European importers of steel and aluminium must increasingly assess the emissions records of upstream production facilities when calculating their exposure under the EU Carbon Border Adjustment Mechanism (CBAM). The definitive regime, which took effect on 1 January 2026, makes the availability and verification of precursor data an important factor in determining the embedded emissions reported for imported industrial goods.
The implications extend across supply chains connecting Türkiye, Serbia, China and other non-EU markets with European manufacturing centres. Steel coils, tubes, profiles, structural components, aluminium sheets and extrusions may incorporate materials produced at several installations, creating additional requirements for manufacturers, traders and importers seeking to substantiate actual emissions values.
The financial stakes are increasing alongside carbon prices and the phased introduction of CBAM costs. The European Commission’s reference price for CBAM certificates rose to €82.32 per tonne of CO₂ equivalent in the third quarter of 2026, from €75.28 in the second quarter. Certificate sales covering 2026 imports are scheduled to begin in February 2027.
The definitive default-value framework also introduces mark-ups of 10% in 2026, 20% in 2027 and 30% from 2028 for relevant steel and aluminium emissions values. Together with the gradual withdrawal of free allocation under the EU Emissions Trading System (EU ETS), these provisions increase the financial significance of reliable emissions data.
Verification requirements extend across production facilities
CBAM verification focuses on the non-EU installation producing the goods, rather than requiring a separate verification exercise for every import shipment. Accredited verifiers examine operators’ emissions reports, monitoring methodologies, production processes, material flows, calculations and supporting documentation. Their assessments must provide reasonable assurance that the reports contain no material misstatements.
Verifiers must hold the appropriate CBAM accreditation for the activities under assessment. Verification reports are issued through the CBAM Registry, with the first reports for the 2026 reporting year permitted from January 2027. EU importers or authorised CBAM declarants subsequently use the verified information to calculate embedded emissions and prepare annual declarations.
The process becomes more complex when finished goods incorporate precursors manufactured at other installations. In these cases, the final producer’s own emissions data may not be sufficient to establish the emissions associated with the complete relevant production chain.
Consider a Turkish manufacturer producing steel tubes for a German distributor using hot-rolled coils purchased from a Chinese steel mill. Customs origin and classification are determined under the applicable customs rules, but the CBAM calculation must also account for the coils where they qualify as relevant precursors.
The Turkish manufacturer can calculate emissions from its own production processes, but it cannot substantiate low actual emissions for the Chinese coils without supporting evidence. Where actual precursor values are claimed, the verifier assessing the Turkish installation must establish that the upstream Chinese installation is covered by an appropriate, satisfactory verification report.
That upstream verification must be conducted by a properly accredited verifier, cover the relevant reporting period and provide the emissions information required for the precursor calculation. The Turkish verifier does not necessarily need to repeat the entire technical audit of the Chinese facility. It must, however, assess the validity and applicability of the upstream verification, the transferred emissions data, and the quantities and allocation used in the finished-product calculation.
The result is a chain of independently supported emissions information linking multiple production installations. This requirement is particularly relevant when materials pass through traders, service centres and intermediaries that may possess commercial invoices, transport documents and certificates of analysis but lack access to the upstream installation’s CBAM verification report.
Actual emissions and default values can be combined
EU rules do not require every precursor in a complex product to be calculated using actual emissions. Commission Implementing Regulation (EU) 2025/2547 permits operators to combine actual values for their own production processes with default values for one or more relevant precursors.
A Serbian steel processor sourcing inputs from several mills could therefore use verified actual emissions for one qualifying precursor and applicable default values for another, provided the calculation follows the prescribed EU methodology and the final installation’s emissions report is satisfactorily verified.
A satisfactory verification conclusion for the finished-product installation does not establish that every upstream precursor has been reported using independently verified actual emissions. Instead, the verifier must determine whether the actual values claimed for externally purchased materials are supported by satisfactory upstream verification.
Where the required evidence is unavailable or cannot substantiate the claimed values, the operator may need to use applicable defaults. A final report can still receive a satisfactory conclusion if the default values are correctly applied and the other regulatory requirements are met.
For EU purchasers, the distinction can have direct commercial consequences. Two manufacturers supplying products with comparable technical specifications, prices and delivery conditions may generate different CBAM exposures because one can demonstrate lower actual emissions while the other must rely on defaults.
Verification is therefore relevant not only to compliance but also to procurement prices, contractual margins and long-term customer relationships. It does not automatically reduce a company’s CBAM liability: the financial outcome depends on the actual emissions established and the applicable default values.
Steel calculations depend on production routes and material records
Steel supply chains present substantial differences in production technology and emissions intensity. Integrated blast-furnace and basic-oxygen-furnace production generally has a different direct-emissions profile from electric-arc-furnace steelmaking using substantial quantities of scrap. Direct-reduced-iron production introduces additional considerations relating to fuels, technology and precursor materials.
Further processing can include rolling, forging, coating, galvanising and other operations. The applicable CBAM calculation must follow the prescribed production boundaries, which exclude specified downstream activities, including certain cutting, welding, plating and finishing operations.
Importers must first establish whether their goods fall within CBAM based on their Combined Nomenclature (CN) classification and identify which upstream materials qualify as regulated precursors. Not every industrial input is automatically a reportable precursor; the relevant scope depends on the covered product categories and applicable calculation methodology.
Where qualifying steel materials originate from several installations, their embedded emissions must be calculated using the applicable weighted-average rules unless an eligible installation-specific allocation can be substantiated.
This becomes particularly important when a processor combines steel from a conventional integrated mill, an electric-arc-furnace producer and an intermediary supplying material from multiple origins. Without reliable production and inventory records, the processor may be unable to demonstrate that a particular downstream process used only the lower-emission material.
Material accounting, inventory reconciliation, production-period identification and precursor-consumption records consequently become important supporting evidence. Heat numbers, mill certificates, warehouse movements, production orders, yield calculations and purchase records can help establish the quantities and origins used in the calculation, although they do not replace upstream emissions verification.
For European steel distributors and industrial manufacturers, these requirements create a need to integrate CBAM data into purchasing, quality-assurance and enterprise-resource-planning systems.
Aluminium sourcing links process emissions with electricity economics
Aluminium presents a related but distinct set of challenges. Primary aluminium production can involve emissions from electrolysis, fuel consumption and perfluorocarbons associated with anode effects. Secondary aluminium production generally has a different emissions profile, although the applicable CBAM calculation remains dependent on the defined production process, material inputs and system boundaries.
A Serbian extruder purchasing primary aluminium billets from Türkiye, secondary aluminium from another regional supplier and additional metal through international traders must account for the relevant precursor emissions in its finished-product calculation. The EU importer needs information identifying the unwrought aluminium-producing installation, the production route and the treatment of precursor emissions.
Where actual values are claimed, the verifier must assess the reported precursor information against the EU methodology and establish the validity of the relevant upstream verification. Evidence distinguishing primary from secondary production can therefore have commercial value because the two routes have different emissions profiles.
Electricity introduces a separate competitiveness issue. Aluminium smelting is electricity-intensive, making power prices and electricity sourcing important factors in production economics. However, the existing CBAM coverage of aluminium products generally concerns direct embedded emissions, including relevant perfluorocarbon emissions, rather than automatically charging all indirect emissions associated with purchased electricity. The same distinction broadly applies to steel under the existing direct-emissions framework.
A renewable electricity supply contract or guarantee of origin does not automatically reduce a steel or aluminium product’s direct CBAM emissions. Electricity-related claims must be assessed separately from direct-emissions calculations, and any future extension of indirect-emissions coverage must be distinguished from the rules already in force.
For primary aluminium producers, production technology, process emissions, electricity procurement and emissions accounting remain important investment considerations, even where certain electricity-related emissions are not currently included in the CBAM charge.
Default-value mark-ups increase the importance of data quality
The interaction between default values, carbon prices and the gradual phase-in of CBAM obligations creates a financial incentive for suppliers to establish defensible actual emissions.
The definitive default-value framework includes country-specific and product-specific values under Commission Implementing Regulation (EU) 2025/2621, as corrected by Regulation (EU) 2026/1740. The prescribed mark-ups for relevant steel and aluminium values rise from 10% in 2026 to 20% in 2027 and 30% from 2028.
Producers whose emissions are materially below the applicable defaults have an incentive to obtain satisfactory verification and make the information available to EU customers. Suppliers with higher actual emissions, however, may find that verified values do not produce a lower calculated exposure than the defaults.
The final certificate obligation also depends on the applicable free-allocation adjustment, CBAM benchmarks, eligible deductions for carbon prices effectively paid in third countries and the certificate-pricing methodology.
Consequently, multiplying a product’s total embedded emissions directly by the EU carbon reference price does not establish the importer’s actual 2026 CBAM charge. Nevertheless, differences between actual and default values can become increasingly significant as the mechanism expands its effective carbon-cost coverage.
For industrial purchasers operating on narrow margins, missing evidence may translate into less competitive pricing, reduced procurement flexibility and greater exposure to future carbon costs. For exporters outside the EU, emissions documentation is increasingly relevant to the commercial specification of their products.
Importers retain responsibility for declarations and certificates
The verifier’s responsibilities are distinct from those of the EU importer or authorised CBAM declarant. Under the definitive regime, importers exceeding the 50-tonne annual mass threshold for the relevant covered sectors must meet the applicable authorisation, reporting and certificate obligations. The threshold applies to cumulative qualifying imports, rather than providing a separate exemption for each shipment or supplier. Importers below it are generally exempt from the corresponding obligations, subject to the applicable conditions.
Verifiers assess operators’ emissions information. They are not automatically responsible for an importer’s customs classification, annual declaration, certificate purchases, carbon-cost budgeting or supply contracts.
The authorised CBAM declarant must ensure that imported goods are correctly classified, that the appropriate emissions values are used and that the required certificates are surrendered. A satisfactory verification report does not independently guarantee that the importer has applied the correct customs codes, reconciled all relevant shipments or accurately priced its entire portfolio.
Nor does verification determine which commercial party ultimately bears the CBAM cost. That depends on customs responsibilities, contractual arrangements and the allocation of risk between buyers, sellers and intermediaries.
For major European importers purchasing from dozens of producers, compliance management may therefore require an internal system linking customs data, supplier information, verification reports and financial exposure.
Procurement contracts increasingly address carbon-related risks
Traditional steel and aluminium procurement contracts focus on specifications, quantities, prices, delivery conditions, quality assurance and liability for defective goods. CBAM adds a need for arrangements covering production-installation identification, access to emissions information and changes in upstream sourcing.
Buyers relying on verified actual-emissions data need assurance that the information applies to the relevant goods and reporting period. A supplier that changes steel mills, substitutes primary aluminium from another installation or begins sourcing through an intermediary may alter the emissions profile of its products.
Similar difficulties arise when suppliers use multiple precursor sources but cannot substantiate an installation-specific allocation. Contracts can address these risks through disclosure obligations, reporting deadlines, documentation requirements, supplier-change notifications and mechanisms for allocating additional costs caused by missing or inaccurate emissions information.
European buyers may also seek rights to obtain updated CBAM data and require corrective action if upstream verification cannot be completed satisfactorily. Such provisions are particularly relevant to long-term agreements negotiated before the full financial effects of CBAM are known.
Without an agreed mechanism for allocating additional carbon costs, disputes may arise over whether the original purchase price accounted for default values or whether the importer must absorb the resulting difference.
Commercial confidentiality adds another complication for commodity traders and service centres. Upstream producers may be reluctant to disclose sensitive manufacturing information, customer relationships or production costs to intermediaries. Although CBAM Registry and verification arrangements support the transmission of relevant information, importers may still require contractual assurances that they will receive the data necessary for compliance.
The challenge is to provide sufficiently reliable emissions evidence without disclosing unrelated proprietary information.
CBAM exposure enters industrial credit assessments
The financial implications extend to banks financing steel and aluminium imports, inventories, working capital and manufacturing operations. Lenders increasingly need to assess whether borrowers have reliable access to emissions information and whether potential CBAM costs could affect their ability to repay debt.
An importer sourcing aluminium profiles from a low-cost third-country supplier may initially appear competitive based on purchase price and logistics. Its position could change when the assessment includes potential default-value costs, verification uncertainty, the phase-in of CBAM obligations and the supplier’s ability to meet contractual information requirements.
For importers, CBAM exposure can affect gross margins, working-capital requirements, inventory valuation, cash conversion and financial covenants. For non-EU exporters, inadequate emissions documentation may reduce competitiveness against suppliers able to substantiate lower actual values, potentially affecting export volumes, customer retention and the financing of capacity expansions.
Banks financing Serbian or Turkish steel processors therefore need to consider not only emissions from the borrower’s own installation but also its dependence on externally sourced CBAM precursors. A manufacturer may invest in more efficient equipment and reduce its own process emissions while continuing to use higher-emission or insufficiently documented metal inputs. Improvements at the final manufacturing stage may then have only a limited effect on the exported product’s reported embedded emissions.
The issue is particularly relevant to projects financed on the assumption of sustained access to EU customers. Lenders can incorporate CBAM exposure assessments into periodic credit reviews, requiring borrowers to identify covered products, supplier dependencies, verification readiness and potential financial consequences.
For new lending, banks can request carbon-cost sensitivity analyses, supplier evidence arrangements and investment plans addressing both production emissions and precursor exposure. Linking technical due diligence with financial modelling would allow lenders to test scenarios involving verified actual emissions, default values, changing carbon prices and future changes in CBAM coverage.
Advisory services must remain separate from independent verification
The growing complexity of CBAM creates demand for technical advisers assisting importers and exporters with emissions information, monitoring systems and commercial exposure. However, EU verification rules impose requirements for verifier independence and impartiality.
An accredited verifier cannot independently verify an operator’s emissions report while also performing prohibited consultancy that develops the same operator’s monitoring methodology, reporting system or emissions report. Conflicts may also arise through relationships with associated advisory organisations involving common management, shared resources, contracts, marketing or financial incentives.
Regulations permit certain eligible verification activities to be outsourced under defined conditions, but the accredited verifier retains responsibility for the work. The independent review and issuance of the verification report cannot be outsourced.
These restrictions distinguish preparatory advisory work from independent assessment. Subject to applicable safeguards, technical advisers can assist producers with installation mapping, monitoring-system design, emissions calculations, precursor identification and verification readiness. The accredited verifier then conducts the independent assessment and issues its conclusion.
Separate importer-focused services can assess supplier information, compare actual and default emissions scenarios, support procurement decisions and incorporate CBAM exposure into financial forecasts.
For large industrial buyers, this broader approach can provide an updated view of which suppliers have reliable emissions evidence, which depend on defaults and where potential cost changes could affect purchasing decisions.
Türkiye and Western Balkan exporters face new sourcing requirements
The requirements are particularly relevant to supply chains linking Germany, Italy, Austria and other EU manufacturing markets with Türkiye and the Western Balkans.
Türkiye’s steel-processing and manufacturing industries produce goods using both domestically manufactured steel and internationally sourced inputs. Serbian and other Western Balkan manufacturers may similarly depend on imported steel coils, semi-finished products or unwrought aluminium for goods destined for the EU.
The location of final processing does not necessarily identify the installation responsible for the largest relevant upstream emissions contribution. A Serbian company manufacturing aluminium profiles from imported billets may need verified emissions information from the billet-producing installation to use actual values for that precursor. A Turkish manufacturer exporting steel products made from Chinese coils faces a comparable requirement.
The EU distributor importing these goods into Germany or Italy must then reconcile the relevant emissions information with its CBAM declaration.
These requirements can influence competition between suppliers. Manufacturers with reliable traceability, documented input quantities and access to satisfactory precursor verification reports may be better positioned than those unable to identify or substantiate upstream emissions.
Producers can also seek to demonstrate lower actual emissions through more efficient production routes, changes in metallic input sourcing and industrial decarbonisation investments. Any resulting advantage depends on the scale of emissions reductions, the applicable CBAM production boundaries and whether the reductions can be independently verified.
For Western Balkan exporters, investment in emissions monitoring and precursor documentation may consequently become increasingly important alongside conventional product certification and quality management.
Reporting and certificate deadlines shape purchasing decisions
The first annual CBAM declarations covering 2026 imports are due on 30 September 2027. Third-country operators have been monitoring and calculating embedded emissions during 2026, while accredited verifiers can undertake the necessary verification preparation and assessment activities.
The first verification reports for the 2026 reporting year can be issued from January 2027. Certificate purchases covering 2026 imports are scheduled to begin in February 2027, followed by the first annual declaration and surrender deadline in September.
From 2027, the certificate-pricing mechanism shifts from quarterly reference prices to weekly prices, introducing a more frequent carbon-price variable into importers’ financial planning.
Importers must manage two separate sources of uncertainty: the price of carbon certificates and the quantity of embedded emissions ultimately accepted for CBAM purposes. The former depends on the EU carbon market and certificate-pricing mechanism; the latter is influenced by production emissions, applicable methodologies, precursor information, verification and the use of default values.
This distinction affects procurement strategies. Buyers may negotiate fixed prices for steel or aluminium while remaining exposed to changes in the associated carbon costs. Suppliers may also claim to offer low-carbon products without being able to provide the upstream actual-emissions information necessary for those claims to be reflected in the CBAM calculation.
Assessing the quality of emissions evidence before finalising purchases is therefore increasingly important when comparing suppliers’ carbon exposure and potential costs.
