EU Commission issues new CBAM guidance for iron and steel

The European Commission has published new sector-specific guidance for iron and steel under the Carbon Border Adjustment Mechanism (CBAM), setting out how producers outside the EU should determine embedded emissions during the definitive period that began in 2026.

The guidance covers the main CBAM categories in the steel value chain, including sintered ore, ferro-alloys, pig iron, direct reduced iron (DRI), crude steel and a broad range of finished and semi-finished iron and steel products. These include flat products, bars, rods, sections, wire, tubes, pipes, structural products and fasteners.

Electricity emissions largely excluded for steel

One important feature of the definitive CBAM methodology is that most iron and steel goods are assessed on their direct emissions. Electricity-related indirect emissions are generally excluded, with sintered ore being an important exception. Its electricity emissions are included and can consequently become part of the embedded emissions of downstream steel products when sintered ore is used as a precursor.

This distinction is particularly relevant for electric arc furnace steelmaking. Although electricity is a major energy input for EAF production, its indirect emissions are not included in the CBAM embedded-emissions figure for steel products covered by the direct-emissions-only rules. Producers must, however, account for relevant direct CO2 emissions, including those arising from fuels, reducing agents, carbon-containing materials and electrodes.

For more complex products, the calculation extends along the production chain. Embedded emissions from relevant precursor materials such as pig iron, DRI, ferro-alloys and crude steel have to be incorporated. Where the same goods or precursors originate from different production routes, periods or installations, weighted averages generally apply unless sufficient evidence allows more specific attribution.

Commission provides steel calculation examples

The Commission also provides practical examples showing how the methodology affects CBAM obligations.

For an integrated blast furnace-based steelworks, the example results in total specific embedded emissions of 1.567 tonnes of CO2 per tonne of finished steel. For a hypothetical import of 10,000 tonnes of rails in 2027, this corresponds to 15,670 tonnes of embedded emissions. After the free-allocation adjustment, 3,690 CBAM certificates would have to be surrendered, before any possible deduction for a carbon price already paid in the country of production.

A separate EAF example for stainless steel results in embedded emissions of 1.783 tonnes of CO2 per tonne of steel pipe. Under the assumptions used by the Commission, importing 100 tonnes in 2027 would require 95.9 CBAM certificates after the free-allocation adjustment and before accounting for an eligible carbon price abroad.

The guidance also illustrates the impact of processing losses. When steel rods are converted into products such as screws and nuts, scrap generated during processing means that more precursor material may be required than the weight of the finished product, increasing the embedded emissions attributed per tonne of final goods.

The Commission stresses that the document is intended as practical guidance rather than a legally binding interpretation of CBAM rules; EU legislation takes precedence.

Source: European Commission, Photo: Fotolia