Verification of Embedded Emissions under the EU Carbon Border Adjustment Mechanism (CBAM)

The European Union Carbon Border Adjustment Mechanism (EU CBAM) is an environmental policy instrument designed to limit carbon leakage and ensure that imported goods bear a carbon cost corresponding to the embedded emissions generated during their production, in line with the gradual phase-out of free allocation under the EU Emissions Trading System (EU ETS).

From 1 January 2026, CBAM entered its definitive period. The mechanism currently applies to goods identified by CN codes in six sectors: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. The principal legal obligations rest with authorised CBAM declarants in the EU; however, non-EU producers must establish monitoring plans, define installation and production-process boundaries, calculate embedded emissions and provide verifiable data to their importing customers.

When an authorised CBAM declarant uses actual embedded emissions values in its annual CBAM declaration, the production installation's emissions report must be independently verified under the CBAM framework. GIC Vietnam provides embedded emissions verification services to assess the conformity of the monitoring plan, calculation methodology, data and control system, and to conclude with reasonable assurance whether the report is free from material misstatements.

The general de minimis threshold is determined by each importer's total annual import mass: CBAM goods other than electricity and hydrogen become subject to the full obligations when they exceed 50 tonnes of net mass per year; electricity and hydrogen are not covered by this threshold-based exemption. Scope must be determined by reference to the specific CN code, origin, type of goods and importer, rather than solely by the sector name or the product's commercial name.

For goods imported during 2026, the authorised CBAM declarant must submit its first CBAM declaration and surrender the corresponding number of CBAM certificates no later than 30 September 2027. Certificate prices are linked to EU ETS allowance auction prices, and the sale of certificates begins on 1 February 2027. A carbon price effectively paid in the country of origin may be deducted where the applicable conditions are met and appropriate evidence is available.

CBAM verification is performed at the production installation level and relates to specific goods, CN codes, production processes/production routes and monitoring periods. The CBAM methodology determines emissions at installation level, attributes emissions to individual production processes and then determines the specific embedded emissions (SEE) of the goods. Consequently, an organisation-level GHG inventory report or product carbon footprint prepared under another standard does not automatically replace a CBAM emissions report.

For complex goods, embedded emissions also include the emissions of relevant precursors within the scope of CBAM. If an installation uses actual data for externally purchased precursors, a valid verification report from the precursor-producing installation and traceability evidence are required. Where verified actual data are unavailable, the rules on default values must be applied in accordance with the relevant requirements.

Verification is risk-based, materiality-based and evidence-based, covering the entire reporting period. Depending on the sector, production process and use of data, the verification team reviews the following principal matters:

• Conformity of the monitoring plan with the CBAM methodology and its implementation in practice.
• Installation and system boundaries, production processes, production routes and goods by CN code.
• Completeness of emission sources, fuels, materials, heat flows, electricity, waste gases and relevant transferred flows.
• Activity data, calculation factors, analytical results, measurement methods, equipment calibration and uncertainty.
• Methods for attributing emissions to production processes and goods; production levels, direct emissions, indirect emissions where applicable, and specific embedded emissions.
• Precursor data, verification reports from upstream installations, production year, origin and traceability evidence for complex goods.
• Data flows, IT systems, internal control activities, treatment of data gaps, changes and data corrections.
• Consistency between the emissions report, source records, aggregated data and information transferred through the CBAM Registry.

An on-site visit to the installation is an important component of the verification process, particularly for the first verification period. The verification team compares the monitoring plan with the physical reality of the installation; observes processes, measuring equipment and monitoring systems; interviews personnel; traces data; and performs necessary tests. Virtual site visits or waivers of on-site visits may be applied only where strict conditions concerning previous visits, complexity, changes to the installation and the results of the risk analysis are fully met; reasonable assurance must still be achieved in all cases.

• The latest version of the monitoring plan and a description of the installation/production processes.
• The CBAM emissions report for the period to be verified and detailed calculation workbooks.
• Lists of goods, CN codes, production routes, production levels and production periods.
• Flow diagrams for materials, energy and data, including relevant control points.
• Invoices, weighbridge tickets, meter readings, operating logs and source data.
• Records of measurement, calibration, sampling, analysis and uncertainty assessment.
• Verified reports/data for precursors, heat or electricity, where applicable.
• Records of changes, discrepancies, data gaps and corrective actions.