The European Commission has released a detailed technical study on indirect emissions under the Carbon Border Adjustment Mechanism, published on 8 June 2026 via DG TAXUD. The document indicates a shift in CBAM’s approach, extending beyond direct industrial emissions to include electricity-related carbon intensity. It is framed as a methodological analysis but is described as informing the definitive CBAM phase.
The study points to implications for energy-intensive industries including copper, steel, aluminium, fertilisers, cement and hydrogen production. It also highlights that exporters operating in regions with carbon-heavy power grids outside the EU may face increased compliance exposure. The Commission’s focus includes electricity sourcing, contractual structures and verification systems.
Methodology for indirect emissions under CBAM
The Commission structures its analysis around three core policy questions. These cover how default emission factors for indirect emissions should be defined, when exporters can report actual indirect emissions, and whether indirect emissions coverage should expand to additional CBAM sectors. The study frames electricity consumption as a formal compliance variable rather than only an accounting detail.
In assessing the approach, the Commission evaluates methodological consistency, carbon leakage risks, administrative feasibility and fairness between EU and non-EU producers. It also flags risks including resource shuffling, weak data quality and verification complexity. For exporters in the Western Balkans, Türkiye, Ukraine, North Africa and parts of Asia, the study links compliance exposure to electricity sourcing, metering systems and contractual energy arrangements.
Default emission factors and data requirements for exporters
A key area concerns the use of default emission factors for indirect emissions. Where exporters cannot reliably demonstrate actual electricity-related emissions, they would be assigned a standardized default value. The Commission notes that this can be significant in carbon-intensive grids where default assumptions may raise calculated embedded emissions.
The study highlights that weak electricity data could translate into higher CBAM costs once the system becomes fully operational for industries producing nickel, steel, cement and aluminium. It indicates that exporters will need granular electricity data beyond plant-level figures. The granularity may extend to production line, process route or product batch.
Evidence hierarchy for reporting actual indirect emissions
The second policy area addresses the conditions under which exporters can declare actual indirect emissions. The Commission identifies three acceptable evidence frameworks: direct technical links to electricity generation, Power Purchase Agreements (PPAs), and independent verification mechanisms. This approach is presented as creating a compliance hierarchy for “green electricity claims.”
The study states that credibility depends on physical and contractual proof rather than certificates alone. It describes a direct technical link—such as dedicated renewable generation connected to a facility—as the strongest validation method. PPAs may qualify if they demonstrate real low-carbon electricity consumption instead of paper-based allocation of renewable energy.
Verification controls aimed at resource shuffling
The Commission warns about resource shuffling in which clean electricity is contractually assigned to CBAM-covered exports while carbon-intensive electricity is shifted elsewhere in the system. The document states that this does not reduce total emissions but can create an artificial compliance advantage. To address this risk, it signals that future CBAM rules will require robust verification frameworks.
Those frameworks include meter-level consumption tracking, time-based electricity matching, generation evidence, contractual settlement validation and independent auditing mechanisms. The study indicates that for exporters in copper and aluminium sectors, this would effectively require procurement practices supported by compliance-grade engineering documentation.
Potential expansion of indirect emissions coverage
The third policy question examines whether indirect emissions rules should extend to additional CBAM-covered sectors. At present, indirect emissions apply mainly to cement and fertilisers while broader reporting requirements exist during the transitional phase for most CBAM goods. Expanding coverage would increase compliance pressure across energy-intensive industries such as nickel, steel and aluminium production.
The Commission presents a policy tension between strengthening environmental integrity to prevent leakage and restricting coverage to preserve competitiveness while reducing administrative burden. It also frames its balancing effort around environmental objectives, WTO compliance, industrial competitiveness and administrative feasibility.
Electricity sourcing as a central CBAM compliance variable
The study’s structural signal is that electricity is becoming central to CBAM compliance architecture. It contrasts prior exporter focus on direct emissions such as fuel combustion, furnace processes and chemical reactions with a new framework covering electricity sourcing, grid intensity and contractual energy arrangements. This expands the compliance boundary into areas tied to power supply characteristics.
It identifies several electricity-intensive activities where electricity can represent a dominant share of total emissions. These include aluminium smelting; steel production especially electric arc furnaces; fertiliser and ammonia production; hydrogen production; cement grinding and processing; and copper and nickel refining.
Electricity documentation systems for CBAM readiness
For exporters preparing for CBAM implementation, the study describes immediate practical implications related to structured electricity documentation. A compliant framework is expected to involve plant-level electricity balances and metering hierarchies integrated with SCADA systems. It also points to process-level allocation methodologies tied to exported outputs.
The document further lists PPA and electricity contract documentation alongside guarantees of origin or equivalent tracking systems. It includes emission factor assumptions and reconciliation models as part of the expected documentation set. It also calls for auditable data trails linking electricity use to exported goods.
For importers, parallel verification systems are described as necessary to validate supplier data, review electricity contracts and reconcile embedded emissions calculations. This requirement is presented as aligned with the broader verification approach outlined for indirect emissions under CBAM.
CBAM-aligned PPAs and requirements for renewable contracts
The study also addresses how renewable energy procurement economics may change under CBAM’s indirect emissions framework. It states that PPAs may become more valuable if they demonstrably reduce CBAM exposure for industrial buyers. It also notes that not all PPAs would carry equal weight under the emerging requirements.
CBAM-aligned contracts are described as likely requiring hourly or sub-hourly matching, verified generation data and certificate retirement systems. The Commission also points to clear grid connection evidence and independent verification access as elements of qualifying arrangements. The study refers to this as creating a category of “CBAM-ready PPAs,” particularly relevant for industrial exporters in Southeast Europe including Serbia, Bosnia and Herzegovina, North Macedonia and Albania.
Demand for technical verification in industrial operations
The complexity of indirect emissions accounting is expected to drive demand for technical verification services beyond traditional accounting or legal compliance support. Exporters are described as increasingly requiring engineering-level assistance covering electrical single-line diagrams and metering infrastructure mapping. This includes support related to production allocation models used in embedded emissions calculations.
The study also lists SCADA system integration alongside certificate tracking systems. It further identifies emissions reconciliation frameworks as part of the technical service layer required for audit-ready reporting under CBAM’s indirect emissions rules.
