⚠ EU CBAM Definitive Financial Phase is Now Active (Sept 2026)
CBAM Transitional Period: What India's Quarterly Reports Revealed About Industry Readiness
The CBAM transitional period ran from October 2023 through December 2025. For Indian exporters, the primary lesson from that era is stark: many buyers relied on standard default values rather than supplier-specific emissions data, leaving a massive compliance gap now that the definitive financial regime is actively levying penalties in 2026.
Key Takeaways
- During the transitional period (which closed in Dec 2025), importers could report either actual embedded emissions data supplied by the exporter or EU Commission default values. The phase was strictly a reporting exercise designed to nudge exporters toward better data quality before the real financial consequences hit.
- A large share of CBAM reports during that period relied on default values rather than producer-specific data, especially as Indian mid-tier suppliers had not yet built reliable emissions-monitoring systems. That created a readiness gap that is now painfully visible in the active 2026 definitive regime.
- In the current definitive period, CBAM compliance relies heavily on verified actual emissions data. Standard transitional-style reporting is no longer sufficient; importers now demand data that can withstand formal auditing by EU-accredited verifiers. Relying on defaults today carries direct, punitive financial penalties.
- The first annual CBAM definitive declaration covering 2026 imports is due on 30 September 2027. This makes the current calendar year a critical data-collection and verification window for Indian exporters that have not yet formalised robust MRV systems.
What default values meant
EU default values were permitted when importers could not obtain supplier-specific emissions data. During the transitional phase, those defaults were intended to keep trade flowing while nudging exporters toward better data quality.
The problem is that defaults can grossly overstate or understate actual emissions depending on the product and the producer. For lower-carbon Indian manufacturers, especially gas-based DRI-EAF steel and scrap-based secondary aluminium operations, the default values were often much higher than actual emissions, creating a misleading picture of carbon exposure.
That difference matters because CBAM is no longer a theoretical reporting exercise. The same data that were treated as approximate during the transitional phase now feed directly into hard certificate obligations in the active definitive regime.
The risk for Steel and Aluminium
For steel, the gap between default values and actual emissions is modest for traditional Blast Furnace-Basic Oxygen Furnace (BF-BOF) producers, but much larger for cleaner DRI-EAF producers. A BF-BOF exporter may sit relatively close to a CBAM default, while a modern gas-based DRI-EAF plant could be far below it.
For aluminium, the risk of distortion is even greater. Primary aluminium smelting is highly carbon-intensive (especially in India due to coal-captive power), but scrap-based secondary aluminium can be over 80% cleaner. Using a primary-aluminium default for a secondary producer dramatically inflates the apparent CBAM liability at the border.
That is why the readiness gap is commercially dangerous today. A supplier that has not built plant-level emissions tracking will be assigned punitive default values, artificially inflating the cost of their goods and severely distorting pricing, negotiations, and EU sourcing decisions.
Verification requirements
Under the definitive CBAM framework, actual emissions data must be verified by an accredited verifier operating under specific EU CBAM rules. The Commission’s framework is built around independent verification, accreditation by EU national bodies, and registry-based reporting.
The framework requires verifiers to be recognised within the EU CBAM accreditation system. Fortunately, local Indian verification bodies can participate if they meet the equivalence and accreditation criteria, lowering the administrative bottleneck for Indian plants.
For exporters, that means MRV systems must be built at the installation level, with a clear methodology, traceable records, and enough documentary support for a third-party verifier to test the numbers before they are handed to the European buyer.
Bottom line: The transitional period exposed a real readiness gap in Indian industry. Many exporters survived the reporting phase by relying on defaults, but the definitive regime now rewards actual emissions data, formal verification, and disciplined MRV systems. For Indian exporters, the message is straightforward: the transitional phase is over, and relying on defaults now destroys export margins.
Frequently Asked Questions
Can importers still use default values in the definitive phase?
The definitive regime is built around actual verified emissions data and a formal CBAM verification process. Default values are heavily restricted and intentionally punitive to discourage their use. They are not a viable substitute for proper supplier data in routine commercial compliance planning.
What verification standard applies?
Emissions data must be verified under the CBAM framework by an accredited verifier recognised through the EU accreditation system. The relevant verifier must be independent and qualified to assess the embedded emissions calculation.
What should an exporter do now?
Exporters should build an installation-level emissions inventory, align it strictly with EU CBAM methodology, and contract a recognised verifier immediately. That is the only practical way to avoid being saddled with punitive default assumptions in an active financial regime that now requires defensible actual data.
Sources & Further Reading
- European Commission — CBAM Implementing Regulation for the Definitive Period
- Ministry of Steel, India — Export compliance guidelines and MRV preparedness reports.
- World Trade Organization (WTO) — Reviews of CBAM transitional period implementation data.