Leaked draft: Implementing Regulation on CBAM Verification

Verification represents a cornerstone of the EU Carbon Border Adjustment Mechanism (CBAM) and is vital to ensuring full regulatory compliance. Accredited third-party verifiers validate emissions data provided by producers, enabling EU importers to base their annual CBAM declarations and related CBAM cost calculations on actual data instead of costly default values.

This article summarises the verification principles and methods outlined in a leaked draft by the EU Commission of an upcoming implementing regulation. While closely aligned with practices under the EU Emissions Trading System (EU ETS) and current CBAM rules, the draft remains provisional and subject to refinement during the ongoing legislative process.

Two Key CBAM Regulations Still Pending

Two key implementing regulations for CBAM verification remain pending, and their adoption is central for operationalising CBAM. The first act will formalize who can serve as an accredited verifier, setting requirements for their approval and registration. The second, a draft of which has now been leaked, will establish the detailed verification principles, procedures, and workflow. These acts were originally expected by late 2024 but have been delayed. Clarity on these rules is crucial for importers, producers, and compliance teams, as they underpin eligibility, risk management, and the operational structure of CBAM verification.

General Verification Procedure

CBAM verification procedures largely mirror those under the EU ETS, fostering a level playing field between EU and non-EU producers in carbon pricing:

Non-EU producers monitor and report emissions following standardized CBAM methodologies
Verifiers conduct risk assessments, on-site or virtual plant visits, and detailed data reviews
Material misstatements or non-conformities result in failed verification, excluding the data from importers’ CBAM declarations
Non-material issues must be corrected before the final verification report is issued

Verification is required each reporting period, typically on an annual basis. Positive reports or those with minor rectified issues can be relied upon by importers for their annual submission of CBAM declarations.

On-Site and Virtual Site Visits

For the first reporting period of the definitive CBAM application in 2026, each installation producing CBAM goods requires a physical site visit from an accredited verifier. From the second reporting period onward, physical site visits must occur at least every other reporting period. Between these, site visits may be conducted virtually or even waived if strict criteria are met: negligible risk, no major changes at the site or monitoring procedure, and comprehensive remote documentation are required for this flexibility.

Physical visits can never be skipped for two consecutive reporting periods. However, serious, extraordinary, and unforeseeable events (such as disasters or border closures) allow for a virtual site visit as a substitute in these cases, provided the verifier’s risk analysis supports this approach and remote records are adequate.

Materiality Levels

Materiality thresholds define the boundaries for tolerable errors in emissions data. The standard is a 5% threshold per CN code, either for total specific embedded emissions or for specific free allocation. Minor inaccuracies below these levels are not considered reason for verification failure, though verifiers can use expert judgement to identify non-material issues that compound together to a material issue.

Default Values and Reporting Chains

According to the draft regulation, verification is possible even if default values are used for part of the CBAM supply chain, notably for precursors when actual data cannot be supplied. The verifier’s report must document all relevant details, including CN codes, country of origin, and default emissions, preserving the chain of verification. Thus, the use of default values does not break eligibility for using the verified emissions data in CBAM declarations, provided information requirements are met.

What Must Be Included in a CBAM Verification Report?

The CBAM verification report is standardized and comprehensive, containing all data points needed for declaring actual emission figures in importers’ annual CBAM declarations. The verification reports cover:

Operator and verifier identification
Site visit logs and monitoring summaries
Direct and indirect emissions calculations
Detailed product, process, and CN code data
Origin and CBAM benchmark determinations

Additionally, the report must disclose material misstatements and non-conformities, corrective actions taken, unresolved issues, and recommendations to improve future data quality. This facilitates regulatory assurance as well as continuous improvement.

All verification reports must be submitted using a forthcoming, standardized electronic template that will be provided by the European Commission and accessed through the CBAM Registry. This digital format will allow automated solutions such as carboneer’s cbam.hub to seamlessly query verified CBAM data directly from the supply chains of importers, streamlining compliance and the submission of CBAM declarations by the importers.

Outlook

While the above rules are drawn from a leaked draft and will likely be revised, they indicate the current direction and meet the expectations of CBAM and EU ETS experts. The pressure is now on the Commission to adopt overdue implementing regulations regarding emissions monitoring, reporting and verification to further operationalize CBAM:

one for the calculation of embedded emissions during the definitive period (from 2026),
one for verifier accreditation,
one for verification principles and procedures.

Final adoption will enable verifiers and producers to prepare effectively and avert bottlenecks that would force importers to rely on default data, increasing their CBAM costs unnecessarily.