CBAM Indirect Emissions: What the DG TAXUD Study Means for Importers

ByOfficer

Last updated: June 2026

Get CBAM indirect emissions wrong and the error does not show up as a rejected file. It shows up later, as a number on a CBAM declaration that you cannot defend, or as a default value you paid for because the supplier data never arrived. The Carbon Border Adjustment Mechanism has moved from its quiet reporting phase into a regime where embedded emissions translate into a financial liability, and the part most teams underestimate is the electricity that sat behind the production process rather than inside it.

On 8 June 2026 the European Commission’s Directorate-General for Taxation and Customs Union published a technical study on indirect emissions in the CBAM. The study is not a rule change. It is a signal about where the indirect-emissions question is heading: how default emission factors for electricity should be set, when an importer should be allowed to claim actual figures, and whether indirect emissions should reach sectors that currently escape them. For anyone building a CBAM data process this year, that combination matters more than another headline about scope.

This article walks through what indirect emissions are under CBAM, which goods carry them today, how the calculation works, and what the DG TAXUD study is actually testing. It assumes you already know the mechanism exists and now need the operational detail.

Related reading: CSRD Omnibus value-chain cap

What CBAM indirect emissions actually cover

CBAM measures the emissions embedded in a covered good. Regulation (EU) 2023/956 splits those embedded emissions into two parts. Direct emissions are released during the production process itself, from fuel combustion and from the chemistry of making the product. Indirect emissions come from the generation of the electricity consumed during production, even though that electricity was burned somewhere else, often in a power plant the producer does not own.

The boundary is narrower than the language suggests. Indirect emissions under CBAM mean the electricity used in the manufacturing process. They do not mean the carbon footprint of the supply chain. Emissions from extracting, processing and transporting the raw materials that feed the installation sit outside CBAM scope for every product. A steel mill’s purchased iron ore, the diesel in the trucks that delivered it, the shipping that brought the finished coil to Rotterdam: none of that is embedded emissions for CBAM purposes. The mechanism draws a tight ring around the installation and asks two questions, what the furnace emitted and what the grid emitted to power it.

That ring is where the first misunderstanding lives. Teams arriving from a corporate sustainability background tend to think in Scope 1, 2 and 3 terms and assume CBAM wants a full life-cycle picture. It does not. CBAM indirect emissions map roughly to Scope 2, the purchased-electricity slice, and stop there. If you are reconciling CBAM numbers against a group carbon inventory, expect them to be smaller and tighter than the inventory, by design.

The line most importers get wrong: which goods carry indirect emissions

Here is the distinction that decides whether indirect emissions cost you anything. In the definitive regime, indirect emissions are included in the chargeable embedded emissions for cement and fertilisers only. For iron and steel, aluminium and hydrogen, the embedded emissions that drive the CBAM charge are direct emissions alone.

The mechanism for this sits in Annex II of Regulation (EU) 2023/956, the list of goods for which only direct emissions are taken into account. Aluminium, hydrogen and most iron and steel classifications appear in Annex II, which is why their indirect emissions do not feed the certificate calculation. Cement and fertilisers are absent from that list, so both direct and indirect emissions count.

The reason is not arbitrary. The sectors in Annex II are the ones whose European producers can already receive compensation for indirect carbon costs under the EU Emissions Trading System state aid rules. Counting indirect emissions on the import side while compensating them on the domestic side would distort the comparison CBAM is meant to make. So the legislator parked indirect emissions for those sectors and left them in for cement and fertilisers, where no such compensation logic applies.

Regulation (EU) 2025/2083, the CBAM simplification adopted on 8 October 2025 and published in the Official Journal on 17 October 2025, added electricity to Annex II so that imported electricity is now also assessed on direct emissions only. Electricity is a special case anyway, because the product is the energy itself, but the amendment makes the treatment explicit.

What this does not mean is that indirect emissions can be ignored for steel or aluminium. During the transitional period the reporting framework required indirect emissions to be reported for CBAM goods regardless of sector, which means many importers already hold indirect figures for products that will never be charged on them. Treat that data as a sunk asset, not a mistake, because the DG TAXUD study is asking whether the charged perimeter should grow.

How the embedded-emissions calculation handles electricity

For cement and fertilisers, the indirect-emissions calculation follows a simple shape with a difficult input. You take the electricity consumed per tonne of the good produced and multiply it by an emission factor for that electricity. The consumption side comes from the installation’s own metering. The emission factor side is where the methodology earns its complexity.

The default emission factor is built on the electricity grid of the country where the good was produced. In the definitive regime, Commission Implementing Regulation (EU) 2025/2547 sets the calculation methodology for embedded emissions and Commission Implementing Regulation (EU) 2025/2621 sets the legally binding default values. For indirect emissions, the default value is based on the average emission factor of the country-of-origin electricity grid, calculated over the most recent five-year period before reporting for which reliable data is available. A tonne of fertiliser made on a coal-heavy grid therefore carries a higher default indirect figure than the same tonne made on a hydro-heavy one, before the producer says anything about its own sourcing.

This is the control point that matters. The first review step on any indirect-emissions line should be to identify whether the figure is a country default or a claimed actual, because the two need completely different evidence behind them. A default value needs only the right country and the right product. An actual value needs a paper trail that links specific electricity to the specific installation, and that trail is where claims fall apart.

The Commission published default values for the transitional period, and the same architecture carries into the definitive regime, where default values can be used more widely under the 2025 simplification, particularly where verified actual data is not available. Defaults are a fallback with a cost, not a convenience. They are generally calibrated to sit above what an efficient installation would report on actuals, which is the regime’s way of rewarding real measurement.

When you can use an actual electricity emission factor

An importer that wants to beat the country default has to use an actual emission factor for the electricity, and the regulation allows that only where the conditions for a direct technical link or a qualifying power purchase agreement are met. In the definitive methodology, the evidence package is not just the contract label. It includes technical and metering evidence linking the electricity source, the installation and the claimed consumption period. Outside those evidenced routes, the installation falls back to the grid-average default.

The trap is treating a PPA as a free pass. A direct technical link is physical, a dedicated line or an on-site generator feeding the plant, and it is easy to evidence because the electricity never touches the public grid. A power purchase agreement is contractual, and contracts vary. The point the DG TAXUD study spends time on is exactly which PPA structures should qualify and what verification an actual indirect claim needs, because a loosely drafted green-tariff contract is not the same as a sleeved PPA tied to a named generating asset.

Whatever figure ends up on the declaration, it has to survive verification. CBAM embedded emissions are checked by a verifier accredited by a national accreditation body, and verification of an indirect actual claim means testing the electricity contract and the metering, not just the production data. A producer that cannot reconcile its claimed clean electricity to a qualifying source will see the actual claim collapse back to the default, and the importer carries that outcome on the declaration.

What the rule does not require is that you chase actuals everywhere. For a low-volume cement or fertiliser line on a relatively clean grid, the country default may cost little more than a verified actual and a fraction of the effort. The decision to pursue actual indirect emissions is a cost-benefit call, not a compliance default, and treating it as mandatory burns budget on lines that did not need it.

What the DG TAXUD technical study is actually testing

The study published on 8 June 2026 is organised around three questions, and reading them as a set tells you where the Commission’s thinking is unsettled.

Task 1: operational default emission factors

The first task looks at how to set operational default emission factors for indirect emissions. This is the country-grid factor problem from the calculation above, examined for the definitive regime rather than the transitional one. The questions underneath it are practical: how granular the defaults should be, how often they are refreshed, and how to handle countries where grid data is thin. For an importer, a change in the default methodology changes the number on every line that uses a default, which is most of them.

Task 2: conditions for claiming actual indirect emissions

The second task examines the conditions under which declarants should be allowed to claim actual indirect emissions, including the requirements around direct technical links, power purchase agreements and verification. This is the PPA question made concrete. If the definitive regime tightens what counts as a qualifying PPA, some actual claims that worked on paper during the transition will not survive into the charged phase, and importers relying on a producer’s green-electricity story should read this task closely.

Task 3: extending indirect emissions to more sectors

The third task considers whether indirect-emissions coverage could be extended to additional CBAM sectors. Today the charge reaches indirect emissions only for cement and fertilisers. A move to include iron and steel, aluminium or hydrogen would pull the data many importers already collected during the transition into the chargeable base. This is the part of the study with the longest reach, and it is why the transitional indirect data for Annex II goods should be kept rather than archived and forgotten.

None of the three tasks is a binding change. A technical study informs whatever the Commission proposes next. The honest reading is that the indirect-emissions perimeter and the actual-claim rules are both still in motion, and a CBAM data process built only for today’s cement-and-fertiliser perimeter is building for a moving target.

The Omnibus simplification changed the deadlines, not the emissions rule

It is easy to confuse the 2025 simplification with a softening of the emissions methodology. It was not. Regulation (EU) 2025/2083 changed who is in scope and when filings are due, while leaving the embedded-emissions logic intact.

The headline change is a 50-tonne annual mass threshold. The previous EUR 150 per-consignment exemption was replaced by a single annual mass-based threshold: importers whose relevant CBAM goods do not exceed 50 tonnes per calendar year are exempt from CBAM obligations, subject to the exclusions for electricity and hydrogen. The Commission estimates this removes roughly 182,000 importers from the obligation while keeping more than 99 percent of emissions in scope. The threshold does not apply to electricity or hydrogen, where the market structure makes a mass-based cut-off unworkable, so importers of those goods stay in scope regardless of volume.

The timing also moved. The annual CBAM declaration and the surrender of certificates shifted from 31 May to 30 September of the year following the import year. The first declaration under the definitive regime, covering 2026 imports, is therefore due by 30 September 2027. The ability to buy and surrender CBAM certificates applies from February 2027 for emissions embedded in 2026 imports. From 2027 the Commission may also publish default carbon prices for third countries that operate their own carbon pricing, which feeds the deduction for a carbon price already paid abroad.

For the indirect-emissions workstream the practical effect is more runway, not a lighter calculation. A cement or fertiliser importer above the 50-tonne line still has to determine indirect embedded emissions, still has to choose between a country default and a verified actual, and now has until 30 September 2027 to get the first definitive-regime declaration right. The simplification bought time. It did not remove the indirect line. Our note on the CSRD Omnibus value-chain cap covers the parallel simplification drive on the sustainability-reporting side, which moved on scope rather than on substance in much the same way.

Building the indirect-emissions data your CBAM declaration needs

An indirect-emissions figure is only as good as the supplier engagement behind it, and that engagement has to start long before the September deadline. The installation that made the good holds the two inputs you need: the electricity consumed per tonne of output, and the source of that electricity if an actual factor is being claimed. Neither lives in your own systems.

The workflow for a charged sector runs in a fixed order. Identify which imported goods are cement or fertilisers, because those are the lines where indirect emissions hit the charge. Request the installation-level electricity consumption and the emission-factor basis from each producer. Decide per installation whether to accept the country default or pursue an actual factor, and where an actual is claimed, secure the direct-technical-link or PPA evidence and the verifier’s confirmation. Then carry the result into the embedded-emissions total for the declaration.

Two controls matter when working these datasets. First, keep the indirect line separate from the direct line all the way through, because they fail for different reasons and a blended number hides which input is weak. Second, treat any supplier-claimed actual indirect factor as unverified until the contract and the verifier report are both in hand, because an actual claim that cannot be evidenced reverts to the default and quietly raises the number declared.

Importers that report bank-side emissions data will recognise the pattern. The discipline of tracing an emissions figure back to a primary source and a verifier is the same discipline behind the EBA ESG Pillar 3 disclosure templates, where unverified estimates carry a different status from measured values. The CBAM version simply ties that discipline to a financial liability and a fixed annual deadline.

Common errors when calculating CBAM indirect emissions

A handful of mistakes show up repeatedly once teams move from reporting to charging.

The first is applying indirect emissions to the wrong sectors. Adding an indirect figure to a steel or aluminium line inflates the embedded-emissions total because those goods sit in Annex II and are charged on direct emissions only. The error is easy to make when a single data template covers all CBAM goods and an indirect column is filled in out of habit.

The second is confusing a renewable-energy tariff with a qualifying actual claim. Buying green electricity on a standard utility tariff does not, on its own, meet the direct-technical-link or PPA condition, so it does not earn an actual emission factor. The figure stays at the country default no matter what the energy contract is called.

The third is using the wrong country grid. The default emission factor follows the country where the good was produced, not the country it was shipped from and not the country of the corporate parent. A producer with plants in several countries can generate goods with different indirect defaults from the same brand, and the declaration has to track production location per consignment.

The fourth is letting a missing actual claim default silently. If a producer promised an actual indirect factor and the verified evidence never arrives, the line does not simply drop out. It reverts to the country default, which is usually higher, and the importer ends up declaring and paying on a number it expected to beat. Cross-cutting tax frameworks share this trap, where a missing piece of third-party data converts a favourable position into a default one, as our guides to DAC7 platform-operator reporting and the wider CARF crypto-asset tax reporting framework both show in their own contexts.

Frequently Asked Questions

Do indirect emissions count for all CBAM goods?

No. In the definitive regime, indirect emissions are included in the chargeable embedded emissions for cement and fertilisers only. Iron and steel, aluminium, hydrogen and electricity are listed in Annex II of Regulation (EU) 2023/956 and are assessed on direct emissions alone. Electricity was added to Annex II by Regulation (EU) 2025/2083.

What are indirect emissions under CBAM?

They are the emissions from generating the electricity consumed during the production of a CBAM good. They do not include emissions from extracting, processing or transporting the raw materials, which are outside CBAM scope for every product.

How is the indirect emission factor for electricity set?

The default is the average emission factor of the electricity grid in the country where the good was produced, calculated over the most recent five-year period for which reliable data is available. For the definitive regime, the calculation methodology sits in Commission Implementing Regulation (EU) 2025/2547 and the legally binding default values sit in Commission Implementing Regulation (EU) 2025/2621. An importer may use an actual factor only where the conditions for a direct technical link or a qualifying power purchase agreement are met and evidenced.

What did the DG TAXUD technical study on 8 June 2026 conclude?

The study examines three questions: how to set operational default emission factors for indirect emissions, the conditions under which declarants may claim actual indirect emissions including direct technical links and power purchase agreements, and whether indirect-emissions coverage should be extended to further CBAM sectors. It is a technical input to future policy, not a binding rule change.

When is the first CBAM declaration with indirect emissions due?

Under Regulation (EU) 2025/2083 the annual CBAM declaration moved to 30 September of the year following the import year. The first definitive-regime declaration, covering 2026 imports, is due by 30 September 2027, and CBAM certificates can be purchased from February 2027.

Does the 50-tonne exemption remove the indirect-emissions obligation?

It removes the whole CBAM obligation for importers below 50 tonnes of covered goods per year, which the Commission estimates exempts around 182,000 importers while keeping over 99 percent of emissions in scope. It does not apply to electricity or hydrogen. An importer above the threshold still calculates indirect emissions for cement and fertilisers.

Can a green-electricity tariff lower my CBAM indirect figure?

Only if it meets the regulation’s conditions for an actual factor, meaning a direct technical link or a qualifying power purchase agreement, and the claim is verified. A standard renewable tariff that does not meet those conditions leaves the line at the country-grid default.

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Key Takeaways

  • CBAM indirect emissions are the emissions from electricity consumed in producing a good, not the full supply chain. Raw-material extraction and transport are outside scope for every product.
  • Indirect emissions feed the CBAM charge only for cement and fertilisers. Iron and steel, aluminium, hydrogen and electricity sit in Annex II of Regulation (EU) 2023/956 and are charged on direct emissions alone.
  • The default indirect emission factor is based on the country-of-origin electricity-grid average over the most recent five-year period for which reliable data is available. For the definitive regime, the operative sources are Commission Implementing Regulation (EU) 2025/2547 and Commission Implementing Regulation (EU) 2025/2621.
  • An actual electricity factor is allowed only with a direct technical link or a qualifying power purchase agreement, and the claim must be verified. A standard green tariff does not qualify.
  • The DG TAXUD study of 8 June 2026 tests default-factor methodology, actual-claim conditions, and extending indirect emissions to more sectors. None of it is binding yet.
  • Regulation (EU) 2025/2083 introduced a 50-tonne annual exemption, moved the declaration deadline to 30 September of the following year, and added electricity to Annex II. It did not change the indirect-emissions calculation.
  • Keep the transitional indirect data for Annex II goods. If the perimeter extends, that data becomes chargeable rather than informational.

Sources and References

Where the indirect-emissions line goes next

The indirect-emissions question is the part of CBAM that is least settled and most likely to move. Today the charge reaches it only for cement and fertilisers, the default factor follows the country grid, and an actual claim needs a direct technical link or a qualifying power purchase agreement. The DG TAXUD study probes all three of those settings at once, which is a fair warning that none should be treated as fixed. The importers who will find 2027 manageable are the ones who keep their indirect data clean even where it is not yet charged, treat actual-factor claims as something to be proven rather than asserted, and read the next Commission proposal as the thing that decides whether their cement-and-fertiliser perimeter holds.

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.

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