Nicolas Endress is the chief executive and founder of ClimEase, a Swiss-based software company providing a platform designed to help businesses comply with the EU’s Carbon Border Adjustment Mechanism.From the start of this year, the EU’s Carbon Border Adjustment Mechanism (CBAM) started to impose additional tariffs on imports of carbon-intensive products – from aluminium and steel to cement and fertilisers.Large industrial producers based in the European Union have been paying a carbon price under the EU Emissions Trading System (EU ETS), Europe’s carbon market, for nearly two decades. The CBAM – the world’s first carbon border tariff – extends that carbon cost to goods entering the bloc from abroad.The logic behind the mechanism is that since EU-based manufacturers have paid for the carbon emissions created during their production of goods using the EU ETS, so too should all the other nations that make the same goods.However, as companies begin to prepare for the cost side of the CBAM, many are finding that the biggest savings today do not necessarily come from switching to cleaner production. Instead, they come from replacing default emissions values with verified emissions data using EU-approved methodologies and independent verification.Moving from the default values can significantly reduce their exposure to carbon tariffs even when verified emissions are not especially low.That could potentially disadvantage relatively efficient producers that do not have access to accredited auditors. If exporters’ capacity to secure verified data is distributed unevenly, the system risks perpetuating inequalities.Default values inflate exposureThe CBAM requires all EU importers to report the “embedded” carbon dioxide equivalent (CO2e) emissions – that is, the total amount of greenhouse gas emissions – associated with the imported goods.They must then compute the actual carbon cost based on the supplier’s reported product-specific emissions data. If no such product-specific emissions data is available, importers must instead apply the default emissions values stipulated by the European Commission.“House of cards”: Verra used junk carbon credits to fix Shell’s offsetting scandalTo evaluate emissions, manufacturers determine the total amount of fuel and other direct inputs used during the manufacturing process, such as the fuel burned during production at a steel mill.These inputs are then converted into tonnes of CO2 using EU-approved methodologies. The results are subsequently verified by an independent expert who is accredited under EU rules. This verification process can be expensive and may be difficult to obtain in many developing countries.