CBAM Report Calculation Methodology
CBAM Calculation Steps and Methodology
The calculation methodology can be split in six steps:
Identify the type of good: Assess the CN codes, assess if it’s complex or simple, define boundaries.
Collection of Reporting Data: Map the required data to run the Emissions calculation.
Calculate Direct Emissions: Determine the indirect emissions associated with the production process.
Calculate Indirect Emissions: Determine the indirect emissions and different calculation methods to get indirect emissions.
Calculate Precursor Emissions: Incorporate Precursor Emissions, in case of Complex Goods.
Consolidation of all Emissions: How to consolidate all the data to get all the embedded emissions of a given CBAM good.
2. Collection of Reporting Data
The first step is to assess which are the goods that fall under the CBAM regulation. This step is more thoroughly described in one of our pages: CBAM Report. To correctly calculate the emissions, it needs to be assessed what are the corresponding CN codes, this will then help determine the good’s complexity type and define the system boundaries:
Assess the Good’s CN Codes: Start by determining the Combined Nomenclature (CN) code of your good. This applies to specific CN codes listed in Annex I of the CBAM regulation.
Assess the Good’s Complexity: Identify if the good is simple or complex. Simple goods are produced using only input materials with zero embedded emissions. Complex goods require precursor goods (simple or complex) in their production.
Define the System’s Boundaries: Establish the system boundaries for your good’s production process. This includes identifying the production process, all input materials and fuels involved. Ideally this exercise should be done once.
1. Identify the type of CBAM Good
The type of data available will impact which calculation methods that can be used and its expected accuracy. We can split the data required in data from the Importers and Customs, and activity data coming from suppliers or manufacturing operators.
Data from Importers or Indirect Customs Representatives
Always keep in mind that the origin data used to compile the CBAM report needs to align with the customs declarations. The type of data that needs to be collected comprises:
Specifications data such as net weight, volume, and quantities. This is the core quantitative data required to calculate emissions by goods.
Source locations, customs requested procedures, and import dates. This data will help assess the reporting period and specific exceptions and requirements.
Country where each good was manufactured. The country of origin will influence the emissions factors used in calculations. During the definitive period, this will help identify potential CBAM purchase exceptions.
This is not an exhaustive list, and the data requirements will change depending on which stage of CBAM implementation we are at. As described on our CBAM Regulation page, from July 2024 onwards, the reporting requirements are more stringent, requiring more data points.
Manufacturing Production Routes
A key factor as well is to identify the Production routes. This refers to the specific technology and processes used in the production of goods. It encompasses all the steps and methods involved in transforming raw materials into final products, including any variations in technology or process efficient. Different production technologies can have varying efficiencies and emissions intensities that can result in different levels of greenhouse gas (GHG) emissions, for example, an electric arc furnace in steel production typically emits less CO2 compared to a blast furnace route.
From CBAM reporting requirements standpoint, the production can impact:
Emission Types: CBAM may require reporting of CO2, CH4, N2O, and PFCs. The specific GHGs to be reported depend on the technologies involved and the emission sources identified within each route.
Emission Factors: CBAM specifies different emission factors for each GHG type based on the production route.
One important step to define, but which will not be covered on this page, is the 'Division of installations into production processes' as covered in Annex III, A4 of the CBAM regulation.
Data from Manufacturing Facilities or Instalations
There needs to be active engagement between importers and manufacturing facilities. The primary emissions data should ideally be gathered from the manufacturing installations. Using standardized templates and methodologies in the process will help maintain consistency and accuracy. Although not mandatory, the EU has made available a tool to facilitate data collection from the installations called the 'CBAM Communication Template for Installations'. This tool can be downloaded from the Commission’s website. This template is not mandatory but can be leveraged as a guiding tool.
The type of data that should be gathered from the manufacturing facilities can be summarized as follows:
Activity Data: This refers to the amount of fuels or materials consumed or produced by a process. This is typically expressed in joules for energy content, tonnes for mass, or normal cubic meters for gases. This quantitative data is essential and forms the basis of the emissions calculation methodology by correlating the amount of material used or produced with the emissions generated.
Activity Data measurements can be done either by using continual metering at the consumption or production process, or by batch-wise metering, where quantities measured separately (batch-wise) are aggregated while considering relevant stock changes.
Net Calorific Values (NCV): The specific amount of energy released as heat when a fuel undergoes complete combustion with oxygen, minus the heat of vaporization of any water formed. NCV is critical to determining the energy content of the fuel, which is then used to calculate combustion emissions. Higher NCV indicates higher energy content and potentially higher emissions if the fuel is fossil-based. CBAM legislation documents also provides default NCV factors.
Oxidation Factors: The ratio of carbon oxidized to CO2 as a consequence of combustion to the total carbon contained in the fuel. These factors help to accurately estimate the amount of CO2 produced for incomplete combustion scenarios.
Measurement Data: This involves the use of measuring sensors to gather greenhouse gas (GHG) concentrations and flue gas flow rates at production facilities. This process can involve the use of Continuous Emission Monitoring Systems (CEMS) or periodic sampling and analysis. These techniques ensure real-time data and are the preferred method for calculating CBAM emissions.
Heat and Electricity Flows: For heat flows, this includes data on measurable heat produced, consumed, and transferred within the installation. Typically measured in gigajoules (GJ) or megawatt-hours (MWh), it can include waste heat recovery, boiler operations, or steam generation. For electricity, it includes data on electricity consumed, generated, or imported/exported. This is usually measured in megawatt-hours (MWh) and is mainly relevant for calculating indirect emissions.
Data on Precursors: Emissions associated with the production of these precursor materials are important for calculating the total embedded emissions in complex goods, as the emissions from precursor materials contribute to the final product’s overall carbon footprint.
3. Calculate Direct Emissions
In this chapter we explain how to obtain the overall direct manufacturing emissions. These values will be used with the relevant Activity Data (AD) to determine what is the direct emission associated with each produced good.
The CBAM Regulation asserts that the most accurate and reliable methodology should be used unless sector-specific requirements mandate a particular method. CBAM permits a combination of calculation methodologies to be applied to different parts of the installation's emissions for a given good. Additionally, CBAM allows other methodologies to be used under specific conditions outlined in the Regulation.
Methods for Determining Calculation Factors
CBAM encourages companies to use the most accurate standardized data available but recognizes that the costs associated with measuring these coefficients may justify the use of less accurate factors. The EU divides these values into Type I and Type II, with Type II being more accurate than Type I. In essence:
Type I values include standard factors from Annex VIII, the latest IPCC guidelines for GHG inventories, and laboratory analysis values not older than five years.
Type II values are more specific and include standard factors used in national inventory submissions to the UNFCCC, values published by national research institutions or public authorities, values guaranteed by suppliers with a high confidence interval, stoichiometric values for pure substances, and laboratory analysis values not older than two years.
There are three types of factors that can be used in the calculation-based methodology:
Standard Values: The pre-established standard values provided by the EU.
Proxy Data: Empirical correlations between the calculation factor and more easily measured properties.
Laboratory Analysis: Values derived from laboratory analyses.
Calculation Methods for Direct Emissions
In CBAM regulation, there are two main applicable methodologies for calculating direct emissions: Calculation-based methodologies and Measurement-based Methodology.
Calculation-Based Methodology
The Calculation-Based Methodology determines emissions using activity data from measurement systems and additional parameters from laboratory analyses or standard values. This can be implemented via two methods:
Standard Method: With differences in the equations, this method can be applied to materials or fuels. The parameters required are the emission factor (EF), the quantities consumed, the net calorific value (NCV) in the case of fuels, the Oxygenation Factor (OF) for fuels, and the Conversion Factor (CF) for materials.
Mass Balance Method: In this method, there is no distinction between fuels and process materials. The CO2 quantities for each source are calculated based on the carbon content in each material or fuel. In other words, the carbon composition of the finished good is used to determine how much of the carbon in the input materials was lost as CO2 emissions. Relevant parameters in this method are the activity data (AD) and the carbon content (CC) of a given input material or fuel, among other factors.
Default Values: In essence, a “Default Value” is an estimation of CO2 emission per mass unit of goods produced. It is conservative by nature, hence it is not the most accurate method. After July 2024, and under specific conditions, default values can still be used if an operator cannot adequately determine emissions using the more accurate methods provided.
Measurement-Based Methodology
The Measurement-Based Methodology determines emissions through continuous measurement of greenhouse gas (GHG) concentrations and flue gas flow and hence requires a continuous Emission Measurement System (CEMS). If multiple emission sources exist in one manufacturing installation and cannot be measured as a single source, the operator can add the results to obtain the total emissions over the reporting period.
The GHG amounts for a given reporting period is determined by summing all hourly values of the measured greenhouse gas concentration multiplied by the hourly flue gas flow. These hourly values are averages of all individual measurements taken during each operating hour.
The key parameters required are the flue gas volume in Nm3 for one hour reference period (Vhour), the hourly concentrations of GHG emissions in g/Nm3 in the flue gas flow measured during operation (GHG conc), and the total number of hours for which the measurement-based methodology is applied.
The flue gas flow can be determined either by calculating through a suitable mass balance, considering significant input and output parameters, or by continuous flow measurement at a representative point.
4. Calculate Indirect Emissions
Indirect emissions refer to emissions from the production of electricity, heating, and cooling consumed during the production of goods. However, in this chapter, we will mainly focus on indirect emissions associated with electricity.
To calculate electricity indirect emissions requires to determine the electricity quantities used for the production of goods during a given reporting period, and the emission factor for a unit of electricity consumed:
Determining electricity quantities: Only real power (active power) should be metered, excluding reactive power. In electricity production, the activity level refers to net electricity output after subtracting internally consumed electricity.
Electricity emission factors: These should be determined based on either the average emission factor of the country of origin's electricity grid, using data from the International Energy Agency (IEA) provided by CBAM, or any other emission factor of the country of origin's electricity grid based on publicly available data.
For electricity produced from fuel combustion within an installation, a calculation method similar to calculating direct emissions is required to obtain the electricity generation emission factor (EFEl). This method requires the quantities of fuels consumed (AD), the net calorific values (NCV) of the fuels, the emission factors of the fuels (EF), and the total net amount of electricity produced during the measured period.
Note 1: Active power is the actual power that can be used to do useful work (measured in watts, W), such as powering machinery or lighting. Reactive power does not perform useful work but is necessary to maintain the voltage levels required for active power to flow (measured in volt-amperes reactive, VAR).
Note 2: It should be mentioned that reporting indirect emissions is mandatory during the transitional period. However, it will not be mandatory during the CBAM definitive period starting from January 1, 2026 unless further revisions mandate it.
5. Calculate Precursor Emissions
As the name indicates, precursor emissions refer to the greenhouse gas emissions associated with the production of precursor materials, or in other words, materials required in the production of a specific CBAM good.
CBAM legislation recommends gathering the direct and indirect emissions data of a precursor material using the same process and calculation methods used to determine the emissions from the installations producing the resultant CBAM product, including leveraging the 'CBAM Communication Template for Installations' artifact. In case the precursor is produced and used within the same production process, the data gathering process becomes simpler and only requires defining the 'Division of installations into production processes' as explained in Annex III, A4 of the CBAM regulation.
A key point is that if there is only incomplete or inconclusive data available for a precursor material, the default values published by the Commission should be used.
Following chapters to be continued…