ALL FRONTIER GLOBAL NEXUS — FAQ SUPPLEMENT

CBAM — CARBON DATA COLLECTION

Carbon Border Adjustment Mechanism — Frequently Asked Questions for Indian Exporters of Steel, Aluminium, Cement, Fertilisers, and Hydrogen

This FAQ is the final document in the All Frontier Global Nexus 111-document library. It answers the most commonly asked questions about collecting, calculating, verifying, and reporting embedded carbon emissions data for CBAM (Regulation (EU) 2023/956) — the practical compliance challenge that Indian exporters of covered goods must address for the EU market.

SECTION 1 — UNDERSTANDING CBAM DATA REQUIREMENTS

Q1. What exactly is "embedded carbon" and why does the EU need data on it from Indian exporters?

Embedded carbon (also called embedded emissions or embodied carbon) refers to the greenhouse gas emissions — primarily CO2, plus N2O and perfluorocarbons for specific sectors — that are generated during the production of a good. These are the emissions that occur in the factory, the smelter, the cement kiln, or the fertiliser plant where the product is made — not the emissions from transporting or using the product. The EU needs this data from Indian exporters because CBAM works by charging EU importers a carbon price equivalent to the EU ETS price on the embedded carbon in imported goods. The CBAM certificate obligation for the EU importer is calculated as: embedded carbon (tCO2e per tonne of product) × CBAM certificate price (EUR/tCO2e). Without actual embedded carbon data from the Indian producer, the EU importer must use EU-published default values — which are set conservatively high to incentivise actual data provision. Indian exporters who provide verified actual embedded carbon data enable their EU buyers to pay less CBAM cost — a direct commercial competitive advantage.

Q2. Which Indian exporters are required to provide CBAM carbon data?

No Indian exporter is directly required by CBAM to provide carbon data — CBAM is an obligation on the EU importer, not the exporter. However, Indian exporters of CBAM-covered goods have a strong commercial incentive to provide carbon data because: (a) if they do not, their EU buyers use default values which are higher than actual emissions for most Indian producers — resulting in higher CBAM costs for the EU buyer and therefore a price disadvantage for the Indian supplier versus producers who provide actual data; (b) EU buyers are increasingly contractually requiring CBAM carbon data from their suppliers as a supply chain compliance obligation — failure to provide data may result in supply contract termination; (c) from 2026 (the definitive CBAM phase), the EU importer must use verified actual embedded carbon data — reliance on default values will become more restricted. CBAM-covered sectors: iron and steel (HS Chapter 72, selected 7301–7326); aluminium (HS 7601–7616, selected 8007); cement (2523, 2507); fertilisers (2808, 2814, 3102, 3105 selected); hydrogen (2804 10 00).

Q3. What is the difference between "direct emissions" and "indirect emissions" under CBAM?

Direct emissions are the greenhouse gas emissions that arise from the production process itself — from combustion of fuel in the furnace, kiln, or reactor; from chemical reactions in the production process (e.g. calcination of limestone in cement production releases CO2 regardless of what fuel is used); and from process gases (e.g. perfluorocarbons from aluminium electrolysis). Indirect emissions are the greenhouse gas emissions associated with the electricity consumed in the production process — specifically, the carbon emissions from the power plants that generated the electricity used. Under CBAM, direct emissions are included for all covered sectors. Indirect emissions are included for aluminium and, to some extent, fertilisers (electricity for ammonia synthesis) from 2026 onwards. For steel produced by electric arc furnace (EAF), indirect emissions from electricity are particularly significant — a steel producer using coal-fired grid electricity has much higher indirect emissions than one using renewable electricity.

Q4. What are "default values" and why are they commercially disadvantageous for Indian exporters?

Default values are EU-published standard embedded emission figures for each covered product category — published by the European Commission in Commission Implementing Regulation (EU) 2023/1773 (Annex VII). They represent the EU's conservative estimate of emissions for producers who cannot or do not provide actual production data. Default values are set at approximately the 90th percentile of emissions intensity for EU producers in that sector — meaning they are higher than the actual emissions of most producers. For Indian exporters: most Indian steel, aluminium, and cement production has higher carbon intensity than European best practice (due to older technology, coal-based energy mix) — but Indian actual emissions may still be lower than the CBAM default values for some product categories and production routes. Even if Indian actual emissions are similar to default values for some products, providing actual verified data gives the EU buyer certainty and avoids the administrative burden of justifying the use of default values to EU customs authorities.

SECTION 2 — COLLECTING CARBON DATA IN PRACTICE

Q5. What specific data does an Indian producer need to collect to calculate embedded direct emissions?

To calculate specific embedded direct emissions (in tCO2e per tonne of product), an Indian producer needs: (1) Production volume: the quantity of product produced in the measurement period (tonnes of steel, aluminium, cement, etc.) — by production unit (specific furnace, kiln, or process line). (2) Fuel inputs: the type and quantity of each fuel consumed in production during the period — coal (by type: coking coal, thermal coal, PCI), natural gas (m³ or GJ), fuel oil, LPG, coke, and any other fuels. (3) Emission factors for each fuel: the CO2 emitted per unit of energy for each fuel type (kg CO2/GJ) — using IPCC 2006 National Inventory Guidelines or country-specific factors. (4) Process emissions: for cement (calcination of limestone) and fertilisers (Haber-Bosch ammonia synthesis) — additional process CO2 and N2O emissions that are not from fuel combustion. (5) Carbon capture: if any CO2 is captured and stored or utilised on-site — this reduces the net embedded emissions. (6) Waste gas combustion: if production process gases (e.g. blast furnace gas, coke oven gas) are combusted for heat or power recovery — these must be quantified and their emissions allocated.

Q6. How do we calculate the emission factor for electricity (for indirect emissions)?

For electricity indirect emissions, the emission factor is the carbon intensity of the electricity grid in the region where the production facility is located — expressed in tCO2e/MWh or kg CO2/kWh. For India: the national average grid emission factor for India is approximately 0.71 kg CO2/kWh (Central Electricity Authority, CEA — Grid Emission Factor Report). However, this national average does not reflect regional variation — some Indian states have higher grid intensity (coal-heavy states like Jharkhand, Chhattisgarh) and some have lower intensity (hydro-heavy states like Himachal Pradesh, Uttarakhand). The CBAM methodology in Implementing Regulation (EU) 2023/1773 specifies which emission factors are acceptable — for EU purposes, the national average or the specific regional grid factor (if separately documented) may be used. If the producer sources electricity from a dedicated renewable energy source (rooftop solar, direct purchase from wind/solar IPP, renewable energy certificate), this can significantly reduce the indirect emission factor — in some cases to near-zero. This is one of the highest-impact actions Indian producers can take to reduce their CBAM exposure: shift to renewable electricity.

Q7. Is metering of energy inputs required or can estimated data be used?

For CBAM transitional phase reporting (October 2023 – December 2025): estimated or calculated data (using production records, fuel purchase invoices, and standard emission factors) is accepted. Third-party verification is not mandatory in the transitional phase. For CBAM definitive phase (from January 2026): actual metered data from monitoring systems is required for primary data submission. The Implementing Regulation specifies monitoring approaches: for fuel consumption — metering at the burner/furnace level for Tier 1 monitoring; for process emissions — calculation based on activity data and emission factors. "Estimated" data using production-scale approximations will not be acceptable for the definitive phase. Indian producers who have not yet installed energy monitoring equipment should begin now — the installation and commissioning of sub-metering at the production-unit level (individual furnace, kiln, or process line) takes time and capital investment.

SECTION 3 — VERIFICATION AND REPORTING

Q8. Does the carbon data need to be verified by a third party?

Transitional phase (2023–2025): Third-party verification is NOT mandatory. Unverified data submitted by the Indian producer directly to their EU buyer (who includes it in the quarterly CBAM transitional report to EU customs) is accepted. Definitive phase (from 2026): Third-party verification WILL be required. The EU importer must submit verified embedded emissions data with the annual CBAM declaration. The verifier must be accredited under EU Regulation (EU) 2018/2067 (the MRV Regulation) or a national equivalent. For Indian producers: the major international verification and certification bodies operating in India can provide CBAM emissions verification: Bureau Veritas, SGS, TÜV SÜD, TÜV Rheinland, DNV, Lloyd's Register, and Intertek all have greenhouse gas verification capabilities in India. Indian producers should engage a verifier before 2026 to: audit the monitoring system; verify the first annual emissions report; identify any gaps in the monitoring methodology; and issue a verification statement that the EU importer can use for the CBAM annual declaration.

Q9. In what format should I send the carbon data to my EU buyer?

The format for CBAM transitional reporting is defined in Commission Implementing Regulation (EU) 2023/1773. The EU importer uses the CBAM Transitional Registry (an EU online portal) to file quarterly reports. The Indian producer needs to provide data to the EU buyer in a format that maps to the CBAM Transitional Registry fields. The key data points to communicate: declarant information (Indian producer name, country of production, production facility address); product identification (CN code, product description, quantity in tonnes); specific embedded direct emissions (tCO2e per tonne of product) — calculated per the methodology in Implementing Regulation Annex III; specific embedded indirect emissions (tCO2e per tonne of product) — for aluminium; production route (the specific production method — e.g. for steel: blast furnace/basic oxygen furnace (BF-BOF); electric arc furnace (EAF); direct reduced iron + EAF (DRI-EAF)); carbon price paid in India (if any — currently NIL for most Indian producers). The European Commission has published a reporting template in Excel format — available on the CBAM Transitional Registry portal — which Indian producers can use as the basis for the data package sent to EU buyers.

Q10. What if we have multiple production facilities? Do we report per facility or in aggregate?

CBAM data must be reported at the production facility (installation) level — not in aggregate across multiple facilities. Each production facility has its own embedded emission intensity based on its specific technology, energy inputs, and process conditions. Reporting aggregate data across facilities is not acceptable under the CBAM methodology — it would average out facility-specific performance and could either overstate or understate the actual embedded emissions of the specific goods exported. For Indian producers with multiple facilities: identify which facility produced the specific goods exported to the EU buyer (by production batch records); report the embedded emissions for that facility; if goods from multiple facilities are mixed in a single export consignment, the methodology for allocating emissions across mixed batches must be documented and consistent.

SECTION 4 — COMMERCIAL AND STRATEGIC IMPLICATIONS

Q11. How much does CBAM cost my EU buyer — and how does this affect my competitiveness?

The CBAM cost to the EU buyer is: specific embedded emissions (tCO2e per tonne of product) × CBAM certificate price (EUR/tCO2e) × quantity imported (tonnes). Example: a tonne of hot-rolled steel from a BF-BOF Indian plant with specific emissions of 2.0 tCO2e/t, at a CBAM certificate price of EUR 60/tCO2e = EUR 120 CBAM cost per tonne. At EUR 80/tCO2e = EUR 160 CBAM cost per tonne. This is in addition to the standard EU import duty. For a 1,000 tonne shipment: CBAM cost ranges from EUR 120,000 to EUR 160,000 at current EU ETS price levels. An Indian producer who can demonstrate lower embedded emissions (e.g. 1.5 tCO2e/t through EAF with partial renewable electricity) saves the EU buyer EUR 30,000–40,000 per 1,000 tonnes compared to a 2.0 tCO2e/t BF-BOF producer — a significant commercial advantage. This is the commercial logic for investing in decarbonisation: lower emissions = lower CBAM cost for EU buyer = stronger competitive position for Indian producer.

Q12. What can Indian producers do NOW to reduce their future CBAM liability?

The highest-impact actions Indian producers can take immediately: (1) Switch to electric arc furnace (EAF) steelmaking using scrap — EAF has approximately 60–70% lower emissions than BF-BOF. Many Indian mini-mills already use EAF — a competitive advantage under CBAM. (2) Procure renewable electricity for EAF and aluminium smelting — reducing indirect emissions toward zero. Many Indian states now allow direct purchase from renewable energy IPPs (Independent Power Producers) or through SECI. (3) Install sub-metering on all furnaces, kilns, and process lines — to enable facility-level actual emissions monitoring for the 2026 definitive phase. (4) Engage a CBAM accredited verifier now — to assess current emission levels and identify the most cost-effective reduction pathway. (5) Engage with the Indian Carbon Market (ICM) — the government's Carbon Credit Trading Scheme (CCTS) may eventually be recognised by the EU as providing a carbon price credit against CBAM. Early engagement in the ICM positions Indian producers for future CBAM credit eligibility. (6) Communicate proactively with EU buyers — providing CBAM data now (even in the transitional phase) demonstrates preparedness and builds commercial trust before 2026.

Q13. What happens if my EU buyer uses default values instead of my actual data — can I object?

You cannot formally object — the CBAM obligation and the choice of methodology (actual data vs. default values) rests with the EU importer, not the Indian exporter. However, you can commercially influence this: (a) Provide your actual embedded carbon data to the EU buyer — make it easy for them to use actual data by sending the data in the correct format (see Q9). (b) Quantify the financial benefit to the EU buyer of using actual data vs. default values — if your actual emissions are meaningfully lower than the default values for your product category, calculate the CBAM certificate cost saving and present it to the EU buyer. (c) Make data provision a commercial differentiator in your sales pitch — "We provide verified CBAM data that can reduce your CBAM cost by EUR X per tonne." EU buyers sourcing from competitors who cannot provide data are paying higher CBAM costs — your data provision is worth real money to them.

CBAM DATA COLLECTION — QUICK-START ACTION PLAN

RELATED DOCUMENTS IN THIS LIBRARY

Doc 111 — FAQ Supplement: CBAM Carbon Data Collection — All Frontier Global Nexus

This is the final document in the All Frontier Global Nexus 111-document Trade and Commerce Library.

111 documents · 30 verticals · Every frontier · Commission-only · Both principals · All Frontier Global Nexus