On May 13, the European Commission published the long-awaited detailed rules on the treatment of carbon prices paid in third countries under the EU CBAM, and detailed formulas on the calculation of deductions from the CBAM obligations. The Draft Implementing Act is available for public consultation until June 10, and it completes the package of detailed CBAM rules from December 17, 2025.
The purpose of this act is that an authorized CBAM declarant may claim a reduction in the number of CBAM certificates to be surrendered corresponding to the carbon price effectively paid in a third country for the declared embedded emissions so as to ensure that a carbon price is not paid twice on the same emissions.
The draft’s methodologies rely on a key term it defines: ‘CPM emissions’ which means emissions reported and confirmed under the Carbon Price Mechanism. It then listed the detailed formulas on how to calculate the effective carbon price paid, as well as carbon price report templates.
Highlights
Dual track: differentiated formulas for actual values and default values used for embedded emissions. This is in line with the previous statements in the Omnibus. For the former, an authorized CBAM declarant may only claim the deduction of the carbon price effectively paid, based on evidence certified by an independent person, where the embedded emissions are determined based on actual values. Where the embedded emissions are determined based on actual values, authorized CBAM declarants may also choose to use the relevant default carbon price. The Commission will publish the default carbon price in the CBAM registry. Where the embedded emissions are determined based on default values, the CBAM declarant must use the relevant default carbon price.
Variety of Carbon pricing schemes: the rule applies to a wide range of carbon pricing schemes, including Emissions Trading System (ETS, and including baseline-and-credit system), Carbon Tax (including Fuel-based), Refunds, Carbon Credits including Article 6 (although limitations may apply, as described below). It also specifies formulas for CPM emissions associated with indirect emissions, as well as for precursors.
Rebates or Compensation: the rule accounts for various types of rebates or compensation on emissions, including reduced tax rates, free allowances, exemptions, refunds, and indirect cost compensation.
Limits on Carbon Credits: A carbon credit is defined as a credit issued by a crediting mechanism that represents an emission reduction or removal generated by activities outside the operations covered by the CPM. Note that even though credits are recognized, they are treated differently depending on whether they are domestic or international. An international credit refers to any carbon credit generated by a mitigation activity implemented in a country other than the country of production of a good. An international credit must be linked to Article 6.2 or Article 6.4 of the Paris Agreement and may only be counted up to 10% of the reported emissions covered by the CPM. The intent of the limit is 'to encourage producers from third countries to reduce their own emissions by developing and using the most efficient technologies, and to ensure that most decarbonisation efforts are pursued domestically.' ClearBlue notes this international vs. domestic distinction based on the location of the mitigation activity could raise issues for linked markets accepting each other’s offsets, such as California and Quebec in WCI.
Importantly, the rule specifies that the calculation of the reduction in the number of CBAM certificates to be surrendered is defined for each good per tonne. The reduction shall be equal to the quantity of goods declared multiplying the ‘effective carbon price per tonne of goods divided by the yearly reference price of CBAM certificates’. The formulas differ for actual values and default values approaches.
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