The first draft of the default values was published on November 7 and outlined provisional carbon emission numbers for CN Codes under CBAM. In response, some industry participants and member states said that for some CN codes and origins the default values were too low if compared with alternative sources.
The EU’s CBAM is set to enter its definitive phase on January 1, with costs depending on the EU’s Emission Trading System (ETS) auction price and the embedded emissions in the CBAM good.
To calculate embedded emissions, importers have the choice of using benchmark rates which are specific to the CBAM good, or default values which are average embedded-emission intensities for each product and production route.
While leaked provisional benchmarks were largely in line with market expectations for aluminium and steel industries, the default values released by the European Commission in early November were not.
The feedback from member states centered around the methodology for calculating default values, with stakeholders saying the proposed method was unreliable.
The Commission subsequently published an approach for revising the default values.
With just over three weeks to go before carbon liabilities at the border kick in, the EU Commission suggested the following approach in the interest of time.
Firstly, it would identify priority cases for values that require updating most urgently. This will be determined by an analysis of the reliability of default values developed by the Joint Research Centre (JCR), which will include consideration of feedback received from stakeholders and the data model used by the JRC for calculating the values.
Once priority cases have been identified, the Commission’s JRC will seek to “improve the reliability of some of their estimates, taking into account additional information provided by stakeholders,” according to the document. Where concerns could be addressed and rectified the new values will be used as default values.
If it is not possible to improve the reliability of default values, the Commission suggests basing the default values for certain products on emission data from the CBAM Transitional Registry.
In limited instances, where the reliability of default values cannot be improved via either of these methods, default values should be based on the average emission intensity of the ten exporting countries with the highest emission intensities.
In addition, the Commission proposed to “revise more structurally the approach to determining default values, with a view to updating the values by 2027 at the latest,” it said.
The analysis for this revision will start immediately after the adoption of the Implementing Act containing the default values for 2026.
Mark-ups to be phased in gradually to compensate for issues with default values
Elsewhere, the Commission noted that to compensate for issues with calculating default values, it will phase-in the use of mark ups from 2026 onward.
CBAM mark ups are essentially an additional penalty which is applied when a CBAM declarant uses default values instead of actual emission data.
As the Commission continues to amend its methodology, default values are still up in the air. To account for this, it proposed a “balanced approach” for most CBAM sectors for the use of mark ups.
The mark up will be 10% in 2026, 20% in 2027 and — pending final confirmation of the default values — 30% in 2028.
EU Commission identifies two shortcomings for calculating iron and steel default values
The European Commission identified two shortcomings in the calculation of default values. The first is that the calculation approach used relies on energy balance data from the International Energy Agency (IEA), which could contain errors.
Secondly, the approach to calculate the values used by the JRC uses a model that attempts to reflect if a high-carbon good is additionally processed in another country then it is included in the default values of the more processed good. This, however, does not cover the entire value chain of the CBAM good and could result in too low values for some stainless-steel goods.
The Commission also identified a series of calculation errors across steel alloy grade, American castings, US forgings and emissions from the foundry casting process, among other things.
To solve issues with the methodology and subsequent default values, the Commission has changed its approach to calculating these default values.
The default values have been checked against those on the CBAM Transitional Registry. For each group, the default value will be compared with the 90th percentile (Q90) of actual emission data on the registry.
If the Q90 actual emission data on the registry is higher than the default value and lower than the average emission intensity of the ten exporting countries with the highest emission intensity, the default value will be updated.
If the Q90 actual emission data on the registry is higher than the existing default value and higher than the average emission intensity of the ten exporting countries with the highest emission intensity, then further action is required.
To avoid “extreme increases that may be difficult to justify,” the Commission has placed a 400% cap on how much the default value can change to “mitigate data quality issues in the CBAM registry.”
Concerns over discrepancies in default values for primary and secondary aluminium
Following the publication of the draft default values in early November, the aluminium industry raised concerns around the data for primary and secondary aluminium.
According to feedback from the market, some of the values for primary aluminium were “very low in comparison to data from commercial providers” for countries like Cameroon, Brazil, Egypt, Ghana, Iran, Tajikistan, Turkey, US and Venezuela.
The market also noted that for secondary aluminium, the default values were “too low, and do not sufficiently consider the trade in precursors made of primary aluminium.”
While the Commission did not offer a solution for these concerns, it said that an assessment is continuing which will suggest scope for correction, however it is likely to be to a “lesser extent than for the steel sector.”
Going forward, the Commission said that a more “granular” analysis is needed to “define an appropriate way forward.” The Commission did not disclose when this would be published, but it provided an overview of what country default values could be subject to change. These included Egypt, India, Mozambique, Turkey and the US, among others.
CBAM is entering its definitive phase on January 1, 2026, while CBAM certificates will only be able to be purchased from 2027 onward.
