CBAM Glossary
Authoritative definitions of 35 key terms covering the Carbon Border Adjustment Mechanism, EU ETS, embedded emissions, and related regulatory concepts. Written for South African exporters navigating EU compliance.
Actual Emission Values
The verified embedded carbon emissions of a specific product, measured and reported by the producing installation under an accredited MRV system. Actual values replace EU default values and typically result in a lower CBAM liability for cleaner producers.
Carbon Border Adjustment Mechanism (CBAM)
An EU trade policy instrument established by Regulation (EU) 2023/956 that places a carbon price on imports of certain goods from countries with weaker or no carbon pricing. It ensures EU carbon pricing is not undermined by cheaper, carbon-intensive imports.
Carbon Leakage
The phenomenon where businesses relocate production to countries with less stringent climate policies to avoid carbon costs, effectively transferring emissions rather than reducing them. CBAM is designed to prevent carbon leakage by equalising the carbon cost for EU and non-EU producers.
CBAM Account Number
A unique identifier assigned to an authorised CBAM declarant upon registration in the EU CBAM Registry. Required to purchase CBAM certificates and submit annual declarations.
CBAM Certificate
A financial instrument issued by EU member state authorities representing one tonne of CO₂ equivalent of embedded emissions. Importers must surrender CBAM certificates equal to the embedded emissions of their imported goods, minus any carbon price already paid in the country of origin.
CBAM Certificate Price
The price of a CBAM certificate, calculated as the weekly average auction price of EU ETS allowances (EUAs) expressed in EUR/tCO₂. As of April 2026, CBAM certificate prices track the EU ETS price at approximately EUR 65/tCO₂.
CBAM Communication Form
A standardised document used by non-EU producers to communicate embedded carbon emission data to EU importers during the transitional phase (2023–2025). Replaced by formal CBAM declarations from January 2026.
CBAM Declaration
An annual report submitted by an authorised CBAM declarant to the EU CBAM Registry by 31 May each year, covering all CBAM-covered goods imported in the previous calendar year. Must include the quantity of goods, embedded emissions, and the number of CBAM certificates surrendered.
CBAM Registry
The EU's centralised digital platform for managing CBAM compliance. Used by authorised declarants to register, purchase CBAM certificates, submit annual declarations, and manage embedded emission data from non-EU suppliers.
CN Code (Combined Nomenclature Code)
An 8-digit EU customs classification code used to identify goods for tariff and statistical purposes. CBAM applies to specific CN codes listed in Annex I of Regulation (EU) 2023/956, covering iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity.
Default Emission Values
Standardised emission intensity figures published by the European Commission for each CBAM-covered product category, based on the average emission intensity of the top 10% most carbon-intensive producers in the EU. Used when actual emission values are unavailable. Default values are deliberately set high to incentivise measurement.
Digital Product Passport (DPP)
A standardised digital record containing product-specific data including embedded carbon emissions, supply chain provenance, and compliance documentation. Under EU Regulation 2024/1781, DPPs will be mandatory for many product categories. For CBAM purposes, a DPP can serve as the verified emission data record.
Embedded Emissions
The total greenhouse gas emissions released during the production of a good, expressed in tonnes of CO₂ equivalent per tonne of product. For CBAM purposes, embedded emissions include direct emissions from the production process (Scope 1) and, for some sectors, indirect emissions from electricity consumption (Scope 2).
EU Emissions Trading System (EU ETS)
The EU's cap-and-trade carbon market, established under Directive 2003/87/EC. Sets a cap on total greenhouse gas emissions from covered installations and allows companies to buy and sell emission allowances (EUAs). The EU ETS price directly determines CBAM certificate prices.
European Union Allowance (EUA)
A tradeable permit under the EU ETS representing the right to emit one tonne of CO₂ equivalent. EUA auction prices are used to calculate CBAM certificate prices on a weekly basis.
Free Allocation
EU ETS allowances distributed at no cost to certain EU installations to prevent carbon leakage. As CBAM is phased in (2026–2034), free allocations for CBAM-covered sectors are progressively reduced, with full phase-out by 2034.
Greenhouse Gas (GHG)
Gases that trap heat in the atmosphere, contributing to climate change. For CBAM purposes, covered greenhouse gases include CO₂, N₂O (for fertilisers), and perfluorocarbons (for aluminium). All are expressed in CO₂ equivalent (CO₂e) using Global Warming Potential (GWP) factors.
Installation
A stationary technical unit where CBAM-covered production activities take place. Non-EU installations producing goods for export to the EU must register in the EU CBAM Registry and report their embedded emissions to enable EU importers to use actual values.
Johannesburg Stock Exchange (JSE) Listed Companies
Publicly listed South African companies with material CBAM exposure — primarily in steel, aluminium, ferrochrome, and manganese sectors. JSE-listed exporters face additional disclosure obligations under IFRS S2 (climate-related financial disclosures) alongside CBAM compliance.
MRV System (Monitoring, Reporting, Verification)
A framework for systematically measuring, documenting, and independently verifying greenhouse gas emissions from an installation. For CBAM purposes, a compliant MRV system is required to produce actual emission values that can replace EU default values in CBAM declarations.
Net CBAM Liability
The CBAM cost after deducting any carbon price already paid in the country of origin. For South African exporters, the SA carbon tax (R236/tCO₂ in 2026) reduces the gross CBAM liability. Net CBAM liability = (Embedded emissions × CBAM certificate price) − Carbon price already paid.
Non-Compliance Penalty
Under Article 26 of Regulation (EU) 2023/956, importers who fail to surrender sufficient CBAM certificates face a penalty of EUR 100 per tonne of CO₂ equivalent of unreported embedded emissions, plus an obligation to surrender the outstanding certificates. The penalty is in addition to, not instead of, the certificate surrender obligation.
Paris Agreement
The 2015 international climate treaty under the UNFCCC, committing signatories to limiting global warming to 1.5–2°C above pre-industrial levels. CBAM is the EU's primary trade policy mechanism for ensuring the Paris Agreement's climate goals are not undermined by carbon leakage.
POPIA (Protection of Personal Information Act)
South Africa's primary data protection legislation (Act 4 of 2013), equivalent to the EU's GDPR. Relevant to CBAM compliance platforms that collect personal data from SA exporters, requiring lawful processing, data minimisation, and breach notification.
Reasonable Surfer (Patent US7716216)
A Google patent describing a link-weighting model that assigns higher value to links a reasonable user is likely to click. Relevant to the FIF Protocol's link graph architecture — internal links on CBAM content pages are structured to maximise Reasonable Surfer probability scores.
South Africa Carbon Tax
A carbon pricing instrument introduced under the Carbon Tax Act 15 of 2019, administered by SARS. The 2026 rate is R236/tCO₂ (approximately EUR 11.80/tCO₂ at current exchange rates). SA carbon tax paid on exported goods can be deducted from the gross CBAM liability.
Scope 1 Emissions
Direct greenhouse gas emissions from sources owned or controlled by an organisation — for example, emissions from industrial furnaces, kilns, or chemical processes. Scope 1 emissions are always included in CBAM embedded emission calculations.
Scope 2 Emissions
Indirect greenhouse gas emissions from the consumption of purchased electricity, steam, heat, or cooling. For CBAM purposes, Scope 2 emissions are included in embedded emission calculations for aluminium and, under certain conditions, other electricity-intensive sectors.
Third-Party Verification
Independent audit of an installation's embedded emission data by an accredited verifier. Required for actual emission values to be accepted in CBAM declarations. Verifiers must be accredited under ISO 14065 or equivalent national standards.
Three Keys Framework
The AJP Ecosystem's three-stage EU export compliance framework: Gate 1 (KYC Identity — kyc-registry.co.za), Gate 2 (CBAM Financial Authorisation — carbonborderadjustment.co.za), and Gate 3 (Digital Product Passport — digitalproductpassports.co.za). Each gate must be completed before EU market access is secured.
Transitional Phase (2023–2025)
The CBAM transitional period from October 2023 to December 2025, during which EU importers were required to report embedded emissions quarterly but were not required to purchase CBAM certificates. The transitional phase ended on 31 December 2025; full enforcement began 1 January 2026.
Verified Emission Data
Embedded emission figures that have been independently audited and confirmed by an accredited third-party verifier. Verified data enables importers to use actual values instead of EU default values, potentially reducing CBAM liability for cleaner producers.
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