New default values used in Europe’s Carbon Border Adjustment Mechanism (CBAM) to calculate emissions embedded in imported products where actual data is not available, are more stringent than in previous versions. A slew of CBAM-related secondary legislation, including these marked-up default values, will next be presented to the European Parliament on 16 December.
EU member states voted on 10 December to approve the benchmarks and default values for the EU’s Carbon Border Adjustment Mechanism (CBAM). These determine how much importers have to pay for the greenhouse gas emissions embedded in their goods to equalise the cost to European producers of those goods, if the data on those products’ carbon intensity of production is not available from the producer.
The benchmark and default values the committee approved have been circulated despite not having been officially released.
Leaks of the provisional benchmarks and default values originally appeared a few weeks ago, prompting pushback from industry concerned that the emissions intensities were too lenient. The latest leaked documents show the pressure from industry may have been successful, as the adopted default values and benchmarks are more stringent.
The calculation of CBAM exposure depends on production volumes, emissions intensities, and CBAM benchmarks. In many instances, suppliers of imported goods have either not monitored their emissions in line with the EU’s CBAM requirements or not reported their emissions to purchasers. The default intensities are fallback values that importers must use rather than actual data.
These values are country- and product- specific. They are also punitive, as the European Commission seeks to encourage the actual, verified collection of data rather than relying on defaults: that is, the values used reflect a good’s carbon intensity of production that is likely higher than the average in the producer country. This encourages producer countries and exporters to build up their data gathering capacity so as not to have to resort to the default values when calculating the CBAM charge. The severity of the values will ramp up gradually from a 10% mark-up in 2026 to a 30% mark-up in 2028. Imported fertilisers will receive only a 1% mark-up on their default values.
The CBAM benchmarks will be used to determine the free allocation adjustment for imported goods, exempting CBAM compliance for a portion of emissions equivalent to the volume of free allowances that would be allocated if the products were produced within the EU.
Per the leaked documents, in 2026 the CBAM benchmarks will be based on the provisional EU ETS benchmarks that are not yet leaked or publicly available. The final EU ETS benchmarks will be formally approved in early 2026. To reflect any changes in the shift from provisional ETS benchmark values to final, the CBAM benchmarks will be updated once more in 2027, though any changes are likely to be minor.
On 16 December, the Commission will present the package of proposals for “Strengthening the Carbon Border Adjustment Mechanism (CBAM)” to the European Parliament. Included in this release should be the technical documents described above as well as 1) a solution to exports, allowing for countries to compensate export-exposed CBAM producers, 2) downstream scope expansion, and 3) delegated legislation to deal with possible resource shuffling.
This adjustment is unlikely to have any immediate market impact for the EU ETS. The increased stringency will likely be welcomed by EU industrials, however should not have any immediate impacts on production levels covered by compliance obligations.
The additional stringency should also increase the share of imported emissions that will require compliance obligations, potentially prompting additional CBAM proxy-hedging. However, using EUAs as a financial hedge for CBAM certificates is cap neutral for the EU carbon trading scheme and there is no evidence yet to suggest that it will have a major impact on price formation.
Specialising in data, analysis, and insights for all significant low-carbon markets and renewable energy.
