CBAM Monitoring Plans for Non-EU Producers

The CBAM Regulation places the reporting obligation on the EU importer, not on the operator of an installation outside the EU. The authorized CBAM declarant reports the embedded emissions of imported goods and surrenders the corresponding certificates. The European Commission nevertheless published a 15-page guide for non-EU operators on 14 August 2026 because importers, and operators that use imported goods as precursors, ultimately need emissions data from the installation that produced them.

For a non-EU producer, the practical response is a monitoring plan that documents how the installation determines the embedded emissions of each CBAM good. Guidance Document 2 sets out seven planning steps before the plan is written, and section A.5 of Annex II to the Methodology Act provides the plan outline. These steps are not a direct legal obligation on the producer, but they determine whether the importer can use verified actual data.

Actual emissions may replace CBAM default values only when they have been verified by an accredited verifier. The verifier must hold accreditation from a National Accreditation Body in the EU for the installation’s industrial sector. Without a monitoring plan there is no basis for verification. Without verified data, the declarant uses the default values established under Annex IV to the CBAM Regulation, leaving the producer with no control over the emissions value applied to its goods.

Source: European Commission, DG TAXUD, Guidance Document 2: Quick guide for non-EU operators on CBAM implementation, 14 August 2026.

CBAM covers the cement, iron and steel, aluminium, fertilizer, hydrogen and electricity products listed in Annex I to the CBAM Regulation. A non-EU producer typically enters the data chain in one of three ways: direct sales to an EU customer, sales to a manufacturer that uses the product as a precursor for another CBAM good, or sales through a trader that subsequently imports into the EU. In each case, the request for embedded emissions data ultimately reaches the installation that produced the goods.

CBAM embedded emissions follow EU ETS accounting rules

Embedded emissions under CBAM comprise the direct emissions of the production process, indirect emissions from electricity where those emissions are in scope, and the embedded emissions of precursors. The concept follows EU ETS accounting rules rather than the GHG Protocol or ISO 14067, so an existing product carbon footprint is not automatically a CBAM figure. Indirect emissions apply only to Annex I goods that are not also listed in Annex II. In CBAM terminology, indirect emissions refer to electricity only; emissions associated with imported heat are treated within the direct-emissions calculation.

Exhibit 1 · How non-EU operator data reaches the declarant

The Commission provides two routes for sharing emissions data. The main difference is whether the operator uploads verified information once through the CBAM Registry or sends the full documentation separately to each counterparty.

Table 1 · Options for sharing verified emissions data

Source: Guidance Document 2, sections 2 and 5. Registration in the O3CI module runs through the Commission’s CBAM Registry and reporting pages.

The seven steps are sequential. Installation boundaries determine the production processes, the production processes determine which parameters must be monitored, and those parameters determine the instruments, records and controls that the monitoring plan must document.

Table 2 · Seven steps for preparing a monitoring plan

Source: Guidance Document 2, section 3.

Step 1 sets the production-process boundaries

A production process is the boundary used to attribute emissions to specific goods and is defined around the functional unit shared by those goods. Because functional units are linked to CN codes, a literal application can create many separate processes. The Methodology Act therefore allows goods to be aggregated under defined rules. For operators familiar with the EU ETS, the production process is broadly analogous to a benchmarking sub-installation.

Step 2 sets the reporting period

During the definitive period, the reporting period is generally the calendar year in which the goods were produced. Where sufficient evidence identifies the actual production period, that period may be used, but never a period earlier than 2026. If the production period cannot be identified, goods imported in 2026 use 2026 and later imports default to the year of import. Electricity imports always use the year of import.

Steps 5 and 6 set the deductions applied to embedded emissions

Step 5 determines the embedded free allocation associated with the production process. That amount is deducted from embedded emissions when the declarant calculates its certificate obligation. The operator may use CBAM default benchmarks or values based on actual data. Because EU ETS free allocation is phased out as CBAM is phased in, the production year of the goods and their precursors becomes part of the calculation.

Step 6 captures any effective carbon price already paid in the country of production. The amount reduces the CBAM obligation from 2026 and must be reported net of applicable rebates. Under an emissions trading system, free allocation counts as a rebate. The resulting carbon price is attributed to production processes and goods categories in euros per tonne of CBAM good, with the same treatment applied to relevant precursors.

Step 7 establishes the data-flow and control system

The final step requires procedures that control how data moves through the calculation. The process begins with a risk assessment covering the likelihood and potential impact of error. High- and medium-risk areas are addressed through controls such as corroborating data sources, independent review, redundant instruments and defined calibration cycles. The operator then reassesses the residual risk and strengthens controls where material risk remains. The Methodology Act does not prescribe the control system in detail, so the guidance points to CBAM Guidance Document 3 and the EU ETS Monitoring and Reporting Regulation.

Steps 3 and 4 define the operational workload. Step 3 identifies the parameters that must be monitored and Step 4 assigns the method, instrument or data source for each one. Together they determine whether an installation can support verified actual emissions or must rely on default values.

Exhibit 2 · Five parameter groups to monitor

How the monitored data builds into the reported figure

Guidance Document 3 names four levels on the direct side and four on the indirect side, and the monitoring plan has to supply the inputs for each. Direct emissions are the combustion and process emissions of the installation, and they also include the emissions produced in making any heat or cooling the installation consumes, so heat taken from an adjacent installation or from a district heating network sits inside the direct figure. Direct attributed emissions are the share belonging to one production process, determined from the installation’s direct emissions together with the relevant heat flows, material flows and waste gases. Direct embedded emissions add the embedded emissions of the precursors used in that process. Dividing by the activity level gives the specific direct embedded emissions, the figure the importer reports.

Indirect emissions follow the same four levels for the electricity a process consumes. Electricity generated on site is worth separating out: the fuel burned to produce it counts as a direct emission of the installation, but electricity production is treated as its own production process, so those emissions are attributed to the electricity rather than to the other goods made at the site.

The unit matters at the last step. Specific embedded emissions are expressed in tonnes of CO₂e per tonne of goods, except where the functional unit is not the tonne of product. Cement is reported per tonne of clinker and fertilizers per kilogram of nitrogen, which is why clinker content and nitrogen forms are collected as qualifying parameters alongside the emissions data.

Table 3 · From installation emissions to the figure the importer reports

Source: Guidance Document 3: CBAM methods for the calculation of emissions embedded in goods, section 4.1.3.

Direct-emissions methods and compulsory cases

Direct emissions may be determined by calculation, using fuel and material quantities with the relevant calculation factors, or by measurement, using greenhouse-gas concentrations and flue-gas flow at the emission source. The choice is generally open provided the Monitoring Regulation is followed. Two cases are prescribed: PFC emissions from primary aluminium production require the overvoltage-based methodology, and nitrous oxide from nitric acid production requires the measurement-based method. Where an installation contains several production processes, internal fuel and material flows may also need to be monitored so emissions can be attributed correctly.

Heat and electricity monitoring rules

Only measurable heat is monitored as a separate heat flow, meaning heat carried in a medium whose flow can be measured. Fuel burned directly in a kiln or dryer is accounted for through fuel consumption. Heat consumption is attributed to each production process and emissions associated with exported heat are deducted. Indirect emissions cover electricity only. The electricity factor may come from the published grid default, the operator’s own power or CHP plant, or a named supplier with verified data and evidence of a direct connection or qualifying power purchase agreement. Where several sources supply the period, a consumption-weighted average applies unless the operator can demonstrate that a specific source served a defined process.

Precursor data requirements

A precursor is any Annex I good used in a production process, and the Methodology Act provides no de minimis threshold for small quantities. Purchases used to build or maintain infrastructure and equipment are excluded. In-house precursors require no separate supplier request. For a purchased precursor, use of actual data requires information from the producer and a valid positive verification report for the relevant production period. The operator needs the following information for each purchased precursor, by CN code and, where relevant, reporting period and installation.

• The installation or installations where it was produced, and the applicable reporting periods.
• Its specific direct and indirect embedded emissions, meaning the emissions attached to one tonne of it.
• The production route, and the additional parameters the importer has to report when the final good enters the EU.
• The reporting period the precursor producer applied, which by default is the year the complex good was produced.
• Where actual data is used for a precursor produced off site, the accredited verifier’s report covering the period in which the precursor was produced.
• Its specific embedded free allocation, and any carbon price paid where it was produced.

The quantity of each precursor used in a production process must be monitored regardless of whether actual or default embedded-emissions data are used. Precursors originating in the EU or in exempted countries have zero specific embedded emissions, although their identity and quantities are still reported. The treatment of indirect emissions also depends on the Annex II status of the final good and its precursor, which can determine whether electricity decarbonization in the supply chain affects the declared CBAM figure.

Default values are the fallback when actual data cannot be supported

Activity quantities come from measurement instruments or from purchase records reconciled with period-end stock. Calculation factors may come from applicable standard sources, including national GHG inventories submitted under the UNFCCC and the Paris Agreement, or from laboratory analysis. Where several data sources are available, the Methodology Act requires the best available and most accurate source. If no qualifying monitoring method is available, including where a precursor supplier does not provide the required data, the operator falls back to CBAM default values. Good-specific qualifying parameters, such as clinker content or nitrogen forms in mixed fertilizers, are reported separately from this hierarchy.

After the seven planning steps are complete, the selected monitoring methods are consolidated into a written monitoring plan. The plan must identify each measurement instrument, reading interval and source used for standard values. Section A.5 of Annex II to the Methodology Act sets out the minimum required content.

The plan must be clear enough for an independent person familiar with GHG monitoring to follow the methodology and detailed enough to guide installation personnel. It should include the applicable calculation steps and every calculation factor not determined through analysis. The verifier needs an English version, and the Commission also recommends a local-language version for operating staff. The methodology may be revised where objectively justified, including changes in technology, fuels, materials, goods produced, data sources or the control system.

Annual review, reporting and version control

The seven planning steps establish the initial framework. Monitoring then runs continuously, and the plan is reviewed at least once in each reporting period against the technologies in use, the goods produced, any new fuels or materials, and the availability of more accurate methods. Changes are documented and only the current approved version is used.

After the reporting period closes, the emissions attributed to each production process are divided by its activity level, such as tonnes of product or another functional unit for the relevant CBAM category. This produces the specific embedded emissions of each good, which is the figure required by the importer and can be used for customers until the next period’s compilation is finalized.

Where actual emissions data are used, the operator prepares an annual emissions report and a summary, with a declarant-specific addendum where electricity embedded emissions are based on actual data. Article 10 of the Methodology Act requires the prescribed templates, which standardize the information shared with declarants across member states.

Emissions and free-allocation data can replace CBAM default values only after verification by an accredited verifier. This applies both to information provided to an authorized CBAM declarant and to information passed to another operator that uses the goods as precursors. Appointing the verifier is the non-EU operator’s responsibility.

The verifier’s accreditation must be issued by a National Accreditation Body located in the EU, remain valid when the final verification report is issued, and cover the industrial sector of the installation. The Commission recommends appointing the verifier early in the reporting period to avoid year-end capacity constraints. The verifier then determines the evidence required, the verification timetable and whether a site visit is needed.

Carbon-price information follows a separate certification route. Article 9 of the CBAM Regulation requires the price paid in the country of production to be certified by a person independent of both the authorized CBAM declarant and the third-country authorities. The implementing act sets competence requirements for those certifiers. An accredited emissions verifier may also meet those requirements, allowing one provider to perform both engagements while keeping the two assurance requirements distinct.

The Commission’s framework is fundamentally a controlled data-management process. The monitoring plan must identify instruments and reading intervals, each reported figure must be traceable to its source, controls must leave evidence that they operated, and the final output must follow a prescribed template. A spreadsheet can assemble the first report. The harder problem is maintaining version control, traceability and evidence over successive reporting periods. TerraNova structures each of the seven steps as a maintained record, then generates the monitoring plan, annual report and verifier evidence pack from the same underlying data.

A digital twin of the operational boundary

The starting point is a digital twin of the operational boundary. Each installation is modelled as its production processes, with the system boundary of every process drawn as the Methodology Act defines it and every CN code mapped to the process that produces it. Each process then carries its inputs and outputs as named streams: fuels and process materials, measurable heat received and exported, electricity by source, precursors by CN code and supplier, waste gases moving between processes, and the goods and saleable by-products leaving the boundary.

An emission factor is assigned to every stream, with the origin of that factor recorded against it: a standard value from applicable literature, a laboratory analysis, the published grid default, an auto-producer factor derived from the fuel mix, or a supplier’s verified figure. Because the twin holds the streams and the factors in one structure, attributed emissions, embedded emissions and the specific embedded figure are calculated rather than assembled, and the whole calculation can be re-run when a quantity, a factor or a supplier changes.

The same structure identifies where decarbonization would change the declared figure. Running the twin stream by stream shows which fuel, which heat flow, which electricity source and which purchased precursor carries the attributed emissions of each production process, so options inside the production boundary and options in the precursor chain can be ranked against the unit the customer sees. It also shows where a change would not reach the declared figure, because the emissions it removes fall outside the boundary of the good being declared, which is worth knowing before capital is committed.

Table 4 · TerraNova functions by monitoring step

This structure keeps the monitoring plan, annual emissions report and verification evidence on the same data foundation. The plan reflects the current registers, the annual report aggregates the locked period data, and the verifier can trace each reported value back to the records from which it was calculated.

The monitoring plan is designed to answer the importer’s reporting requirement, but the same attribution also identifies where carbon exposure sits within the operation. Emissions are assigned to production processes and then to the fuel and material streams, electricity sources and precursors within those processes. Because the output is expressed per unit of product, it can also support decisions on which operational changes most directly reduce the CBAM figure.

Table 5 · Attribution outputs and management use

Three features make the attribution particularly useful. Default values give missing data an immediate compliance cost. The embedded free-allocation adjustment declines as EU ETS free allocation is phased out, increasing the share of physical emissions exposed to CBAM. Any effective carbon price already paid at home reduces the certificate obligation. For a producer with several sites, products and precursor suppliers, the resulting dataset shows where CBAM exposure is concentrated and allows abatement options to be ranked by their effect on the declared figure.

Climate Decode · Advisory

Can your installation produce a verifiable CBAM figure?

Climate Decode builds the monitoring plan, the digital twin of your operational boundary and the verification trail, and runs them in TerraNova.

Sources

European Commission, Directorate-General for Taxation and Customs Union, Indirect Taxation and Tax Administration, CBAM, Energy and Green Taxation: “Guidance Document 2: Quick guide for non-EU operators on CBAM implementation” and “Guidance Document 3: CBAM methods for the calculation of emissions embedded in goods”, both Brussels, 14 August 2026, first publication for the definitive period. Provisions referenced within those documents: Regulation (EU) 2023/956 establishing the CBAM, Annexes I, II and IV; the Methodology Act, Articles 1, 10 and 11 and Annexes I, II, III and IV, including Annex II sections A.3, A.5, B.5.4, C, D.2.4, D.4.1, D.4.2, E and G, and Annex III section A.2.2; the Default Values Act, Annex II; the Monitoring Regulation; the implementing act adopted under Article 9 of the CBAM Regulation; CBAM guidance documents 1, 4 and 5a to 5f; and, for the EU ETS, the Monitoring and Reporting Regulation together with its guidance document 6 on data flow activities and control systems. Registration in the O3CI module runs through the Commission’s CBAM Registry and reporting pages.

This article is analytical research provided for information only and is not legal, tax or investment advice.