Two very different obligations
It is easy to talk about "CBAM compliance" as if it were one thing. It isn't. The Carbon Border Adjustment Mechanism is built in two structurally distinct phases, and the gap between them is not a matter of degree — it is a change in what kind of obligation applies at all.
In the transitional period, the obligation is to report. Importers of covered goods into the EU — iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity — have to declare the embedded emissions associated with those imports. Nothing is bought, surrendered, or priced. It is a disclosure exercise, and the compliance burden sits mostly on the importer, who depends on the exporter for data.
In the definitive regime, the obligation becomes financial. Importers must purchase CBAM certificates corresponding to the embedded emissions in the goods they bring in, with the certificate price tracking the carbon price that EU producers already face under the EU Emissions Trading System. Reporting becomes the input to a payment obligation rather than an end in itself.
That shift changes who in an exporting company needs to care about CBAM, and how precise their data needs to be.
What the transitional period actually asks for
During the reporting-only phase, the core requirement is a periodic declaration of embedded emissions per shipment or per reporting period, broken out by direct and indirect emissions associated with production. Exporters are expected to supply this data to their EU importers, since the importer is the one filing.
Critically, the methodology allows for two routes to that number. Embedded emissions should be calculated on the actual production route where that data is available — real facility-level emissions intensity tied to the specific production process used. Where that isn't available, conservative default reference values apply instead, essentially a standardised, unfavourable estimate used as a fallback.
That fallback matters more than most exporters initially treat it. A default value is deliberately conservative, meaning it is set high enough to avoid underestimating emissions in the absence of real data. For a producer with genuinely efficient operations, relying on the default instead of submitting actual production-route data means being assessed as if they were a dirtier producer than they are.
What changes under the definitive regime
The definitive regime turns that gap from a reputational inconvenience into a cost. Once certificates have to be purchased against embedded emissions, every tonne of emissions attributed to a shipment — whether from actual data or from a default value — has a price attached. An exporter who hasn't built the systems to supply actual production-route data isn't just reporting conservatively; they are putting their EU importer, and by extension their own competitiveness, on the hook for a more expensive certificate bill than their real emissions profile would justify.
The definitive regime also brings verification requirements into the picture in a way the transitional period does not. Embedded emissions data that will be used to calculate a purchase obligation needs to be auditable, not just declared. That means the systems generating facility-level emissions figures have to hold up to third-party scrutiny, not just internal recordkeeping.
The overall direction of travel is toward tighter reliance on actual production-route data and a narrower role for default values over time, with verification embedded into the process rather than bolted on. Exporters should treat any continued reliance on default values as a temporary and increasingly costly position, not a stable compliance strategy.
What exporters should have in place before the shift binds
A few things are worth building now rather than at the point the definitive regime's obligations take effect:
- Facility-level emissions measurement, covering both direct process emissions and the relevant indirect emissions, calculated to a standard that could survive third-party verification, not just internal estimation.
- A documented production-route methodology that can be defended to an importer's auditor, including how boundaries were drawn and what emission factors were used.
- A data-sharing process with EU-based buyers that doesn't depend on ad hoc spreadsheet requests each reporting period, since the volume and granularity of data required only increases as the regime matures.
- An internal view of exposure — which product lines, which facilities, and which markets carry the highest embedded-emissions intensity — so that investment in cleaner production can be prioritised where it has the largest effect on future certificate costs.
None of this requires guessing at figures that haven't been finalised. It requires building the measurement and verification infrastructure that any version of the definitive regime will need, regardless of exactly how its remaining parameters are set.
Where this intersects with Scope 3 accounting
For the EU companies on the importing side, embedded emissions data flowing in through CBAM is effectively Scope 3 Category 1 data — purchased goods and services — arriving with a level of rigour their own inventories may not otherwise have. That creates a secondary pressure: EU buyers increasingly have reason to prefer suppliers who can provide verifiable, production-route emissions data over suppliers who can only be assessed on a conservative default. A CBAM-ready exporter is, in effect, offering their EU customers better Scope 3 data as a byproduct.
That is worth treating as leverage. Suppliers who get ahead of embedded-emissions measurement are not only protecting their own exposure to certificate costs, they are becoming the easier, lower-risk choice for EU buyers who need credible Scope 3 figures of their own.
If your organisation exports covered goods into the EU and is still relying on default values, the work to change that doesn't start when the definitive regime's certificate obligations take effect. It starts with the measurement systems that make actual production-route reporting possible. Scope 3 Emissions' CBAM Export Readiness work focuses on exactly that gap. Questions can be directed to carbon@digi.ai.in.