CBAM Terms Explained

CBAM Regulation 

• • CBAM (Carbon Border Adjustment Mechanism) – A regulation introduced by the EU to ensure that imported goods follow similar carbon emission rules as goods produced in the EU.

• • CBAM Certificate – A digital proof that importers need to buy, showing they have paid for the emissions linked to their imported goods.

• • Reporting Obligation – In the CBAM context: the legal requirement for importers to report the amount of CO₂ emissions linked to the goods they bring into the EU.

• • EU Emissions Trading System (EU ETS) – A system where companies in the EU buy and sell permits to emit CO₂, helping to reduce overall emissions.

• • Transitional Period – A phase before the full CBAM enforcement, where reporting is required for importers but payments for emissions are not yet necessary (October 2023 – December 2025).

• • Implementation Period – The phase starting in January 2026 when importers must buy CBAM certificates equivalent to their emissions.

• • CN (Common Nomenclature) Code – A classification code for traded goods, used to identify which products are subject to CBAM. CN Codes are the EU version of HS codes (Harmonized System) used for international trade.

• • UN/LOCODE of installation – The United Nations Code for Trade and Transport Locations of the factory (typically 5 letters).

• • Aggregated Goods Category – A classification used in CBAM to group similar goods under the same reporting framework e.g. iron or steel products. You can find a list of all accepted aggregated goods categories in our Excel Upload Template in the tab “Aggregated Goods Category”. 

• • Carbon Leakage – When companies move production to countries with weaker climate regulations to avoid carbon costs. However, carbon emissions result in the same amount or even higher and are not reduced. 

• • Carbon Price – The cost assigned to carbon emissions, which companies must pay to encourage lower emissions.

• • Carbon Price in Jurisdiction – A fee applied to emissions within a country, which may reduce CBAM obligations if already paid.

• • Carbon Price Rebate – A financial compensation or credit received for carbon costs, which must be reported under CBAM.

Actors

• • Importers – In the CBAM context: companies that bring goods from outside the EU into the EU.

• • Reporting Declarant – In the CBAM context: The importer or representative responsible for submitting CBAM reports to the European Commission, detailing the embedded emissions of imported goods and purchasing the required CBAM certificates.

• • Third-Country Producers – In the CBAM context: companies producing goods outside the EU that may be affected by CBAM if they export to the EU.

• • Installation Operators –  This is a natural or legal person who operates an industrial facility in which CBAM-relevant goods are produced. This person or entity is responsible for monitoring and reporting the direct and indirect emissions associated with production.

Article & Production 

• • Sustainable Production – Manufacturing processes that reduce environmental impact, including lower emissions and cleaner energy use. 

• •  Embedded Emissions in Precursors – Emissions from raw materials or intermediate products used in the final production process.

• •  Precursor Goods – Raw materials or intermediate products whose emissions must be accounted for in the final product’s total emissions.

• • Production Process – The specific methods and steps used to produce goods, impacting emission calculations.

• • Installation – A stationary technical unit where production occurs, and emissions are generated. This could be a complete factory or just a part of a factory. 

Emission Accounting

• • Carbon Emissions – The amount of carbon dioxide (CO₂) released into the air during the production of goods.

• • CO₂e (Carbon Dioxide Equivalent) – A unit used to express the total impact of different greenhouse gases (e.g. methane, nitrous oxide) in terms of the equivalent amount of carbon dioxide that would cause the same level of global warming.

• • Greenhouse Gases (GHG) – Gases that trap heat in the Earth’s atmosphere, contributing to global warming and climate change (e.g., CO₂, methane).

• • Direct Embedded Emissions – Emissions directly generated by the factory producing the goods and attributed to the relevant production process. This includes emissions from on-site fuel combustion, process heat, material inputs, waste gases, and any raw materials (precursors) used during production.

• • Indirect Embedded Emissions – Emissions resulting from the generation of electricity consumed during the production process at the manufacturing installation, as well as emissions embedded in any relevant precursor materials. 

• • Scope 1 Emissions – Direct emissions from a company’s own production processes, such as burning fuel. 

• • Scope 2 Emissions – Indirect emissions from purchased electricity and energy used in production.

• • Scope 3 Emissions – Other indirect emissions, including those from suppliers and transport.

• • Benchmarking – Comparing emissions data with industry standards to assess a company’s performance.

• • Default Values – Predefined emission values set by the EU, used if actual emission data from production is not available.

• • Actual Emissions Data – The real measured CO₂ emissions from a supplier's production process producing, which can be used instead of default values.

• • Unit – The unit used for reporting embedded greenhouse gas emissions is “ton of CO2e”, which means one metric ton of carbon dioxide, or an amount of any other greenhouse gas listed in Annex I of the CBAM regulation with an equivalent (“e”) global warming potential. 

• • Carbon Intensity – The amount of CO₂ emitted per unit of product (e.g. per ton of steel or cement).

• • Direct Emissions Related to Heat Flows – Emissions from heat consumption used in production, whether generated on-site or received from external sources.

• • Indirect Emissions from Electricity – Emissions generated from the electricity used in production, regardless of where the electricity was produced.

• • Monitoring Methodology – The process suppliers must follow to track and report emissions data accurately.

• • Calculation-Based Approach – A method of determining emissions based on emission factors and recorded fuel consumption.

• • Measurement-Based Approach – A method of determining emissions through direct monitoring of exhaust gases from production.

• • Power Purchase Agreement (PPA) – An arrangement where a supplier receives electricity from a specific external power plant and reports its emissions accordingly.