Guidance Documents on the Definitive Period of the EU Carbon Border Adjustment Mechanism Published

Recent Developments
Guidance Documents on the Definitive Period of the Carbon Border Adjustment Mechanism Published.

On 14 August 2026, the European Commission published a comprehensive package of guidance documents setting out the implementation of the monitoring, reporting, verification and free allocation adjustment rules applicable during the definitive period of the Carbon Border Adjustment Mechanism (“CBAM”). The guidance documents provide detailed explanations on the core CBAM concepts, obligations of operators of installations established outside the European Union (EU), methodologies for the calculation of embedded emissions, and sector-specific implementation requirements.

The Guidance Documents are available here, and the announcement published by the Turkish Ministry of Trade is available here (in Turkish).

Background

Following the reporting-focused transitional period implemented between 1 October 2023 – 31 December 2025, CBAM entered into its definitive period on 1 January 2026, during which financial obligations became applicable.

CBAM imposes a carbon cost on imports of certain goods in the cement, iron and steel, aluminum, fertilizers, hydrogen and electricity sectors into the EU, reflecting the carbon costs borne by EU producers under the EU Emissions Trading System (“EU ETS”) in respect of the embedded emissions generated during the production of those goods.

Under the definitive period, EU importers are required to purchase and surrender CBAM certificates corresponding to the embedded emissions of imported goods. As a result, CBAM has evolved from a reporting and data collection mechanism into a compliance obligation with direct financial implications.
In this context, the first annual CBAM declarations covering imports made during 2026 must be submitted by no later than 30 September 2027. In addition, certain exemptions apply to imports below the annual net mass threshold of 50 tones, and EU importers are required to hold a specified number of CBAM certificates during the year.

Furthermore, pursuant to the proposal submitted by the European Commission on 17 December 2025, Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards the extension of its scope to downstream goods and anti-circumvention measures (COM(2025) 989 final), which has not yet been adopted, the scope of CBAM is envisaged to be expanded to cover additional downstream products and new anti-circumvention measures are proposed. If adopted, the proposal may significantly broaden the range of products and supply chains subject to CBAM-related obligations.

From a fiscal standpoint, the Guidance Documents also confirm that a carbon price effectively paid in the country of production may be taken into account in reducing the CBAM obligation, a point of particular significance for Turkish exporters in light of the Turkish ETS established under the Climate Law No. 7552.

The financial dimension of the CBAM’s definitive regime and its interaction with the Turkish ETS are examined in further detail in the July 2026 issue of our ESG Newsletter, available here.

What Does the Guidance Documents Introduce?

The European Commission has published a total of ten guidance documents relating to the implementation of the definitive period of the EU CBAM, comprising four general and six sector-specific guidance documents.

The guidance documents provide detailed implementation guidance and illustrative examples on topics such as the calculation of embedded emissions, the determination of the free allocation adjustment, data management relating to precursors, verification processes, and sector-specific calculation methodologies.

1. General Guidance Documents

Guidance Document No. 1: Introduction to CBAM Concepts

The guidance document explains the key concepts applicable during the definitive period of the CBAM and the operation of the mechanism. It establishes a common terminology and framework regarding CBAM goods, relevant actors, embedded emissions, CBAM certificates and the main elements used in calculating the CBAM obligation.

In this respect, the key elements of the Guidance are as follows:

• CBAM obligation is not determined solely on the basis of the embedded emissions of the imported goods. The effect of free allocation under the EU ETS and any carbon price effectively paid in the country of production are also taken into account when calculating the CBAM obligation. As a result, the number of CBAM certificates to be surrendered may differ for products with the same level of emissions.
• While participation by producers established outside the EU is not legally mandatory, the Guidance notes that, where producers do not provide the necessary emissions and carbon price data, EU importers may be required to rely on default values.
• The Guidance recalls that the CBAM obligation will be phased in progressively in parallel with the phase-out of free allocation under the EU ETS and that, as of 2034, embedded emissions will be fully covered by CBAM certificates.
• It further clarifies the scope of the de minimis exemption applicable to imports below the annual net mass threshold of 50 tonnes (except for electricity and hydrogen), as well as exemptions relating to certain military imports and specified goods originating in Iceland, Liechtenstein, Norway and Switzerland.
• The Guidance explains that, in order for carbon pricing mechanisms applied in third countries to reduce the CBAM financial obligation, the relevant carbon price must have been effectively paid in respect of the goods or their precursors and must be supported by appropriate evidence.

The Guidance is available here.

Guidance Document No. 2: Quick Guide for Non-EU Operators on CBAM Implementation

The Guidance sets out the practical requirements for monitoring, reporting and verification that operators of installations established outside the EU must fulfil in order to prepare emissions data for use during the definitive period of the CBAM. In this respect, the key elements are as follows:

• The Guidance introduces a seven-step methodology for the development of a Monitoring Plan for the monitoring, calculation and reporting of emissions relating to CBAM goods produced by operators established outside the EU.
  • Step 1: Define the installation boundaries, production processes and production routes. CBAM goods sharing the same functional unit are grouped under the same production process, while certain CN codes may be aggregated into broader production processes to reduce the monitoring burden.
  • Step 2: Define the reporting period. During the definitive period, the monitoring period is, as a rule, the calendar year. Where the date of production can be reliably determined, the actual production period may be used; otherwise, emissions are generally attributed to the calendar year in which the import takes place. For electricity imports, the reporting period corresponds to the year of import.
  • Step 3: Identify the data to be monitored. This includes direct emissions, heat and electricity consumption, indirect emissions, precursors and additional product-specific parameters.
  • Step 4: Determine the appropriate monitoring methodology for each data category. Data may be monitored using measurements, existing records, laboratory analyses or, where permitted under the applicable legislation, default values.
  • Step 5: Collect the data required to determine the level of free allocation that would apply if the installation were located in the EU.
  • Step 6: Collect and report the data required for any carbon price effectively paid in a third country to be taken into account in reducing the CBAM obligation. In this regard, operators are expected to incorporate relevant carbon pricing information and supporting documentation into their monitoring system.
  • Step 7: Establish and regularly update data flows, risk assessments and internal control mechanisms in order to ensure the accuracy and integrity of the monitored data.
• Actual emissions and free allocation data may only be used where such data have been verified by an accredited verifier. In this regard, operators are expected to establish the necessary data collection and internal control mechanisms to support the verification process.
• Operators established outside the EU may register in the Operators of Third Country Installations (O3CI) module of the CBAM Registry in order to share their data with multiple EU importers.
• The Guidance highlights that a significant portion of the information required by EU importers for the preparation of annual CBAM declarations will need to be provided by producers established outside the EU. Accordingly, it recommends the establishment of data-sharing arrangements between producers and EU importers at an early stage.

The Guidance is available here.

Guidance Document No. 3: CBAM Methodologies for the Calculation of Embedded Emissions of Goods

The Guidance provides a detailed explanation of the methodology for calculating the embedded emissions of CBAM goods and serves as a practical guide for the monitoring, reporting and data management processes applicable during the definitive period. In this respect, the key elements are as follows:

• The Guidance explains how emissions should be attributed among relevant goods where an installation contains multiple production processes or produces multiple products. In this regard, it includes examples illustrating how emissions arising from heat flows, electricity consumption, waste gases and precursors should be allocated to specific products and production processes.
• For precursors with the same CN code sourced from multiple installations, the Guidance explains that, as a rule, the weighted average of the embedded emissions of the relevant precursors should be used. However, where an operator can demonstrate that only precursors from a specific source or sources were used in a particular production process, a separate calculation may be performed for that production process. The Guidance further states that actual emissions data relating to precursors may only be used where such data is supported by a verification report issued by an accredited verifier for the installation producing the relevant precursor.
• With respect to the minimum content of the Monitoring Plan, the Guidance specifies that it should include, among other things, a description of the installation and production processes, goods produced by CN code and functional unit, monitoring methodologies, emission sources, precursors and their suppliers, heat and electricity flows, and control mechanisms aimed at ensuring data quality.
• The Guidance also includes practical examples regarding the establishment of a control system to ensure data quality. These examples cover risk assessments relating to data sources, the implementation of independent control mechanisms, regular calibration of measurement equipment, the recording of data inconsistencies and the monitoring of corrective actions.
• As regards the calculation of indirect emissions, the Guidance explains that where electricity is sourced from multiple suppliers, an average emission factor should, as a rule, be determined by weighing the emission factors of the relevant sources according to their share of electricity consumption. However, if it can be demonstrated that a specific production process uses electricity from only one source, a separate emission factor may be applied to that production process.
• The Guidance further clarifies that, where actual emissions data is not available, default values may be used. In addition, for complex goods, actual data may be used for certain precursors while default values may be used for others within the same calculation.

The Guidance is available here.

Guidance Document No. 4: Calculation of the Free Allocation Adjustment for the Number of CBAM Certificates to be Surrendered

The Guidance explains how the free allocation adjustment to be taken into account in the calculation of the CBAM obligation is determined. In this respect, the key elements are as follows:

• Pursuant to the Guidance, in determining the CBAM obligation, not only embedded emissions but also the level of free allocation that the relevant goods would have received if produced within the EU is taken into account. The Guidance notes that this approach is intended to ensure an equivalent carbon cost between EU producers benefiting from free allocation under the EU ETS and imported products subject to the CBAM.
• Accordingly, it is explained that the free allocation adjustment is calculated differently for simple goods and complex goods. While the relevant CBAM benchmark values are used for simple goods, the free allocation shares attributable to the precursors used in the production process must also be included in the calculation for complex goods.
• Furthermore, it is stated that, the criteria for determining default benchmark values where actual installation data is not available and notes that the relevant benchmark values are identified based on the CN code, production route and origin of the goods.
• The Guidance explains that, for precursors produced within the customs territory of the EU or in countries and territories exempted under the CBAM framework, the free allocation share is deemed to be zero. However, the quantities of such precursors must still be reported.
• The Guidance also includes practical examples relating to the cement, fertilizers, iron and steel, aluminum, hydrogen and electricity sectors, illustrating how the free allocation adjustment is calculated across different sectors and how the relevant data should be reported in the Operator’s Emissions Report.
• In addition, the Guidance notes that certain values relating to the Cross-Sectoral Correction Factor (CSCF) are preliminary and that the final coefficients applicable, particularly for the period after 2031, will be published separately by the European Commission.

The Guidance is available here.

1. Sector-Specific Guidance Documents

The sector-specific guidance documents published by the European Commission explain how production processes, value chains and embedded emissions calculation rules are to be applied in the six CBAM sectors, namely cement, hydrogen, fertilizers, iron and steel, aluminum and electricity. The Guidance documents also contain practical examples for each sector. The key elements of the Guidance Documents are as follows:

Cement

Emissions arising from clinker production constitute a key component of embedded emissions calculations. In this respect, emissions resulting from fuel combustion, the decomposition of carbonate-containing raw materials, alternative raw materials and additives, as well as cement kiln dust (CKD), must be included in the calculation. The Guidance also provides examples illustrating how measurable heat used across production processes and emissions arising from certain emission control processes are reflected in embedded emissions calculations.

The Guidance is available here.

Hydrogen

The technologies used in the production process of hydrogen, such as natural gas-based production, coal gasification and electrolysis, have a significant impact on embedded emissions calculations. That said, as hydrogen is listed in Annex II to Regulation (EU) 2023/956 as a good for which only direct emissions are taken into account, indirect emissions are not included in the embedded emissions of hydrogen in the definitive period. In this context, the Guidance sets out the effect of the electricity source used in hydrogen production on emissions calculations and explains the consequences of using hydrogen as a precursor in the production of other CBAM goods.

The Guidance is available here.

Fertilizers

The nitrogen content of products is specified as one of the key determinants in emissions calculations. It explains the different calculation methodologies applicable to ammonia, nitric acid, urea and compound fertilizers, and demonstrates that, due to the inclusion of N₂O emissions arising from nitric acid production, installations producing the same quantity of product may generate different emissions results.

The Guidance is available here.

Iron and Steel

The Guidance demonstrates that different production routes, particularly blast furnace-basic oxygen furnace (BF-BOF) and electric arc furnace (EAF) production routes, may result in significantly different emissions outcomes. It also includes sector-specific examples illustrating the impact of scrap utilization rates, the allocation of waste gases between production processes and emissions arising from precursors on final product calculations.

The Guidance is available here.

Aluminum

The Guidance addresses the differences in emissions between primary and secondary (recycled) aluminum production. It explains that electricity consumption and perfluorocarbon (PFC) emissions play a determining role in embedded emissions calculations and provides practical examples illustrating the effect of scrap utilization on emissions outcomes.

The Guidance is available here.

Electricity

As a rule, the default emission factor determined by the European Commission applies to imported electricity. The use of actual embedded emissions is only permitted in limited circumstances where the conditions set out in Annex IV to the CBAM Regulation are satisfied. The Guidance explains the additional conditions that must be met for the use of actual emissions data, the determination of emission factors for electricity sources and the calculation methodologies specific to electricity imports. In particular, it includes examples regarding the application of evidentiary requirements relating to direct connections, power purchase agreements (PPAs) and metering data.

The Guidance is available here.

Conclusion

The Guidance Documents published by the European Commission do not redefine the core obligations applicable during the definitive period of the CBAM. Rather, they provide practical explanations and examples illustrating how the existing legal framework is to be implemented in practice. In particular, the Guidance documents provide valuable insight into the calculation of embedded emissions, data management relating to precursors, verification procedures, the determination of the free allocation adjustment and the application of sector-specific methodologies.

In light of the foregoing, producers exporting CBAM goods to the EU market, as well as companies using such goods within their supply chains, should review their processes for the collection, verification and reporting of emissions data, identify the information that must be obtained from suppliers and establish the necessary internal control and data management mechanisms in preparation for the first annual CBAM declarations due on 30 September 2027. In addition, relevant developments such as the European Commission’s proposal to expand the scope of the CBAM should be closely monitored.