How the EU’s New Default Emissions Values Under CBAM Impact US Exporters: What You Need to Know for 2026

The European Union recently released its regulation setting default greenhouse gas emission values for the Carbon Border Adjustment Mechanism (CBAM), which applies to importers of steel, iron, aluminum, cement, fertilizers, hydrogen, and electricity. CBAM requires businesses to account for the carbon footprint of their goods entering the EU and purchase certificates to cover these emissions. For companies unable to provide precise, third party-verified emissions data, the EU will apply country and product-specific default values—plus an added markup—to calculate liabilities. Notably, US iron and steel exporters may face higher costs if they rely on these conservative default values, highlighting the need for more precise emissions tracking in the US.

Key Takeaways:

• Default Values: Importers without reliable emissions data must use country- and product-specific default values set forth in the new regulation for calculating their CBAM liability.
• Markup Incentive: Default values will be increased by a 10% markup in 2026, rising to 30% by 2028, to encourage importers to use actual data instead of relying on the default values.
• US Exporter Impact: US iron and steel goods may face inflated CBAM costs due to conservative default values for these goods; more precise US emissions data is needed to enable US exporters to report actual data instead of relying on default values.

CBAM Financial Obligations

After a transitional three-year reporting-only phase, the CBAM’s financial obligations took effect on January 1, 2026. Importers will now be required to purchase certificates to cover the carbon cost of their EU imports based on the prevailing price of emissions allowances under the EU Emissions Trading System (ETS). CBAM certificates for 2026 must be purchased and surrendered by September 30, 2027.

Default Emission Values and Markup System  

The new regulation sets out default emission values by country of origin and by product type, covering both direct and indirect emissions. Importers who lack reliable, product-specific emissions data must use these default values to calculate their CBAM liabilities. The calculation involves multiplying the applicable default emission value by the quantity of imported goods and then multiplying the resulting amount by the prevailing price of emissions allowances under the ETS.

To incentivize the collection of accurate emissions data and to account for producers whose emissions may exceed national averages, the regulation also imposes a blanket markup on all default values. The markup is 10% for 2026, 20% for 2027, and 30% for 2028 and beyond. The European Commission intends to further review and potentially revise both the default values and the markup rates, with a target completion date of December 2027.

Producers seeking to avoid the use of default values must monitor emissions at each installation, allocate emissions to specific production processes, and attribute emissions to individual goods. Actual emissions data must be verified by accredited third parties to ensure compliance with EU standards. The European Commission recently published a separate regulation with more detail on how actual emissions must be calculated for companies that wish to avoid using the default values.

Implications for US and Other Exporters

US businesses and other companies that import goods into the EU risk having their products assessed using the default values if they are not able to obtain accurate, verifiable emissions data. In a recent report, the Bipartisan Policy Center highlighted particular concerns for US producers of iron and steel products. The report noted that “the US-assigned default values for iron and steel goods are not consistent with existing US government estimates,” and that such default values “are consistently higher than the estimates reported by the International Trade Commission in January 2025.” The report concluded that more US data is needed to help US exporters avoid inflated CBAM liability under the overly conservative default values.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Eric Rothenberg, an O'Melveny of counsel licensed to practice law in New York and Missouri; John D. Renneisen, an O’Melveny senior counsel licensed to practice law in the District of Columbia; and Chris Bowman, an O’Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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