Technical Study on Indirect Emissions: Default Values, PPA Evidence, and the Question of Extension

The Commission lays the technical groundwork

On 8 June 2026, the Directorate-General for Taxation and Customs Union (DG TAXUD) published a technical study on indirect emissions in the CBAM. For three central questions, it offers a concrete recommendation. These concern the methodology behind the default emission factors for electricity, the conditions for claiming actual values, and the possible extension of indirect emissions to further sectors.

What indirect emissions cover under CBAM today

Indirect emissions do not arise in the production process itself. They occur when the electricity used in manufacturing is generated. In the definitive period, they are so far captured for only two sectors, namely cement and fertilisers. For iron and steel, aluminium, hydrogen and electricity, only the direct emission counts. Importers of cement or fertilisers therefore already have to include electricity emissions in their embedded emissions. Where verified actual values are missing, default values apply, based on country-specific averages of electricity generation plus a mark-up.

How reliable the default values for electricity are

The first question in the study concerns the methodology behind the default emission factors for electricity. Such values come into play whenever an importer does not provide verified actual data. The study argues for continuing to rely on country-specific grid averages, derived from internationally available data such as that of the International Energy Agency (IEA). It considers more complex approaches, for instance orienting values to the price-setting or the marginal electricity source, theoretically more precise but barely workable given data gaps and high effort. It also recommends updating the values annually so they keep pace with the rapid change in electricity markets. For affected importers, the level of these values is directly cost-relevant, because it determines the number of certificates to be surrendered.

The route to lower values runs through proof

The second question matters most to companies with a clean electricity supply. It concerns the conditions under which actual indirect emissions may be claimed. At its core are two routes of proof, namely a direct technical link to a power plant and a power purchase agreement (PPA) covering an equivalent amount of renewable electricity, each accompanied by verification.

The study concludes that the rules in force leave too much room for interpretation and therefore develops stricter criteria. For the direct link it requires a physical connection and seamless measurement through smart metering. For PPAs it proposes requirements on a) temporal correlation, b) geographical correlation, and c) the additionality of the renewable electricity. Additionality means that the electricity must come from new or otherwise incremental renewable capacity, not from already existing installations. This requirement would go beyond today's Regulation and would require an amendment of the legal framework. The study identifies resource shuffling, the purely accounting reassignment of clean electricity without a real climate effect, as the central risk. Its core message is that what matters is less whether actual values are allowed at all than the stringency and verifiability of the conditions.

The open question for steel and aluminium

The third question reaches furthest. It examines whether and how indirect emissions coverage could be extended to sectors that currently price only direct emissions, above all iron and steel as well as aluminium. The study sees the current partial coverage as a structural inconsistency, because EU producers already bear the indirect carbon costs through electricity prices shaped by the EU ETS, while importers in most sectors pay nothing for them. From a purely climate-policy perspective, it considers extension to all CBAM goods except electricity more effective than today's patchwork. The decisive factor, in its view, is the interaction with Indirect Cost Compensation (ICC), through which Member States currently relieve part of their industry's burden. Full extension while compensation remains unchanged would amount to double protection and would be hard to justify. The study therefore assesses a phased introduction, or a solution linked to compensation, as more viable. For importers of steel and aluminium this is a signal with lead time, because an extension would widen the assessment base noticeably. Nothing has been decided. The study lays the technical groundwork for a later decision by the Commission.

Outlook

The study is a preparatory step whose recommendations feed into the further work on the emissions methodology, on which the Commission already gathered feedback in 2025. Importers of cement and fertilisers should assess whether switching from default values to verified actual values via a power purchase agreement pays off; importers of steel and aluminium should track how the Commission reconciles a possible extension with Indirect Cost Compensation. We will continue to monitor these developments for you.

Support

If you would like to understand how the treatment of indirect emissions affects your CBAM calculation, for instance whether proving actual electricity values through a power purchase agreement is worthwhile for your cement or fertiliser imports, or what a possible extension to steel and aluminium would mean for you, please get in touch at helge@kolum.earth.