MEPS analysis: Draft EU benchmarks reveal future CBAM cost structure

by David Fleschen

A draft European Commission document reviewed by MEPS International provides the most detailed indication so far of the benchmark values that will determine emissions-based charges under the EU Carbon Border Adjustment Mechanism (CBAM). These benchmarks will apply to steel imports from 1 January 2026 onward.

Although the figures remain unofficial and subject to change, MEPS reports that the draft offers a first look at the methodology the Commission intends to use to calculate embedded emissions and to determine the number of CBAM certificates importers must surrender.

How the benchmarks shape CBAM costs

According to the draft seen by MEPS, imported steel with embedded emissions below the benchmark for its product category will incur a CBAM levy equal to 2.5% of the EU carbon cost in 2026. Steel above the benchmark will be charged at 100% of the applicable ETS price.

Importers will offset part of this cost through “adjustments” that account for the gradual phase-out of free ETS allowances currently granted to EU steelmakers. These adjustments are themselves tied to the benchmarks.

MEPS analyst Jon Carruthers-Green commented: “These benchmarks are a critical part of the CBAM cost calculation. They define the emission thresholds that separate efficient producers from high-emission ones. Crucially, the higher the benchmark, the lower the eventual CBAM cost for importers.”

Draft benchmarks cover the full product spectrum

The Commission’s draft annex reportedly includes indicative benchmark values for:

  • Pig iron, ferro-alloys and semi-finished products

  • Flat and long products

  • Pipes, tubes and hollow profiles

  • Castings, fittings and other downstream products

Route-based differentiation for carbon steel

For carbon steel, the draft introduces a detailed set of rules to classify each import into one of three production routes—Scrap/EAF, DRI/EAF or BF/BOF—each with its own benchmark:

  • Scrap/EAF if more than 50% of crude steel mass comes from scrap

  • DRI/EAF if more than 50% comes from DRI

  • BF/BOF if more than 50% originates from blast furnace or smelting reduction

  • Mixed inputs default to the largest single contributor

This classification is crucial because benchmark levels—and therefore CBAM liabilities—vary substantially by route.

Stainless steel: one benchmark for each period

For stainless steel, MEPS notes that the Commission proposes one unified benchmark for 2026–2027 and another for 2028–2030, reflecting the dominance of EAF production in the EU and the lower relevance of route differentiation.

What this means for trade

Once finalised, the benchmarks will influence the competitiveness of global suppliers:

  • EAF-based producers with lower emissions intensities are likely to gain a cost advantage.

  • BF/BOF mills could face significantly higher CBAM charges, depending on the benchmark level.

Carruthers-Green added that uncertainty remains: “While the benchmarks are crucial, they are only one piece of a much larger puzzle. Future EU carbon prices will play an equally important role in determining the cost of accessing the European market.”

He also pointed to the expected revision of the EU steel safeguard regime in July 2026, which—combined with CBAM—may exert upward pressure on domestic European steel prices.

MEPS says it will continue tracking the legislative process as the CBAM framework moves toward full implementation in 2026.

Source: MEPS, Photo: Fotolia