What unit your embedded emissions are divided by, and how to tell which one applies

By Ahmed Medhat · Published21 September 2026

Every embedded emissions figure is a ratio, and the act names its denominator. "Functional unit" means the reference unit used for the calculation of embedded emissions in goods (Implementing Regulation (EU) 2025/2547, Art. 1, definition (1)). Pick the wrong one and the result is not slightly off. It is a different measurement wearing the same label.

Two roles run through this guide and they are not interchangeable. The operator is the producer of the goods, outside the Union, who identifies the production process and determines the number. The authorised CBAM declarant is the party established in the Union that files the CBAM declaration: an EU-established importer, an appointed indirect customs representative, or, where the importer is not established in a Member State, that representative acting for it (Regulation (EU) 2023/956 Art. 5(1), 5(1a) and 5(2)). The operator never files the declaration; the declarant never determines the production figures. They work in different units, and the act intends that.

The general rule, and the three exceptions

Article 4 sets one rule and then lifts specific goods out of it. Read the paragraphs in order.

• The general rule. The quantities of goods produced in tonnes classified under the same CN code shall constitute the functional unit, except for the goods referred to in paragraphs 3, 4 and 5 (Art. 4(2)).
• Electricity. For electricity, the kWh shall constitute the functional unit (Art. 4(3)).
• Fertilisers, first case. For CN codes 2808 00 00, 2814, 3105, the kilograms of nitrogen contained in the goods produced under the respective CN codes (Art. 4(4)(a)).
• Fertilisers, second case. For the CN codes of fertilisers other than the ones listed in point (a), the supplementary units as laid down in Regulation (EEC) No 2658/87 of the goods produced under the respective CN codes (Art. 4(4)(b)). That is the Combined Nomenclature act; we do not hold its text and we do not print a list of codes against it here. What the calculation act itself says about this unit is that where it supplies the equation for it, it names it "the supplementary unit kg of nitrogen content" (Annex III point B, Equation 66).
• Cement clinker and three cements. For CN codes 2523 10 00, 2523 21 00, 2523 29 00, 2523 90 00, the tonnes of clinker contained in the goods produced under the respective CN codes (Art. 4(5)).

Paragraph 2 is the residual. If your CN code is not caught by paragraphs 3, 4 or 5, the denominator is a tonne of the good itself. For iron and steel the recitals say the general rule is used because the CN codes already allow differentiation in the calculation, and for aluminium and hydrogen that the general rule is sufficient to define a functional unit covering goods similar enough in quality and composition (recital 6).

One wording point in the same recital is worth knowing before someone quotes it at you. Recital 6 describes the fertiliser unit as "tonnes of nitrogen". The enacting provision, Art. 4(4)(a), says kilograms. The enacting article is the rule.

Four CN codes, not a sector

Art. 4(5) names four codes. It is a list, not a sector, and the distinction is load-bearing.

CN 2523 30 00, aluminous cement, is a cement good that Art. 4(5) does not name. Annex I to the calculation act carries it as an aggregated goods category of its own, "Aluminous cement", separate from "Cement clinker" (2523 10 00) and from "Cement" (2523 21 00, 2523 29 00, 2523 90 00), and gives it its own entry in the sector rules at Annex I point 3.5, alongside point 3.4 for cement. Nothing takes it out of Art. 4(2), so its functional unit is the tonne of the good.

So the shorthand "cement is measured in clinker" is wrong at the edge that matters. Four named codes are measured in tonnes of clinker contained. The fifth cement code is measured in tonnes of itself.

The nitrogen fertilisers, and the factor the acts do not give you

For CN 2808 00 00, 2814 and 3105 the denominator is the kilograms of nitrogen contained in the goods produced (Art. 4(4)(a)). Two things follow.

There is no conversion factor in the acts. Nothing in the calculation act or the basic regulation converts a tonne of product into kilograms of nitrogen. The nitrogen content is a property of your goods that you determine and state; it is not a coefficient to look up. Anyone who hands you a single number for it is handing you their own assumption.

The act supplies the mechanism instead. Where goods whose functional units are kilograms of nitrogen content are commercialised in different ranges of composition, the operator calculates the specific embedded emissions according to the nitrogen contained in the goods averaged for each range of composition, applying Equation 65: SEEg(Ni) = SEEg × Ni, where Ni is the average nitrogen content of the goods within a range of composition, in kilograms of nitrogen per tonne of goods (Annex III point B). Equation 64 is the same construction for clinker content, and Equation 66 for the supplementary unit kg of nitrogen content. The ranges of composition for clinker content and nitrogen content shall not be larger than 10 % (same point).

For custom-made compositions the act drops to the consignment. Where goods with those functional units are commercialised in custom-made compositions on request of the client, the installation operator will issue a declaration of clinker content or nitrogen content for each consignment, and calculate the specific embedded emissions under Equation 64, 65 or 66 using that consignment's content (Annex III point B).

What the act says, what the guidance says, and which one we follow

The basic regulation states the declaration in tonnes. The CBAM declaration shall contain the total quantity of each type of goods imported during the preceding calendar year, expressed in megawatt-hours for electricity and in tonnes for other goods (Regulation (EU) 2023/956 Art. 6(2)(a)), and the total embedded emissions in those goods, expressed in tonnes of CO2e emissions per megawatt-hour of electricity or, for other goods, in tonnes of CO2e emissions per tonne of each type of goods (Art. 6(2)(b)). Its Annex IV point 1(c) defines specific embedded emissions to match: the embedded emissions of one tonne of goods, expressed as tonnes of CO2e emissions per tonne of goods.

The Commission's fertiliser guidance reads it the other way for nitrogen goods. It says the quantity of declared nitrogen containing fertiliser sector goods imported into the EU must be expressed using the functional unit applicable to the relevant fertiliser CBAM good, that is kilograms of nitrogen content or the relevant supplementary units, as applicable (guidance document on fertilisers, section 2.2.1).

The guidance documents are non-binding: the acts remain the authority, and where a guidance document and an act read differently we follow the act. On the declared quantity, Art. 6(2)(a) says tonnes for goods other than electricity and megawatt-hours for electricity, and that is what we hold to. We print the guidance reading as well because a declarant may meet it in a registry form or in a question from a competent authority, and because it costs an operator nothing to be ready for both: the act already requires you to hold both figures.

Both figures, on every production process

That last point is the practical one. The activity level of a production process shall be calculated as the total mass of the goods leaving the production process during the reporting period measured in functional units and in tonnes of goods (Annex II point F). Not one or the other.

The rest of the calculation is then stated per functional unit. The specific direct and indirect embedded emissions of goods g are expressed in t CO2e per functional unit, and the activity level of goods g is expressed in functional units (Annex III point A.3). The Operator's Emissions Report carries the same unit through: the specific direct embedded emissions of each of the goods, expressed in tonnes of CO2 per functional unit, and where applicable the specific direct embedded emissions of each of the compositions of the goods (Annex IV point 1.1, item 15(a) and (b)); a list of all relevant goods produced measured in the functional unit for each CN code (item 31); and the quantity of goods per production route, measured in the functional unit for each CN code, plus, where the functional unit under Article 4 is different from the tonnes of goods per CN code, the quantities of goods expressed in functional unit produced in the reporting period per production process (item 34(a) and (b)).

For one of the four clinker codes, or for a nitrogen fertiliser, you therefore end up holding two intensities that are different numbers with different meanings: t CO2e per functional unit, and t CO2e per tonne of the good. Equations 64 to 66 are the act's own route from the first to the second, through a composition you declare. Label every figure with the unit it was computed on. An intensity calculated per tonne of cement and printed under a heading that says per tonne of clinker is not a rounding difference, and a verifier reading the report has both the activity level in tonnes and the activity level in functional units to check it against.

One functional unit, one production process

The functional unit also decides how the installation is cut up, which is the step most operators get wrong before they get any arithmetic wrong.

Operators shall identify, within the system boundaries of an installation, the production process of goods to which the same functional unit applies (Art. 4(1)). Where goods to which the same functional unit applies are produced using different production routes within an installation, a single production process shall be used encompassing all production routes (Art. 4(6)); recital 7 spells out the consequence, that the emissions attributable to those goods are the weighted average of the emissions of all the production routes used within the installation. You do not get to report the cleaner route separately.

Where goods to which different functional units apply are produced through the same processes, the operator may determine a single multifunctional production process, and the attribution rules in Annex III point A.2 then apply; in the situations specified in point A.4 that determination is mandatory (Art. 4(8)). Those situations are set out at Annex II point A.4, and one of them is aimed squarely at fertilisers: where different functional units are produced with the same precursors in types, quantities and proportions, or are composed by the same substance and only differ in concentrations, a single multifunctional production process shall be defined for that group of goods. The parallel case covers crude steel, iron and steel products, unwrought aluminium and aluminium products where the functional units only differ in size or shape.

And once you are inside a multifunctional process, the functional unit is not always what the emissions are split by. Attribution rules apply in a fixed order: emissions to heat flows first, then to waste gases, then functional unit attribution or molar ratio attribution, as applicable (Annex III point A.2). For fertilisers that last step is usually not the functional unit at all. If a chemical substance under the aggregated goods categories chemicals or fertilisers is produced as a co-product of a multi-functional process, the attribution among the chemical substances shall be based on molar ratio (Annex III point A.2.1), and where the molar mass of one of the co-products is not known, the emissions are attributed based on mass of the co-products.

The short version

The denominator is the functional unit, and Article 4 gives it in four lines. Electricity: the kWh. CN 2808 00 00, 2814 and 3105: the kilograms of nitrogen contained. CN 2523 10 00, 2523 21 00, 2523 29 00 and 2523 90 00: the tonnes of clinker contained. Other fertiliser CN codes: the supplementary units under Regulation (EEC) No 2658/87. Everything else, including CN 2523 30 00 aluminous cement: tonnes of the good under its CN code.

No act converts tonnes of product into kilograms of nitrogen. The content is yours to determine and declare, by range of composition or by consignment, and Equations 64 to 66 apply it. Record the activity level in functional units and in tonnes of goods, because Annex II point F asks for both and the two audiences want different ones: the operator's report states specific embedded emissions per functional unit, while the declarant's CBAM declaration states the quantity in tonnes, or megawatt-hours for electricity, and the embedded emissions per tonne or per megawatt-hour.

Regulatory sources: Implementing Regulation (EU) 2025/2547, recitals 6 and 7, Art. 1 definition (1), Art. 4(1), Art. 4(2), Art. 4(3), Art. 4(4)(a), Art. 4(4)(b), Art. 4(5), Art. 4(6) and Art. 4(8), Annex I points 3.4 and 3.5 and the aggregated goods categories for cement clinker, cement and aluminous cement, Annex II point A.4 and point F, Annex III points A.2, A.2.1, A.3 and B including Equations 64, 65 and 66, and Annex IV point 1.1 items 15, 31 and 34; Regulation (EU) 2023/956 Art. 5(1), 5(1a) and 5(2), Art. 6(2)(a), Art. 6(2)(b) and Annex IV point 1(c); Regulation (EEC) No 2658/87, referred to by Art. 4(4)(b) and not held by us. Non-binding: the Commission's guidance document on fertilisers, section 2.2.1.