European companies importing carbon-intensive goods may face financial losses when verified emissions data proves inaccurate, even if the verification was performed by an accredited body. As the EU Carbon Border Adjustment Mechanism (CBAM) verification market develops, questions about professional liability, insurance coverage and contractual remedies are becoming increasingly important.
For importers using actual embedded-emissions values, verification reports support calculations of certificate obligations and can influence purchasing decisions, profit margins and supply-contract negotiations. An error may therefore affect several businesses connected to the same industrial supply chain.
Accreditation provides a regulatory framework for assessing verification competence and oversight, but it does not automatically guarantee compensation for every company affected by an incorrect report. The distinction between regulatory compliance and financial recovery could become a central issue for importers, producers, verification companies and insurers.
Three parties, three different responsibilities
CBAM separates responsibilities among the installation operator outside the EU, the accredited verifier and the authorised EU CBAM declarant.
The non-EU installation operator is responsible for monitoring emissions and providing reliable production information. The verifier independently examines the evidence and issues a conclusion based on reasonable assurance. The authorised EU declarant remains responsible for its statutory declaration and the associated certificate obligations.
These roles are commercially connected but legally distinct.
For example, a steel producer may engage a verification company and distribute the resulting report to several European customers. If the report contains a material error, multiple importers could face additional compliance work or financial exposure, even though they were not parties to the original verification contract.
Whether an importer can claim compensation directly from the verifier depends on the applicable law, contractual arrangements and circumstances of the error. A regulatory requirement to conduct independent verification does not necessarily amount to a contractual commitment to reimburse every downstream customer for all consequential losses.
Professional indemnity does not eliminate liability gaps
The EN ISO/IEC 17029 framework requires verification bodies to address risks arising from their activities and maintain appropriate arrangements for meeting associated liabilities. These arrangements may include insurance or financial reserves.
However, compliance with such requirements does not mean that every verification body carries unlimited professional indemnity coverage or that every affected importer will be compensated for all losses.
The outcome of an insurance claim depends on factors including policy wording, insured activities, coverage limits, exclusions and the legal basis of the claim.
Several types of exposure may require separate consideration:
- Professional negligence: a verifier fails to carry out appropriate procedures or identify material inconsistencies that should have been detected.
- Undetectable data errors: an installation provides incorrect information that the verifier could not reasonably identify despite performing the required work to the appropriate standard.
- Fraudulent source information: an operator deliberately supplies misleading data, potentially leading to disputes over the adequacy of the verification procedures.
- Consequential commercial losses: an emissions error contributes to delivery problems, price disputes, lost business or reduced access to financing.
These situations do not necessarily receive the same treatment under professional indemnity policies.
Cross-border arrangements add another layer of complexity. The installation operator, verification body and importing customer may be established in different jurisdictions, making applicable law, dispute resolution, enforcement of judgments and contractual liability limits important considerations when selecting a provider.
Financial exposure can exceed the verification fee
The potential imbalance between the cost of verification and the economic value of the information being verified is significant. A single engagement may support emissions claims covering large annual production volumes and multiple EU customers, while the verification fee represents only a fraction of the commercial value involved.
If a material error affects embedded-emissions figures, the aggregate financial consequences could exceed the original fee. The exposure may be even more complex when companies have already made commercial decisions based on the incorrect information.
An importer might agree to a fixed supply price based on expected CBAM costs. A commodity trader could structure a transaction around a supplier’s verified emissions intensity. A lender might approve inventory financing based on projected profitability for imports from a particular installation.
A subsequent correction could undermine all three decisions.
Nevertheless, the financial impact of an emissions error is not automatically equal to the amount recoverable from the verifier. A claim may be limited by contractual terms, applicable legal requirements, insurance coverage and the need to establish that the verifier’s conduct caused a legally recoverable loss.
Contractual safeguards gain importance
Importers working with major industrial suppliers may increasingly seek explicit contractual provisions governing the reliability and use of verification reports. Potential provisions include notification of material errors, cooperation with investigations, delivery of corrected emissions information and allocation of costs arising from corrections.
Due diligence on verification providers may also extend to professional indemnity limits, territorial coverage, exclusions, claims procedures and liability caps. Importers may pay particular attention to whether insurance covers work performed at non-EU installations and claims brought in EU jurisdictions.
The treatment of errors discovered after verification is another relevant issue. CBAM verification bodies must maintain procedures for issuing revised reports when errors are identified. Such procedures help correct the underlying emissions information, but a revised report does not, by itself, resolve a damages claim.
Nor does every subsequent correction establish professional negligence. Verification based on reasonable assurance is not an absolute guarantee that all reported information is accurate. A successful liability claim would generally require the claimant to establish the applicable legal elements, potentially including breach of duty, causation and recoverable loss.
Maintaining clear records of the verification process, the evidence examined and the basis for the final conclusion is therefore important for both the verifier and the companies relying on its work.
Insurance could become a differentiator in the verification market
As CBAM verification expands, the financial strength and insurance arrangements of providers may become increasingly important selection criteria. Large industrial customers could favour organisations able to demonstrate appropriate professional indemnity coverage, financial resilience and experience handling complex assurance assignments.
Smaller verification bodies could face higher barriers if customers demand insurance limits that are difficult to support through the fees generated by individual engagements.
For insurers, pricing this emerging professional risk presents its own challenges. The exposure combines emissions calculations, international industrial facilities and a developing European regulatory framework, while the market has limited claims experience on which to base assessments.
Verification companies may consequently need to review their liability caps and contractual protections as the value of the CBAM obligations supported by their reports increases.
The first major dispute involving an incorrect CBAM verification report could influence how the emerging market approaches liability and financial protection. Until then, accreditation should be understood as evidence of regulatory oversight and competence requirements—not as a guarantee that every business affected by an error will recover its losses.
For EU importers, choosing a verification provider may increasingly involve assessing not only the reliability of its technical work, but also the contractual and financial arrangements available if that work proves defective.
