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EUROPEAN COMMISSION DIRECTORATE-GENERAL TAXATION AND CUSTOMS UNION Indirect Taxation and Tax Administration CBAM, Energy and Green Taxation Brussels, 8 December 2023

GUIDANCE DOCUMENT ON CBAM IMPLEMENTATION FOR INSTALLATION OPERATORS OUTSIDE THE EU

This guidance document represents the views of the European Commission Services at the time of publication. It is not legally binding.

2 VERSION HISTORY Date Version notes 17 Aug 2023 First Publication 26 Oct 2023 The following corrections were made: • Some clarification in section 6.7.3 (electricity and CHP) • Improvement of worked sector examples, in particular
• Cement, section 7.1.3 (minor clarifications) • Steel (7.2.2.1, in particular calculation of the waste gas deduction) • Mixed fertilizer (section 7.3.2, minor clarifications) • Aluminium (section 7.4.2 minor clarifications) • Hydrogen (section 7.5.2 – not all produced H2 is sold) • Various typos, references and formats corrected. 21 Nov 2023 Correction on de minimis rule 8 Dec 2023 The following corrections were made: • Clarifications in section 4.3 (Transitional period), in particular sections 4.3.3 (Reporting periods) and 4.3.5 (Inward Processing). • Clarifications in section 5.4.3 (hydrogen) to include other production routes, and to Figure 5-6 (Sintered ore) and Figure 5-11 (Crude steel-Basic oxygen steelmaking).

4.3.5 (Inward Processing). • Clarifications in section 5.4.3 (hydrogen) to include other production routes, and to Figure 5-6 (Sintered ore) and Figure 5-11 (Crude steel-Basic oxygen steelmaking). • In section 6.2.1 the addition of Table 6-1 comparing GHG emission scope for the CBAM, EU ETS and other standards. • Minor clarifications in section 6.3 (Defining production process system boundaries). • The inclusion of equation reference numbers, in sections 6 and 7 that refer to the Implementing Regulation (EU) 2023/1773. • Clarifications in sections 6.8.1.2 (Monitoring requirements) regarding the quality of goods, and 6.8.2 (Monitoring precursor data) regarding differences in reporting periods. • Clarifications in section 6.9 (Use of default factors and other methods) and in particular the addition of a new section 6.9.4 (Transitional use of other GHG monitoring and reporting systems). • In section 7.2.2.3 addition of a new worked example regarding the making of steel products from purchased precursors. • In section 8 correction to the EFTA exemption rule. • Deletion of the Annex on Default Values, as this information can be found on the European Commission’s dedicated website for the CBAM.

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• In section 8 correction to the EFTA exemption rule. • Deletion of the Annex on Default Values, as this information can be found on the European Commission’s dedicated website for the CBAM.

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CONTENTS 1 SUMMARY 7 2 INTRODUCTION 8 2.1 About this document 8 2.2 How to use this document 9 2.3 Where to find further information 9 3 QUICK GUIDE FOR OPERATORS 12 4 THE CARBON BORDER ADJUSTMENT MECHANISM 20 4.1 Introduction to the CBAM 20 4.2 Definitions and scope of emissions covered in the CBAM 21 4.3 Transitional period 22 4.3.1 Key reporting roles and responsibilities 23 4.3.2 What needs to be monitored by you (as an operator) 24 4.3.3 Reporting periods for operators and importers 25 4.3.4 Governance of the CBAM 27 4.3.5 Inward processing 29 5 CBAM GOODS AND PRODUCTION ROUTES 31 5.1 Foreword to sector specific sections 31 5.2 Identifying CBAM goods 32 5.2.1 Product specifications 32 5.2.2 Identifying goods in scope for the CBAM Regulation 32 5.3 Cement sector 33 5.3.1 Unit of production and embedded emissions for industry sector 33 5.3.2 Definition and explanation of goods covered 34 5.3.3 Definition and explanation of relevant production processes and routes 35 5.4 Chemicals sector – Hydrogen 39 5.4.1 Unit of production and embedded emissions 40 5.4.2 Definition and explanation of sector CBAM goods covered 40 5.4.3 Definition and explanation of relevant production processes and routes 41 5.5 Fertilizers sector 45 5.5.1 Unit of production and embedded emissions 45

on of sector CBAM goods covered 40 5.4.3 Definition and explanation of relevant production processes and routes 41 5.5 Fertilizers sector 45 5.5.1 Unit of production and embedded emissions 45 5.5.2 Definition and explanation of sector CBAM goods covered 46 5.5.3 Definition and explanation of relevant production processes and routes 47 5.6 Iron and Steel sector 52 5.6.1 Unit of production and embedded emissions 52 5.6.2 Definition and explanation of sector CBAM goods covered 53

5 5.6.3 Definition and explanation of relevant production processes and emissions covered 58 5.7 Aluminium sector 72 5.7.1 Unit of production and embedded emissions 72 5.7.2 Definition and explanation of sector goods covered 73 5.7.3 Definition and explanation of relevant production processes and routes 75 6 MONITORING AND REPORTING OBLIGATIONS 82 6.1 Definitions and scope of emissions covered in the CBAM 84 6.1.1 Installation, production process and production routes 84 6.1.2 Activity level, quantity of goods produced 84 6.1.3 Direct and indirect embedded emissions 85 6.1.4 Units for reporting embedded emissions 87 6.2 How to determine embedded emissions 87 6.2.1 The concept 87 6.2.2 From installation’s emissions to goods’ embedded emissions 89 6.3 Defining production process system boundaries and production routes 101 6.4 Planning your monitoring 105 6.4.1 What documentation is needed to plan your monitoring 105 6.4.2 Monitoring methodology principles and procedures 106 6.4.3 Written procedures 107

101 6.4 Planning your monitoring 105 6.4.1 What documentation is needed to plan your monitoring 105 6.4.2 Monitoring methodology principles and procedures 106 6.4.3 Written procedures 107 6.4.4 Choosing best available data sources 107 6.4.5 Limiting monitoring-related costs 110 6.4.6 Control measures and quality management 111 6.5 Determine installation’s direct emissions 112 6.5.1 Calculation-based approach 115 6.5.2 Measurement-based Methodology – Continuous Emission Measurement Systems (CEMS) 127 6.5.3 Non-EU country specific methods 130 6.5.4 Treatment of biomass emissions 131 6.5.5 Determine PFC (perfluorocarbon) emissions 132 6.5.6 Rules for transfers of CO2 between installations 133 6.6 Determine installation’s indirect emissions 135 6.7 Rules required for attributing emissions to production processes 136 6.7.1 Generic rules for metering of parameters to be attributed to production processes 136 6.7.2 Rules for heat energy and emissions 139 6.7.3 Rules for electrical energy and its emissions 146 6.7.4 Rules for combined heat and power 148 6.7.5 Rules for waste gas energy and emissions 151 6.8 Calculation of embedded emissions of goods 153 6.8.1 Rules for goods produced 153 6.8.2 Rules for monitoring of precursor data 155 6.9 Use of default factors and other methods 157 6.9.1 Default specific embedded emission values 157

153 6.8.1 Rules for goods produced 153 6.8.2 Rules for monitoring of precursor data 155 6.9 Use of default factors and other methods 157 6.9.1 Default specific embedded emission values 157

6 6.9.2 Default emission factors for grid electricity 158 6.9.3 Minor data gaps in installation’s monitoring data 159 6.9.4 Transitional use of other GHG monitoring and reporting systems 159 6.10 Reporting the effective carbon price due 161 6.11 Reporting template 163 6.11.1 For operators 165 6.11.2 For reporting declarants 167 7 SECTOR SPECIFIC MONITORING AND REPORTING 168 7.1 Cement sector 169 7.1.1 Sector-specific requirements for monitoring and reporting 169 7.1.2 Example for splitting a cement installation into separate production processes 173 7.1.3 Worked example for the cement sector 176 7.2 Iron and Steel sector 180 7.2.1 Sector-specific requirements for monitoring and reporting 181 7.2.2 Worked examples for the iron and steel sectors 183 7.3 Fertilizers sector 199 7.3.1 Sector-specific requirements for monitoring and reporting 199 7.3.2 Worked example for the fertilizer sector 203 7.4 Aluminium sector 205 7.4.1 Sector-specific requirements for monitoring and reporting 206 7.4.2 Worked example for the aluminium sector 210 7.5 Chemicals – Hydrogen sector 216 7.5.1 Sector-specific requirements for monitoring and reporting 216 7.5.2 Worked examples for the hydrogen sector 219 7.6 Electricity “as a good” (i.e.

10 7.5 Chemicals – Hydrogen sector 216 7.5.1 Sector-specific requirements for monitoring and reporting 216 7.5.2 Worked examples for the hydrogen sector 219 7.6 Electricity “as a good” (i.e. imported into the EU) 224 7.6.1 CO2 emission factor based the reporting declarant’s data 225 7.6.2 CO2 emission factor based on actual CO2 emissions of the installation 225 8 EXEMPTIONS FROM THE CBAM 227 ANNEX A LIST OF ABBREVIATIONS 228 ANNEX B LIST OF DEFINITIONS 230 ANNEX C – FURTHER INFORMATION ON BIOMASS 238 ANNEX D – STANDARD VALUES FOR EMISSION CALCULATIONS 246

7 1 SUMMARY The Carbon Border Adjustment Mechanism (CBAM) is an environmental policy instrument designed to apply the same carbon costs to imported products as would be incurred by installations operating in the European Union (EU). In doing so, the CBAM reduces the risk of the EU's climate objectives being undermined by production relocating to countries with less ambitious decarbonisation policies (so-called ‘carbon leakage’).
Under the CBAM, in its definitive (post-transitional) period EU authorised declarants representing the importers of certain goods will purchase and surrender CBAM certificates for the embedded emissions of their imported goods.

ive (post-transitional) period EU authorised declarants representing the importers of certain goods will purchase and surrender CBAM certificates for the embedded emissions of their imported goods. As the price for those certificates will derive from the EU Emission Trading System (EU ETS) allowance price, and since Monitoring, Reporting and Verification (MRV) rules have been designed based on the MRV system of the EU ETS, this will equalise the price of carbon incurred between imported goods and goods produced in installations participating in the EU ETS. This guidance document is part of a series of guidance documents and electronic templates provided by the European Commission to support the harmonised implementation of the CBAM during the transitional period (1 October 2023 to 31 December 2025). It provides an introduction to the CBAM and the concepts to be used for monitoring and reporting of stationary installations. This guidance does not add to the mandatory requirements of the CBAM, but it is aimed at assisting correct interpretation to facilitate implementation.
This guidance document represents the views of the European Commission Services at the time of publication. It is not legally binding.

isting correct interpretation to facilitate implementation.
This guidance document represents the views of the European Commission Services at the time of publication. It is not legally binding.

8 2 INTRODUCTION 2.1 About this document This document has been written to support stakeholders by explaining the requirements of the CBAM Regulation in a non-legislative language. This guidance focuses on the requirements for operators of installations producing CBAM goods outside of the EU for the transitional period, from 1 October 2023 to 31 December 2025, during which time the CBAM is applied without a financial obligation for importers and solely for data collection purposes.
• Section 3 provides a quick guidance for the intended reader of this document, the operator of an installation producing CBAM goods. It gives a roadmap to the most important concepts of CBAM emissions monitoring and where to find more information in this document. • Section 4 provides an introduction to the CBAM and an overview of the compliance cycle, roles and responsibilities and milestones and deadlines for operators of installations outside the EU during the transitional period.
• Section 5 presents an overview of the production processes and value chains for the sectors and goods that are included in the scope of the CBAM. • Section 6 sets out the monitoring and reporting obligations and recommendations which are potentially applicable to any affected producer of CBAM goods.

hat are included in the scope of the CBAM. • Section 6 sets out the monitoring and reporting obligations and recommendations which are potentially applicable to any affected producer of CBAM goods.
• Section 7 adds to this with sector specific monitoring and reporting considerations for each CBAM good where this is relevant. The section is supplemented by examples for each sector.
• Section 8 explains the general exemptions from the CBAM. A separate guidance document is provided by the European Commission for importers of CBAM goods (“reporting declarants”). The guidance documents are accompanied by an electronic template for information that should be used by installation operators to communicate information to the reporting declarants.

Presentation of numbers in EU documents To align with EU legal documents, this guidance document uses the following convention when presenting numbers. The decimal separator used to separate the integral part of a number from its fractional part is a comma, e.g.: 0,890 Thousands, and powers of 103n thereafter, are separated by a space, e.g.:
• fifteen thousand is written as 15 000 • fifteen million is written as 15 000 000

ctional part is a comma, e.g.: 0,890 Thousands, and powers of 103n thereafter, are separated by a space, e.g.:
• fifteen thousand is written as 15 000 • fifteen million is written as 15 000 000

9 Simplified!

2.2 How to use this document Where article numbers are given in this document without further specification, they always refer to the CBAM Regulation1. Where the ‘Implementing Regulation’ is cited, it means the Regulation2 which sets out the detailed MRV rules for the transitional period. For acronyms and definitions used in this document, please see Annex A and Annex B. A series of icons are used throughout to help guide the reader: Icon Description of use

Points to information of particular importance for operators of installations producing CBAM goods.

Highlights simplified approaches of the general requirements of the CBAM.

Used where recommended improvements are presented

Used where other documents, templates or electronic tools are available from other sources

Points to examples given for the topics discussed in the surrounding text.

Highlights sections that refer to the definitive period of the CBAM, rather than the transitional period

2.3 Where to find further information The textbox below signposts the key sections of the CBAM Regulation and the Implementing Regulation that are relevant to operators of installations producing CBAM goods during the transitional period.

textbox below signposts the key sections of the CBAM Regulation and the Implementing Regulation that are relevant to operators of installations producing CBAM goods during the transitional period. The CBAM Regulation Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism.
Available from: http://data.europa.eu/eli/reg/2023/956/oj

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Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism; Available from : http://data.europa.eu/eli/reg/2023/956/oj
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Commission Implementing Regulation (EU) 2023/1773 of 17 August 2023 laying down the rules for the application of Regulation (EU) 2023/956 of the European Parliament and of the Council as regards reporting obligations for the purposes of the carbon border adjustment mechanism during the transitional period; Available from: http://data.europa.eu/eli/reg_impl/2023/1773/oj

Council as regards reporting obligations for the purposes of the carbon border adjustment mechanism during the transitional period; Available from: http://data.europa.eu/eli/reg_impl/2023/1773/oj

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• Article 2 – sets out the scope of the CBAM with reference to Annex I. • Article 3 and Annex IV – provide definitions for common terms used in the CBAM. • Article 10 – sets out requirements for operator registration under the CBAM (from 31 December 2024). • Article 30 – requires the European Commission to undertake a review of the scope of the CBAM by 31 December 2024. • Articles 32 to 35 – set out the reporting obligations on EU importers in the transitional period. • Article 36 – sets out the dates from when the other articles start to apply. • Annex I– provides the list of CBAM goods by industry sector with CN code to identify goods, and the corresponding relevant greenhouse gases.
• Annex III – identifies the non-EU countries and territories that are not covered by the CBAM. • Annex IV – provides the general methods for calculating the embedded emissions in goods; in section 2 for Simple Goods and in section 3 for Complex Goods.

Implementing Regulation (pursuant to Article 35(7) of the CBAM Regulation): Commission Implementing Regulation (EU) 2023/1773, available from: http://data.europa.eu/eli/reg_impl/2023/1773/oj
• Article 2 and Annex II Section 1 – provide definitions for common terms used in the CBAM and the MRV rules.

ation (EU) 2023/1773, available from: http://data.europa.eu/eli/reg_impl/2023/1773/oj
• Article 2 and Annex II Section 1 – provide definitions for common terms used in the CBAM and the MRV rules. • Article 3 – provides the reporting obligations of the reporting declarants, including the parameters for which data is to be reported. • Articles 4 and 5 – set out the approaches for the calculation of the embedded emissions and conditions for the use of default values. • Article 7 – indicates the information to be reported regarding the carbon price due. • Article 16 – relates to the penalties that shall be applied by Member States if the reporting declarant has not correctly fulfilled its reporting obligations. • Articles 19 and 22 – set out technical elements of the CBAM Transitional Registry. • Annex I: Table 1 - CBAM Report Structure, Table 2 - Detailed information requirements in the CBAM report. • Annex II: Section 2, Table 1 – mapping of CN codes to the CBAM aggregated goods categories; and Section 3 – definition of production processes for the CBAM goods categories, including system boundaries of production routes and relevant precursors.

o the CBAM aggregated goods categories; and Section 3 – definition of production processes for the CBAM goods categories, including system boundaries of production routes and relevant precursors.

11 • Annex III: Rules for monitoring emissions at installation level, for attributing them to production processes, and for determining specific direct and indirect embedded emissions of simple and complex goods. It is structured in sections as follows: o A. Principles o B. Monitoring of direct emissions at installation level o C. Monitoring of heat flows o D. Monitoring of electricity o E. Monitoring of precursors o F. Rules for attributing emissions of an installation to goods o G. Calculation of specific embedded emissions of complex goods o H. Optional measures to increase quality of data • Annex IV: Minimum data to be reported by producers of goods (“operators”) to importers (or reporting declarants). • Annexes V to VII: Tables listing data requirements for other reports, including for inward processing (by importers), EORI and the National Import System. • Annex VIII: Standard factors that may be used for the monitoring of direct emissions. • Annex IX: Reference values for efficiency of separate production of heat and electricity, to be used in CHP calculations.

tandard factors that may be used for the monitoring of direct emissions. • Annex IX: Reference values for efficiency of separate production of heat and electricity, to be used in CHP calculations.

All EU legislation can be found on: eur-lex.europa.eu/homepage.html Other guidance and training materials that have been produced by the European Commission to help operators and importers include: • A separate guidance document is provided by the European Commission for importers of CBAM goods into the EU (“reporting declarants”).
• Guidance developed for importers on how to complete quarterly reports on the CBAM Trader Portal. • Excel-based template for operators to automatically calculate embedded emissions and communicate this data clearly to importers of goods
• Training videos.

The guidance documents and template are available on the dedicated website for the CBAM of the European Commission: https://taxation-customs.ec.europa.eu/carbon- border-adjustment-mechanism_en

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The guidance documents and template are available on the dedicated website for the CBAM of the European Commission: https://taxation-customs.ec.europa.eu/carbon- border-adjustment-mechanism_en

12 3 QUICK GUIDE FOR OPERATORS In this section we provide a step-by-step overview of important concepts, rules and obligations under the transitional period.
Are you an operator of an installation producing “CBAM goods”?
CBAM goods are goods currently imported into the EU from the cement, iron and steel, aluminium and some chemical industries (fertilizers and hydrogen), and electricity. To answer this question, you must compare the CN codes3 of your products against the list of goods given in Annex I to the CBAM Regulation. More information on how to approach this can be found in Section 5.2 of this document, and subsequent sub-sections within section 5 set out further detail for each sector. If you do not produce such goods, you do not have to read this document. However, it is written to be of help also to all other kinds of interested audiences (academia, CBAM importers, GHG verifiers, competent authorities, consultants, etc.). If you just want to understand how the CBAM works in general, you may find an introduction to the CBAM in Section 4. Are you exporting your goods to customers in EU Member States?
The CBAM affects you if this is the case.

tand how the CBAM works in general, you may find an introduction to the CBAM in Section 4. Are you exporting your goods to customers in EU Member States?
The CBAM affects you if this is the case.
Please note that your products may also be purchased by clients who themselves manufacture CBAM goods, and your products may serve as “precursor” for their CBAM goods, which then may be exported to EU countries. Also, if you sell your products to traders who then sell them to EU customers, your goods fall under the CBAM.
In all those cases where CBAM goods end up in being imported into the EU, at some point the importer will contact you to gather information on the “embedded emissions” of these CBAM goods. Alternatively, the operator using your goods as precursor for producing other CBAM goods will ask the level of embedded emissions. Therefore, you must be prepared to provide these data and as soon as possible start to develop a monitoring methodology at your installation, as described in this guidance document. What are embedded emissions? The concept has been developed to reflect as much as possible the way in which emissions are covered by the EU ETS if the CBAM goods were produced in the EU. The EU ETS requires operators to pay a price for their own (“direct”) emissions. However, if they consume electricity, they also experience the CO2 costs included in the price of electricity they purchase4 (“indirect emissions”). The same applies to the input materials needed for their production process, and which may be supplied by an EU ETS installation.

in the price of electricity they purchase4 (“indirect emissions”). The same applies to the input materials needed for their production process, and which may be supplied by an EU ETS installation. These so-called precursors therefore contribute to the CO2 costs the EU ETS installation faces. The “embedded emissions” are defined in parallel to the emissions causing CO2 costs in the EU ETS: they take into account the direct and indirect5 emissions of the production process as well as the embedded emissions of precursors. They are similar in concept to a carbon footprint of the goods. The scope of the CBAM is

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CN (Common Nomenclature) codes are the EU version of the HS (Harmonised System) codes for international trade. CN codes consist usually of 8 digits (the first 6 digits are identical to the HS code). Where Annex I to the CBAM Regulation contains fewer digits, it means that all CN codes starting with those digits are covered. 4
If the EU installation produces its own electricity, it experiences the CO2 costs directly. 5
Indirect emissions have to be reported for all CBAM goods during the transitional period. Although at this stage only a smaller number of goods is included in Annex II to the CBAM Regulation, and only those will have to cover indirect emissions in the definitive period.

itional period. Although at this stage only a smaller number of goods is included in Annex II to the CBAM Regulation, and only those will have to cover indirect emissions in the definitive period.

13 principally related to the rules of the EU ETS and therefore has differences to other methods for calculating product carbon footprints such as the “GHG Protocol” or ISO14067. A detailed introduction to the concept and calculation of embedded emissions is given in section 6.2. What do you need to monitor? To answer this question, you need to perform the following steps to develop your “monitoring methodology documentation”, i.e. the handbook you and your personnel use as a basis for performing monitoring tasks in a consistent way during the coming years. The presented steps will ensure that all the data which you need to calculate embedded emissions is covered. • Step 1: Define the installation’s boundaries, production processes and production routes. Production process means the system boundaries which are needed to attribute emissions to specific goods produced6. Each “Aggregated good category” (i.e. an aggregation of goods with different CN codes, but suitable to be covered by common monitoring rules) corresponds to one production process. Guidance on system boundaries is found in Section 5.2 and for each sector specific sub section in Section 5. • Step 2: Define the reporting period you are going to use. The default case is the (European) calendar year.

ndaries is found in Section 5.2 and for each sector specific sub section in Section 5. • Step 2: Define the reporting period you are going to use. The default case is the (European) calendar year. However, if your installation is situated in a country with a different calendar, or where there are other reasonable arguments for a different period, this may be used, too, if it covers at least three months. Suitable alternative periods include, in particular, the reporting periods of a carbon pricing scheme or compulsory emissions monitoring scheme in the country of your installation, or the fiscal year used. The main reason for choosing such other periods is that there may be additional scrutiny applied for those purposes, such as stock taking and financial auditing for annual financial accounts, or third-party verification of emissions, which gives a higher level of confidence in the quality of your data when also used for CBAM purposes. Further guidance on reporting periods is given in Section 4.3.3.

ty verification of emissions, which gives a higher level of confidence in the quality of your data when also used for CBAM purposes. Further guidance on reporting periods is given in Section 4.3.3. • Step 3: Identify all the parameters you need to monitor:
o Direct emissions of the installation: you have two options available:
a) The “calculation-based” approach, where you need to determine the quantities of all fuels and relevant materials7 consumed, and corresponding “calculation factors” (in particular the so-called “emission factor” based on the carbon content of the fuel or material); b) The “measurement-based” approach, where you need to measure online the concentration of the greenhouse gases as well as the flow of the flue gas for each “emission source” (stack). Note, however, that during an introductory phase until 31 July 2024 you may apply other methods allowed for emissions monitoring in your jurisdiction, if they lead to a similar emission coverage and accuracy. These other methods may include default values made available and published by the European Commission for the transitional period. Other default values can be used on the condition that the reporting declarant indicates and references in the CBAM

6 If you are familiar with the EU ETS, it may help you to understand the concept of “production process” that it is very similar to the “sub-installations” used for benchmarking. 7
The term “source stream” is used to cover both, fuels and other input or output materials that have an influence on emissions.

is very similar to the “sub-installations” used for benchmarking. 7
The term “source stream” is used to cover both, fuels and other input or output materials that have an influence on emissions.

14 reports the methodology followed for establishing such values. For PFC8 emissions from primary aluminium production a special methodology based on overvoltage measurements should be applied. For N2O emissions from nitric acid production, the measurement-based method is compulsory. In all other cases, you may choose which method best fits to the situation of your installation. Additionally, if your installation has more than one production process, there may be a need to monitor fuel or material streams between the production processes in order to enable correct attribution of emissions to production processes9.
The rules for monitoring these direct emissions are found in Annex III, section B of the Implementing Regulation. Section 6.4 of this document gives relevant guidance on details. o (Direct) emissions related to heat flows10: Heat consumption (both heat produced in the installation or received from a separate installation) needs to be attributed to each production process, and emissions related to heat exported from production processes need to be deducted from the attributed emissions of each production process from where the heat is produced or recovered. Therefore, rules for monitoring heat flows are found in section C of Annex III to the Implementing Regulation. There are also rules on determining the emission factor of heat.

oduced or recovered. Therefore, rules for monitoring heat flows are found in section C of Annex III to the Implementing Regulation. There are also rules on determining the emission factor of heat. Detailed guidance is found in Section 6.7.2 of this document. o Indirect emissions: These are emissions occurring during the production of the electricity your installation consumes for its production processes, irrespective of whether this electricity was produced within the installation or imported from outside. You need to monitor the quantities of electricity consumed in each production process and multiply it by the relevant emission factor of electricity. For the emissions factor, the following options exist: a) If the electricity comes from the grid, you use the default emission factor provided by the European Commission based on IEA11 data. b) If you produce electricity yourself in your installation (you are an “auto- producer”), you need to monitor the emission of the power plant or CHP plant12 in the same way as you monitor other direct emissions of your

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Perfluorocarbons.
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For example, if a blast furnace produces pig iron, a part of the waste gases is usually used as fuel in other parts of the installation (e.g. a power plant or a hot-rolling mill). In such a case, the quantity and calculation factors need to be determined also for this waste gas, although they are not necessary to calculate the total emissions of the installation.
10 Note 1: this is only about “measurable heat”, i.e.

factors need to be determined also for this waste gas, although they are not necessary to calculate the total emissions of the installation.
10 Note 1: this is only about “measurable heat”, i.e. heat that is transported via a heat medium such as steam, hot water, liquid salts, etc. and where its flow rate can be measured in a pipe, duct, etc. Where heat is produced in a burner and directly used e.g. in a kiln or dryer there is no need to monitor the heat flow, instead the emissions are determined from the fuel consumption. On the other hand, measurable heat is often produced centrally or at several points in the installation, which do not directly correspond to the system boundaries of production processes. It is therefore useful to determine the emissions of the heat production separately, and attribute the emissions to production processes via the heat consumed in each production process.

Note 2: In context of carbon footprints, emissions from (imported) heat is often considered “scope 2 emissions” and therefore termed “indirect emissions”. Please be aware that in the CBAM legislation as well as in this document, the expression “indirect emissions” refers only to electricity, not heat. 11 International Energy Agency. 12 CHP means combined heat and power, also known as “cogeneration”.

as in this document, the expression “indirect emissions” refers only to electricity, not heat. 11 International Energy Agency. 12 CHP means combined heat and power, also known as “cogeneration”.

15 installation, and use specific rules to calculate the emission factor from the fuel mix and taking into account CHP heat production, if applicable. The relevant rules are found in section D of Annex III to the Implementing Regulation. Section 6.7.2 and section 6.7.4 of this document provide guidance on heat and CHP. c) If you receive electricity from a specific installation under a “power purchase agreement”, provided this power plant monitors its emissions in line with the same rules as applicable for auto-produced electricity and communicates that information to you appropriately, you may use the resulting emission factor for this electricity. Detailed guidance is found in Section 6.7.3 of this document. o Precursors: As explained under point 3 above, the concept of embedded emissions includes the addition13 of embedded emissions of certain materials used in the production process, the so-called precursors. Which precursors are relevant to each production process is listed in section 3 of Annex II of the Implementing Regulation and is discussed in Section 5 of this document for each affected sector. The following parameters need to be monitored for each precursor material: a) If the precursor is produced within your installation, all relevant monitoring is already done in line with the above points.

lowing parameters need to be monitored for each precursor material: a) If the precursor is produced within your installation, all relevant monitoring is already done in line with the above points. You only need to take the precursor’s embedded emissions into account when calculating the embedded emissions of the goods which use the precursor in the production process.
b) If you purchase the precursor from other installations, you need to request data from the relevant producers in the same way as you are asked for data when your goods are imported into the EU. The relevant information includes the following, for each precursor, separately for each installation of its production:  Identification of the installation where it was produced;  The specific14 direct and indirect embedded emissions of the precursor;  The production route, and additional parameters that the importer needs to report when the final good is imported to the EU under the CBAM. These additional parameters are listed in section 2 of Annex IV to the Implementing Regulation and discussed in section 5 and section 7 of this document for each affected sector.  The reporting period applied by the producer of the precursor.  If applicable, information on a carbon price due in the relevant jurisdiction production of the precursor (see point 5 below). c) In both cases, i.e. for purchased or self-produced precursors, you need to monitor the quantity of each precursor you used during the reporting period for each of your production processes.

w). c) In both cases, i.e. for purchased or self-produced precursors, you need to monitor the quantity of each precursor you used during the reporting period for each of your production processes.

13 Note the difference between precursors and normal input materials: For the determination of direct emissions it is taken into account that the carbon atoms contained in a material may be oxidised to CO2 and emitted. However, for precursors, additionally the emissions which took place already earlier (during their own production), i.e. the precursor’s embedded emissions, need to be added. 14 Specific (embedded) emissions means emissions related to one tonne of the material under discussion.

16 The rules for monitoring precursor-related data are found in section E of Annex III to the Implementing Regulation. More details are given in Section 6.8.2 of this document. o Finally, there are some additional qualifying parameters that the EU importer needs to report under the CBAM. These depend on the goods produced. For example, for cements imported, the total clinker content needs to be reported, for mixed fertilizers the contents of the different forms of nitrogen, etc. The relevant parameters are listed in section 2 of Annex IV to the Implementing Regulation. You need to ensure that you collect all the parameters necessary for your CBAM goods and communicate them to the importers of your goods. Guidance can be found in Section 5 of this document.

tion. You need to ensure that you collect all the parameters necessary for your CBAM goods and communicate them to the importers of your goods. Guidance can be found in Section 5 of this document. • Step 4: Determine the methodology to monitor each parameter you have identified:
o For quantities of fuels and materials (including precursors) used, you may either have measurement instruments available which tell you how much has been consumed during the reporting period (e.g. weighing belts, flow meters, heat meters, etc.) or you may determine the used amounts from purchase records and stock measurements at the end of each period.
o For the so-called calculation factors (e.g. the carbon content of the fuel or material) you can either choose a “standard value” from applicable literature (in particular national GHG inventories submitted under the UNFCCC/ Paris Agreement) or from Annex VIII to the Implementing Regulation, or you can determine them based on laboratory analyses, for which the Implementing Regulation provides further rules in section B.5 of Annex III. o For continuous emission measurements, heat flow and electricity measurements you also need to define the instruments to use, and applicable calibration and maintenance measures.
o In some cases, it may be necessary to define estimation methods, or indirect methods based on known correlations of measurement parameters.

and applicable calibration and maintenance measures.
o In some cases, it may be necessary to define estimation methods, or indirect methods based on known correlations of measurement parameters.
o As the very last resort, if you have no other methods available for monitoring your goods’ embedded emissions, and in particular if the producer of your precursors used does not provide the required data, you may use the default values for embedded emissions of CBAM goods (which include all relevant precursors) which the European Commission makes available for the purpose. A list of the goods for which default values are available can be found on the European Commission’s dedicated website for the CBAM and further guidance on their use in Sections 6.9. Note that sometimes you may have the choice of different monitoring approaches (e.g. you may have more than one measurement instrument, or you need to choose between continual metering and use of batch-wise delivery records, choose between calculation- based and measurement-based methods, etc.) The Implementing Regulation contains provisions in section A.3 of Annex III on how to select the best available (i.e. most accurate) data source. Details are discussed in Section 6.4 of this document. Do you pay a carbon price in your own jurisdiction? To ensure similar treatment between installations in the EU ETS and in other countries, a carbon price due in the country where a CBAM good is produced will allow for a reduction in the CBAM obligation in the definitive period from 2026 onwards.

s in the EU ETS and in other countries, a carbon price due in the country where a CBAM good is produced will allow for a reduction in the CBAM obligation in the definitive period from 2026 onwards. This is already a reporting obligation during the transitional period of the CBAM (namely until the end of 2025). You

17 need to ensure that you include information on carbon pricing in your monitoring methodology, so you can convey the relevant information to the importer of your CBAM goods. During the transitional period such reporting on the carbon prices due around the world is important for the European Commission to consider any further improvements of the CBAM legislation in that regard. If your installation is subject to a carbon price, you will have to collect information on the carbon price due, in such a way that you can attribute it to production processes and CBAM goods categories in a similar way as you attribute emissions to the goods. The effective carbon price is to be considered, i.e. taking into account any applicable rebates (in case of an ETS, any free allocation is considered a rebate).
Note that you need to collect information for each precursor purchased if a carbon price applies in its country of origin. If the producer of the precursor does not provide the required information, you must assume the carbon price due for the precursor to be zero. The total effective carbon price needs to be attributed to the CBAM goods in a similar way as the specific embedded emissions, i.e. it needs to be expressed as euros per tonne of CBAM good.

zero. The total effective carbon price needs to be attributed to the CBAM goods in a similar way as the specific embedded emissions, i.e. it needs to be expressed as euros per tonne of CBAM good. The reporting rules of information regarding the carbon price due are found in Article 7 of the Implementing Regulation. Detailed guidance is given in section 6.10 of this document. Compile the monitoring methodology documentation (MMD) At this point you have listed all the monitoring methods for all the materials or emission sources you need to monitor throughout the year. You should put all of this information together into one written documentation (a “CBAM management handbook” of your installation) so that the methodology can be consistently used over the coming years. This should be done in a systematic way (e.g. by listing all measurement instruments, all reading intervals, all data sources for standard values). It is also advisable to use a diagram of the installation where all the necessary instruments, sampling points etc. are indicated. The guiding principle for setting up this monitoring methodology documentation is that it should be sufficiently clear and transparent so that independent persons, who have some knowledge of GHG monitoring, are enabled to understand the monitoring methodology. It needs to be detailed enough to serve as instructions to the installation’s personnel to perform all necessary tasks for determining the embedded emissions of goods.

d the monitoring methodology. It needs to be detailed enough to serve as instructions to the installation’s personnel to perform all necessary tasks for determining the embedded emissions of goods. It must therefore also contain the applicable calculation steps, and all calculation factors which are not determined by analyses.
Guidance on setting up a MMD is given in Section 6.4 of this document. It may also be helpful to check the monitoring methodology against the “communication template” provided by the European Commission (see point 8 below). You may want to use the data requirements of that template for checking the completeness of the MMD. Furthermore, the MMD needs to contain control measures in the data flow from primary data to final specific embedded emissions. These measures must be commensurate with the risks for errors. Measures should include frequent checking by an independent person, and comparing data from different sources, consistency checking of time series, etc. More guidance is found in section 6.4.6 of this document. Perform monitoring throughout the reporting period: While all the steps above are necessary only once to prepare your installation and its staff for the monitoring tasks, this and the following point are to be performed continuously throughout all the following years.
You have to perform the monitoring tasks defined in the MMD.

d its staff for the monitoring tasks, this and the following point are to be performed continuously throughout all the following years.
You have to perform the monitoring tasks defined in the MMD. You have to regularly read fuel meters, take stock of materials consumed or produced, take samples of fuels or materials to be analysed, carry out maintenance, control and calibration of measuring

18 instruments, etc. You need to collect the relevant data, perform calculation of emissions, and perform all relevant quality control and assurance measures defined in the MMD.
Furthermore, at least once per reporting period, you should review the MMD and check if it is still accurate and appropriate. For instance, does it still reflect the technologies used in your installation, is the list of produced goods still up to date? Have new fuels or materials become relevant? Can you use better (more accurate) monitoring methods, can you reduce the risk for errors in the data flow? All changes and improvements should be documented in the MMD, and you should ensure that only the latest version of the MMD is used. You may also consider verification by a third-party GHG verifier as a voluntary means to identify weak points in your monitoring methodology and to improve it. Finally, you must communicate the embedded emissions data of your CBAM goods to the EU importer(s) who bear(s) the reporting obligation under the CBAM Regulation. As you may sell your goods to a multitude of clients, there may be a large number of EU importers who must request this information from you.

(s) the reporting obligation under the CBAM Regulation. As you may sell your goods to a multitude of clients, there may be a large number of EU importers who must request this information from you. In order to perform this communication as efficiently as possible, the European Commission provides a common template that can be used for this purpose.
While the use of this template is voluntary, it needs to be highlighted that the use of a common template greatly simplifies the communication on both ends. Your customers may be established in different EU Member States and may speak different languages, and may themselves purchase CBAM goods from many suppliers in different countries. The common template ensures a common reporting format, so that the same type of information can always be found in the same field in the template, and the meaning of each field will also be clear.
Whenever your chosen reporting period ends (e.g. after the end of a calendar year), you must compile the monitored data of the whole reporting period, determine the attributed emissions of each production process, and divide them by the corresponding “activity level” (i.e. the total tonnes of goods under the related CBAM category produced within the reporting period) in order to get the specific embedded emissions of this good. This is the main parameter the EU importer is interested in (plus the additional qualifying parameters mentioned under point 4 step 3 above).

er to get the specific embedded emissions of this good. This is the main parameter the EU importer is interested in (plus the additional qualifying parameters mentioned under point 4 step 3 above). Until you finalise the data compilation of the following reporting period, you should use these embedded emissions data (using the template you have filled for this reporting period) and provide it to all your customers who need them for CBAM purposes. The template can be found on the European Commission’s dedicated website for the CBAM. It has been designed based on the rules set out in Annex IV to the Implementing Regulation on the content of the recommended communication from operators of installations to reporting declarants. More guidance on compiling relevant information for importers and using the template is given in Section 6.11 of this document and directly within the template.

19

What happens after the transitional period.
From 2026, the definitive period of the CBAM will apply. That means from 1 January 2026 onwards, importers will have to bear a “CBAM obligation” in the form of certificates, which they purchase at the average price of EU ETS allowances, for every CBAM good imported into the EU. There will be a phase-in with increasing coverage of embedded emissions by the CBAM obligation from 2026. The full embedded emissions will only be covered from 2034 onwards15.

15 The detailed calculation formula will be developed and published by the European Commission at a later stage.

rom 2026. The full embedded emissions will only be covered from 2034 onwards15.

15 The detailed calculation formula will be developed and published by the European Commission at a later stage.

20 4 THE CARBON BORDER ADJUSTMENT MECHANISM 4.1 Introduction to the CBAM The Carbon Border Adjustment Mechanism (CBAM) is an environmental policy instrument designed to support the EU climate ambitions of achieving a net reduction of greenhouse gas (GHG) emissions of at least 55% by 2030 and of reaching climate neutrality by 2050 at the latest.
The CBAM complements the EU Emission Trading System (EU ETS), which was recently strengthened as part of the EU’s “Fit for 55” legislative package. Under the EU ETS, operators of installations producing emission-intensive goods surrender emission allowances for each tonne of CO2e emissions. Since an (increasing) amount of these allowances are purchased in auctions or on the secondary market, these operators face a ‘carbon price’16 on their GHG emissions. However, most operators in non-EU countries do not have such an obligation, and this competitive advantage puts European production at risk of carbon leakage i.e. relocation outside the EU. In order to mitigate the risk of carbon leakage prior to the CBAM, the relevant industry sectors have been receiving a part of their allowances free of charge (“free allocation”) under the EU ETS. With the introduction of the CBAM, free allocation is gradually being phased out as the CBAM is gradually phased in.

a part of their allowances free of charge (“free allocation”) under the EU ETS. With the introduction of the CBAM, free allocation is gradually being phased out as the CBAM is gradually phased in. Instead of alleviating the carbon costs for EU operators, the CBAM ensures that importers of goods from non-EU countries bear similar carbon costs for the “embedded emissions” of the imported goods. This general guiding principle of both the EU ETS and the CBAM aims at incentivising emissions reductions on an equivalent basis between EU operators and non-EU operators exporting to the EU. The CBAM does not target countries but the embedded carbon emissions of products imported into the EU for specific sectors that are within the scope of the EU ETS and the most at risk of carbon leakage. They include namely: cement, iron and steel, aluminium, fertilizers, hydrogen and electricity. It also includes some precursors and some downstream products of the aforementioned sectors (hereinafter referred to as “CBAM goods”). For a complete list of CBAM goods per sector see Section 5 of this document. The CBAM will be introduced in phases as follows: • Transitional period (1 October 2023 to 31 December 2025):

Designed as a “learning phase”, during which CBAM importers are required to report a set of data, including emissions embedded in their goods, without paying a financial adjustment for the embedded emissions. However, penalties may be imposed, for example for failing to submit the required quarterly CBAM reports.

embedded in their goods, without paying a financial adjustment for the embedded emissions. However, penalties may be imposed, for example for failing to submit the required quarterly CBAM reports. • Definitive period (starting on 1 January 2026): o From 2026 to 2033, the embedded emissions for CBAM goods will gradually be covered by the CBAM obligation, as free allocation under the EU ETS is gradually phased out.

16 More precisely, a price for the CO2 or other equivalent greenhouse gas emissions.

21 o From 2034, 100% of embedded emissions of the CBAM goods will be covered by CBAM certificates and no free allocation will be given under the EU ETS for these goods. The CBAM in the definitive period is designed to mirror the emission cost under the EU ETS: • EU operators will pay the CO2 price of their emissions and surrender allowances (EUAs) under the EU ETS; and • EU importers of CBAM goods into the EU will surrender CBAM certificates that closely reflect the situation of the EU ETS, both in terms of MRV rules and of the price of the certificates. The CBAM is designed in compliance with World Trade Organization (WTO) rules and other international obligations of the EU and is applied equally to imports from all countries outside the EU.17
This document only deals with the requirements of the transitional period.
This phase is meant for learning and setting up of the relevant MRV approaches outside the EU, and of institutions and information technology systems within the EU.

nts of the transitional period.
This phase is meant for learning and setting up of the relevant MRV approaches outside the EU, and of institutions and information technology systems within the EU.

4.2 Definitions and scope of emissions covered in the CBAM The textbox below signposts the key sections in the Implementing Regulation defining terms used for the CBAM. Implementing Regulation references:
The CBAM Regulation (EU) 2023/956, Chapter I Article 3 Definitions and Annex IV Definitions Annex II, Section 1 Definitions, sub-section A.1. Definitions. A list of abbreviations and definitions used is also provided in annexes in the back of this guidance document.

The following terms are frequently used in this guidance document: • ‘tonne of CO2e’ means one metric tonne of carbon dioxide (‘CO2’), or an amount of any other greenhouse gas listed in Annex I to the CBAM Regulation adjusted to the equivalent global warming potential of CO2. • ‘Direct emissions’ means emissions from the production processes of goods, including emissions from the production of heating and cooling consumed during the production processes, regardless of the location of the production of the heating and cooling.

17 The only exception are goods from countries that either apply the EU ETS (currently Iceland, Norway and Liechtenstein) or have an ETS fully linked with the EU ETS (currently Switzerland). Producers in these countries therefore face the same carbon price as in the EU.

S (currently Iceland, Norway and Liechtenstein) or have an ETS fully linked with the EU ETS (currently Switzerland). Producers in these countries therefore face the same carbon price as in the EU.

22 • ‘Indirect emissions’ means emissions from the production of electricity, which is consumed during the production processes of goods, regardless of the location of the production of the consumed electricity. • ‘Embedded emissions’ means emissions released during the production of goods, including the embedded emissions of relevant precursor materials consumed in the production process. • ‘Relevant precursor material’ means a simple or complex good which has embedded emissions not equal to zero and which is identified as being within the system boundaries for the calculation of embedded emissions of a complex good. • ‘Simple goods’ means goods produced in a production process requiring exclusively input materials and fuels having zero embedded emissions. • ‘Complex goods’ means goods other than simple goods. • ‘Specific embedded emissions’ means the embedded emissions of one tonne of goods, expressed as tonnes of CO2e emissions per tonne of goods. • ‘Specific embedded emissions’ means the embedded emissions of one tonne of goods, expressed as tonnes of CO2e emissions per tonne of goods.

pressed as tonnes of CO2e emissions per tonne of goods. • ‘Specific embedded emissions’ means the embedded emissions of one tonne of goods, expressed as tonnes of CO2e emissions per tonne of goods. • ‘Production process’ means the parts of an installation in which chemical or physical processes are carried out to produce goods under an aggregated goods category defined in Table 1 of Section 2 of Annex II of the Implementing Regulation, and its specified system boundaries regarding inputs, outputs and corresponding emissions. • ‘Aggregated goods category’ is implicitly defined in the Implementing Regulation by listing the relevant aggregated goods categories and all the goods identified by their CN codes in Table 1 of Section 2 of Annex II. • ‘Production route’ means a specific technology used in a production process to produce goods under an aggregated goods category. One production process usually relates to one group of CBAM goods produced (the ‘aggregated goods categories’). However, in some case more than one production route exists for producing these goods.

4.3 Transitional period A summary of key elements of the transitional period is presented in Table 4-1. Table 4-1: Transitional period – key points Duration 1 October 2023 to 31 December 2025. MRV rules Implementing Regulation (EU) 2023/1773. Reporting of indirect emissions
Required for all CBAM goods.

: Transitional period – key points Duration 1 October 2023 to 31 December 2025. MRV rules Implementing Regulation (EU) 2023/1773. Reporting of indirect emissions
Required for all CBAM goods.

23 Default values for reporting of embedded emissions Global values
(except electricity). May be used for precursors of complex goods contributing up to 20% of the total for the complex good. Must be used for imports of electricity and for indirect emissions, unless certain criteria are met. Flexibility regarding MRV rules The use of rules from other (non-EU) carbon pricing or reporting schemes are allowed for operators of installations until the end of 2024, if they cover the same emissions and provide similar accuracy.
Importers may use other (estimation) methods until 31 July 2024. Frequency of reporting Quarterly (importers). Verification of reported data Not required.
Operators and importers should aim to report as accurately and completely as possible.
If verification has been undertaken this should be noted in the submission. Surrender of CBAM certificates Not required.

4.3.1 Key reporting roles and responsibilities The “reporting declarant”18 is the entity which is responsible for the reporting of embedded emissions of imported goods. In principle, the reporting declarant is the “Importer”. However, in practice there are different options depending on the person lodging the customs declaration.

edded emissions of imported goods. In principle, the reporting declarant is the “Importer”. However, in practice there are different options depending on the person lodging the customs declaration. Where different actors are involved in the importation process, it is important to remember that every tonne of imported good is the responsibility of exactly one reporting declarant, i.e. that it is neither reported twice nor omitted from reporting.
In line with the options provided under the Union Customs Code (UCC19), the reporting declarant can be either20: • The importer who lodges a customs declaration for release for free circulation of goods in its own name and on its own behalf;
• The person, holding an authorisation to lodge a customs declaration referred to in Article 182(1) of the UCC, who declares the importation of goods; or

18 The Implementing Regulation uses this term in order to cover both situations, either where an importer or its indirect customs representative are responsible for the CBAM reporting. 19 Regulation (EU) No 952/2013, consolidated version: http://data.europa.eu/eli/reg/2013/952/2022-12-12
20 Article 2(1) of the Implementing Regulation.

e are responsible for the CBAM reporting. 19 Regulation (EU) No 952/2013, consolidated version: http://data.europa.eu/eli/reg/2013/952/2022-12-12
20 Article 2(1) of the Implementing Regulation.

24 • The indirect customs representative, where the customs declaration is lodged by the indirect customs representative appointed in accordance with Article 18 of the UCC, when the importer is established outside the Union or where the indirect customs representative has agreed to the reporting obligations in accordance with Article 32 of the CBAM Regulation. The reporting declarant must provide a ‘CBAM report’ on a quarterly basis21, to the European Commission via the CBAM Transitional Registry, at the latest by the end of the month following the end of the quarter. This is to report the information listed in Annex I of the Implementing Regulation on the goods imported into the EU during that quarter. Note the specific requirements, including on the date of importation, in case of the so-called “inward processing” customs procedure (see section 4.3.5).
The operator of an installation producing CBAM goods outside the EU is the second key role for the functioning of the CBAM. Installation operators are the persons who have direct access to information on the emissions of their installations. They are therefore responsible for monitoring and reporting the embedded emissions of goods they have produced and are exporting to the EU.
Third-party verifiers will play an important role in the definitive period.

responsible for monitoring and reporting the embedded emissions of goods they have produced and are exporting to the EU.
Third-party verifiers will play an important role in the definitive period. However, during the transitional period, verification is a fully voluntary measure which operators of installations may choose as a means to improve their data quality, and to prepare for the requirements of the definitive period. Furthermore, the competent authority in the EU Member State where the reporting declarant is established plays an important role. It is in charge of enforcing the certain provisions of the CBAM Regulation, such as reviewing the CBAM reports to ensure that reporting declarants submit complete and correct quarterly CBAM reports, and to impose penalties in line with the Implementing Regulation, if necessary. The European Commission (in this document also “the Commission”) is responsible for running the CBAM Transitional Registry, assessing the overall implementation of the CBAM during the transitional period by checking the information contained in the quarterly CBAM reports, for further developing the legislation with a view to the definitive period, and for co-ordinating the competent authorities in the EU Member States. Furthermore, the European Commission provides a dedicated website for the CBAM, with further guidance documents, templates for reporting, training material, and the portal to the CBAM Transitional Registry (which will be further updated to become the CBAM Registry in the definitive period).

uidance documents, templates for reporting, training material, and the portal to the CBAM Transitional Registry (which will be further updated to become the CBAM Registry in the definitive period).

4.3.2 What needs to be monitored by you (as an operator) The first element is the monitoring of direct emissions of the installation. However, monitoring of an installation’s emissions is only the initial part of determining embedded emissions of a product. Whenever an installation produces several different products, the emissions must also be appropriately attributed to the individual products. Due to the specific rules for attributing emissions to goods, there is also a need to determine certain flows of heat (steam, hot water, etc.) to and from the installation, and between relevant

21 Article 35 to the CBAM Regulation

25 production processes. The same applies to so-called “waste gases” (e.g. blast furnace gas in the steel industry). Both heat and waste gases contribute to the direct emissions. You must also monitor and report to the reporting declarant(s) the quantities of specific input materials which themselves have embedded emissions (the so-called “relevant precursors”, which are themselves CBAM goods) used in the manufacturing process, and determine the embedded emissions of these precursor materials. Where you purchase precursors to produce other CBAM goods, you need to obtain data on the embedded emissions from the supplier of these precursors.

embedded emissions of these precursor materials. Where you purchase precursors to produce other CBAM goods, you need to obtain data on the embedded emissions from the supplier of these precursors.
Indirect emissions released from the generation of the electricity consumed during the production of all CBAM goods similarly must be monitored for the purposes of the CBAM22 and attributed to the goods produced. Again, emissions embedded in precursors must be included, where relevant. Note that only direct emissions are relevant for electricity imported into the EU as a good in its own right. The treatment of electricity as a CBAM good is discussed further in Section 7.6. Explanations of how to determine these embedded emissions and to define system boundaries are elaborated upon in Sections 5.2 and 5. Finally, you must communicate to the importer(s) the carbon price due in the production of the good within its own jurisdiction, if any. This includes the carbon price per tonne CO2e and the amount of free allocation or any other financial support, compensation or rebate received per tonne of the product relevant for the CBAM. Notably, in case of complex goods, the carbon costs due by the producers of precursor materials should also be taken into account.

4.3.3 Reporting periods for operators and importers The reporting period is the reference period for determining embedded emissions. Operators and importers have different reporting periods.

t.

4.3.3 Reporting periods for operators and importers The reporting period is the reference period for determining embedded emissions. Operators and importers have different reporting periods. Installation operators For you (as an operator), the default reporting period is twelve months to allow you to collect representative data that reflects an installation’s annual operations. The twelve-month reporting period may be either a: • Calendar year – which is the default option for reporting; or alternatively a • Fiscal year – if this can be justified on the basis that the data for a fiscal reporting year is more accurate, or to avoid incurring unreasonable cost; for example, where the financial year end coincides with an annual stock take of fuels and materials.

22 During the transitional period, indirect emissions of all CBAM goods are to be monitored and reported, including the embedded indirect emissions of precursors. However, in the definitive period, indirect emissions will be included only for certain products (the goods included in Annex II to the CBAM Regulation).

embedded indirect emissions of precursors. However, in the definitive period, indirect emissions will be included only for certain products (the goods included in Annex II to the CBAM Regulation).

26 A period of twelve months is considered representative as this reflects seasonal variations in an installation’s operations, as well as any periods of disruption to the process resulting from planned annual shutdowns (e.g. for maintenance) and start-ups. A full year also helps to mitigate any data gaps e.g. by taking meter reads on either side of any missing periodic data points.
However, you may also choose an alternative reporting period, of a least three months, if the installation participates in an eligible MRV system and the reporting period coincides with the requirements of that MRV system. For example:
• A mandatory carbon pricing scheme (an emission trading system or carbon tax, levy or fee) or GHG reporting scheme with a compliance obligation. In this case that scheme’s reporting period may be used, if it covers at least three months; or • Monitoring and reporting for the purpose of another monitoring scheme (e.g. a GHG emission reduction project, which includes verification by an accredited verifier. In this case the reporting period of the applicable MRV rules may be used if it is at least three months. In all the above cases, the direct and indirect embedded emissions of goods should be calculated as the average of the reporting period chosen.

RV rules may be used if it is at least three months. In all the above cases, the direct and indirect embedded emissions of goods should be calculated as the average of the reporting period chosen. In order to allow representative data to be reported from the start of the transitional period, operators should aim to share a full year of data for 2023 in January 2024, with importers, for the first quarterly report. In order to do this, you should: • Collect emissions data and activity data from the start of the transitional period, for as much of 2023 as is available. For the period before actual emissions monitoring starts23, you should make estimates based on best available data (e.g. by using production protocols, backward calculation based on known correlations between known data and the relevant emissions, etc.). • Start to collect data for the last quarter of 2023 in preparation for reporting a full year of data to importers, if possible, as early as possible at the start of January 2024. In light of the above, you should therefore start preparing your monitoring methodology as soon as possible, and aim to start actual monitoring as soon as possible after 1 October 2023. You should share your embedded emissions data with importers as soon as they are available after the end of each quarter.
Importers
During the transitional period, the reporting period for importers (“reporting declarants”) is quarterly, with reports due within one month.

e available after the end of each quarter.
Importers
During the transitional period, the reporting period for importers (“reporting declarants”) is quarterly, with reports due within one month. • The first quarterly report is for the period October to December 2023, with the report due to be submitted on the CBAM Transitional Registry by 31 January 2024.

23 This will be the most frequent case, except where an eligible MRV system is already in place.

27 • The last quarterly report is for the period October to December 2025, with the report due to be submitted on the CBAM Transitional Registry by 31 January 2026. The quarterly report should summarise the embedded emissions in goods imported during the previous quarter of the calendar year, splitting out direct and indirect emissions, as well as any carbon price due outside the EU. For deciding at what date a good was imported, the “release to the market” (i.e. the clearance by the customs authorities) is relevant. This is important in particular for goods put under the “inward processing” procedure (see section 4.3.5). As operators and importers have different reporting timelines, importers will need to use the latest embedded emissions data communicated to them by installation operators, for their quarterly CBAM reports.

ors and importers have different reporting timelines, importers will need to use the latest embedded emissions data communicated to them by installation operators, for their quarterly CBAM reports. For example, where an operator has a calendar year as their reporting period, an importer completing a quarterly CBAM report for any of Q1 to Q4 of 2025 would need to use the specific embedded emissions information for the good for calendar year 2024 for reporting purposes, as communicated to them by the operator. I.e. if the good was manufactured by an operator in December 2024 and was imported into the EU by an importer in January 2025, the importer’s Q1 CBAM report would use the specific embedded emissions for that good for calendar year 2024. If the 2024 data are not yet available by the end of January 2025, data on specific embedded emissions from 2023 could be used for the Q1 CBAM report. A difference would be where an operator has a compliance obligation under an eligible MRV system and the reporting period is shorter than a calendar year, but at least three months. For example, if the reporting period is three months, the importer may use the operator’s Q1 data in their Q2 CBAM report, and so on. Note that a CBAM report which has already been submitted may still be corrected24 until two months after the end of the reporting quarter. This may be the case, for example, when more accurate data on embedded emissions becomes available to the importer after the reporting deadline.

two months after the end of the reporting quarter. This may be the case, for example, when more accurate data on embedded emissions becomes available to the importer after the reporting deadline. Acknowledging the difficulty to set up MRV systems in time, the Implementing Regulation allows a longer period for corrections for the first two quarterly reports, which is until the deadline for the third quarterly report. This means that the reports due by 31 January and 30 April 2024 may be subsequently corrected until 31 July 2024.

4.3.4 Governance of the CBAM Figure 4-1: Overview of the reporting responsibilities in the transitional period of the CBAM.

24 Article 9 of the Implementing Regulation

28

For explanation of the numbers (relating to the workflow), please see main text below. As shown schematically in Figure 4-1, the governance system and workflows in the transitional period of the CBAM follow the steps below (paragraph numbering follows the red numbers in the figure):

1. The importer (reporting declarant) receives CBAM goods from various installations, possibly from different countries outside the EU.
2. For each import, the importer lodges the usual customs declaration. The customs authority of the relevant EU Member State checks and clears the import, as usual.
3. The customs authority (or the IT system used) informs the European Commission (using the CBAM Transitional Registry) of this import. This information can then be used to check the completeness and accuracy of quarterly CBAM reports.

used) informs the European Commission (using the CBAM Transitional Registry) of this import. This information can then be used to check the completeness and accuracy of quarterly CBAM reports. 4. The reporting declarant requests the relevant data on specific embedded emissions of the imported CBAM goods from the operators (in practice, this may involve intermediary traders, who would have to forward the request to the operator of the installation which produced the CBAM goods). The latter reply by sending the requested data, if possible, using the template provided for this purpose by the Commission. The data may be voluntarily verified by a third-party verifier. 5. The reporting declarant is then able to submit the quarterly CBAM report to the CBAM Transitional Registry. 6. An information exchange between the Commission and the competent authorities in the EU Member States takes place. The Commission informs (based on the customs data), which reporting declarants are expected to submit CBAM reports. Furthermore, the Commission can perform spot checks of actual reports and check their completeness with regards to the customs data. Where irregularities are identified, the Commission informs the competent authority of this. The competent authority will then follow up, usually by getting in contact with the importer and requesting rectification of the irregularity, or submission of the missing CBAM report. If the reporting declarant does not correct the mistakes, the competent authority can ultimately impose a (financial) penalty.

ication of the irregularity, or submission of the missing CBAM report. If the reporting declarant does not correct the mistakes, the competent authority can ultimately impose a (financial) penalty.
Importer (reporting declarant) European Commission CBAM Transitional Registry Graphic by Competent Authority Member States Non-EU countries 👮 Customs authority 2  Customs declaration 4 Import of goods 1 Installations in various countries Quarterly reports on embedded emissions 5 Information of import 3 Information exchange 6 Request data on embedded emissions Verification optional

29 7. (Not shown in the figure and not required by legislation, but in the own interest of the importer): to avoid similar problems in the future, the importer who received a penalty should inform the operator of the problem(s) identified by the Commission or the competent authority in order to address the issue(s) for future submissions.

4.3.5 Inward processing The Union Customs Code defines several special procedures. “Inward processing”25 means that a good is imported into the EU for processing with suspension of import duties and VAT. After the processing operations, the processed products or the original imported goods can then be either re-exported or released for free circulation in the EU. The latter would imply the obligation to pay import duty and taxes, as well as the application of commercial policy measures. This principle is extended to the CBAM, i.e.

ee circulation in the EU. The latter would imply the obligation to pay import duty and taxes, as well as the application of commercial policy measures. This principle is extended to the CBAM, i.e. in the case of re-export, no obligation for reporting under the CBAM arises for goods placed under inward processing. However, if the CBAM good is released to the EU market after inward processing, either as the original good or modified, a CBAM reporting obligation arises.
For goods actually imported after having been put under inward processing, the period under which they must be included in the CBAM report is determined by the date of release for free circulation within the EU. For this reason, in some cases goods may have to be reported under the CBAM although they were put under inward processing before 1 October 2023.
Article 6 of the Implementing Regulation provides some special reporting requirements for goods released for free circulation after inward processing for the purposes of the quarterly CBAM reports: • If the good was not modified during the inward processing, the quantities of the CBAM good released and the embedded emissions of those quantities are to be reported; the values are the same as for the good placed under inward processing.

nward processing, the quantities of the CBAM good released and the embedded emissions of those quantities are to be reported; the values are the same as for the good placed under inward processing. The report shall also include the country of origin and the installations where the goods were produced, if those are known; • If the good was modified, and the product of the inward processing no longer qualifies as a CBAM good, then the quantities of the original good and embedded emissions of those original quantities are still to be reported. The report shall also include the country of origin and the installations where the goods were produced, if those are known; • If the good was modified, and the product of the inward processing is a CBAM good, then the quantities and the embedded emissions of the good released to the market are to be reported. If the inward processing takes place in an EU ETS installation, the carbon price due is also to be reported. The report shall also include the country of origin and the installations where the goods were produced, if those are known;

25 See: https://taxation-customs.ec.europa.eu/customs-4/customs-procedures-import-and-export-0/what- importation/inward-processing_en

30 • Where the origin of the good used for inward processing cannot be defined, the embedded emissions shall be calculated on the basis of the weighted average embedded emissions of the totality of the goods placed under the inward processing procedure for the same aggregated good category.

issions shall be calculated on the basis of the weighted average embedded emissions of the totality of the goods placed under the inward processing procedure for the same aggregated good category.

31 5 CBAM GOODS AND PRODUCTION ROUTES This section provides guidance on industry sector specific rules that apply for the transitional period, for the cement, hydrogen, fertilizers, iron and steel and aluminium sectors. It deals with the specification of products covered by the CBAM and the relevant production routes. Section 6 explains the monitoring requirements of the CBAM which apply to all sectors. Thereafter, section 7 continues with sector-specific details, in particular by adding sector-specific monitoring and reporting requirements, and by providing elaborated examples for each sector.
While this guidance document is intended primarily for use by operators who produce tangible goods falling under the CBAM, section 7 contains also some information for importers of electricity as a good, under the CBAM (section 7.6).

5.1 Foreword to sector specific sections The following sections provide an overview of the different production routes for the goods listed in Annex I to the CBAM Regulation and provide sector specific guidance. Additional information on the production processes of the goods can also be found in the BREF26 reference documents for best available techniques (BAT). Diagrams used in the following sections.

e. Additional information on the production processes of the goods can also be found in the BREF26 reference documents for best available techniques (BAT). Diagrams used in the following sections. For the system boundary graphics presented in the sections below, the following conventions are applied:  Production processes (for which monitoring of the direct emissions would take place) are shown as rectangles; Materials are shown in boxes with rounded corners.  Optional processes (e.g. CCS/CCU) are shown in blue boxes. In particular, CCS/CCU would not be taken into account for developing default values, but where you (as an operator) use them, the related emissions or emission savings should be taken into account for determining actual embedded emissions.  Materials which are considered to have no embedded emissions are shown in red boxes, materials with embedded emissions (relevant precursor materials and final products, i.e. goods under the CBAM) in green boxes. Simple goods are shown in normal font, complex goods in bold font.  Input materials are presented without trying to be complete. This means that the focus is on materials which are relevant for demonstrating the differences between different production routes. As a consequence, less important input materials and in particular fuels are usually omitted in order to keep graphs simple.

26 BAT Reference document (BREF), BAT being “Best Available Techniques” as defined by the IED (Industrial Emissions Directive).

rticular fuels are usually omitted in order to keep graphs simple.

26 BAT Reference document (BREF), BAT being “Best Available Techniques” as defined by the IED (Industrial Emissions Directive). Relevant BREF documents are those for: the production of cement; for iron and steel production; large volume inorganic chemicals (which includes fertilizers); for Chlor- alkali; and for non-ferrous metals (which includes both aluminium and ferro-alloys). All BREFs can be found at the European IPPC Bureau, under https://eippcb.jrc.ec.europa.eu/reference.

32  Note: CCS/CCU processes are indicated in the following Figure 5-1 for the cement value chain as an example. To keep the graphics reasonably simple, this is not shown in other sectors, but is equally applicable. Electricity as input is shown only in cases where it is the main “precursor” of the process (i.e. in particular for electric arc furnaces and electrolysis processes).

5.2 Identifying CBAM goods This section explains how goods covered by the CBAM are defined and identified in the Regulation. The textbox below signposts the key sections for the definition and reporting of CBAM goods, relevant for the CBAM transitional period. Annex II, Section 2, Table 1 Mapping of CN codes to Aggregated goods categories. Annex III, Section F Rules for attributing emissions of an installation to goods.

5.2.1 Product specifications The Combined Nomenclature (CN)27,28 classification system defines the essential characteristics of goods and is used to identify those sector goods in scope for the CBAM.

.1 Product specifications The Combined Nomenclature (CN)27,28 classification system defines the essential characteristics of goods and is used to identify those sector goods in scope for the CBAM.
The CN ‘product specification’ classification system comprises two parts, firstly a numerical 4, 6 or 8-digit numbering system, reflecting different levels of product disaggregation, and secondly a short text description of each product category giving its essential characteristics. The first 6 digits are identical to the Harmonised System (HS) classification used in international trade and the remaining 2 digits are EU-specific additions. Both parts of the goods’ product specification are given in Annex I to the CBAM Regulation, but elsewhere in the text this may also be abridged to the numerical code only, for ease of reference. 5.2.2 Identifying goods in scope for the CBAM Regulation You (as an operator) should first establish which goods produced by your installation fall under the scope of the CBAM. To this end, you should: • Draw up a list of all goods and precursors at your installation, both produced at your installation and precursors obtained from outside the installation.

27 Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 256, 7.9.1987, p. 1). 28 For further information on the CN definitions for goods see the Eurostat RAMON database for 2022 at: https://ec.europa.eu/eurostat/ramon/nomenclatures/index.cfm?TargetUrl=LST_NOM_DTL&StrNom= CN_2022

or further information on the CN definitions for goods see the Eurostat RAMON database for 2022 at: https://ec.europa.eu/eurostat/ramon/nomenclatures/index.cfm?TargetUrl=LST_NOM_DTL&StrNom= CN_2022

33 Note that it is possible for the same goods category to be applicable to both the good produced and for the precursor used to produce that good. This is relevant for iron and steel, aluminium and fertilizer sector goods. • Check and compare the full range of goods produced against the product specifications given in Annex I to the CBAM Regulation. • From this comparison, establish which of the listed goods produced by the installation are within the scope of the CBAM.

5.3 Cement sector The textbox below signposts sector-specific sections in the Implementing Regulation, relevant for the CBAM transitional period.
• Annex II, Section 2, Table 1 Mapping of CN codes to aggregated goods categories. • Annex II, Section 3 Production routes, system boundaries, and relevant precursors, as specified in sub-sections: 3.2 – Calcined clay, 3.3 – Cement clinker, 3.4 – Cement and 3.5 – Aluminous cement.

5.3.1 Unit of production and embedded emissions for industry sector The quantity of declared cement goods imported into the EU should be expressed in metric tonnes. You should record the quantity of CBAM good(s) produced by the installation or production process(s), for the purposes of reporting.

goods imported into the EU should be expressed in metric tonnes. You should record the quantity of CBAM good(s) produced by the installation or production process(s), for the purposes of reporting. Industrial sector Cement Production unit of goods Tonnes (metric), reported separately for each type of CBAM good produced, by the installation or production process in the country of origin. Associated activities Producing cement clinkers and calcined clays, grinding and blending cement clinker to produce cement. Relevant greenhouse gas emissions
Carbon dioxide (CO2) Direct Emissions
Tonnes (metric) of CO2e
Indirect Emissions Quantity of electricity consumed (MWh), source and emissions factor used to calculate the indirect emissions in tonnes (metric) of CO2 or CO2e.
To be reported separately during transitional period. Unit for embedded emissions Tonnes CO2e emissions per tonne of good, reported separately for each type of CBAM good, by the installation or production process in the country of origin.

period. Unit for embedded emissions Tonnes CO2e emissions per tonne of good, reported separately for each type of CBAM good, by the installation or production process in the country of origin.

34 The cement sector has to account for both direct emissions and indirect emissions, in the transitional period. Indirect emissions are to be reported separately. Emissions should be reported in metric tonnes of CO2 equivalent (tCO2e) emissions, per tonne of good output. This figure should be calculated for the specific installation or production process in your country of origin. Note that a case study showing how direct and indirect specific embedded emissions (SEE) values are derived for the cement production process, and how the embedded emissions of imports into the EU are calculated, is given in section 7.1.3. The following sections set out how the system boundaries of cement sector goods should be defined and identify elements of the production processes that should be included for the purposes of monitoring and reporting.

5.3.2 Definition and explanation of goods covered The following Table 5-1 lists the relevant goods in scope for the CBAM transitional period in the cement industry sector. The aggregated goods category in the left hand column defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring.

l period in the cement industry sector. The aggregated goods category in the left hand column defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring. Table 5-1: CBAM goods in the cement sector
Aggregated goods category CN Code Description Calcined clay 2507 00 80 Other kaolinic clays Cement clinker 2523 10 00 Cement clinkers29 Cement 2523 21 00

2523 29 00 2523 90 00 White Portland cement, whether or not artificially coloured Other Portland cement Other hydraulic cements Aluminous cement 2523 30 00 Aluminous cement30 Source: The CBAM Regulation, Annex I; Implementing Regulation, Annex II. The aggregated goods categories listed in Table 5-1 include both finished cement goods and precursor goods (intermediate products) that are consumed in the production of cement. Only input materials listed as relevant precursors to the system boundaries of the production process as specified in the Implementing Regulation are to be considered. Table 5-2 lists the precursors by aggregated goods category and production route.

29 No distinction is made between different types of clinker, i.e. grey and white cement clinker are the same for the purposes of the CBAM. 30 Also referred to as ‘Calcium Aluminate Cement’.

29 No distinction is made between different types of clinker, i.e. grey and white cement clinker are the same for the purposes of the CBAM. 30 Also referred to as ‘Calcium Aluminate Cement’.

35 Table 5-2: Aggregated goods categories, their production routes and relevant precursors Aggregated Goods Category Relevant precursors Production route Calcined clay None Cement clinker None Cement Cement clinker; calcined clay (if used in the process). Aluminous cement None

Precursor goods relevant to the system boundary are ‘cement clinker31’ (CN code 2523 10 00), which includes both white clinker (used to make white cement) and grey clinker, and ‘calcined clay’ (CN code 2507 00 80)32, which is a clinker substitute and may be used to modify the properties of the cement produced. These precursors are defined as simple goods, as the raw material constituents and fuels (both fossil fuels and any alternative fuels) used in their manufacture are themselves considered to have zero embedded emissions. The finished cement goods listed in Table 5-1 comprise both white Portland cement, grey Portland cement, other hydraulic cements and aluminous cement. These goods are defined as complex goods (with the exception of aluminous cement) as they include the embedded emissions from precursor goods.

cement, other hydraulic cements and aluminous cement. These goods are defined as complex goods (with the exception of aluminous cement) as they include the embedded emissions from precursor goods. Other constituents used in cement manufacture, in particular granulated blast furnace slag, fly ash and natural pozzolana that are used in the manufacture of other hydraulic cement goods (including blended or ‘composite’ cements) are not considered to have any embedded emissions and are not in scope for the CBAM. Cement sector goods are produced by a number of different process routes, outlined below.

5.3.3 Definition and explanation of relevant production processes and routes
The system boundaries of precursors and cement goods are distinct and may, under certain conditions, be added together to include all processes directly or indirectly linked to the production processes for these goods, including input activities to the process and output activities from the process.
The relevant emissions that should be monitored for the cement sector are detailed in section 7.1.1.

31 No distinction is made between grey and white clinker, the operator should apply the relevant embodied emissions of the relevant clinker precursor used. 32 The CN code includes non-calcined clays too, which are not subject to the CBAM; in this case, the quantities of non-calcined clay imported are still reported, but with zero embedded emissions and without monitoring requirements for the producer.

h are not subject to the CBAM; in this case, the quantities of non-calcined clay imported are still reported, but with zero embedded emissions and without monitoring requirements for the producer.

36 5.3.3.1 Calcined clay production process Calcined clay may be used as a clinker substitute. Kaolinic clay that is calcined (metakaolin) can be added to cement in place of clinker in varying proportions in order to modify the properties of the cement mixture.
The Implementing Regulation (section 3 Annex II) defines the system boundaries for direct emissions monitoring of the calcined clay production route, as encompassing: “ – All processes directly or indirectly linked to the production processes, such as raw material preparation, mixing, drying, and calcining, and flue gas cleaning.
– CO2 emissions from the combustion of fuels as well as from raw materials, where relevant.” There are no relevant precursors for this production process. Indirect emissions that result from electricity consumed by the production process should also be monitored. Note that other clays falling under CN code 2507 00 80 which are not calcined are assigned embedded emissions of zero.

5.3.3.2 Cement clinker production process Cement clinker is produced in clinker plants (kilns) by the thermal decomposition of calcium carbonate to form calcium oxide, followed by the clinkering process in which the calcium oxide reacts at high temperatures with silica, alumina and ferrous oxide to form a clinker.

tion of calcium carbonate to form calcium oxide, followed by the clinkering process in which the calcium oxide reacts at high temperatures with silica, alumina and ferrous oxide to form a clinker. Grey and white clinkers may be produced depending on the temperature of the process and purity of raw materials.
emissions monitoring of the cement clinker production route, as encompassing:
“ – Calcination of limestone and other carbonates in the raw materials, conventional fossil kiln fuels, alternative fossil-based kiln fuels and raw materials, biomass kiln fuels (such as waste-derived fuels), non-kiln fuels, non-carbonate carbon content of limestone and shales, or alternative raw materials such as fly ash used in the raw meal in the kiln and raw materials used for flue gas scrubbing.” There are no relevant precursors for this production process. Indirect emissions that result In line with the above definition of system boundaries, the following production steps may be regarded as being within the system boundaries of cement clinker installations: • Raw material preparation – grinding, milling, homogenisation.
• Fuel storage and preparation – for conventional and waste derived fuels.
• Clinker production (‘clinker burning’) – all steps for the integrated kiln system including preheating, kiln processing and clinker cooling.

paration – for conventional and waste derived fuels.
• Clinker production (‘clinker burning’) – all steps for the integrated kiln system including preheating, kiln processing and clinker cooling.

37 • Intermediate storage – storage of cement clinker under cover before export off site or cement grinding. • Emissions control – for treating releases to air, water or ground.
The methods for calculating process emissions from carbonate materials on either an input or output basis are given in section 6.5.1.1 of this guidance document. An additional rule on the treatment of cement kiln dust (CKD) is given section 7.1.1.2, and a case study showing how the specific embedded emissions of cement clinker are derived is given in section 7.1.2.

5.3.3.3 Cement production process Cement (apart from aluminous cement) is defined as a complex good as it is produced from relevant precursors cement clinker and possibly calcined clay.
Cement is produced in a grinding plant (cement mill), which may be located at the same installation that produced the cement clinker, or at a separate standalone plant. Cement clinker is ground and blended with certain other constituents to produce the finished cement product. Depending on the mix of different constituents this may be Portland cement, blended cement (containing a mix of Portland cement and other hydraulic constituents) or other hydraulic cements.

roduct. Depending on the mix of different constituents this may be Portland cement, blended cement (containing a mix of Portland cement and other hydraulic constituents) or other hydraulic cements. emissions monitoring of the cement production route, as encompassing:
“ – All CO2 emissions from fuel combustion, where relevant for drying of materials.” Relevant precursors are cement clinker and calcined clay (if used in the process). Indirect emissions that result from electricity consumed by the production process should also be monitored. In line with the above definition of system boundaries, the following production steps may be regarded as being within the system boundaries of cement installations: • Material preparation – materials (cement clinker, calcined clay and mineral additives) handling and pre-treatment e.g. preheating and drying mineral additives. • Cement production – all steps, including crushing, grinding, further milling and separation by particle size. • Cement storage, packaging and dispatch. Figure 5-1 following shows how the cement clinker and cement production processes relate to each other.

further milling and separation by particle size. • Cement storage, packaging and dispatch. Figure 5-1 following shows how the cement clinker and cement production processes relate to each other.

38 Figure 5-1: System boundaries of cement clinker and cement production processes. Cement clinker and cement production processes

Direct emissions of the cement clinker production process result from the combustion of both kiln and non-kiln fuels and from raw materials used in the process such as limestone. Direct emissions may also result from fuels used for drying materials used to make the final cement product. A variation on the clinker production process may be with permanent geological storage i.e. carbon capture and sequestration (CCS). Note that no distinction is made between grey and white cement clinker used in the production of cement goods.

5.3.3.4 Aluminous cement production process Aluminous cement is regarded as a simple good as it is produced directly from aluminous clinker by a continuous production process, and is ground without the addition of further additives. emissions monitoring of the aluminous cement production route, as encompassing:
Alternative raw materials Limestone, clays, etc Fuels and alternative fuels CCS / CCU processes Clinker Clinker production CO2 Emissions Calcined lime, dolime, magnesia System boundaries: embedded emissions of clinker (Portland) Cement Gypsum Other constituents Clinker Cement grinding CO2 Emissions System boundaries: embedded emissions of (Portland) cement Calcined clays

undaries: embedded emissions of clinker (Portland) Cement Gypsum Other constituents Clinker Cement grinding CO2 Emissions System boundaries: embedded emissions of (Portland) cement Calcined clays

39 “ – All CO2 emissions from fuel combustion directly or indirectly linked to the process. – Process emissions from carbonates in raw materials, if applicable, and flue gas cleaning.” There are no relevant precursors for this production process. Indirect emissions that result In line with the above definition of systems boundaries, the integrated production of aluminous cement includes both clinkering and cement grinding production steps, from raw material preparation through to emissions control. Figure 5-2: System boundaries of the aluminous cement production process Aluminous cement production process

Note that alumina (produced from bauxite) is treated as a raw material and has zero embedded emissions.

5.4 Chemicals sector – Hydrogen • Annex II, Section 2, Table 1 Mapping of CN codes to aggregated goods categories. • Annex II, Section 3 Production routes, system boundaries, and relevant precursors, as specified in sub-section: 3.6 – Hydrogen, including additional rules for the attribution of emissions in sub- section 3.6.2.2 Electrolysis of water and sub-section 3.6.2.3 Chlor-Alkali electrolysis.

pecified in sub-section: 3.6 – Hydrogen, including additional rules for the attribution of emissions in sub- section 3.6.2.2 Electrolysis of water and sub-section 3.6.2.3 Chlor-Alkali electrolysis.

40 5.4.1 Unit of production and embedded emissions The quantity of hydrogen imported into the EU should be expressed in metric tonnes (as pure hydrogen). As an operator, you should record the quantity of hydrogen produced by installation or production process, for the purposes of reporting. Industrial sector Chemicals – Hydrogen Production unit of goods Tonnes (metric) pure hydrogen, reported separately by installation or production process in the country of origin Associated activities Producing hydrogen by steam reforming or partial oxidation of hydrocarbons, water electrolysis, Chlor-Alkali electrolysis or production of sodium chlorate. Relevant greenhouse gases Carbon dioxide (CO2) Direct Emissions
Tonnes (metric) of CO2e
Indirect Emissions Quantity of electricity consumed (MWh), source and emissions factor used to calculate the indirect emissions in Tonnes (metric) of CO2 or CO2e.
To be reported separately during transitional period. Unit for embedded emissions Tonnes CO2e emissions per tonne of good, reported separately for each type of good, by installation in the country of origin

The hydrogen sector has to account for both direct emissions and indirect emissions in the transitional period. Indirect emissions are to be reported separately33.

lation in the country of origin

The hydrogen sector has to account for both direct emissions and indirect emissions in the transitional period. Indirect emissions are to be reported separately33. Emissions should be reported in metric tonnes CO2 equivalent (tCO2e) emissions per tonne of output. This figure should be calculated for the specific installation or production process in your country of origin. Note that several case studies showing how direct and indirect specific embedded emissions (SEE) values are derived, for hydrogen produced by the steam reforming and Chlor-Alkali production routes, and how the embedded emissions of imports into the EU are calculated, is given in section 7.5.2. The following sections set out how the system boundaries of different hydrogen production routes should be defined, and identify elements of the production process that should be included for the purposes of monitoring and reporting. 5.4.2 Definition and explanation of sector CBAM goods covered The following Table 5-3 lists the relevant goods in scope for the CBAM transitional period in the hydrogen industry sector. The aggregated goods category in the left hand column

33 Note that for this sector indirect emissions are only reported during the transitional period (and not during the definitive period).

r. The aggregated goods category in the left hand column

33 Note that for this sector indirect emissions are only reported during the transitional period (and not during the definitive period).

41 defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring. Table 5-3: CBAM goods in the chemicals sector – hydrogen Aggregated goods category Product CN Code Description Hydrogen 2804 10 000 Hydrogen Source: The CBAM Regulation, Annex I; Implementing Regulation, Annex II. Hydrogen is defined as simple good, as the raw materials and fuels used in its manufacture are considered to have zero embedded emissions. There are no relevant precursors for hydrogen. However, hydrogen may itself be a relevant precursor for other processes, where it is separately produced for use as a chemical feedstock to produce ammonia, or to produce pig iron or direct reduced iron (DRI). The production of hydrogen is by a number of different process routes, outlined below. 5.4.3 Definition and explanation of relevant production processes and routes Hydrogen can be produced from various feedstocks including plastic wastes, but currently it is derived mostly from fossil fuels. Hydrogen production units are typically integrated into larger industrial processes e.g. as for an installation producing ammonia. The following diagram illustrates the variety of different routes by which hydrogen may be produced.

ally integrated into larger industrial processes e.g. as for an installation producing ammonia. The following diagram illustrates the variety of different routes by which hydrogen may be produced. Figure 5-3: System boundaries of different production routes for hydrogen – overview
Production routes for hydrogen – overview

The system boundaries for direct emissions monitoring for hydrogen include all processes directly or indirectly linked to hydrogen production, and all fuels used in the production of hydrogen. The relevant emissions that should be monitored for the hydrogen sector are detailed in section 7.5.1.1.

42 Note that other production routes for hydrogen are possible, e.g. hydrogen produced as a by-product from the production of ethylene, but that only the production of pure hydrogen or mixtures of hydrogen with nitrogen usable in ammonia production shall be considered. Not covered are the production of synthesis gas or of hydrogen within refineries or organic chemical installations, where the hydrogen is exclusively used within those plants, and not used for the production of goods under the CBAM Regulation. 5.4.3.1 Hydrogen – Steam reforming production route The natural gas feedstock for this process is converted to carbon dioxide and hydrogen through primary and secondary steam reformation. The overall reaction is highly endothermic and process heat is supplied by the combustion of natural gas or other gaseous fuel. Carbon monoxide produced is almost all converted to carbon dioxide by the process.

eaction is highly endothermic and process heat is supplied by the combustion of natural gas or other gaseous fuel. Carbon monoxide produced is almost all converted to carbon dioxide by the process.
emissions monitoring for the steam reforming (or partial oxidation) production routes, as encompassing:
“ – All processes directly or indirectly linked to hydrogen production, and flue gas cleaning. – All fuels used in the hydrogen production process irrespective of their energetic or non-energetic use, and fuels used for other combustion processes including for the purpose of producing hot water or steam.” There are no relevant precursors for this production process. Indirect emissions that result In line with the above definition of systems boundaries, the following production steps may be regarded as being within the system boundaries of a hydrogen (steam reformation) installation: • Raw material pre-treatment – natural gas desulphurisation • Steam reformation – primary and secondary, H2/CO generation • Shift conversion – carbon monoxide to carbon dioxide and hydrogen • Separation & purification – CO2 removal, separation processes as present including cryogenic, adsorption, absorption, membrane, hydrogenation (methanation) • Emissions control – for treating releases to air, water or ground The stream of carbon dioxide produced by the steam reforming process is very pure and is separated and captured for further use, e.g. for urea production. A variation on this process may be with permanent geological storage i.e.

oduced by the steam reforming process is very pure and is separated and captured for further use, e.g. for urea production. A variation on this process may be with permanent geological storage i.e. carbon capture and sequestration (CCS).
A worked example for the calculation of specific embedded emissions for hydrogen produced by the steam reforming production route is given in section 7.5.2.1.

43 5.4.3.2 Hydrogen – Partial oxidation of hydrocarbons (gasification) production route Hydrogen is produced by the partial oxidation (gasification) of hydrocarbons, typically from heavy feedstocks such as residual heavy oils or coal and even waste plastics. Carbon monoxide produced by the process is almost all converted to carbon dioxide. emissions monitoring for the partial oxidation (or steam reforming) production routes, as encompassing:
“ – All processes directly or indirectly linked to hydrogen production, and flue gas cleaning. – All fuels used in the hydrogen production process irrespective of their energetic or non-energetic use, and fuels used for other combustion processes including for the purpose of producing hot water or steam.” There are no relevant precursors for this production process. Indirect emissions that result may be regarded as being within the system boundaries of a hydrogen (partial oxidation) installation: • Air separation unit – to produce the oxygen for the partial oxidation step. • Gasification – H2/CO generation. • Synthesis gas clean up – soot and sulphur removal. • Shift conversion – carbon monoxide to carbon dioxide.

o produce the oxygen for the partial oxidation step. • Gasification – H2/CO generation. • Synthesis gas clean up – soot and sulphur removal. • Shift conversion – carbon monoxide to carbon dioxide. • Separation & purification – CO2 removal, separation processes including cryogenic separation (liquid nitrogen). The stream of carbon dioxide produced from the process is of high purity and may be separated and captured for further use.
5.4.3.3 Hydrogen – Electrolysis of water production route Water electrolysis is a standalone, non-integrated production process that produces a very pure stream of hydrogen gas. Direct emissions from this process are minimal. Indirect emissions result from electricity consumed by the process. Hydrogen produced by renewable electricity may become relevant in the future. emissions monitoring the electrolysis of water production route, as encompassing if relevant:
“ – All emissions from fuel use directly or indirectly linked to the hydrogen production process and from flue gas cleaning.”

electrolysis of water production route, as encompassing if relevant:
“ – All emissions from fuel use directly or indirectly linked to the hydrogen production process and from flue gas cleaning.”

44 There are no relevant precursors for this production process.
Indirect emissions that result from electricity consumed by the production process also need to be monitored. Note that where the produced hydrogen has been certified to comply with Commission Delegated Regulations (EU) 2023/1184 (1), an emission factor of zero for the electricity may be used. In all other cases, the rules on indirect embedded emissions (Section D of Annex III) shall apply). An additional rule giving the method for attributing emissions to hydrogen produced by the electrolysis of water is provided in section 7.5.1.2. 5.4.3.4 Hydrogen – Chlor-alkali electrolysis (and production of chlorates) production routes Hydrogen is produced as a by-product of the electrolysis of brine, alongside the simultaneous production of chlorine and sodium hydroxide. There are three basic chlor- alkali process techniques: mercury cell, diaphragm cell and the membrane cell. All three cell techniques produce hydrogen, which is formed at the cell cathode and which leaves the cell at very high purity. The hydrogen gas produced is cooled, dried and purified to remove water vapour, and other impurities, which may in some cases include oxygen, and is then compressed and stored or exported off site.

The hydrogen gas produced is cooled, dried and purified to remove water vapour, and other impurities, which may in some cases include oxygen, and is then compressed and stored or exported off site. emissions monitoring for the chlor-alkali and production of chlorates production routes, as encompassing if relevant:
“ – All emissions from fuel use directly or indirectly linked to the hydrogen production process and from flue gas cleaning.”
There are no relevant precursors for this production process.
Indirect emissions that result from electricity consumed by the production process also need to be monitored. Note that where the produced hydrogen has been certified to comply with Commission Delegated Regulations (EU) 2023/1184 (1), an emission factor of zero for the electricity may be used. In all other cases, the rules on indirect embedded emissions (Section D of Annex III) shall apply). may be regarded as being within the system boundaries of a hydrogen (chlor-alkali) installation: • Electrolysis of brine – brine preparation, electrolysis, generation of hydrogen as a by-product and collection. • Gas cooling, drying and purification – removal of water vapour, sodium hydroxide, salt, chlorine and oxygen from hydrogen gas. An additional rule for the method for attributing emissions to hydrogen produced by the chlor-alkali process is provided in section 7.5.1.2 and a worked example is given in section 7.5.2.2.

gas. An additional rule for the method for attributing emissions to hydrogen produced by the chlor-alkali process is provided in section 7.5.1.2 and a worked example is given in section 7.5.2.2.

45 5.5 Fertilizers sector • Annex II Section 2, Table 1 Mapping of CN codes to aggregated goods categories. • Annex II: Section 3 Production routes, system boundaries, and relevant precursors, as specified in sub-sections: 3.7 – Ammonia; 3.8 – Nitric acid; 3.9 – Urea; 3.10 – Mixed fertilizers.

5.5.1 Unit of production and embedded emissions The quantity of declared nitrogen containing fertilizer sector goods imported into the EU should be expressed in metric tonnes. As an operator, you should record the quantity of CBAM goods produced by installation or production process, for the purposes of reporting. Industrial sector Fertilizers Production unit of goods Tonnes (metric)34, reported separately for each type of sector goods, by installation or production process in the country of origin Associated activities Producing chemical precursors for nitrogenous fertilizer production, producing nitrogenous fertilizers by physical mixing or chemical reaction, and processing into their final form. Relevant greenhouse gas emissions
Carbon dioxide (CO2) and nitrous oxide (N2O) Direct Emissions
Tonnes (metric) of CO2e
Indirect emissions Quantity of electricity consumed (MWh), source and emissions factor used to calculate the indirect emissions in Tonnes (metric) of CO2 or CO2e.
To be reported separately during transitional period.

tity of electricity consumed (MWh), source and emissions factor used to calculate the indirect emissions in Tonnes (metric) of CO2 or CO2e.
To be reported separately during transitional period. Unit for embedded emissions Tonnes CO2e emissions per tonne of goods, reported separately for each type of goods, by installation in the country of origin

The fertilizer industry sector has to account for both direct emissions and indirect emissions in the transitional period. Indirect emissions are to be reported separately.

34 For certain goods, the imported quantities need to be converted to standardised tonnes that are subsequently used for calculating the CBAM obligation. For example, for nitric acid, hydrous solutions of ammonia and nitrogen-containing fertilizers, there will be a need to explicitly state the reference concentration / nitrogen content (and form of nitrogen).

46 Emissions should be reported in metric tonnes CO2 equivalent (tCO2e) emissions per tonne of output. This figure should be calculated for the specific installation or production process in your country of origin. Note that a case study showing how direct and indirect specific embedded emissions (SEE) values are derived for the mixed fertilizer production process, and how the embedded emissions of imports into the EU are calculated, is given in section 7.3.2.

ct specific embedded emissions (SEE) values are derived for the mixed fertilizer production process, and how the embedded emissions of imports into the EU are calculated, is given in section 7.3.2. The following sections set out how the system boundaries of fertilizer sector goods should be defined, and identify elements of the production process that should be included for the purposes of monitoring and reporting. 5.5.2 Definition and explanation of sector CBAM goods covered The following Table 5-4 lists the relevant goods in scope for the CBAM transitional period in the fertilizer industry sector. The aggregated goods category in the left hand column defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring. Table 5-4: CBAM goods in the fertilizer sector Aggregated goods category Product CN Code Description Nitric acid 2808 00 00 Nitric acid; sulphonitric acids Urea 3102 10 Urea, whether or not in aqueous solution Ammonia 2814 Ammonia, anhydrous or in aqueous solution Mixed fertilizers 2834 21 00, 3102, 3105

• Except 3102 10 (Urea) and 3105 60 00 2834 21 00 – Nitrates of potassium 3102 – Mineral or chemical fertilizers, nitrogenous
• Except 3102 10 (Urea) 3105 – Mineral or chemical fertilizers containing two or three of the fertilising elements nitrogen, phosphorus, and potassium; other fertilizers
• Except: 3105 60 00 – Mineral or chemical fertilizers containing the two fertilising elements phosphorus and potassium35 Source: The CBAM Regulation, Annex I;

and potassium; other fertilizers

• Except: 3105 60 00 – Mineral or chemical fertilizers containing the two fertilising elements phosphorus and potassium35 Source: The CBAM Regulation, Annex I; Implementing Regulation, Annex II.

35 Only nitrogen (N) containing fertilizers have significant embedded emissions, therefore their precursors are included in the CBAM.

47 The aggregated goods categories listed in Table 5-4 include both the finished nitrogenous fertilizer goods and chemical precursor goods (intermediate products) that are consumed in the production of fertilizer. Only input materials listed as relevant precursors to the system boundaries of the production process as specified in the Implementing Regulation, that are produced for use in chemical fertilizer production, are to be considered36. Table 5-5 below lists the possible precursors by aggregated goods category and production route.
Table 5-5: Aggregated goods categories, their production routes and possibly relevant precursors Aggregated Goods Category Relevant precursors Production route Ammonia Hydrogen, if separately produced for use in the process37. Haber Bosch with steam reforming Haber Bosch with gasification Nitric Acid Ammonia (as 100% ammonia). Urea Ammonia (as 100% ammonia). Mixed fertilizer If used in the process: ammonia (as 100% ammonia), nitric acid (as 100% nitric acid), urea, mixed fertilizers (in particular salts containing ammonium or nitrate).

For the production of mixed fertilizer, not all precursors will apply in every case.

ric acid (as 100% nitric acid), urea, mixed fertilizers (in particular salts containing ammonium or nitrate).

For the production of mixed fertilizer, not all precursors will apply in every case. Note in particular that in some instances an aggregated goods category (mixed fertilizer itself) may be used as a precursor for its own category, depending on the final formulation of the mixed fertilizer product required. The final nitrogenous chemical fertilizer goods produced from the relevant precursors (in bulk in integrated plants) are defined as complex goods as they include the embedded emissions from relevant precursor goods.
The production of fertilizer sector goods is by a number of different process routes, outlined below. 5.5.3 Definition and explanation of relevant production processes and routes The system boundaries of chemical precursors and fertilizers are distinct and may, under certain conditions, be added together to include all processes directly or indirectly linked

36 Around 80% of all ammonia production is used as a chemical precursor for fertilizer production and circa 97% of nitrogen fertilizers are derived from ammonia. 37 Where hydrogen from other production routes is added to the process, it shall be treated as a precursor with its own embedded emissions.

a 97% of nitrogen fertilizers are derived from ammonia. 37 Where hydrogen from other production routes is added to the process, it shall be treated as a precursor with its own embedded emissions.

48 to the production processes for these goods, including input activities to the process, and output activities from the process. The following Figure 5-4 provides an overview of the different processes and process routes for the production of nitrogenous fertilizer and its relevant precursors. Figure 5-4: System boundaries and value chain for the production of nitrogenous fertilizer and its precursors – overview Production of nitrogenous fertilizer and its precursors – overview

Urea is used as a precursor in mixed fertilizer production but may also be used as a convenient fertilizer on its own due to its high nitrogen content. Mixed fertilizers comprise all kinds of nitrogen (N) containing fertilizers, including ammonium nitrate, calcium ammonium nitrate, ammonium sulphate, ammonium phosphates, urea ammonium nitrate solutions, as well as nitrogen-phosphorus (NP), nitrogen-potassium (NK) and nitrogen-phosphorus-potassium (NPK) fertilizers. The relevant emissions that should be monitored for the fertilizers sector are detailed in section 7.3.1.1. 5.5.3.1 Ammonia – Haber-Bosch with steam reforming production route Ammonia is synthesised from nitrogen and hydrogen via the Haber-Bosch process. Hydrogen for the process is obtained in this production route by steam reforming natural gas (or biogas) whilst nitrogen is obtained from the air.

nitrogen and hydrogen via the Haber-Bosch process. Hydrogen for the process is obtained in this production route by steam reforming natural gas (or biogas) whilst nitrogen is obtained from the air. The overall reaction is highly endothermic and process heat is supplied by the combustion of natural gas or other gaseous fuel. Any carbon monoxide produced is almost all converted to carbon dioxide. emissions monitoring for the Haber-Bosch process with steam reforming production route, as encompassing:
“ – All fuels directly or indirectly linked to ammonia production, and materials used for flue gas cleaning.
– All fuels shall be monitored, irrespective of whether used as energetic or non- energetic input.
Ammonia production (coal) Ammonia (route via separate H2) Nitric acid production Urea production Mixed fertilizer production Ammonia Nitric Acid Urea Other materials incl. P,K compounds Mixed fertilizers Mixing / granulation Ammonia production (gas) Nitric Acid Ammonia Ostwald process Ammonia Hydrogen (various routes) innovative processes Ammonia CO2 Urea Urea production Ammonia Natural gas Haber-Bosch process Steam reforming Ammonia Coal Haber-Bosch process Gasification

ess Ammonia Hydrogen (various routes) innovative processes Ammonia CO2 Urea Urea production Ammonia Natural gas Haber-Bosch process Steam reforming Ammonia Coal Haber-Bosch process Gasification

49 – Where biogas is used, the provisions of Section B.3.3 of Annex III shall be applied.
– Where hydrogen from other production routes is added to the process, it shall be treated as a precursor with its own embedded emissions.” A relevant precursor is separately produced hydrogen, if used in the process. Indirect emissions that result from electricity consumed by the production process should also be monitored. In line with the above definition of system boundaries, the following production steps may be regarded as being within the system boundaries of the Haber-Bosch with steam reforming process:
• Production of hydrogen by steam reforming natural gas or biogas38. • Synthesis of ammonia – from hydrogen and nitrogen, at high temperature and pressure in the presence of a catalyst; ammonia condensation, purification and storage (if applicable). The stream of carbon dioxide from the production of ammonia is of high purity and can be separated, captured and transferred elsewhere for other uses e.g. for urea production. Note that the ammonia produced is reported as 100% ammonia, whether in hydrous or anhydrous form. 5.5.3.2 Ammonia – Haber-Bosch with gasification production route With this production route, hydrogen is obtained by the gasification of hydrocarbons, typically from heavy feedstocks such as coal, heavy refinery fuels or other fossil feedstock.

production route With this production route, hydrogen is obtained by the gasification of hydrocarbons, typically from heavy feedstocks such as coal, heavy refinery fuels or other fossil feedstock. A synthesis gas containing hydrogen is produced, which has to be purified before it can be used for the next production step. Ammonia is then synthesised from the hydrogen produced and from nitrogen obtained from the air, at high temperature and pressure in the presence of a catalyst. Any carbon monoxide produced is almost all converted to carbon dioxide. emissions monitoring for the Haber-Bosch process with gasification production route, as encompassing:
“ – All fuels directly or indirectly linked to ammonia production, and materials used for flue gas cleaning. – Each fuel input shall be monitored as one fuel stream, irrespective of whether it is used as energetic or non-energetic input.
– Where hydrogen from other production routes is added to the process, it shall be treated as a precursor with its own embedded emissions.”

38 For process steps see hydrogen sector section 5.4.3.1 above.

drogen from other production routes is added to the process, it shall be treated as a precursor with its own embedded emissions.”

38 For process steps see hydrogen sector section 5.4.3.1 above.

50 A relevant precursor is separately produced hydrogen, if used in the process. Indirect emissions that result from electricity consumed by the production process should also be monitored. In line with the above definition of system boundaries, the following production steps may be regarded as being within the system boundaries of the Haber-Bosch with gasification process:
• Production of hydrogen by gasification (partial oxidation)39. • Synthesis of ammonia – from hydrogen and nitrogen, at high temperature and pressure in the presence of a catalyst; ammonia condensation, purification and storage (if applicable). Note that the ammonia produced is reported as 100% ammonia, whether in hydrous or anhydrous form. 5.5.3.3 Nitric acid (and sulphonitric acids) production process Nitric acid is mostly produced via the oxidation of ammonia by Ostwald process. Ammonia is first oxidised in the presence of a catalyst to form nitrogen oxide, which is then further oxidised to nitrogen dioxide, followed by absorption in water in an absorption tower to form nitric acid. The reaction is exothermic and heat and power may be recovered to the process. emissions monitoring for the nitric acid production route, as encompassing:
“ – CO2 from all fuels directly or indirectly linked to nitric acid production, and materials used for flue gas cleaning.

missions monitoring for the nitric acid production route, as encompassing:
“ – CO2 from all fuels directly or indirectly linked to nitric acid production, and materials used for flue gas cleaning. – N2O emissions from all sources emitting N2O from the production process, including unabated and abated emissions. Any N2O emissions from the combustion of fuels are excluded from monitoring.” A relevant precursor is ammonia (as 100% ammonia). Indirect emissions that result from electricity consumed by the production process should also be monitored. may be regarded as being within the system boundaries of the nitric acid process production: • Raw material preparation – evaporation and filtration of ammonia and process air. • Oxidation of ammonia – to nitrogen oxide, all process steps. • Further oxidation and absorption – to nitrogen dioxide and absorption in water to form nitric acid, all process steps.

39 For process steps see hydrogen sector section 5.4.3.2 above.

steps. • Further oxidation and absorption – to nitrogen dioxide and absorption in water to form nitric acid, all process steps.

39 For process steps see hydrogen sector section 5.4.3.2 above.

51 Note that nitric acid produced is reported as 100% nitric acid. 5.5.3.4 Urea production process Urea is synthesised by reacting ammonia and carbon dioxide together at high pressure, to form ammonium carbamate, which is then dehydrated to form urea.
emissions monitoring for the urea production route, as encompassing:
“ – CO2 from all fuels directly or indirectly linked to urea production, and materials used for flue gas cleaning. – Where CO2 is received from another installation as process input, the CO2 received and not bound in urea shall be considered an emission, if not already counted as emission of the installation where the CO2 was produced, under an eligible monitoring, reporting and verification system.” A relevant precursor is ammonia (as 100% ammonia). Indirect emissions that result from electricity consumed by the production process should also be monitored. may be regarded as being within the system boundaries of the urea production process: • Raw material preparation – evaporation and filtration of ammonia, CO2. • Production of urea – all process steps, from synthesis to particle formation. The ammonia and CO2 consumed by this production process are usually delivered from other production processes on the same site.

on of urea – all process steps, from synthesis to particle formation. The ammonia and CO2 consumed by this production process are usually delivered from other production processes on the same site.
5.5.3.5 Mixed fertilizers production process A wide range of operations are included in the production of all kinds of nitrogen containing mixed fertilizers (especially ammonium salts and NP, NK and NPK), such as mixing, neutralisation40, particle formation (such as by granulation or prilling), irrespective of whether only physical mixing or chemical reactions take place. emissions monitoring for the mixed fertilizer production route, as encompassing:
“ – CO2 from all fuels directly or indirectly linked to fertilizer production, such as fuels used in driers and for heating input materials, and materials used for flue gas cleaning.” Relevant precursors (if used in the process) are: ammonia (as 100% ammonia); nitric Acid (as 100% nitric acid); urea; mixed fertilizers (in particular salts containing ammonium or

40 Nitrogen containing chemical fertilizers are produced by the neutralisation of an acid with ammonia to form the corresponding ammonium salt. Fertilizers produced in this way include ammonium nitrate, calcium ammonium nitrate, ammonium sulphate, ammonium phosphates, urea ammonium nitrate.

ammonia to form the corresponding ammonium salt. Fertilizers produced in this way include ammonium nitrate, calcium ammonium nitrate, ammonium sulphate, ammonium phosphates, urea ammonium nitrate.

52 nitrate). Indirect emissions that result from electricity consumed by the production process should also be monitored.
may be regarded as being within the system boundaries of the mixed fertilizer production process: • Raw material preparation. • Production of mixed fertilizer – all process steps. A case study showing how direct and indirect specific embedded emissions (SEE) values are derived for mixed fertilizer production process, and how the embedded emissions of imports into the EU are calculated, is given in section 7.3.2.

5.6 Iron and Steel sector • Annex II, Section 2, Table 1 Mapping of CN codes to aggregated goods categories. • Annex II, Section 3 Production routes, system boundaries, and relevant precursors, as specified in sub-sections: 3.11 – Sintered ore; 3.12 – Ferro-manganese, Ferro-chromium, Ferro-nickel; 3.13 – Pig iron; 3.14 – DRI; 3.15 – Crude steel; and 3.16 – Iron or steel products.

5.6.1 Unit of production and embedded emissions The quantity of declared iron and steel sector goods imported into the EU should be expressed in metric tonnes. As an operator, you should record the quantity of CBAM goods produced by your installation in each production process, for the purposes of reporting.

to the EU should be expressed in metric tonnes. As an operator, you should record the quantity of CBAM goods produced by your installation in each production process, for the purposes of reporting. Industrial sector Iron and steel Production unit of goods Tonnes (metric), reported separately for each type of sector goods, by installation or production process in the country of origin Associated activities Producing, melting or refining iron or steel or ferrous alloys; manufacture of semi-finished and basic steel products. Relevant greenhouse gas Carbon dioxide (CO2) Direct Emissions
Tonnes (metric) of CO2e
Indirect Emissions Quantity of electricity consumed (MWh), source and emissions factor used to calculate the indirect emissions in Tonnes (metric) of CO2 or CO2e.

53 To be reported separately during transitional period. Unit for embedded emissions Tonnes CO2e emissions per tonne of goods, reported separately for each type of goods, by installation in the country of origin

The iron and steel sector has to account for both direct emissions and indirect emissions in the transitional period. Indirect emissions are to be reported separately41. Emissions should be reported in metric tonnes CO2 equivalent (t CO2e) emissions per tonne of output. This figure should be calculated for the specific installation or production process in your country of origin.

be reported in metric tonnes CO2 equivalent (t CO2e) emissions per tonne of output. This figure should be calculated for the specific installation or production process in your country of origin. Note that several case studies showing how direct and indirect specific embedded emissions (SEE) values are derived for iron to steel products, using the mass balance method, and how the embedded emissions of imports into the EU are calculated, are given in section 7.2.2. The following sections set out how the system boundaries of iron and steel sector goods should be defined, and identify elements of the production process that should be included for the purposes of monitoring and reporting. 5.6.2 Definition and explanation of sector CBAM goods covered The following Table 5-6 lists the relevant goods in scope for the CBAM transitional period in the iron and steel industry sector. The aggregated goods category in the left hand column defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring.

in the iron and steel industry sector. The aggregated goods category in the left hand column defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring. Table 5-6: CBAM goods in the iron and steel sector Aggregated goods category Product CN Code Description Sintered Ore42 2601 12 00 Agglomerated iron ores and concentrates, other than roasted iron pyrites Pig iron 7201 Pig iron and spiegeleisen43 in pigs, blocks or other primary forms

720544 Some products under 7205 (Granules and powders, of pig iron, spiegeleisen, iron, or steel) may be covered here

41 Note that for this sector indirect emissions are only reported during the transitional period (and not during the definitive period). 42 This aggregated goods category includes all kinds of iron ore pellet production (for sale of pellets as well as for direct use in the same installation) and sinter production. 43 Pig iron containing alloy ferro-manganese. 44 Only some products of this CN code will qualify as “pig iron”, while other goods of this code are classified as “iron or steel products”

ion unit, slag handling. The following Figure 5-7 shows the system boundaries of the relevant ferro-alloy production processes.

Figure 5-7: System boundaries of Ferro-alloy production processes. Ferro-alloy production process – EAF reductive smelting

Note that raw material inputs for ferro-alloys may include pellets and sinter that are produced under the separate production process (for CN code 2601 12 00) for sintered iron ore.
The mass balance method is used to give a complete balance of the amount of carbon entering or leaving (carbon remaining in steel, in wastes or in slag) the EAF production process. A case study showing how the mass balance method is applied is given in section 7.2.2.2.

Electric arc (or other) furnace CO2 Emissions System boundaries: embedded emissions of ferro-alloys (generic) Ferro Alloy Aluminium Sinter or pellets Coke Silicon or FeSi Lime, other additives Waste gases to other processes and power plant Electrodes

oundaries: embedded emissions of ferro-alloys (generic) Ferro Alloy Aluminium Sinter or pellets Coke Silicon or FeSi Lime, other additives Waste gases to other processes and power plant Electrodes

62 5.6.3.3 Pig iron – Blast furnace production route The blast furnace production route produces liquid pig iron (“hot metal”) that may be alloyed (e.g. spiegeleisen and nickel pig iron or NPI47) or non-alloyed. The main production unit for this production process is the blast furnace. Inputs into the blast furnace include iron ore pellets or sintered ore, fuels and other raw materials including those used as reducing agents. Inside the blast furnace iron oxide is reduced to iron metal. The hot metal produced is then tapped and is either cast, or is directly converted to crude steel in a sequential step by the basic oxygen converter. This step is covered under a different production process, the crude steel – basic oxygen steelmaking production route. emissions monitoring for the pig iron – Blast furnace production route, as encompassing:
“ – CO2 from fuels and reducing agents such as coke, coke dust, coal, fuel oils, plastic wastes, natural gas, wood wastes, charcoal, as well as from waste gases such as coke oven gas, blast furnace gas or converter gas. – Where biomass is used, the provisions of Section B.3.3 of Annex III shall be taken into account. – CO2 from process materials such as limestone, magnesite, and other carbonates, carbonatic ores; materials for flue gas cleaning.

isions of Section B.3.3 of Annex III shall be taken into account. – CO2 from process materials such as limestone, magnesite, and other carbonates, carbonatic ores; materials for flue gas cleaning. – Carbon remaining in the product or in slags or wastes is taken into account by using a mass balance method in accordance with Section B.3.2 of Annex III.” Relevant precursors (if used in the process) are: sintered ore; pig iron or DRI from other installations or production processes; ferro-alloys FeMn, FeCr, FeNi; and hydrogen, if used. Indirect emissions that result from electricity consumed by the production process should also be monitored. may be regarded as being within the system boundaries of blast furnace installations: • Raw material handling and pre-treatment. • Fuel storage and preparation – e.g. coal drying and preparation for pulverized coal injection (PCI), vessels preheating stands. • Hot metal production – all steps for the blast furnace process resulting in liquid pig iron, the main unit being the Blast furnace, along with hot metal treatment units, blast furnace blowers, blast furnace hot stoves, compressed air production, steam injection in the blast furnace unit, steam generation plant, etc. • Emissions control – for treating releases to air, water or ground, including slag treatment, waste gas treatment, dedusting units, dust briquetting. • Miscellaneous not covered above.

lant, etc. • Emissions control – for treating releases to air, water or ground, including slag treatment, waste gas treatment, dedusting units, dust briquetting. • Miscellaneous not covered above.

47 NPI is covered by this production process if the nickel content is lower than 10%, otherwise if more than 10% it is covered under the ferro-alloy production process.

63 The following Figure 5-8 shows the system boundary for the blast furnace production route. If all the liquid pig iron from the blast furnace was used by the oxygen steelmaking process to produce crude steel, then there would be no need to monitor emissions from the blast furnace production route separately. Instead, a joint production process for crude steel making may be defined.
The mass balance method is used to give a complete balance of the amount of carbon entering or leaving (carbon remaining in the product, or in wastes or slags) the production process. A case study showing how the mass balance method is applied is given in section 7.2.2.1.

Figure 5-8: System boundaries of the Pig iron – Blast furnace production route.
Pig iron – Blast furnace production route

5.6.3.4 Pig iron – Smelting reduction production route Smelting reduction produces pig iron from precursor sintered ore, iron ore pellets, or ironmaking residues, using different fuels and reducing agents. The process comprises two steps, the reduction of iron ore followed by melting to produce liquid pig iron / hot metal.

re pellets, or ironmaking residues, using different fuels and reducing agents. The process comprises two steps, the reduction of iron ore followed by melting to produce liquid pig iron / hot metal.
emissions monitoring for the pig iron – smelting reduction production route, as encompassing:
“ – CO2 from fuels and reducing agents such as coke, coke dust, coal, fuel oils, plastic wastes, natural gas, wood wastes, charcoal, waste gases from the process or converter gas, etc.

64 – Where biomass is used, the provisions of Section B.3.3 of Annex III shall be taken into account. – CO2 from process materials such as limestone, magnesite, and other carbonates, carbonatic ores; materials for flue gas cleaning. – Carbon remaining in the product or in slags or wastes is taken into account by using a mass balance method in accordance with Section B.3.2 of Annex III.” Relevant precursors (if used in the process) are: sintered ore; pig iron or DRI from other installations or production processes; ferro-alloys FeMn, FeCr, FeNi; and hydrogen, if used. Indirect emissions that result from electricity consumed by the production process should also be monitored. may be regarded as being within the system boundaries of smelting reduction installations: • Raw material handling and pre-treatment. • Fuel storage and preparation. • Smelting reduction process – all steps for the smelting process, resulting in hot metal. • Casting plant. • Emissions control – in particular flue gas cleaning.

• Fuel storage and preparation. • Smelting reduction process – all steps for the smelting process, resulting in hot metal. • Casting plant. • Emissions control – in particular flue gas cleaning. The following Figure 5-9 shows the system boundaries of the smelting reduction process for producing pig iron.

Figure 5-9: System boundaries of the Pig iron – smelting reduction production route.
Pig iron – Smelting reduction production route

65 The mass balance method is used to give a complete balance of the amount of carbon entering or leaving (as carbon remaining in the product, or in wastes or slags) the production process. A case study showing how the mass balance method is applied is given in section 7.2.2.1. 5.6.3.5 Direct Reduced Iron (DRI) production process Direct reduction involves the production of solid primary iron from high grade iron ores (pellets, sinter or concentrates). There are different technologies that may use different qualities of ores (which may require pelletisation or sintering) and different fuels and reducing agents (natural gas, diverse fossil fuels or biomass, hydrogen). The solid product is called direct reduced iron (DRI). Different types of DRI are produced, for example ‘iron sponge’ and hot briquetted iron (HBI). Some DRI is used directly as a feedstock in EAFs or for other downstream processes. It is expected that production routes using hydrogen will play a major role in decarbonising the steel industry in coming years.

d directly as a feedstock in EAFs or for other downstream processes. It is expected that production routes using hydrogen will play a major role in decarbonising the steel industry in coming years. emissions monitoring for the DRI production route, as encompassing:
“ – CO2 from fuels and reducing agents such as natural gas, fuel oils, waste gases from the process or converter gas, etc. – Where biogas or other forms of biomass are used, the provisions of Section B.3.3 of Annex III shall be taken into account. – CO2 from process materials such as limestone, magnesite, and other carbonates, carbonatic ores; materials for flue gas cleaning. – Carbon remaining in the product or in slags or wastes is taken into account by using a mass balance method in accordance with Section B.3.2 of Annex III.” Relevant precursors (if used in the process) are: sintered ore; hydrogen; pig iron or DRI from other installations or production processes; and ferro-alloys FeMn, FeCr, FeNi, if used. Indirect emissions that result from electricity consumed by the production process should also be monitored. may be regarded as being within the system boundaries of DRI installations: • Raw material handling and pre-treatment. • Fuel storage and preparation – coal, natural gas or hydrogen etc. • Direct reduction process for iron production – all steps for the DRI process, forming into hot briquetted iron (HBI) if applicable. • Emissions control – in particular flue gas cleaning. The following Figure 5-10 shows the system boundaries of the relevant processes for DRI production.

hot briquetted iron (HBI) if applicable. • Emissions control – in particular flue gas cleaning. The following Figure 5-10 shows the system boundaries of the relevant processes for DRI production. Although there are several different processes used in practice, the high-level system boundaries are very similar and can therefore be represented on a single diagram.

66 Note that where an installation does not sell or transfer DRI produced to other installations, there is no need to monitor emissions from the DRI production process separately. A common production process including steelmaking may be used. The mass balance method is used to give a complete balance of the amount of carbon entering or leaving (as carbon remaining in the product, or in wastes or slags) the production process. A case study showing how the mass balance method is applied is given in section 7.2.2.1.

Figure 5-10: System boundaries of the DRI production process DRI production process

5.6.3.6 Crude steel – Basic oxygen steelmaking production route If the basic oxygen steelmaking production route starts with hot metal (liquid pig iron); the hot metal is directly converted to crude steel by the basic oxygen converter or furnace (BOF) as part of a continuous process. Following the converter, a steel decarburisation process by argon oxygen decarburisation (AOD) or vacuum oxygen decarburisation (VOD) may be performed, followed by various secondary metallurgical processes such as vacuum degassing to remove dissolved gases.

argon oxygen decarburisation (AOD) or vacuum oxygen decarburisation (VOD) may be performed, followed by various secondary metallurgical processes such as vacuum degassing to remove dissolved gases. Crude steel is then cast into its primary forms by continuous casting or ingot casting, which may be followed by hot-rolling or forging to obtain the semi-finished crude steel products (under CN codes 7207, 7218 and 7224). emissions monitoring for the Crude steel – basic oxygen production route, as encompassing:
“ – CO2 from fuels such as coal, natural gas, fuel oils, waste gases such as blast furnace gas, coke oven gas or converter gas, etc.

67 – CO2 from process materials such as limestone, magnesite, and other carbonates, carbonatic ores; materials for flue gas cleaning.” – Carbon entering the process in scrap, alloys, graphite etc. and carbon remaining in the product or in slags or wastes is taken into account by using a mass balance method in accordance with Section B.3.2 of Annex III.” Relevant precursors (if used in the process) are: pig iron, DRI; ferro-alloys FeMn, FeCr, FeNi; and crude steel from other installations or production processes, if used. Indirect emissions that result from electricity consumed by the production process should also be monitored. may be regarded as being within the system boundaries of basic oxygen steelmaking installations: • Basic oxygen converter or furnace (BOF). • Decarburisation – AOD or VOD processes, where relevant. • Secondary metallurgy and vacuum degassing.

daries of basic oxygen steelmaking installations: • Basic oxygen converter or furnace (BOF). • Decarburisation – AOD or VOD processes, where relevant. • Secondary metallurgy and vacuum degassing. • Casting plant – continuous casting or ingot casting, preheating equipment. • Hot rolling or forging – where relevant, only primary hot-rolling and rough shaping by forging to obtain the semi-finished products. • All necessary auxiliary activities – such as transfers, re-heating. • Emissions control – in particular flue gas cleaning, dedusting units, slag handling. Note that only primary hot-rolling and rough shaping by forging to obtain the semi-finished products under CN codes 7207, 7218 and 7224 are included in this aggregated goods category. All other rolling and forging processes are included in the aggregated goods category “iron or steel products”.

Figure 5-11: System boundaries of basic oxygen steelmaking and related processes.

68 Crude steel – Basic oxygen steelmaking alongside other related activities

In integrated steel plants, liquid pig iron that is directly charged to the oxygen converter is the product which separates the production process for pig iron (bottom left in Figure 5-11 above) from the production process of crude steel (bottom right, above). The integrated blast furnace / basic oxygen furnace (BF/BOF) steelmaking process is by far the most complex steel making process and is characterised by networks of interdependent material and energy flows between the various production units.

rnace (BF/BOF) steelmaking process is by far the most complex steel making process and is characterised by networks of interdependent material and energy flows between the various production units. Note that coke (top left) is treated as a raw material with no embedded emissions. When all the liquid pig iron from the blast furnace is used by the oxygen steelmaking process to produce crude steel, there is no need to monitor emissions from the blast furnace production route separately. Instead, a joint production process for crude steel making may be defined.

69 The mass balance method is used to give a complete balance of the amount of carbon entering or leaving (carbon remaining in steel product, or in wastes and slags) the production process.
A case study of how the mass balance method is applied for this production route is given in section 7.2.2.1.

5.6.3.7 Crude steel – EAF steelmaking production route The direct smelting of materials which contain iron is usually performed in an electric arc furnace (EAF). Feedstocks for EAF routes are metallic iron; in particular ferrous scrap48 and/or Direct Reduced Iron (DRI). Where significant amounts of DRI are used, one of the various EAF-DRI routes applies. Following EAF smelting, a steel decarburisation process by argon oxygen decarburisation (AOD) or vacuum oxygen decarburisation (VOD) may be performed, followed by various secondary metallurgical processes such as desulphurisation and vacuum degassing to remove dissolved gases. Electricity is the main energy input to the EAF.

D) may be performed, followed by various secondary metallurgical processes such as desulphurisation and vacuum degassing to remove dissolved gases. Electricity is the main energy input to the EAF.
emissions monitoring for the Crude steel – EAF production route, as encompassing:
“ – CO2 from fuels such as coal, natural gas, fuel oils, as well as from waste gases such as blast furnace gas, coke oven gas or converter gas. – CO2 from the consumption of electrodes and electrode pastes. – CO2 from process materials such as limestone, magnesite, and other carbonates, carbonatic ores; materials for flue gas cleaning. – Carbon entering the process, e.g. in the form of scrap, alloys and graphite, and carbon remaining in the product or in slags or wastes is taken into account by using a mass balance method in accordance with Section B.3.2 of Annex III.” Relevant precursors (if used in the process) are: pig iron, DRI; ferro-alloys FeMn, FeCr, FeNi; and crude steel from other installations or production processes, if used. Indirect emissions that result from electricity consumed by the production process are also to be monitored. may be regarded as being within the system boundaries of EAF steelmaking installations – all relevant activities and production units, such as: • Raw material handling and pre-treatment– scrap drying and pre-heating of raw materials. • EAF process – all steps for the EAF process, including charging, melting, primary refining and steel and slag tapping of the primary furnace. • Decarburisation – AOD or VOD processes, where relevant.

F process – all steps for the EAF process, including charging, melting, primary refining and steel and slag tapping of the primary furnace. • Decarburisation – AOD or VOD processes, where relevant.

48 Where only post-consumer scrap is used, it is assumed to have zero embedded emissions.

70 • Secondary metallurgy and vacuum degassing. • Casting plant – continuous casting or ingot casting, preheating equipment. • Hot rolling or forging – where relevant, only primary hot-rolling and rough shaping by forging to obtain the semi-finished products. • All necessary auxiliary activities – such as transfers, heating of equipment, re- heating. • Emissions control – in particular flue gas cleaning, dedusting units, slag handling.
Note that only primary hot-rolling and rough shaping by forging to obtain the semi-finished products under CN codes 7207, 7218 and 7224 are included in this aggregated goods category. All other rolling and forging processes are included in the aggregated goods category “iron or steel products”.

Figure 5-12: System boundaries of the Crude steel – EAF steelmaking production route. Crude steel – EAF alloy and non-alloy steel production route

There are several different EAF production routes, for crude steel and crude alloy steel, which are broadly similar and are shown jointly in Figure 5-12.

and non-alloy steel production route

There are several different EAF production routes, for crude steel and crude alloy steel, which are broadly similar and are shown jointly in Figure 5-12.
EAF (electric arc furnace) CO2 Emissions System boundaries: embedded emissions of crude steel (EAF route) Crude steel Optional: Other materials and fuels Electricity* Electricity is mentioned here explicitly as it is the main energy input to the process. Scrap Electrodes Lime DRI (various routes) EAF (electric arc furnace) & AOD / VOD CO2 Emissions System boundaries: embedded emissions of crude alloy steel (EAF route) Crude alloy steel Optional: Other materials and fuels Electricity *Electricity is mentioned here explicitly as it is the main energy input to the process. Scrap Electrodes Lime Alloy components (FeNi, FeCr, FeMn) Pig iron, DRI, NPI

71 The mass balance method is used to give a complete balance of the amount of carbon entering or leaving (carbon remaining in steel, in wastes and in slag) the EAF production process.
A case study showing how the mass balance method is applied for this production route is given in section 7.2.2.2.

5.6.3.8 Iron or steel products production process Iron or steel products are produced from the further processing of crude steel, semi-finished products, as well as other final steel products by all kinds of forming and finishing steps, including: re-heating, re-melting, casting, hot rolling, cold rolling, forging, pickling, annealing, plating, coating, galvanizing, wire drawing, cutting, welding, finishing.

g and finishing steps, including: re-heating, re-melting, casting, hot rolling, cold rolling, forging, pickling, annealing, plating, coating, galvanizing, wire drawing, cutting, welding, finishing.
emissions monitoring for the iron or steel products production route, as encompassing:
“ – All CO2 emissions from combustion of fuels and process emissions from flue gas treatment, related to production steps applied at the installation, including, but not limited to: re-heating, re-melting, casting, hot rolling, cold rolling, forging, pickling, annealing, plating, coating, galvanizing, wire drawing, cutting, welding and finishing of iron or steel products.” Relevant precursors (if used in the process) are: crude steel; pig iron, DRI; ferro-alloys FeMn, FeCr, FeNi; and other iron or steel products. Indirect emissions that result from electricity consumed by the production process should also be monitored. may be regarded as being within the system boundaries of basic steel products: • Raw material preparation – including pre-heating, re-melting and alloying. • Forming processes for basic steel products – all forming process steps, including casting, hot and cold rolling, shaping by forging, wire drawing. • Finishing activities – all finishing steps including surface treatment (such as pickling, annealing, plating, coating, galvanizing) and further fabrication (cutting, welding, finishing). The following Figure 5-13 shows the system boundaries from crude steel to basic steel products.

g, annealing, plating, coating, galvanizing) and further fabrication (cutting, welding, finishing). The following Figure 5-13 shows the system boundaries from crude steel to basic steel products.

72 Figure 5-13: System boundaries of steel products production process Iron or steel products

Note that for final iron or steel products that contain more than 5% by mass of other materials, e.g. insulation materials in CN code 7309 00 30 (reservoirs, tanks, vats and similar containers for any material (other than compressed or liquefied gas), of iron or steel, of a capacity exceeding 300 l, lined or heat-insulated), only the mass of iron or steel shall be reported as the mass of the goods produced. Several case studies showing how direct and indirect specific embedded emissions (SEE) values are derived for iron to steel products, using the mass balance method, and how the embedded emissions of imports into the EU are calculated, are given in section 7.2.2.

5.7 Aluminium sector The textbox below signposts the sector-specific sections in the Implementing Regulation, • Annex II, Section 2, Table 1 Mapping of CN codes to aggregated goods categories. • Annex II, Section 3 Production routes, system boundaries, and relevant precursors, as specified in sub-sections: 3.17 – Unwrought aluminium and 3.18 – Aluminium products.

5.7.1 Unit of production and embedded emissions The quantity of declared aluminium goods imported into the EU should be expressed in metric tonnes.

ght aluminium and 3.18 – Aluminium products.

5.7.1 Unit of production and embedded emissions The quantity of declared aluminium goods imported into the EU should be expressed in metric tonnes. As an operator, you should record the quantity of CBAM good(s) produced by the installation or production process, for the purposes of reporting. Production of basic steel products** CO2 Emissions System boundaries: embedded emissions of basic steel products (may apply to all steel routes) Basic steel products Crude steel (depending on production route) Fuels (incl. waste gases) ** This includes in a generic way all typical productions steps, such as casting, hot and cold rolling, coating etc.

73 Industrial sector Aluminium Production unit of goods Tonnes (metric), reported separately for each type of sector goods, by installation or production process in the country of origin. Associated activities Producing unwrought aluminium from alumina, or secondary raw materials (aluminium scrap), by metallurgical, chemical or electrolytic means; manufacture of semi-processed and finished aluminium products. Relevant greenhouse gases Carbon dioxide (CO2) and perfluorocarbons (CF4 and C2F6) Direct Emissions
Tonnes (metric) of CO2e
Indirect Emissions Quantity of electricity consumed (MWh), source and emissions factor used to calculate the indirect emissions in Tonnes (metric) of CO2 or CO2e.
To be reported separately during transitional period.

tity of electricity consumed (MWh), source and emissions factor used to calculate the indirect emissions in Tonnes (metric) of CO2 or CO2e.
To be reported separately during transitional period. Unit for embedded emissions Tonnes CO2e emissions per tonne of goods, reported separately for each type of good, by installation in the country of origin.

The aluminum sector should account for both direct emissions and indirect emissions in the transitional period. Indirect emissions are to be reported separately49. Emissions should be reported in metric tonnes CO2 equivalent (tCO2e) emissions per tonne of output. This figure should be calculated for the specific installation or production process in your country of origin. Note that a case study showing how direct and indirect specific embedded emissions (SEE) values are derived for aluminium products, and how the embedded emissions of imports into the EU are calculated, is given in section 7.4.2. The following sections set out how the system boundaries of aluminium sector goods should be defined, and identify elements of the production process that should be included for the purposes of monitoring and reporting.

5.7.2 Definition and explanation of sector goods covered The following Table 5-8 lists the relevant goods in scope for the CBAM transitional period in the aluminium industry sector. The aggregated goods category in the left-hand column defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring.

eriod in the aluminium industry sector. The aggregated goods category in the left-hand column defines groups for which joint ‘production processes’ are to be defined for the purpose of monitoring.

49 Note that for this sector indirect emissions are only reported during the transitional period (and not during the definitive period).

74 Table 5-8: CBAM goods in the aluminium sector Aggregated goods category Product CN Code Description Unwrought aluminium 7601 Unwrought aluminium Aluminium products 7603 – 7608, 7609 00 00, 7610, 7611 00 00, 7612, 7613 00 00, 7614, 7616 7603 – Aluminium powders and flakes 7604 – Aluminium bars, rods and profiles 7605 – Aluminium wire 7606 – Aluminium plates, sheets and strip, of a thickness exceeding 0,2 mm 7607 – Aluminium foil (whether or not printed or backed with paper, paper-board, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0,2 mm 7608 – Aluminium tubes and pipes 7609 00 00 – Aluminium tube or pipe fittings (for example, couplings, elbows, sleeves) 7610 – Aluminium structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns);

ctures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures 7611 00 00 – Aluminium reservoirs, tanks, vats and similar containers, for any material (other than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment 7612 – Aluminium casks, drums, cans, boxes and similar containers (including rigid or collapsible tubular containers), for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat- insulated, but not fitted with mechanical or thermal equipment 7613 00 00 – Aluminium containers for compressed or liquefied gas
7614 – Stranded wire, cables, plaited bands and the like, of aluminium, not electrically insulated 7616 – Other articles of aluminium Source: The CBAM Regulation, Annex I; Implementing Regulation, Annex II.

nded wire, cables, plaited bands and the like, of aluminium, not electrically insulated 7616 – Other articles of aluminium Source: The CBAM Regulation, Annex I; Implementing Regulation, Annex II.

75 The aggregated goods categories listed in Table 5-8 include both finished aluminium products and a precursor ‘unwrought aluminium’ that is itself consumed in the production of aluminium goods. Only input materials listed as relevant precursors to the system boundaries of the production process as specified in the Implementing Regulation are to be considered. Table 5-9 lists the possible precursors by aggregated goods category and production route below.
Table 5-9: Aggregated goods categories, their production routes and possibly relevant precursors Aggregated Goods Category Relevant precursors Production route Unwrought aluminium None for primary aluminium For secondary aluminium – unwrought aluminium from other sources, if used in the process50 Primary aluminium Secondary aluminium Aluminium products Unwrought aluminium (differentiated between primary and secondary aluminium, if known), other aluminium products (if used in the production process).

Unwrought aluminium is produced by several production routes (‘primary aluminium’ for electrolytic smelting, ‘secondary aluminium’ for melting/recycling of scrap) as metal ingots, blocks, billets, slabs or similar.

um is produced by several production routes (‘primary aluminium’ for electrolytic smelting, ‘secondary aluminium’ for melting/recycling of scrap) as metal ingots, blocks, billets, slabs or similar. It is defined as a ‘simple good’, as the raw materials (carbon anodes and alumina for primary aluminium, scrap for secondary aluminium) and fuels used in its manufacture are themselves considered to have zero embedded emissions.
The aluminium goods listed above include most types of aluminium product manufactured51. Aluminium products are defined as complex goods as they include the embedded emissions from the precursor unwrought aluminium. The production of aluminium sector goods is by a number of different process routes, outlined below.

5.7.3 Definition and explanation of relevant production processes and routes The system boundaries of the precursor unwrought aluminium and of aluminium products are distinct and may, under certain conditions, be added together to include all processes directly or indirectly linked to the production processes for these goods, including input activities to, and output activities from the process (see section 6.3).

50 Note that if the product from secondary aluminium production route contains more than 5% alloying elements, the embedded emissions of the product shall be calculated as if the mass of alloying elements were unwrought aluminium from primary smelting. 51 Excludes categories CN 7615 for certain household articles and CN 7602 00 aluminium scrap.

ll be calculated as if the mass of alloying elements were unwrought aluminium from primary smelting. 51 Excludes categories CN 7615 for certain household articles and CN 7602 00 aluminium scrap.

76 Figure 5-14: System boundaries and value chain of aluminium products System boundaries and value chain of aluminium products

The difference in primary aluminium smelting route in the above diagram is due to the different electrode materials used, i.e. pre-baked or Søderberg anodes. The relevant emissions that should be monitored for the aluminium sector are detailed in section 7.4.1.1. 5.7.3.1 Unwrought aluminium – Primary (electrolytic) smelting production route Primary aluminium is produced by the electrolysis of alumina52 in electrolytic cells. During electrolysis, aluminium is reduced and oxygen from the alumina is liberated and combines with the carbon anode to form carbon dioxide and carbon monoxide – the carbon anodes in the primary aluminium process are therefore continuously consumed during the process. Primary aluminium cell systems vary according to the type of anode used. The ‘Pre-baked’ electrolytic cell uses multiple pre-baked carbon anodes that must be regularly replaced. The ‘Søderberg’ electrolytic cell uses a single continuous carbon anode, which is self- baked in situ within the cell by means of the heat released during the electrolytic process within the smelter; ‘green’ anode paste briquettes are added at the top while the anode is consumed at the bottom.

situ within the cell by means of the heat released during the electrolytic process within the smelter; ‘green’ anode paste briquettes are added at the top while the anode is consumed at the bottom. Molten aluminium is deposited at the cathode and collects at the bottom of the cell, where it is periodically withdrawn by vacuum siphons into crucibles before being transported to the casting plant. At the casting plant molten aluminium is held in holding furnaces for further processing prior to casting metal ingots, blocks, billets, slabs or similar; small quantities of clean commercial scrap may also be added at this stage.

52 Alumina is purified aluminium oxide produced by beneficiation of bauxite ore via the Bayer process. Production of alumina usually takes place at a different site to primary aluminium production for logistical and power supply reasons

77 emissions monitoring for the primary (electrolytic) smelting production route, as encompassing:
“ – CO2 emissions from the consumption of electrodes or electrode pastes.
– CO2 emissions from any fuels used (e.g. for drying and pre-heating of raw materials, heating of electrolysis cells, heating required for casting). – CO2 emissions from any flue gas treatment, from soda ash or limestone if relevant.
– Perfluorocarbon emissions caused by anode effects monitored in accordance with Section B.7 of Annex III.” There are no relevant precursors for this production process.

r limestone if relevant.
– Perfluorocarbon emissions caused by anode effects monitored in accordance with Section B.7 of Annex III.” There are no relevant precursors for this production process. Indirect emissions that result may be regarded as being within the system boundaries of primary aluminium installations: • Raw material preparation – including storage of various additive constituents. • Electrolytic cell system for aluminium production process – all steps. • Casting plant – all steps including holding furnaces, conveying systems, further metal processing (metal treatment, alloying and homogenisation) and casting. • The process materials consumed by the primary aluminium production route – alumina, pre-baked carbon anodes, ‘green’ anode paste briquettes, cryolite and other additives – are treated as raw materials and so have zero embedded emissions. • Details on the special rules for the aluminium sector for determining emissions from PFCs are given in section 6.5.5 and section 7.4.1.2 of this guidance document, and a case study showing how the specific embedded emissions for aluminium sector goods are derived is given in section 7.4.2.

given in section 6.5.5 and section 7.4.1.2 of this guidance document, and a case study showing how the specific embedded emissions for aluminium sector goods are derived is given in section 7.4.2.

78 Figure 5-15: System boundaries of the unwrought aluminium – primary smelting production route Unwrought aluminium – Primary smelting

5.7.3.2 Unwrought aluminium – Secondary melting (recycling) production route Secondary aluminium is produced mainly from post-consumer aluminium scrap collected for recycling (although unwrought aluminium may also be separately added). Scrap is sorted according to type (cast or wrought alloy) and the sort of pre-treatment measures required (e.g. de-coating, de-oiling), and is then re-melted in the appropriate type of furnace (typically rotary or reverberatory, but induction furnaces may also be used) before further processing including: alloying, melt treatment (addition of salt or chlorination) and finally casting metal ingots, blocks, billets, slabs or similar. Typical fuels used are natural gas, LPG or fuel oil.
emissions monitoring for the secondary melting (recycling) production route, as encompassing:
“ – CO2 emissions from any fuels used for drying and pre-heating of raw materials, used in melting furnaces, in pre-treatment of scrap such as de-coating and de- oiling, and combustion of the related residues, and fuels required for casting of ingots, billets or slabs. – CO2 emissions from any fuels used in associated activities such as treatment of skimmings and slag recovery.

of the related residues, and fuels required for casting of ingots, billets or slabs. – CO2 emissions from any fuels used in associated activities such as treatment of skimmings and slag recovery.
– CO2 emissions from any flue gas treatment, from soda ash or limestone if relevant.” A relevant precursor is unwrought aluminium from other sources, if used in the process. Indirect emissions that result from electricity consumed by the production process should also be monitored. Primary smelting CO2 + PFC Emissions System boundaries: embedded emissions of aluminium (primary smelting) Unformed aluminium Optional: Fuels Alumina Pre-baked anodes Anode paste (Søderberg route) Electricity* *Electricity is mentioned here explicitly as it is the main energy input to the process.

79 should be regarded as being within the system boundaries of secondary aluminium: • Raw material preparation – including sorting, pre-treatment (de-coating, de-oiling), drying and pre-heating of scrap. • Furnace system for aluminium production process – all steps, including furnace charging, melting and holding furnaces. • Casting plant – all steps including holding furnaces, conveying systems, further metal processing (metal treatment, alloying and homogenisation) and casting. The following Figure 5-16 shows the system boundaries of the relevant processes for secondary aluminium production.

her metal processing (metal treatment, alloying and homogenisation) and casting. The following Figure 5-16 shows the system boundaries of the relevant processes for secondary aluminium production. Figure 5-16: System boundaries of the Unwrought aluminium – secondary melting production route Unwrought aluminium – Secondary melting

There are no PFC emissions from the secondary aluminium process. Aluminium scrap is the main material input to the secondary melting production route. Scrap (whether pre-consumer or post-consumer) is treated as a raw material and so has zero embedded emissions.
Note that where the product of this process contains more than 5% alloying elements, the embedded emissions of the product shall be calculated as if the mass of alloying elements were unwrought aluminium from primary smelting.

System boundaries: embedded emissions of aluminium (secondary smelting) Secondary production (Re-melting) CO2 Emissions Unformed aluminium Aluminium scrap Fuels

aluminium from primary smelting.

System boundaries: embedded emissions of aluminium (secondary smelting) Secondary production (Re-melting) CO2 Emissions Unformed aluminium Aluminium scrap Fuels

80 5.7.3.3 Aluminium products production process Aluminium products are produced by the further processing of precursor unwrought aluminium (alloyed or un-alloyed). Aluminium products are produced by a variety of forming processes including extrusion, casting, hot and cold rolling, forging and drawing. Extrusion is a common process used to produce aluminium profiles. Hot and cold rolling may be used to produce plate, sheet and foil. Casting may be used to produce complex forms. emissions monitoring for the aluminium products production route, as encompassing:
“ – All CO2 emissions from fuel consumption in processes forming aluminium products, and flue gas cleaning.” Relevant precursors are unwrought aluminium, if used in the production process (primary and secondary aluminium should be treated separately, if data is known, as each has different embedded emissions), and aluminium products, if used in the production process. Indirect emissions that result from electricity consumed by the production process should also be monitored. should be regarded as being within the system boundaries of basic aluminium products installations: • Raw material preparation – including pre-heating, re-melting and alloying.

also be monitored. should be regarded as being within the system boundaries of basic aluminium products installations: • Raw material preparation – including pre-heating, re-melting and alloying. • Forming processes – all forming process steps for basic aluminium products, including (but not limited to): extrusion, casting, hot and cold rolling, forging, drawing. • Finishing activities – including sizing, annealing, surface preparation and treatment and further fabrication. The following Figure 5-17 shows the system boundaries of the relevant processes for aluminium products.

81 Figure 5-17: System boundaries of Aluminium products production process Aluminium products production process

There are no PFC emissions resulting from aluminium products forming processes. Note that where the product of this process contains more than 5% alloying elements, the embedded emissions of the product should be calculated as if the mass of alloying elements were unwrought aluminium from primary smelting. Also note that for products that contain more than 5 % by mass of other materials, e.g. insulation materials in CN code 7611 00 00 only the mass of aluminium shall be reported as the mass of the goods produced. A case study showing how the specific embedded emissions for aluminium sector goods are derived is given in section 7.4.2.

e mass of aluminium shall be reported as the mass of the goods produced. A case study showing how the specific embedded emissions for aluminium sector goods are derived is given in section 7.4.2.

82 6 MONITORING AND REPORTING OBLIGATIONS
This section contains all of the rules necessary for monitoring and calculating embedded emissions during the transitional period. It is structured as follows: • Section 6.1 contains definitions and principles. • Section 6.2 explains the concept of embedded emissions (6.2.1), before it provides the calculation rules (6.2.2) in three steps: o Installation-level monitoring (6.2.2.1). o Attributing the emissions data to production processes within the installation (6.2.2.2). o Calculation of specific embedded emissions from the attributed emissions of the processes, the embedded emissions of the precursor, and the activity level of the production process. • How to define the production processes of the installation and their system boundaries is the topic of section 6.3. • Section 6.4 deals with the planning of the monitoring methodology. This includes setting up the MMD (monitoring methodology documentation), how to select the best available data sources and the possibilities to limit monitoring costs. The section also provides advice on setting up a control system for ensuring correct data. • Section 6.5 is a central part of this guidance.

ources and the possibilities to limit monitoring costs. The section also provides advice on setting up a control system for ensuring correct data. • Section 6.5 is a central part of this guidance. It gives guidance on the eligible monitoring approaches to monitor direct emissions at installation level, with the following sub-structure, reflecting the “building-block” character of allowed approaches:
o Section 6.5.1: Calculation-based methodology  Calculation formulae and parameters are explained in 6.5.1.1 (standard method) and 6.5.1.2 (mass balance).  Rules for determining activity data (i.e. quantities of fuels and materials used) are given in section 6.5.1.3.  The rules for determining ‘calculation factors’ (i.e. information on properties and composition of the fuels and materials used) are subject of 6.5.1.4. These methods include the selection of appropriate standard values, are the use of laboratory analyses, for which basic requirements are discussed. o In section 6.5.2, the measurement-based methodology is described, i.e. how to use CEMS (continuous emissions monitoring systems). This is in particular necessary for N2O emissions. o The conditions to use other methods, in particular from other carbon pricing schemes, are explained in section 6.5.3. o Requirements for accounting biomass emissions as zero in all the above methods are outlined in section 6.5.4, which is supplemented by additional information in Annex C. o The monitoring of PFCs (perfluorocarbon emissions) is explained in section 6.5.5.

l the above methods are outlined in section 6.5.4, which is supplemented by additional information in Annex C. o The monitoring of PFCs (perfluorocarbon emissions) is explained in section 6.5.5.

83 o As the last element of installation-level monitoring, section 6.5.6 outlines basic elements of ‘transferred CO2’ monitoring, which is the link to future CCS and CCU rules.
• Indirect emissions of an installation and their monitoring requirements are explained in section 6.6. • The rules for attributing emissions to production processes are the subject of section 6.7 containing the following detailed rules: o General rules for monitoring: 6.7.1, o Flows of (measurable) heat and the related emissions: 6.7.2, o Electricity and respective emissions: 6.7.3, o Rules for the combined production of heat and electricity (cogeneration, CHP) to supplement the two previous sections are explained in section 6.7.4. o Waste gases and their emission attribution rules: 6.7.5, • Calculation of embedded emissions from attributed emissions: Relevant guidance is found in section 6.8 with the following sub-sections: o Rules on goods produced (quality and activity levels) are found in 6.8.1. o The rules for monitoring quality and quantity of precursor materials are discussed in section 6.8.2. • The monitoring rules are concluded by explaining what can be done if the monitoring fails, i.e.

e rules for monitoring quality and quantity of precursor materials are discussed in section 6.8.2. • The monitoring rules are concluded by explaining what can be done if the monitoring fails, i.e. data gaps occur, or if some information could not be obtained within the required time frame (section 6.9): o Use of default values of specific embedded emissions provided by the European Commission is discussed in section 6.9.1. o For indirect emissions, i.e. default values for the emission factor of electricity, is described in section 6.9.2. o Guidance on closing of minor data gaps in everyday monitoring activities is given in section 6.9.3. • Collecting data on a carbon price due in the country of origin (as possible rebate from the CBAM obligation) is the topic of section 6.10. • Finally, section 6.11 explains the reporting template, i.e. the template which the European Commission provides for the communication between operators of installations producing CBAM goods and the EU importers in order to provide the data the latter require for producing the ‘quarterly CBAM reports’, i.e. for complying with the CBAM Regulation. That template is also proposed for communication between operators producing complex goods and their suppliers of precursor materials.

CBAM reports’, i.e. for complying with the CBAM Regulation. That template is also proposed for communication between operators producing complex goods and their suppliers of precursor materials.

84 6.1 Definitions and scope of emissions covered in the CBAM In order to complete the relevant calculations, it is important to understand the precise meanings of terms are used in these calculations. In addition to the general definitions introduced in Section 4.2, this section presents additional terms used in the following sections of this guide.
6.1.1 Installation, production process and production routes The following hierarchical approach of definitions applies: • ‘Installation’ means a stationary technical unit where a production process is carried out. • ‘Production process’ means the parts of an installation in which chemical or physical processes are carried out to produce goods under an aggregated goods category defined in Table 1 of Section 2 of Annex II to the Implementing Regulation, and its specified system boundaries regarding inputs, outputs and corresponding emissions. • ‘Aggregated goods category’ is implicitly defined in the Implementing Regulation by listing the relevant aggregated goods categories and all the goods identified by their CN codes in Table 1 of Section 2 of Annex II. • ‘Production route’ means a specific technology used in a production process to produce goods under an aggregated goods category. From these definitions it can be deduced that an installation may consist of one or more production processes.

ogy used in a production process to produce goods under an aggregated goods category. From these definitions it can be deduced that an installation may consist of one or more production processes. For the purpose of the CBAM only those production processes are relevant that are listed in Annex II Section 2 of the Implementing Regulation. If your installation carries out other production processes, it is your choice to include them in your monitoring methodology or not. In both cases the rules for attributing the emissions to the CBAM-relevant processes will work. One production process usually relates to one group of CBAM goods produced (the ‘aggregated goods categories’). However, in some case more than one production route exists for producing these goods. If more production routes co-exist at your installation for the same aggregated goods category, they may be jointly monitored using one production process and its respective system boundaries. From the above, the short summary is: An installation can consist of more than one production process, and production processes can consist of more than one production route. The “attributed emissions” are always calculated at the production process level. Note that some further rules exist for defining production processes and their system boundaries, as discussed in Section 6.3.

uted emissions” are always calculated at the production process level. Note that some further rules exist for defining production processes and their system boundaries, as discussed in Section 6.3.

6.1.2 Activity level, quantity of goods produced In a given reporting period, ‘activity level’ is the total quantity of goods produced within a production process meeting a particular CN product specification for that good, expressed in tonnes or MWh for electricity. For the purpose of determining the activity level of a production process, the quantity of all goods under all CN codes which represent an ‘aggregated goods category’ are added up.

85 The activity level for an installation or production process should take into account saleable product53, including any product used directly as precursor in another production process for producing other products (termed ‘relevant precursor material’). In order to avoid any double counting of production, you should only consider the final products leaving the system boundaries of the production process. Product that is returned to the same process (where the production of precursors is included in the same production process) as well as any waste or scrap is excluded from the total. In reporting the activity level for goods, you should also take into account any special provisions given in Annex II, Section 3 of the Implementing Regulation for specific production processes or production routes. These are also referred to for each sector as relevant in section 7.

provisions given in Annex II, Section 3 of the Implementing Regulation for specific production processes or production routes. These are also referred to for each sector as relevant in section 7.

6.1.3 Direct and indirect embedded emissions During the transitional period you need to account for both ‘direct emissions’54 and ‘indirect emissions’55, in reporting the embedded emissions of the goods produced at your installations. In this context: • Direct emissions include combustion and process emissions for your installation, but also emissions produced during the production of heat consumed in your installation, in case the installation receives heat from adjacent installations or from a district heating network.
• Direct attributed emissions are the emissions attributed to the relevant production process producing goods at your installation, based on your installation’s direct emissions, emissions from relevant heat flows, material flows, waste gases (if relevant).
• Direct embedded emissions of the goods produced are calculated from the direct attributed emissions of the production process by adding the embedded emissions of any relevant precursor materials used in this production process. • Specific direct embedded emissions: These are the direct embedded emissions of the goods produced, divided by the activity level of the production process. The result is expressed as tonne CO2e per tonne of product. • Indirect emissions include emissions related to the electricity consumed at your installation.

tivity level of the production process. The result is expressed as tonne CO2e per tonne of product. • Indirect emissions include emissions related to the electricity consumed at your installation. Note that if your installation produces itself electricity, the fuels consumed in the electricity production count as direct emissions of the installation. But electricity production is considered a separate production process, i.e. those direct emissions are not attributed to direct attributed emissions of any goods produced in this installation.

53 I.e. products that meet the product specification for an aggregated CN goods category listed in the Implementing Regulation. 54 ‘Direct emissions’ mean emissions from the production processes of goods including emissions from the production of heating and cooling consumed during the production processes, regardless of the location of the production of the heating and cooling; 55 ‘Indirect emissions’ mean emissions from the production of electricity, which is consumed during the production processes of goods, regardless of the location of the production of the consumed electricity.

t emissions’ mean emissions from the production of electricity, which is consumed during the production processes of goods, regardless of the location of the production of the consumed electricity.

86 • Indirect attributed emissions are the indirect emissions attributed to the relevant production process producing goods at your installation. • Indirect embedded emissions of the goods produced are calculated from the indirect attributed emissions of the production process by adding the indirect embedded emissions from any relevant precursors used in the production process.
• Specific indirect embedded emissions: These are the indirect embedded emissions of the goods produced, divided by the activity level of the production process. The result is expressed as tonne CO2e per tonne of product. • (Specific) total embedded emissions: The sum of (specific) direct and indirect embedded emissions. Your approach used to monitor direct and indirect emissions should reflect the range of ‘emission sources’ and ‘source streams’ (for definition see section 6.2.2.1) that need to be covered for your individual installation and its production routes. Embedded emissions in precursor goods You should include the embedded emissions in precursor goods (both direct and indirect emissions, as above) if relevant in the calculation of total embedded emissions for a final good, making it a ‘complex good’. The embedded emissions of the relevant precursor goods56 are added to attributed emissions of the complex good.

calculation of total embedded emissions for a final good, making it a ‘complex good’. The embedded emissions of the relevant precursor goods56 are added to attributed emissions of the complex good. The inclusion of embedded emissions of precursor goods is necessary to ensure comparability of carbon costs under the EU ETS and the CBAM. The relevant greenhouses gas emissions correspond to those greenhouse gas57 emissions covered also by Annex I to the EU ETS Directive58, namely carbon dioxide (CO2) for all sectors, and additionally nitrous oxide (N2O) for fertilizers and perfluorocarbons (PFCs) for aluminium. Embedded emissions outside of the operator’s control Where you (as an operator) are receiving electricity, heat or precursor goods from outside of the installation, for use in your installation’s production processes, you should use the most recent data available from their supplier for the purpose of determining the embedded emissions of your CBAM goods. Such emissions-related data include: • Indirect emissions from imported grid electricity; • Emissions from electricity and heat imported from other installations; • Direct and indirect emissions of precursors received from other installations.

56 Where a precursor is itself a complex good, this process is repeated recursively until no more precursors are relevant. 57 ‘Greenhouse gases’ mean greenhouse gases as specified in Annex I to the CBAM Regulation in relation to each of the goods listed in that Annex; 58 Directive 2003/87/EC

ecursors are relevant. 57 ‘Greenhouse gases’ mean greenhouse gases as specified in Annex I to the CBAM Regulation in relation to each of the goods listed in that Annex; 58 Directive 2003/87/EC

87 6.1.4 Units for reporting embedded emissions The unit used for reporting embedded greenhouse gas is ‘tonne of CO2e59’, which means one metric tonne of carbon dioxide (‘CO2’), or an amount of any other greenhouse gas listed in Annex I to the CBAM Regulation with an equivalent (‘e’) global warming potential60; i.e. where relevant, N2O and PFCs emissions should be converted to their ‘tCO2e’ value.
For reporting purposes embedded emissions data should be rounded to whole tonnes CO2e over the reporting period. Parameters used to calculate the reported embedded emissions should be rounded to include all significant digits, to a maximum of 5 decimal places. The level of rounding required for parameters used in such calculations will depend on the accuracy and precision of the measurement equipment used.

6.2 How to determine embedded emissions
6.2.1 The concept The concept of embedded emissions, for the purposes of the CBAM, is based on, but not fully aligned with the principles and requirements for a carbon footprint of products (CFP). A CFP is usually understood as an amount of GHG emissions (expressed as kg or t CO2e) per declared unit, (e.g.

aligned with the principles and requirements for a carbon footprint of products (CFP). A CFP is usually understood as an amount of GHG emissions (expressed as kg or t CO2e) per declared unit, (e.g. a tonne of good) based on a life-cycle perspective covering, all significant emissions from upstream and downstream processes (called life-cycle stages), from mining and production to transport, use and end-of-life. The difference from the CFP scope is because the CBAM is intended to cover the same emissions as would be covered by the EU ETS if the production were situated in the EU. The system boundaries of emissions covered by the EU ETS, and therefore the CBAM, are narrower than those in a CFP. Downstream emissions (emissions from the use and end-of-life) of the products are outside the scope of the EU ETS and the CBAM. Emissions from transport of materials between sites and from processes further upstream are not included either. Figure 6-1 summarizes this situation graphically. Furthermore, Table 6-1 compares the CBAM scope of emissions to the scope of the EU ETS and other common GHG reporting schemes for carbon footprints. For the purpose of determining CBAM embedded emissions at a product level, the starting point are emissions of an installation. The installation’s emissions are split (‘attributed’) to emissions of its production processes.

ning CBAM embedded emissions at a product level, the starting point are emissions of an installation. The installation’s emissions are split (‘attributed’) to emissions of its production processes. Then any relevant embedded emissions of precursor materials are added, and the result is divided by the activity level of each production process, thereby resulting in ‘specific embedded emissions’ of the goods resulting from the production process. These considerations are reflected in the definitions of direct and indirect emissions, as set out in the CBAM Regulation, and in its Annex IV which lays down the basic calculation approach, which in particular requires taking into account precursor materials. The details of this approach are elaborated in the Implementing Regulation, in particular Annexes II and III, and explained in this document.

59 ‘tonne of CO2e’ means one metric tonne of carbon dioxide (‘CO2’), or an amount of any other greenhouse gas listed in Annex I to the CBAM Regulation with an equivalent global warming potential 60 In line with the EU ETS legislation, the 100-year GWP values of the 5th IPCC Assessment Report (AR5) are used.

ted in Annex I to the CBAM Regulation with an equivalent global warming potential 60 In line with the EU ETS legislation, the 100-year GWP values of the 5th IPCC Assessment Report (AR5) are used.

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Figure 6-1: Comparison of product environmental footprint, product carbon footprint, and the specific partial carbon footprint that is to be used for determining embedded emissions in the CBAM.
Comparison of scopes in product footprints and the requirements of the CBAM

Table 6-1: Comparison of the GHG emission scope of the CBAM, the EU ETS, and the definitions contained in widely used standards (ISO 14064-1 and the ‘GHG Protocol’) Parameter
ISO 14064-1 (Annex B) GHG
protocol EU ETS CBAM “Direct emissions”
(stationary) Category 1

Scope 1 Subject to system boundaries of each EU ETS installation Direct emissions are defined as “Emissions from the production processes of goods including emissions from the production of heating and cooling consumed during the production processes, regardless of the location of the production of the heating and cooling”
“Direct emissions”
(mobile, e.g.

om the production of heating and cooling consumed during the production processes, regardless of the location of the production of the heating and cooling”
“Direct emissions”
(mobile, e.g. forklift, cars) Outside the scope Outside the scope Upstream processes • Mining • Transport • Etc. Production of precursors • If applicable (only for complex goods) Production process • Point of MRV • Producer outside the EU Use stage • Including distribution End of life • Re-use • recycling • Waste disposal Full Product Environmental Footprint (PEF) Product Carbon Footprint (PCF) Other emissions (water, air) GHG emissions Waste Energy consumption Toxicity and other dangers Cradle to gate Cradle to grave GHG Emissions Products under consideration Raw materials GHG Emissions Precursors Other products System boundaries for CBAM embedded Emissions other impacts beyond Climate change/GHG emissions

89 Parameter
ISO 14064-1 (Annex B) GHG
protocol EU ETS CBAM “Indirect emissions”
(upstream)

of heating/cooling
imported Category 2 Scope 2 Covered if produced in an EU ETS installation Included under “direct emissions”

of electricity imported Covered if produced in an EU ETS installation Indirect emissions are defined as “Emissions from the production of electricity, which is consumed during the production processes of goods, regardless of the location of the production of the consumed electricity”

of fuels imported Category 3

Scope 3 Outside the scope Outside the scope

Transport
Outside the scope

goods, regardless of the location of the production of the consumed electricity”

of fuels imported Category 3

Scope 3 Outside the scope Outside the scope

Transport
Outside the scope Outside the scope

of (precursor) materials imported Category 4 Covered if produced in an EU ETS installation To the extent precursors are defined as relevant in the implementing act “Indirect emissions” (downstream and other, e.g. use of product, end- of-life emissions) Category 5 Outside the scope Outside the scope

6.2.2 From installation’s emissions to goods’ embedded emissions This section outlines the steps to follow to determine the embedded emissions of a good; first explaining the concept, then the attribution of emissions and finally the calculation of the embedded emissions.
The textbox below signposts the key sections in the Implementing Regulation for this purpose, relevant for the CBAM transitional period. Annex II, Section 3 Production routes, system boundaries, and relevant precursors Annex III, Section A Definitions and principles, in particular, sub-sections A.4. Division of installations into production processes

To aid understanding of the monitoring rules contained in Annex III to the Implementing Regulation, this section explains some terms and concepts. If you are experienced with emissions monitoring, you may skip this section. This might be the case for example if your installation is located in a jurisdiction where a carbon pricing system (e.g.

If you are experienced with emissions monitoring, you may skip this section. This might be the case for example if your installation is located in a jurisdiction where a carbon pricing system (e.g. an emissions trading system) or a mandatory monitoring rule for GHGs applies, or if your installation performs GHG reduction projects under an internationally accepted certification scheme with verification.

90 The approach of the CBAM is “top-down” as follows:
• First the emissions of the installation are determined (details in section 6.5).
• Then the installation is split into ‘production processes’ which produce the (groups of) goods for which the embedded emissions should be determined. The total installation’s emissions are ‘attributed’ to these production processes using the concepts described in section 6.2.2.2. The rules for defining boundaries of production processes are found in section 6.3.
• The attribution of emissions to production processes is a relatively complex task, because the rules had to be designed in a way that different installation designs are treated as equally as possible. Such different situations involve e.g.: o The different ways of heat supply: Heat can be produced directly within the process from fuels or electricity, it can be received from other parts of the installation (e.g. from a central boiler, a CHP unit, a steam grid with various heat sources, from exothermal chemical reactions) or from outside the installation (from a known boiler house or CHP unit, or from a district heating network).

CHP unit, a steam grid with various heat sources, from exothermal chemical reactions) or from outside the installation (from a known boiler house or CHP unit, or from a district heating network). A certain amount of emissions should be attributed to any such heat. Therefore, attribution of emissions to production processes requires the monitoring of relevant heat streams (for rules see section 6.7.2).
o Differences in electricity supply: It requires the monitoring of electricity quantities (rules see section 6.7.3) exported from production processes (the import is relevant for the determination of indirect emissions). For every type of electricity there are common elements (such as the emission factor).
o Finally, so-called ‘waste gases’ have to be taken into account, i.e. gases that have some heating value due to incompletely oxidised fuels and which occur as result of some production processes (e.g. the blast furnace of a steel plant) are treated with some special rules which evolved during the development of EU ETS benchmarks (see section 6.7.5).
• The next step is the addition of embedded emissions of the relevant precursor materials. The ‘attributed emissions’ of the production process only give the emissions of the CBAM good as if it were a ‘simple good’. However, if precursors are identified as relevant in Annex II, section 3 of the Implementing Regulation, i.e. if the good is a ‘complex good’, the precursor’s own embedded emissions need to be added. Only thereafter it is correct to use the term ‘embedded emissions’ of the goods produced.

Regulation, i.e. if the good is a ‘complex good’, the precursor’s own embedded emissions need to be added. Only thereafter it is correct to use the term ‘embedded emissions’ of the goods produced.

The concept is further described in section 6.2.2.3, and rules for monitoring of precursor-related data are given in section 6.8.2. • Finally, the embedded emissions as determined under the previous step still relate to the total production process and the total quantity of goods produced therein, over the whole ‘reporting period’, usually a (calendar) year. However, the importers need to report the embedded direct and indirect emissions per tonne of product, which are the so-called ‘specific (direct or indirect) embedded emissions’. Those specific embedded emissions are determined by dividing the process-level embedded emissions by the ‘activity level’, i.e. the total quantity (in tonnes) of the goods produced. Rules for determining the activity level are discussed in section 6.1.2.

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Note: The Commission’s template for the communication between operators and importers is designed to perform most of the relevant calculations automatically when the necessary data is input. It is, therefore, a valuable tool for you as an operator to provide all the data that importers are obliged to report, as it will help you to avoid incomplete data and to reduce calculation errors to a large extent. Therefore, it is highly recommended to use this template. It is described in