial carbon-accounting practices go beyond the prescribed legal methodology, both approaches should be documented separately. A broader product-footprint calculation should not be treated as the official CBAM result when it does not match the legal basis.
Installation-level monitoring supports verified emissions instead of defaults
Reducing reliance on default values requires monitoring and reporting systems capable of producing installation-level embedded-emissions data that an accredited verifier can check. Such systems depend on defined processes, source streams, precursor information, production quantities, and appropriate controls.
Evidence needs to be collected as production occurs rather than assembled later from incomplete inputs. From 2027, suppliers cannot reliably reconstruct a complete year’s emissions allocation from annual energy invoices alone if necessary process records and allocation controls were never maintained.
The rising mark-up provides a financial rationale for emissions-data projects by linking expected certificate costs under defaults versus verified actual emissions. Exporters can compare those certificate-cost outcomes and estimate investment needs for monitoring, reporting, and verification (MRV). EU buyers can apply similar comparisons when evaluating suppliers and setting deadlines for delivery of emissions data.
Managing substantiation risk across 2026–2028
Risk reporting is expected to account for scenarios where claimed actual-emissions values cannot be substantiated. If substantiation fails, an importer may be required to use a more punitive default value, potentially increasing liability independently of movements in EU ETS certificate prices.
Management should identify suppliers and products with the largest differences between expected actual emissions and applicable defaults. Prioritisation should focus on verification efforts and improvements to data quality where gaps are greatest.
Exporters are expected to calculate the default-versus-actual cost gap for principal EU-bound products across 2026, 2027, and 2028. Where differences are material, approvals for pre-verification work such as improved metering and stronger supplier-data controls should be made before the 30% mark-up takes effect.
Integrating CBAM evidence into customs, finance, and purchasing controls
A practical test described for implementation is whether a company can explain its CBAM calculation to both a verifier and a commercial manager using the same underlying records. Compliance documentation should be integrated with purchasing, production, customs, and finance rather than maintained as a separate reporting exercise.
Routine data collection supported by controlled assumptions and documented fallback treatments allows calculations to be updated when suppliers, routes, prices, or legal requirements change. This approach is also intended to make emissions figures and supporting evidence easier to substantiate during customer negotiations.
A minimum decision file should connect customs volumes, the emissions basis used for calculation, the applicable certificate price, cash-flow timing, and contractual cost pass-through arrangements. It should identify who approves each assumption and specify alternative treatment when preferred emissions calculations cannot be substantiated.
Fallback procedures defined in advance are described as a way to avoid discovering actual exposure only after challenges by a verifier, customs authority, or authorised declarant. Even if fallback options are commercially less attractive, they provide a controlled response when evidence is missing or insufficient. The same discipline supports later price adjustments, verification changes, and management reporting.
CBAM default values are presented as a compliance fallback rather than a cost-free substitute for verified data. With mark-ups rising from 10% to 20%, then 30%, delays in establishing reliable emissions evidence can become increasingly expensive for exporters and their EU customers.