How EU Buyers Shortlist CBAM-Ready Suppliers: Inside the 2026 RFQ Process

How EU Buyers Shortlist CBAM-Ready Suppliers: Inside the 2026 RFQ Process

For Indian manufacturers exporting steel, cement, aluminium, fertilisers, and hydrogen to the European Union, the Carbon Border Adjustment Mechanism (CBAM) is rapidly transforming the landscape of international trade. While the transitional phase (October 2023 - December 2025) primarily focuses on reporting embedded emissions, the definitive phase starting January 1, 2026, introduces a direct financial obligation for EU importers. This shift fundamentally alters how EU buyers will evaluate and shortlist their suppliers, making "CBAM-readiness" a critical differentiator.

This article provides Indian MSMEs and large exporters with an insider's view into the evolving Request for Quotation (RFQ) process for EU buyers. We'll detail the new criteria, the data EU importers will demand, and the strategic steps Indian suppliers must take to not only maintain but also strengthen their position in the European market. Understanding these dynamics now is crucial for securing future contracts and avoiding the risk of being de-prioritised by your European partners.

Key Takeaways

• CBAM Shifts Risk to Importers: From 2026, EU importers bear the direct financial cost of embedded emissions, making supplier emissions data a core procurement criterion.
• Emissions Data is the New Price: Beyond price and quality, verified embedded emissions data will be a non-negotiable requirement in EU RFQs, impacting supplier selection and negotiation.
• Proactive Data Collection is Essential: Indian exporters must establish robust systems for collecting primary activity data (fuel consumption, electricity usage, production volumes) at a granular level.
• Verification is Key: Emissions calculations must be verified by an accredited third party, similar to ISO 14064-3 standards, to be accepted by EU authorities.
• Transparency Builds Trust: Suppliers who can transparently and accurately provide their product-specific embedded emissions will gain a significant competitive advantage.
• CarbonSettle: Your End-to-End Partner: CarbonSettle offers comprehensive, managed CBAM compliance services, handling all aspects from data collection to verified report generation, ensuring Indian exporters are "CBAM-ready" for 2026 and beyond.

Why EU Buyers Are Changing Their RFQ Process for CBAM Goods

The primary driver for the change in EU buyer RFQ processes is the financial liability introduced by Regulation (EU) 2023/956, which mandates the purchase of CBAM certificates from January 2026. Prior to this, the cost of carbon emissions was largely externalised or borne by domestic EU producers through the EU Emissions Trading System (ETS). With CBAM, this cost is now directly applied to imported goods, making the embedded emissions of a product a tangible financial factor for the EU importer.

Consider an EU importer sourcing steel from a manufacturer in Ludhiana, India, or cement from Gujarat. Currently, their procurement decision revolves around price, quality, delivery, and reliability. Post-2026, a new variable enters the equation: the carbon intensity of the imported product. A tonne of steel with high embedded emissions will cost the EU importer more in CBAM certificates than a tonne of steel with lower emissions, even if the base price is the same. This means that a supplier offering a slightly higher base price but significantly lower emissions might become the more cost-effective option overall for the EU buyer.

This shift transforms carbon emissions from an environmental concern into a core procurement cost. EU buyers, whether they are large automotive manufacturers in Germany, construction companies in France, or infrastructure developers in the Netherlands, will now actively seek to minimise their CBAM certificate costs. Their RFQ process will therefore be designed to identify suppliers who can provide not just competitive prices and quality, but also verifiable, low-carbon products. This is why "CBAM compliance India" is no longer just a regulatory burden, but a strategic imperative for market access.

What Data Will EU Buyers Demand in 2026 RFQs?

From January 2026, EU buyers will require comprehensive and verified data on the embedded emissions of the goods they import. This goes far beyond generic company-level carbon footprint reports. They will need product-specific, verified embedded emissions data for each consignment.

Here's a breakdown of the key data points and documentation EU importers will demand:

1. Product-Specific Embedded Emissions (tCO2e/tonne or unit):

   • This is the most critical piece of information. It represents the total direct and indirect greenhouse gas emissions (GHG) associated with the production of a specific quantity of a CBAM good.
   • For steel, this would be emissions per tonne of hot-rolled coil; for cement, per tonne of clinker or finished cement.
   • This data must be calculated according to the methodologies outlined in Regulation (EU) 2023/956 and its implementing acts.

2. Breakdown of Direct and Indirect Emissions:

   • Direct Emissions (Scope 1): Emissions from processes owned or controlled by the Indian manufacturer (e.g., fuel combustion in furnaces, process emissions from clinker production).
   • Indirect Emissions (Scope 2): Emissions from the generation of electricity, heat, or cooling consumed by the manufacturer. This requires knowing the specific electricity mix and emission factor of the grid (e.g., MSEDCL in Maharashtra, UGVCL in Gujarat, TANGEDCO in Tamil Nadu) or specific power purchase agreements.

3. Specific Production Route and Inputs:

   • For industries like steel, the production route (e.g., Blast Furnace-Basic Oxygen Furnace vs. Electric Arc Furnace) significantly impacts emissions. Buyers will want to know this.
   • Information on key input materials and their embedded emissions (e.g., for aluminium, the emissions from producing the alumina used).

4. Verification Report:

   • The embedded emissions data must be verified by an independent, accredited verifier. This is paramount for the data to be accepted by EU authorities. The verification process ensures the accuracy, completeness, and adherence to EU methodologies.
   • This report will be a mandatory attachment to the CBAM declaration submitted by the EU importer.

5. HS/CN Codes:

   • While not an emissions data point, the correct classification of goods using Harmonised System (HS) and Combined Nomenclature (CN) codes is crucial for identifying CBAM-applicable products. EU buyers will expect suppliers to confirm the correct codes. You can refer to our CBAM CN code directory for guidance.

6. Proof of Carbon Price Paid (if any):

   • If the Indian manufacturer has already paid a carbon price in India (e.g., under a future Indian ETS or carbon tax), this amount can be deducted from the CBAM liability. Documentation proving such payment would be required. Currently, India does not have a comprehensive carbon pricing mechanism that would qualify for this deduction, but this might change in the future.

This level of detail requires Indian manufacturers, from the small steel re-rolling mills in Pune to the large cement plants near Jamshedpur, to implement robust data collection and calculation systems. Generic environmental reports will not suffice. This is where an "end-to-end CBAM compliance" service becomes invaluable.

Operational Steps for Indian Exporters to Become CBAM-Ready

Becoming "CBAM-ready" for the 2026 definitive phase requires a structured, proactive approach. Indian exporters cannot afford to wait until their EU buyers start demanding this data. Here are the critical operational steps:

1. Identify CBAM-Applicable Products and HS/CN Codes

The first step is to accurately identify which of your exported products fall under the CBAM scope. This involves checking the HS/CN codes against the list provided in Annex I of Regulation (EU) 2023/956. Even slight variations in product description or composition can impact applicability.

• Action: Review your entire product portfolio destined for the EU. Cross-reference your product's 8-digit CN code with the official CBAM list.
• Resource: Utilise tools like our CBAM CN code directory to simplify this identification process.

2. Establish Robust Data Collection Systems

This is the backbone of CBAM compliance. You need to collect primary activity data at the facility level, specifically linked to the production of your CBAM goods.

• Direct Emissions Data:

  • Fuel Consumption: Monthly or quarterly records of all fuels consumed (coal, natural gas, diesel, furnace oil) for production processes, including quantity (tonnes, cubic meters, litres) and calorific value.
  • Process Emissions: Data related to specific industrial processes (e.g., clinker production in cement, calcination in lime production) that release GHGs.

• Indirect Emissions Data (Electricity):

  • Electricity Consumption: Monthly electricity bills from utilities like MSEDCL, UGVCL, TANGEDCO, or private power providers. Record total kWh consumed.
  • Grid Emission Factors: Obtain the specific emission factor for your regional electricity grid. If you have a Power Purchase Agreement (PPA) for renewable energy, document this rigorously.

• Production Data:

  • Accurate records of the quantity of each CBAM-relevant product manufactured during the reporting period.

• Material Input Data:

  • For complex products like aluminium, data on the embedded emissions of key precursors (e.g., alumina, pre-baked anodes). This often requires outreach to your own suppliers.

• Action: Designate a team or individual responsible for data collection. Implement digital logging systems where possible. Ensure data is auditable and traceable to source documents (invoices, meter readings, production logs).

3. Calculate Embedded Emissions According to EU Methodology

Once data is collected, it must be converted into embedded emissions (tCO2e per tonne of product) using the specific methodologies prescribed by the EU. This is not a simple calculation. It involves:

• Defining System Boundaries: Determining which processes and emissions sources are included.

• Applying Emission Factors: Using correct emission factors for fuels, electricity, and processes.

• Allocating Emissions: Distributing facility-level emissions to specific products, especially in multi-product facilities.

• Considering Precursors: Calculating emissions from precursor materials if required.

• Action: Engage with experts who understand the EU CBAM calculation methodologies. Generic GHG accounting software may not be sufficient without expert interpretation. This is a core service provided by CBAM service provider India like CarbonSettle.

4. Engage with Your Supply Chain

CBAM is not just about your factory's emissions. If you use precursor materials (e.g., clinker for cement, pig iron for steel, alumina for aluminium) that are themselves CBAM goods, you will need their embedded emissions data from your suppliers.

• Action: Initiate conversations with your upstream suppliers. Explain CBAM and the need for their emissions data. This can be challenging, especially with smaller, less sophisticated suppliers.

5. Prepare for Verification

The EU will only accept verified emissions data. This means an independent, accredited third-party verifier will scrutinise your data collection, calculations, and internal controls.

• Action: Understand the verification requirements. Ensure your data is organised, transparent, and supported by robust documentation. Prepare for potential audits and data requests from verifiers.

6. Proactive Communication with EU Importers

Don't wait for your EU buyers to ask. Proactively inform them of your CBAM readiness efforts.

• Action: Share your understanding of CBAM, your data collection progress, and your commitment to providing verified emissions data. This builds trust and positions you as a reliable, forward-thinking partner.

By taking these steps, Indian exporters can transition from being reactive to proactive, ensuring they remain competitive and preferred suppliers in the European market. Our end-to-end CBAM compliance services are designed to manage all these complex steps for you.

The Role of Default Values and Why They Are Costly for Indian Exporters

The EU CBAM regulation allows for the use of "default values" for embedded emissions if an importer cannot obtain actual, verified data from their non-EU supplier. However, relying on these default values is a financially detrimental strategy for Indian exporters and their EU partners.

Why Default Values are Problematic:

1. High Emission Factors: The default values are intentionally set high. They represent the average emissions of the worst-performing 10% of EU installations for that specific product category. This means they are significantly higher than the actual emissions of most efficient Indian producers.
2. Increased CBAM Costs: For an EU importer, using default values translates directly into higher CBAM certificate costs. For example, if your actual emissions for a tonne of steel are 1.5 tCO2e, but the default value is 2.5 tCO2e, the EU importer will pay for an extra 1.0 tCO2e per tonne. At current EU ETS prices (e.g., €70-€90 per tonne of CO2e), this can add an extra €70-€90 (approx. ₹6,300 - ₹8,100) per tonne of steel, making your product significantly less competitive.
3. Competitive Disadvantage: EU buyers will naturally gravitate towards suppliers who can provide actual, lower emissions data, as it reduces their overall procurement cost. Relying on default values makes your product appear more carbon-intensive and expensive, putting you at a severe disadvantage against other suppliers, including those within the EU.
4. Reputational Risk: Being unable to provide your own emissions data signals a lack of transparency and potentially a lack of commitment to sustainability, which can damage your long-term relationship with environmentally conscious EU buyers.

Example Cost Impact: Let's assume the EU default value for a specific steel product is 2.5 tCO2e/tonne, and the average EU ETS price is €80/tCO2e.

• Cost using Default Value: 2.5 tCO2e/tonne * €80/tCO2e = €200/tonne (approx. ₹18,000/tonne)
• If an efficient Indian steel manufacturer actually emits 1.5 tCO2e/tonne, and provides verified data:
  • Cost using Actual Data: 1.5 tCO2e/tonne * €80/tCO2e = €120/tonne (approx. ₹10,800/tonne)
• Savings: €80/tonne (approx. ₹7,200/tonne) for the EU importer, which translates to a competitive advantage for the Indian exporter.

By providing accurate, verified emissions data, Indian exporters can demonstrate their lower carbon footprint, potentially saving their EU importers up to 40% on CBAM costs compared to default values. This is a powerful negotiation tool and a clear pathway to becoming a preferred supplier. For more details on potential costs, refer to our India CBAM Cost Index.

2026 Regulatory Impact for Indian Exporters

The definitive phase of CBAM, commencing January 1, 2026, marks a significant regulatory and financial shift for Indian exporters. The key impact areas are:

1. Direct Financial Impact on EU Importers: From 2026, EU importers will be legally obligated to purchase and surrender CBAM certificates corresponding to the embedded emissions of their imported goods. The price of these certificates will be linked to the weekly average auction price of EU ETS allowances. This direct financial cost means that the carbon intensity of your products will directly affect your EU buyer's bottom line.
2. Mandatory Verified Data: The option to use estimated data, which is permissible in the transitional phase under certain conditions, will largely disappear. Importers will be required to provide actual, verified embedded emissions data from their non-EU suppliers. Without this, they will be forced to use the punitive default values, making your products uncompetitive.
3. Increased Due Diligence: EU importers will intensify their due diligence on suppliers' CBAM readiness. They will not just ask for data; they will demand evidence of robust data collection, calculation, and verification processes. This will manifest in more detailed RFQs, supplier audits, and contractual clauses related to CBAM compliance.
4. Risk of Market Exclusion: Indian exporters who fail to provide the required verified data risk being de-prioritised or even excluded by EU buyers. As the financial stakes rise for importers, they will naturally favour suppliers who make their compliance process smooth and cost-effective.
5. Competitive Pressure: The definitive phase will intensify competition. Indian manufacturers who have proactively invested in understanding and complying with CBAM will gain a significant competitive edge over those who have not. This includes not just other non-EU suppliers but also EU domestic producers who already bear carbon costs through the ETS.

The regulatory framework, specifically Regulation (EU) 2023/956, is clear about these obligations. Indian exporters must view 2026 not as a distant deadline, but as an imminent reality that requires immediate strategic action. This involves not just understanding the rules but implementing practical, operational changes within their factories and supply chains.

Frequently Asked Questions

What is the primary difference for Indian exporters between the CBAM transitional phase and the definitive phase?

The transitional phase (Oct 2023 - Dec 2025) primarily involves reporting embedded emissions data to the EU without any financial payment. The definitive phase, starting January 1, 2026, introduces a direct financial obligation for EU importers, who must purchase and surrender CBAM certificates based on the embedded emissions of imported goods. This means that from 2026, the carbon intensity of your products will directly impact the cost for your EU buyer.