A note on this case
This is a composite, illustrative scenario, not a profile of any real company. It draws on how CBAM's methodology is structured and walks through the sequence a mid-sized Indian steel exporter would reasonably follow to build a monitoring, reporting, and verification (MRV) system capable of producing actual embedded-emissions figures instead of relying on default values. Any exporter reading this should treat the steps as a framework to adapt, not a template to copy line for line.
Why default values are a starting point, not a strategy
CBAM covers iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity. Importers of covered goods into the EU have to report embedded emissions, and the regulation's stated preference is actual emissions calculated on the real production route used at the exporting facility. Conservative default reference values exist as a fallback when actual data isn't available, but they are deliberately set conservative, which usually means higher than a reasonably efficient facility's real footprint. As CBAM moves toward a definitive regime with verification requirements attached, an exporter stuck on defaults is effectively volunteering to look dirtier than it is, and to carry that penalty indefinitely unless it builds the data infrastructure to prove otherwise.
Step 1: Scope the installation, not the company
The first task for our illustrative exporter was not emissions accounting at all — it was mapping which physical installations actually produced the CBAM-covered goods being shipped to the EU, and which production routes (blast furnace–basic oxygen furnace versus electric arc furnace, for example) were in use at each site. CBAM methodology calculates embedded emissions at the installation level and by production route, so a company with multiple plants making similar-looking steel products needed separate data pipelines per facility rather than one company-wide number.
Step 2: Build the monitoring plan around three emission sources
Embedded emissions under CBAM's logic break into three buckets, and the monitoring plan had to capture all three separately:
- Direct emissions from the production process itself and on-site fuel combustion.
- Indirect emissions from purchased electricity consumed in production.
- Emissions embedded in precursor materials — inputs like coke, scrap, or intermediate metal products brought in from upstream suppliers.
For the first two, this meant installing or formalising metering at the process level (fuel flow, electricity sub-metering by production line) rather than relying on whole-site utility bills. For the third, it meant going back to suppliers of precursor materials and asking for their own embedded-emissions data — the same supplier-engagement challenge that runs through most Scope 3 work, just applied to a regulatory reporting obligation instead of a voluntary inventory.
Step 3: Get the underlying activity data verification-ready
A monitoring plan only matters if the data behind it holds up. The exporter's team worked through:
- Fuel and material input records reconciled against purchase and production logs, not just estimated from throughput.
- Lab or supplier-certificate data on fuel composition and carbon content where generic emission factors would otherwise have to be used.
- Documentation trails that a third-party verifier could trace from raw meter reading to final reported figure.
This stage is where most of the real effort goes, and where companies underestimate the lead time. Retrofitting metering and renegotiating data-sharing terms with suppliers takes months, not weeks, and it has to happen before a reporting period closes, not after.
Step 4: Translate internal data into CBAM's calculation methodology
Having good plant-floor data doesn't automatically produce a CBAM-compliant number. The exporter had to map its internal data into the specific calculation structure CBAM expects — separating direct and indirect emissions, applying the correct treatment for precursor materials, and keeping the installation- and route-specific boundaries CBAM requires rather than a corporate consolidated figure. This is a translation exercise as much as a measurement one, and getting the mapping wrong is a common source of verification findings later.
Step 5: Bring in verification early, not at the end
Rather than treating third-party verification as a final sign-off, the exporter ran an internal gap assessment against what a verifier would expect to see — complete documentation chains, consistent methodology across reporting periods, and defensible treatment of any estimated (as opposed to measured) data points. CBAM's trajectory toward a definitive regime carries verification requirements with it, so building verifier expectations into the system design from the start, rather than retrofitting them after a failed first audit, saved a second cycle of rework.
Step 6: Move from default to actual, one reporting period at a time
The transition wasn't a single switch. The exporter moved its most data-mature installation off default values first, kept others on defaults while their monitoring plans matured, and used the first facility's experience — including where verifiers pushed back — to shorten the build time for the rest.
What generalises from this
Three things hold regardless of sector: embedded-emissions reporting has to be built at the installation and production-route level, not the company level; precursor material data depends on supplier cooperation that has to be negotiated well in advance of any filing deadline; and verification-readiness is a design input, not a final checkpoint. Exporters in CBAM's other covered sectors — aluminium, cement, fertilisers, hydrogen — face the same sequence even though the underlying process emissions look different.
For exporters working through this transition, our CBAM Export Readiness practice supports facility-level MRV design, supplier data engagement, and verification preparation. Questions on where your own export profile sits against CBAM's methodology can be sent to carbon@digi.ai.in.