Allocation

The Allocation section in the base data provides support for correctly splitting emissions across products and processes. It is divided into three tabs: 1. Co-products, 2. Waste treatment, and 3. Material recycling. This article first explains the structure of the form, then — for each tab — which methods are available in the respective mode, and finally defines the individual allocation methods.

Structure of the Form

Each tab contains the same basic structure:

1	Selection of the allocation method The method that was applied is selected from the dropdown.
2	Description of the allocation approach used A free-text field allows a description of how the emissions were split, which co-products are involved, which allocation keys were used, and which specific values the allocation is based on.
3	Upload documents Using the "Upload documents" button, supporting evidence for decision documentation can be uploaded, e.g. a calculation spreadsheet or the rulebook used. Supported formats are docx, xlsx, csv, and pdf, up to 15 MB per file.

The following figure shows the "Co-products" tab as an example — Waste Treatment and Material Recycling have an identical structure.

1. Allocation for Co-products

This tab is relevant when the production process generates several products simultaneously — these are referred to as co-products. The available allocation methods must be checked in the prescribed order. Select the method that you applied.

1.1 Subdivision

When to apply? When the process can be technically divided in such a way that each sub-process can be clearly assigned to one product and no allocation is required anymore. Subdivision should only be selected as the method if the need for allocation is fully resolved.

Modeling in the Climate Hub: In the Allocation – Co-products section, the method "Subdivision" is selected. The separated sub-processes are created as standalone activities in the data tab.

Example: A production line manufactures frames and forks through fully separate process steps – material cutting, forming, and welding are each product-specific, without any shared equipment. No allocation is needed; therefore, no allocation method needs to be recorded in the software.

1.2 System expansion via substitution

When to apply? When subdivision is not possible, but the co-product demonstrably displaces a dominant product on the market, and this relationship is recognized industry-wide. In addition, primary data or representative secondary data must be available for the substituted product.

The system boundary is expanded so that the co-product replaces another product on the market. The emissions of this substituted product are deducted as a credit from the PCF of the main product — this eliminates the need for allocation.

Main product PCF = Total process emissions − Emissions of substituted product

Modeling in the Climate Hub: When this option is selected, the additional text field "Name of substitution product" appears, in which the name of the replaced product is entered. The actual credit is not calculated automatically; instead, it must be recorded as an additional activity "Displaced product" with negative emission factor within the sub-stage. This negative value corresponds to the avoided emissions of the substituted product and is automatically netted against the other process emissions when calculating the PCF.

Example: Sawmill processing generates boards and wood chips simultaneously. The wood chips displace virgin wood chips that would otherwise be used in another process. In the system, an additional activity "Displaced product: virgin wood chips" is created in the sawing sub-phase with a negative emission factor. This credit is automatically deducted from the CO2e emissions of the sub-phase.

1.3 Choosing between physical and economic allocation

If neither subdivision nor substitution can be applied, a decision must be made between physical and economic allocation. The approach here differs depending on the standard.

ISO 14067: Physical allocation is generally to be preferred, regardless of the economic value ratio of the co-products. Economic allocation is only permitted if no meaningful physical relationship can be established between the co-products – e.g., if no common physical reference quantity such as mass, unit count, or energy content can be meaningfully determined.

Catena-X / PACT: Here, the economic value ratio of the co-products determines which method is to be applied:

Economic value per product = Mass × Market price
Ratio = Highest value ÷ Lowest value

The method is determined based on the result:

Ratio	Interpretation	Next step
≤ 5	Market values similar	→ Step 1.3.1 Physical allocation
> 5	Market values significantly different	→ Step 1.3.2 Economic allocation

Example:

• Product A: 5 kg × €200/kg = €1,000

• Product B: 8 kg × €15/kg = €120

• Ratio: 1,000 : 120 = 8.3 → economic allocation (Step 1.3.2)

1.3.1 Physical Allocation

When to apply? When the value ratio of the co-products is ≤ 5, so that the physical property of the products is considered sufficiently representative.

The emissions of a shared process are split among the products involved based on a measurable physical property. Typical allocation keys are mass, unit count, energy, or energy content, e.g.:

Allocation factor = Mass of this product ÷ Total mass of all co-products

Example: Over a production period, a shared painting facility processes a total of 1,450 kg of e-mountain bike frames and 1,020 kg of e-road bike frames, totaling 2,470 kg.

Allocation factor e-mountain bike: 1,450 ÷ 2,470 = 0.587 – i.e., 58.7% of the painting emissions of the batch are attributed to the e-mountain bike frames.

Modeling in the Climate Hub:

1. In the "Allocation method" dropdown, "Physical allocation" is selected.
2. The allocation factor is calculated outside the software, based on the mass figures of the production batch for the co-products.
3. The calculated factor is then applied to the affected activities: instead of the full batch quantity, only the already allocated share is entered as the activity quantity (e.g., 1,450 kg instead of the full painting quantity of 2,470 kg); the emission factor of the activity remains unchanged.
4. In the free-text field within the Allocation section, the approach is documented including the calculation. Using "Upload documents," the calculation basis can be attached as supporting evidence.

Standard compatibility: Catena-X firmly prescribes the permitted physical reference quantities: produced mass, produced unit count, exergy content, or energy content. For combined heat and power generation (CHP), Catena-X mandates allocation based on generated exergy.

1.3.2 Economic Allocation

When to apply? When the value ratio of the co-products is > 5, so that physical allocation would distort economic reality.

The emissions are split based on the economic value of the co-products. The value results from mass multiplied by market price:

Allocation factor = (Mass × price of the product) ÷ (Mass × price of all co-products)

Example: A production batch yields co-product A (500 kg × €200/kg = €100,000) and co-product B (800 kg × €15/kg = €12,000), total value €112,000.

Allocation factor co-product A = 100,000 ÷ 112,000 = 0.893 – i.e., 89.3% of the batch's emissions are attributed to co-product A.

Modeling in the Climate Hub:

1. In the "Allocation method" dropdown, "Economic allocation" is selected.
2. The "Price type" dropdown then appears. Select the basis on which the allocation was calculated:
   • Global market price: The globally applicable market price for the product. First choice per Catena-X, if available.
   • Regional market price: A regionally limited market price, e.g. for Europe or North America. To be used if no global price is available or representative.
   • Other: Other economic indicators such as production costs or sales price. Only to be used if neither a global nor a regional market price is available.
3. Using the "From" and "To" date fields, the reference period on which the prices used are based can be specified.
4. The allocation factor is calculated outside the software, based on the mass and price figures of the production batch for the co-products.
5. The calculated factor is then applied to the affected activities: instead of the full batch quantity, only the already allocated share is entered as the activity quantity; the emission factor of the activity remains unchanged.
6. In the free-text field within the Allocation section, the approach is documented including the calculation (price type, reference period, values, factor). Using "Upload documents," the calculation basis can be attached as supporting evidence.

Standard compatibility: The order for determining the price type (global → regional → other) is specified by Catena-X. PACT does not prescribe any order, but requires that only one price type be used. Catena-X also stipulates that the selected price must be averaged over 3–5 years. PACT requires averaging only in the event of significant fluctuation (over 100 per cent year-on-year). 

2. Waste Treatment

This tab is relevant when waste streams occur during production, e.g. due to offcuts, rejects, or process residues. In waste treatment, a cut-off is typically drawn between two product systems: the primary system, which generates the waste, and the secondary system, which takes over and treats the waste. Where exactly this cut-off is set determines who bears the emissions of the treatment.

In the "Allocation method" field, select the method you applied.

Availability of allocation methods

Allocation method	ISO 14067	Catena-X	PACT	TfS
Polluter pays principle / Reverse cut-off approach	Available	Available	Available	Available
Cut-off approach	Available	-	Available	Available
System expansion	-	-	-	Available
No allocation took place	Available	-	-	Available

With Catena-X activated: The method is fixed to Polluter Pays Principle and cannot be changed. The Cut-off approach and "No allocation took place" are not available when Catena-X is enabled.

2.1 Polluter Pays Principle / Reverse cut-off approach

When to apply? When the end-of-waste point is not reached before incineration/landfilling. The waste is still considered part of the generating product system at the time of treatment. The waste treatment of the material is borne by the primary system – from collection through transport to final disposal.

Modeling in the Climate Hub:

1. In the "Allocation method" dropdown in the Waste Treatment tab, "Polluter Pays Principle" is selected.
2. The waste treatment emissions are recorded in full as an activity within the primary system (e.g., in the Waste and Wastewater sub-phase) – regardless of whether the treatment is carried out by an external service provider.
3. In the free-text field within the Allocation section, it is documented how the allocation was carried out.
4. Using "Upload documents," the decision documentation (e.g., disposal certificate) can be attached as supporting evidence.

Example: In the manufacture of an aluminum frame, 4 g of paint waste per unit is generated and thermally disposed of. All incineration emissions are attributed to the aluminum frame. No credit is applied for recovered heat.

Standard compatibility: Catena-X refers to this principle as the Polluter Pays Principle and mandates it for waste treatment (including incineration with energy recovery); the recovered energy is credit-free in this case. TfS refers to the same procedure as a reverse cut-off. PACT shares the same basic principle for production waste that is disposed of; however, PACT deviates for energy recovery and uses the cut-off approach instead.

2.2 Cut-off Approach

When to apply? When the end-of-waste point is already reached before incineration/landfilling. The waste is already considered part of another product system at the time of treatment. The waste treatment of the material is borne by the secondary system. The primary system releases the waste emission-free at the end-of-waste point.

Modeling in the Climate Hub:

1. In the "Allocation method" dropdown in the Waste Treatment tab, "Cut-off approach" is selected.
2. No activity for the waste hand-over is recorded in the primary system, since the secondary system bears the waste emissions.
3. In the free-text field in the Allocation tab, it is documented at which point the end-of-waste point is reached.
4. Using "Upload documents," the hand-over documentation (e.g., disposal contract) can be attached as supporting evidence.

Example: In the manufacture of battery cells, solvent-containing residues are generated and handed over to an external disposal facility for proper chemical treatment. Since the waste is released emission-free at the factory gate, the battery cell bears no emissions for the downstream treatment. The emissions entry for this waste stream is zero.

Standard compatibility: For pure waste treatment with energy recovery (waste-to-energy), the cut-off approach is not provided for in Catena-X — there, the Polluter Pays Principle applies as mandatory.  PACT, on the other hand, mandates the cut-off approach for energy recovery.

3. Material Recycling

This tab is relevant when residual materials or waste from production are recycled. In nearly all cases, the cut-off approach applies as the standard method. Here too, the end-of-waste point marks the transition of responsibility from the primary system to the secondary system.

Availability of allocation methods

Allocation method	ISO 14067	Catena-X	PACT	TfS
Cut-off approach	Available	Available	Available	Available
Upstream System Expansion	-	-	-	Available
No allocation took place	Available	-	-	Available

With Catena-X or PACT is activated: The method is fixed to Cut-off approach and cannot be changed. 

3.1 Cut-off Approach

When to apply? When the material is recycled externally and is not part of the company's own product system, or when a cradle-to-gate perspective applies.

The responsibility of the generating product system ends at the end-of-waste point. From the point of hand-over, the generating system no longer bears any emissions. At the same time, it receives no credit for the fact that the material replaces primary production elsewhere.

Modeling in the Climate Hub:

1. In the "Allocation method" dropdown in the Material Recycling section, "Cut-off approach" is selected.
2. No activity for the waste hand-over is recorded in the primary system, since the secondary system bears the waste emissions.
3. In the free-text field, the quantity of material handed over as well as the hand-over point (e.g., factory gate) is documented.
4. Using "Upload documents," the hand-over documentation can be attached as supporting evidence.

Example: A bicycle manufacturer hands over 180 g of aluminum shavings per frame to an external recycler. Emissions for transport, melting, and processing are borne by the recipient of the secondary aluminum. The emissions entry in the frame's PCF is zero — a credit for replaced primary production is likewise not applied.

Standard compatibility: The cut-off approach is the prescribed standard method across all three standards. Preparatory steps for recycling are generally attributed, under Catena-X, to the receiving product system (the one using the recycled material); for pre-consumer scrap, however, the preparatory steps occurring at the waste generator are to be accounted for by the generator (cut-off rules apply).

3.2 Upstream System Expansion

When to apply? Exclusively in the context of TfS and only for recycling cases where all the criteria listed below are met:

• A societal benefit can be demonstrated in the form of overall lower GHG emissions compared to other available treatment methods.
• The technology is new and it can be assumed that its efficiency will continue to improve after commercial scale-up.
• Regularly updated data is used in accordance with the TfS guideline.
• The market for the alternative waste treatment is known and the requirements are clearly defined.
• An ISO-compliant substitution approach is applied and the exact end use of the waste is known.
• Substitution is only applied if the alternative treatment replaces the final disposal and thereby eliminates the need for final disposal.
• Data on the impact of the alternative production process must be available in order to calculate the PCF of the alternative product and compare it to the system under study.
• A clear description of the process for selecting the final end-of-life option substituted by chemical recycling must be documented.

In exceptional cases, the upstream system expansion method may be applied when calculating recycling emissions. This method assesses the benefits of a recycled material by comparing it with alternative treatment methods. The method is based on the substitution principle: the recycled material replaces an alternative treatment, and the emissions avoided as a result are counted as a credit. In practice, the method is particularly relevant for chemical recycling.

Example: A company uses chemical recycling to convert plastic waste back into raw materials that would otherwise have been thermally disposed of. As all criteria are met, the Upstream System Expansion method is applied. The emissions avoided from thermal disposal are counted as a credit.

Note on standard compatibility: TfS permits the method as an exception for recycling cases such as chemical recycling, provided all defined criteria are met. Catena-X and PACT prescribe the cut-off approach as the standard and do not provide for any comparable exemption.