Posted on 20 Nov 2025
The draft annex, circulated informally among industry stakeholders, outlines how “specific embedded free allocations” (SEFA) and “free allocation adjustments” (FAA) will be calculated once CBAM enters its definitive phase from January 1, 2026.
This is the first hint at what importers will be liable to pay once CBAM kicks in next year, although the benchmarks are still provisional and subject to change.
CBAM certificates are calculated by the weekly average EU Emission Trading System (ETS) auction price and the cost of embedded emissions with the CBAM good.
To calculate embedded emissions, importers have the choice of using benchmark rates, which are specific to the CBAM good or default values, which are average embedded-emission intensities for each product and production route.
The leaked document outlined some differences in calculating benchmarks, depending on whether actual emissions factor data or default emission values are used by the importer.
When using actual emissions factor data, the importer will have to calculate the benchmark using the precursor good’s benchmark values and the mass of each precursor that has been used, the leaked document read.
Precursor goods are input materials used in the production of complex CBAM goods that have their own benchmark value for embedded emissions.
Default values are applied in a standardized fashion and because of this are anticipated to cost importers more than their actual emission counterparts.
“Given the Commission’s precursor-based approach for calculating benchmarks for complex CBAM goods, there could be additional benefits for companies using actual data through lower emissions intensity benchmarks,” Shyamal Patel, Fastmarkets’ head of carbon modelling, said.
For the aluminium and steel industries, the leaked draft annex seen by Fastmarkets was largely in line with market expectations around benchmark values.
The document outlines that unwrought, un-alloyed aluminium, unwrought aluminium slabs, unwrought aluminium billets and unwrought aluminium alloys excluding billets and slabs, all carry a benchmark value of 1.464 tonnes of carbon dioxide equivalent (tCO2e).
This is unchanged from the 2021-2025 ETS benchmark from 2021-2025.
For secondary aluminium the benchmark value is 0.139 for all the aforementioned aluminium CBAM goods.
Notably, the draft document said that when more than 50% of the aluminium produced or used is sourced from scrap, the production route to be selected is “secondary aluminium”.
“Primary vs. secondary aluminium benchmarks in the leaked draft reveal some of the Commission’s thinking around pre-consumer scrap with a ten-to-one emissions factor difference between the two production pathways,” Patel said.
“Producers may seek to game the 50% scrap mass threshold to benefit from the primary pathway benchmark factor while having lower emissions intensity due to use of scrap,” he added.
Market response to the leaked draft was somewhat muted, with one aluminium trader telling Fastmarkets: “We’re still also waiting for the default country benchmarks and the list of accreditors to measure smelter benchmarks. It’s interesting that there is likely to be an additional category for secondary aluminium imports with high scrap content.”
“CBAM has really diverged away from any green objectives — but the plan to address scrap leakage from Europe does have logic,” they added.
The aluminium industry has long expressed concern over the so-called scrap loophole within CBAM, whereby exporters are able to avoid CBAM liabilities by inflating the content of scrap within primary aluminium, in turn making “super profits.”
Initially, scrap was assigned zero emissions under CBAM, but the addition of pre-consumer scrap into the policy’s ambit is the first step in closing this loophole. But sources recently told Fastmarkets that the loophole won’t be entirely eradicated unless post-consumer scrap is added as well.
Meanwhile, for steel, the document sets three provisional benchmark values by production route — differentiating between blast furnace/basic oxygen furnace (BF/BOF), direct reduced iron/electric-arc furnace (DRI/EAF) and scrap-based EAF technologies.
Steel hot-rolled coil carries benchmark values of 1.530 tCO2 per tonne for BF/BOF production, 1.033 tCO2 per tonne for DRI/EAF and 0.288 tCO2 per tonne for scrap-based EAF routes.
Sources told Fastmarkets this was “more or less” what was expected.
While the market has received additional clarity on what to expect from CBAM benchmark rates this week, it continues to await additional information on default values.
Significant progress has been made recently in clarifying a policy that has been marred in uncertainty and opacity, default values remain one of the missing links in being able to accurately calculate CBAM costs for next year.
Crucially, default values apply whenever verified actual data are unavailable, allowing importers to complete CBAM declarations even without detailed upstream information.
Market participants generally expect default values to be published sometime in early 2026, alongside the final ETS benchmarks.
CBAM on the other hand is set to enter its definitive phase in under two months, while CBAM certificates will be able to be purchased from 2027 onwards.
Source:Fastmarkets
