The European Commission (EC) has published its sector-specific guidance for iron and steel under the Carbon Border Adjustment Mechanism (CBAM) to help non-EU operators, providing detailed rules on calculating and monitoring embedded emissions during the definitive period beginning in 2026.
According to the guidance, iron and steel imports are divided into six main aggregated goods categories: sintered ore, ferro-alloys, pig iron, direct reduced iron (DRI), crude steel and iron or steel products. The latter category covers a wide range of products, including flat steel, bars, rods, wire, sections, tubes, pipes, structural products, tanks, containers and fasteners.
Direct emissions generally apply to steel products
For iron and steel products, only direct emissions are generally included in embedded emissions during the definitive period. The main exception is sintered ore classified under CN 2601 12 00, for which electricity-related indirect emissions must also be calculated. When sintered ore is subsequently used as a precursor for another steel product, these indirect emissions are carried forward into the embedded emissions of the downstream product.
The Commission also clarified that complex steel goods must incorporate emissions embedded in their relevant precursors, including sintered ore, pig iron, DRI, ferro-alloys and crude steel. Post-consumer scrap is assigned zero embedded emissions, as are relevant precursors produced in the EU or CBAM-exempt countries and territories.
EAF electricity emissions excluded from crude steel calculations
For electric arc furnace-based steelmaking, electricity-related emissions are not included in the definitive-period embedded emissions of crude steel despite electricity being the route’s principal energy input. However, direct emissions arising from fuels, electrodes, carbon-containing materials and other relevant sources must be calculated.
According to the guidance, operators are allowed to combine several production stages into a single production process, or “bubble,” under certain circumstances. For example, an integrated steel producer may combine sinter, pig iron and crude steel production with downstream operations when internally produced precursors are entirely consumed within the installation and are not sold or transferred separately.
Weighted averages apply to different production routes
Where the same goods are produced through different routes at one installation, their specific embedded emissions must generally be calculated using a weighted average. A similar principle applies to precursors sourced from different installations or production periods unless sufficient evidence allows particular batches to be attributed to a specific production process.
The document also establishes additional reporting requirements for steel producers. For pig iron and DRI, required information includes the main reducing agent and certain alloying-element contents. For crude steel and finished steel products, operators must report information including scrap consumption per ton of product and the proportion of pre-consumer scrap.
Actual emissions require monitoring and verification
Operators seeking to use actual emissions values must maintain an English-language monitoring plan and retain supporting documentation for at least six years.
Actual emissions data for externally sourced precursors may be used only when supported by a verification report from an appropriately accredited verifier. Otherwise, the relevant default values must be applied.
CBAM calculation examples for steel products
In a worked example for an integrated blast furnace-basic oxygen furnace steelworks, the Commission calculates specific embedded emissions of 1.567 mt of CO₂ per mt of finished steel, including indirect emissions associated with sinter production. For a hypothetical 2027 import of 10,000 mt of rails, this results in 15,670 mt of embedded emissions and, following the applicable free-allocation adjustment, an obligation to surrender 3,690 CBAM certificates, before accounting for any eligible carbon price paid in the country of origin.
In another example covering stainless steel produced through the EAF/AOD route, finished products have calculated embedded emissions of 1.783 mt of CO₂ per mt. A hypothetical 100 mt import of stainless steel pipes in 2027 results in an obligation to surrender 95.9 CBAM certificates following the free-allocation adjustment and before any deduction for an eligible foreign carbon price.
Material losses can increase embedded emissions
The guidance also addresses downstream products such as screws and nuts. Since material lost during cutting and machining does not carry over into the final product, these losses can increase embedded emissions per ton of finished goods. In the Commission’s example, specific embedded emissions reach 2.039 mt of CO₂ per mt for carbon steel screws and nuts and 2.371 mt per mt for stainless steel screws and nuts.
Lastly, the EU emphasized that the sector-specific guidance is explanatory rather than legally binding, with applicable EU legislation taking precedence.