Scope 1, Scope 2, and Scope 3 Emissions: What CBAM Actually Measures

CBAM measures embedded carbon using Scope 1 direct emissions and Scope 2 indirect emissions from electricity. Understanding the difference is essential for accurate CBAM reporting.

Published April 2026·Last updated April 2026·carbonborderadjustment.co.za

What CBAM Actually Measures

The Carbon Border Adjustment Mechanism measures the carbon embedded in imported goods — specifically, the greenhouse gas emissions that occurred during the production of those goods. Understanding exactly what is measured is essential for accurate CBAM reporting and for identifying opportunities to reduce your CBAM liability.

Scope 1: Direct Emissions

Scope 1 emissions are direct greenhouse gas emissions from sources owned or controlled by the producing company. For CBAM-covered sectors, the main sources of Scope 1 emissions are:

Fuel combustion: Burning coal, natural gas, oil, or other fuels in furnaces, kilns, boilers, and other industrial equipment. For steel production, the blast furnace is the dominant source of Scope 1 emissions.

Process emissions: Chemical reactions that release CO₂ as a by-product, independent of energy use. The most significant example is the reduction of iron ore (Fe₂O₃) with coke (carbon) in a blast furnace, which releases CO₂ as an inherent part of the steelmaking process.

Fugitive emissions: Unintentional releases of greenhouse gases, including methane leaks from coal mines and natural gas infrastructure.

Scope 2: Indirect Emissions from Electricity

Scope 2 emissions are indirect emissions from the generation of purchased electricity, heat, or steam. For energy-intensive industries, Scope 2 emissions can be a significant portion of total embedded carbon.

South Africa's electricity grid is approximately 85% coal-powered, with a grid emission factor of approximately 0.9 tCO₂/MWh — one of the highest in the world. This means SA manufacturers who consume significant amounts of grid electricity have higher Scope 2 emissions than equivalent manufacturers in countries with cleaner electricity grids.

The practical impact: A SA aluminium smelter consuming 15,000 kWh/tonne of aluminium produced will have Scope 2 emissions of approximately 13.5 tCO₂/tonne from electricity alone (15 MWh × 0.9 tCO₂/MWh). A Norwegian aluminium smelter consuming the same electricity from hydropower would have near-zero Scope 2 emissions.

The Renewable Energy Opportunity

SA exporters who can demonstrate they use renewable electricity — through Power Purchase Agreements (PPAs), on-site generation, or renewable energy certificates — can use a lower emission factor for their Scope 2 calculations. This can significantly reduce the embedded carbon of their products and the CBAM certificates their EU buyers must purchase.

The SA renewable energy sector is growing rapidly. SA exporters who invest in renewable energy PPAs are not only reducing their carbon footprint — they are directly reducing their CBAM liability and improving their competitive position in EU markets.

What CBAM Does NOT Measure (Yet)

CBAM Phase 1 does not include:

▸Scope 3 emissions: Indirect emissions from the value chain, including raw material extraction, transportation, and end-of-life disposal
▸Downstream emissions: Emissions from the use of the exported product by the EU buyer
▸Logistics emissions: Carbon from shipping and transportation

This may change in future CBAM phases as the EU expands coverage.

For a complete CBAM compliance registration pathway, visit the Digital Product Passport Registry.

Frequently Asked Questions

What is the difference between Scope 1 and Scope 2 emissions?

Scope 1 emissions are direct greenhouse gas emissions from sources owned or controlled by the reporting company — for example, fuel combustion in furnaces, process emissions from chemical reactions, and fugitive emissions. Scope 2 emissions are indirect emissions from the generation of purchased electricity, heat, or steam consumed by the company. CBAM measures both Scope 1 and Scope 2 emissions embedded in covered goods.

Does CBAM include Scope 3 emissions?

CBAM Phase 1 does not include Scope 3 emissions (indirect emissions from the value chain, including raw material extraction and logistics). CBAM focuses on direct embedded carbon — the Scope 1 and Scope 2 emissions that occur during the production of the covered good itself. However, Scope 3 emissions may become relevant in future CBAM phases as the EU expands coverage.

How does South Africa's coal-dominated electricity grid affect CBAM calculations?

South Africa's electricity grid is approximately 85% coal-powered, giving it one of the highest grid emission factors in the world (approximately 0.9 tCO₂/MWh). This means SA manufacturers who use significant amounts of grid electricity have higher Scope 2 emissions than equivalent manufacturers in countries with cleaner electricity. This directly increases the embedded carbon of SA-produced goods and therefore the CBAM liability for EU buyers.

Can SA exporters use renewable energy PPAs to reduce their CBAM liability?

Yes. If an SA exporter purchases electricity from a renewable energy source under a Power Purchase Agreement (PPA) or generates their own renewable electricity, they can use a lower emission factor for their Scope 2 calculations. This can significantly reduce the embedded carbon of their products and therefore reduce the CBAM certificates their EU buyers must purchase. The renewable energy source must be documented and verifiable.

What is the EU default emission factor for electricity?

The EU uses country-specific default emission factors for electricity in CBAM calculations. For South Africa, the EU default electricity emission factor reflects the high coal intensity of the SA grid. SA exporters who can demonstrate they use renewable electricity can use a lower, verified emission factor instead of the EU default, which reduces their CBAM liability.

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