On 10,000 tonnes of imported Turkish steel, the gap between verified and default carbon data is €530,000 a year.1 Same factory. Same product. Same regulation. The only difference is whether the importer can produce verified emissions data from the supplier — or has to fall back on the EU’s default value.
That gap is not a fine and not a sanction. It is a structural feature of CBAM’s definitive phase, which began 1 January 2026. Default values are calibrated to the average emissions intensity of the worst-performing 10% of EU installations in each product category — deliberately punitive, designed to make verified data the only economic option.2 At today’s EU ETS price of €55/tCO2 the penalty is €53/tonne; at the €120/tCO2 the market expects by 2030, the same volume produces an unnecessary cost of €1.15 million a year.
How CBAM actually works now
The transitional period — two years of quarterly reporting with no financial obligations — is over. From 1 January 2026, importing goods covered by CBAM into the EU carries a direct carbon cost.
The mechanics are straightforward but consequential:
- Authorisation required. Importers must be registered as authorised CBAM declarants before they can import covered goods. Without authorisation, customs clearance is blocked.
- CBAM certificates. Each certificate covers one tonne of CO2 equivalent embedded in imported goods. Certificates are priced weekly, based on the average closing price of EU ETS allowances from the prior week’s auctions. In early-to-mid 2026, that price sits in the range of €55–70 per tonne.
- Surrender deadline. The first annual CBAM declaration is due by 31 May 2027, covering all imports during calendar year 2026. Certificates must be surrendered at that point.
- Product scope. Six categories are currently covered: iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen — defined in Annex I of EU Regulation 2023/956.
- Free allocation phase-out. CBAM obligations are reduced by the share of free EU ETS allowances EU producers receive for the same products. In 2026 free allocation covers 97.5%, meaning only 2.5% of embedded emissions face CBAM certificates. That tapers to 90% by 2028, 51.5% by 2030, and zero by 2034.
The cost today is modest. The cost tomorrow is not. And the mechanism that determines how much you pay — default values versus verified data — is where the real financial exposure lives.
The default value trap
When an importer submits their CBAM declaration, they must report the embedded emissions of the goods they imported. There are two ways to determine those emissions:
- Verified installation-level data — actual emissions measured at the production facility where the goods were manufactured, verified according to EU methodology.
- EU-published default values — assigned by the European Commission when verified data is not available.
The critical detail is how default values are calculated. They are not averages. They are not estimates. Default values are based on the average emissions intensity of the worst-performing 10% of EU installations for each product category.
This is deliberate. The regulation is designed to make default values punitive — a financial incentive to collect real data. If you do not know your supplier’s actual emissions, the EU assumes you are sourcing from the dirtiest producers on the continent. For steel, the impact is stark: default values can be 40–80% higher than the actual emissions of an efficient producer.
The math
Consider a Turkish steel producer — a common scenario for EU importers. The facility uses electric arc furnace (EAF) technology with a meaningful share of scrap input. Its actual verified emissions: 1.4 tCO2 per tonne of crude steel. The EU default value for the same product category: 2.36 tCO2 per tonne.
At a CBAM certificate price of €55 per tonne of CO2:
| Scenario | Emissions factor | Cost / t steel | Annual cost (10,000 t) |
|---|---|---|---|
| Default value | 2.36 tCO2/t | €130 | €1,300,000 |
| Verified actual | 1.4 tCO2/t | €77 | €770,000 |
| Gap | −0.96 tCO2/t | −€53 | €530,000 |
And that calculation uses today’s certificate prices. Market consensus forecasts EU ETS prices reaching €100–150 per tonne by 2030. At €120/tCO2, the same 10,000-tonne volume produces a default value penalty of over €1.15 million per year.
“Default values are not a safety net. They are a penalty for not knowing your supply chain’s actual emissions.”
What verified data requires
Avoiding default values is not a matter of self-reporting or reasonable estimates. The EU requires a specific, rigorous data chain that traces emissions back to the physical installation where the product was manufactured.
- Installation-level emissions data. Not company-wide averages. Not regional benchmarks. The data must come from the specific production facility — furnace by furnace, process by process.
- Direct and indirect emissions. Direct emissions from on-site combustion and chemical processes, plus indirect emissions from purchased electricity and heat consumed in production (for certain products). Measured according to EU implementing-regulation methodology.
- Activity-level data. Energy consumption by fuel type, process input quantities (ore, scrap, alloys, reductants), production volumes per product, and allocation methodology where a facility produces multiple outputs.
- Accredited third-party verification. The data must be verified by a body accredited under ISO 14065, or by an accredited CBAM verifier recognised in the EU framework. Self-attestation is not sufficient.
- Documentation trail. Complete calculation methodology, emission factor sources, measurement uncertainty analysis, and quality assurance procedures. The verifier must be able to trace every number back to a primary data source.
- Product-specific granularity. Where a facility produces multiple goods, emissions must be attributed to specific products using defined allocation rules — not divided equally or averaged across output.
The reference frameworks are ISO 14067 (carbon footprint of products) and the GHG Protocol Product Standard, though the EU implementing regulation specifies its own methodology that takes precedence for CBAM purposes.
The compliance timeline pressure
The first CBAM declaration deadline is 31 May 2027, covering all covered imports during calendar year 2026. That sounds like 18 months away. It is not enough.
- Supplier onboarding takes 2–4 weeks. Aligning on data scope, getting access to facility records, and resolving methodology questions is rarely fast.
- Data collection takes 4–8 weeks. Real production data, especially when a facility produces multiple grades or products, requires significant accounting work.
- Verification takes 4–8 weeks minimum. An accredited verifier must review the installation data, conduct a desk audit (and potentially a site visit), identify non-conformities, and issue a verification statement. Demand for qualified CBAM verifiers is high and growing.
Total minimum timeline: 6–10 months from first engagement to verified, declaration-ready data. Importers who have not started collecting verified data from their suppliers by Q2 2026 will almost certainly rely on default values for their first CBAM declaration. The cost of that delay is directly measurable: at 10,000 tonnes of annual steel imports, every quarter spent on default values costs approximately €132,500 in unnecessary CBAM exposure.
Beyond CBAM: the cascading effect
The default value penalty is a CBAM problem today. It will be a multi-jurisdictional problem within two years.
- UK CBAM launches January 2027. Covers steel, aluminium, cement, ceramics, glass, and fertiliser. Uses a flat-rate default value methodology that is less granular than the EU’s but follows the same principle: no verified data means higher assumed emissions.
- CSRD reporting requires verified Scope 3 data. Companies subject to the EU Corporate Sustainability Reporting Directive must disclose upstream emissions. The same supplier data needed for CBAM feeds directly into CSRD Category 1 (purchased goods and services) reporting.
- Green premium markets demand the same data. SteelZero members (90+ companies including Volvo, Skanska, and Landsec) and First Movers Coalition participants require verified product-level emissions. Green steel commands €50–300 per tonne in premiums — but only with credible, verified data.
- Downstream cost pass-through. EU manufacturers importing CBAM-covered materials will pass certificate costs through to their customers. Importers with verified low-emissions data can offer lower total cost of ownership than competitors relying on default values.
The investment in building verified emissions data infrastructure pays off across every one of these regimes. The cost of not having it compounds.