CBAM Embedded Emissions Calculation for Steel Manufacturers

Steel is the largest CBAM sector by import volume. From January 2026, default values are gone — EU importers of your products now need actual verified embedded emissions data per CN code or they face financial penalties. Here is exactly how to calculate it.

What are CBAM embedded emissions?

Under EU Regulation 2023/956 and Implementing Regulation 2023/1773, embedded emissions are the greenhouse gas emissions generated during the production of a CBAM good. For steel, the EU uses an installation-based methodology: you calculate the total GHG emissions from a specific production facility and divide by the total tonnage of goods produced, to arrive at a per-tonne embedded emission factor for each CN code.

Two emission categories are included:

• Direct emissions (Scope 1): Emissions directly from the installation — combustion of fuel in furnaces, process emissions from iron ore reduction (BF-BOF route), electric arc furnace operation, ladle metallurgy, and any other on-site processes.
• Indirect emissions (Scope 2): Emissions from the generation of purchased electricity consumed by the installation. The EU methodology uses either the actual emission factor of the contracted electricity supplier (if documented) or the national grid average.

Step 1 — Define your installation boundary

A CBAM installation is the technical unit where the steel good is produced. For an integrated steelmaker, this is typically the entire plant (coke ovens, blast furnace, BOF, casting and rolling). For an EAF minimill, it is the EAF building, ladle furnace, and continuous caster.

The installation boundary must be defined in writing and must cover all equipment and processes that contribute to producing the goods in question. Equipment used exclusively for other purposes (e.g. a maintenance workshop) can be excluded if documented.

Step 2 — Calculate direct (Scope 1) emissions

Direct emissions come from three sources for steel installations:

1. Fuel combustion: Natural gas, coke oven gas, blast furnace gas, or oil burned in furnaces, boilers, or reheating equipment. Use the actual fuel consumption data from metering records multiplied by the appropriate IPCC or national emission factor for each fuel type.
2. Process emissions from iron ore reduction (BF-BOF route only): The reduction of iron ore to pig iron generates CO₂ as a process emission (not combustion). Calculate this using the carbon balance methodology — carbon inputs (coke, coal, lime) minus carbon outputs (hot metal carbon, slag, off-gases).
3. Other process emissions: Lime calcination, flux consumption, and any fugitive emissions from material handling.

Sum all direct emission sources to get total direct CO₂e for the installation over the monitoring period (typically a calendar year). Divide by total tonnes of goods produced in that period.

BF-BOF vs EAF methodology

The calculation differs by production route. BF-BOF (blast furnace, basic oxygen furnace) is carbon-intensive because it uses virgin iron ore and coke — process emissions are large and must be measured via carbon balance. EAF (electric arc furnace) melts scrap steel and has much lower direct emissions, but higher electricity consumption — so Scope 2 indirect emissions are proportionally more significant in EAF operations.

Step 3 — Calculate indirect (Scope 2) emissions

Indirect emissions from purchased electricity are calculated as:

Indirect emissions (tCO₂e) = Electricity consumed (MWh) × Emission factor (tCO₂e/MWh)

The emission factor to use depends on whether you have a documented power purchase agreement (PPA) with a specific emission factor, or whether you use grid electricity. In the absence of a supplier-specific emission factor, the EU CBAM methodology uses the national average grid emission factor published annually by the European Environment Agency (EEA) for the country of operation.

Step 4 — Include precursor embedded emissions

For complex steel goods that incorporate purchased materials produced in another installation — such as flat-rolled products that incorporate hot-rolled coil purchased from a separate upstream facility — the embedded emissions of those precursor materials must also be included.

The precursor's embedded emissions are calculated separately (using the same methodology) and added to the processing installation's direct and indirect emissions. This is one of the most technically complex parts of the CBAM calculation for downstream steel products like wire rods, sections, or tubes.

Step 5 — Third-party verification

All CBAM embedded emissions data must be verified by an accredited third-party verifier before being passed to the EU importer. Accredited verifiers include TÜV Rheinland, TÜV SÜD, DNV, SGS, Bureau Veritas, and other bodies accredited under ISO 14065 by a national accreditation body.

The verifier will conduct a document review of your calculation methodology, supporting records, and monitoring plan, followed by a site visit to verify data quality and completeness. Allow 4–8 weeks for the verification process.

Step 6 — Deliver the EU importer handover pack

The verified embedded emissions data must be provided to your EU importer in a format they can use for their CBAM declaration. The handover pack should include: the verified embedded emissions per tonne per CN code, the monitoring period covered, the name and accreditation details of the verifier, and the calculation methodology summary.

Your EU importer files quarterly CBAM declarations and purchases CBAM certificates equivalent to the total embedded emissions of CBAM goods they import. Having clean, verifier-certified data minimises their administrative burden and reduces the risk of disputes or penalties.