What is Embedded Carbon and How is it Measured?

What is Embedded Carbon?

Embedded carbon (also called embodied carbon or production emissions) is the total greenhouse gas (GHG) emitted during the manufacturing process of a product, expressed in tonnes of CO₂ equivalent (tCO₂e) per tonne of product.

For South African exporters, embedded carbon is the single most important number in the CBAM calculation. The EU CBAM regulation requires that every tonne of goods imported into the EU carries a verified embedded carbon figure. If you cannot provide an actual figure, the EU will apply a default emission value — which is typically 20-40% higher than the actual figure for SA producers.

Why Embedded Carbon Matters for CBAM

The CBAM liability formula is:

CBAM Cost = Embedded Carbon (tCO₂e/t) × Tonnes Exported × (EU ETS Price − SA Carbon Tax Credit)

A steel producer with embedded carbon of 1.8 tCO₂e/t exporting 50,000 tonnes to the EU at EUR 65.42/tCO₂ pays approximately EUR 5.9 million per year in CBAM certificates. If the EU applies the default value of 2.1 tCO₂e/t instead, the same exporter pays EUR 6.9 million — a EUR 1 million annual penalty for not measuring.

The Two Types of Embedded Carbon Under CBAM

CBAM distinguishes between two categories:

| Type | Definition | Applies To | |------|-----------|-----------| | Direct Embedded Emissions | GHG emitted directly in the production process (Scope 1) | All 6 CBAM sectors | | Indirect Embedded Emissions | GHG from electricity consumed in production (Scope 2) | Cement, fertilisers, hydrogen, and some aluminium processes |

For steel and most aluminium products, only direct emissions are counted. For cement and fertilisers, both direct and indirect emissions must be reported.

How Embedded Carbon is Measured

Step 1: Define the System Boundary

The system boundary determines which processes are included. CBAM uses the cradle-to-gate boundary: all emissions from raw material extraction through to the factory gate, excluding transport and end-of-life.

Step 2: Collect Activity Data

Activity data is the physical quantity of each emission source: tonnes of coking coal consumed, MWh of electricity consumed, tonnes of limestone used, litres of diesel consumed by on-site vehicles.

Step 3: Apply Emission Factors

Each activity is multiplied by its emission factor — the GHG emitted per unit of activity. Emission factors come from the IPCC Guidelines, the South African National GHG Inventory, or plant-specific measurements.

Step 4: Calculate Total Embedded Carbon

Embedded Carbon (tCO₂e/t) = Total Emissions (tCO₂e) ÷ Production Volume (tonnes)

Step 5: Verify with an Accredited Third Party

For CBAM purposes, actual emission values must be verified by an accredited verifier before the annual declaration deadline (31 May each year).

Default vs Actual Embedded Carbon Values

| Sector | EU Default (tCO₂e/t) | SA Average Actual (tCO₂e/t) | Difference | |--------|---------------------|----------------------------|-----------| | Steel (basic) | 2.10 | 1.78 | +18% | | Aluminium (primary) | 6.70 | 5.20 | +29% | | Cement (clinker) | 0.83 | 0.76 | +9% | | Fertilisers (ammonia) | 2.40 | 2.10 | +14% |

For most SA producers, measuring actual embedded carbon reduces CBAM liability by 10-30%.

The MRV System

CBAM requires a formal MRV (Monitoring, Reporting, and Verification) system to produce defensible embedded carbon figures. SA exporters who do not have an MRV system in place will be assigned default values for all exports.