What CBAM Is — and Why It Now Affects Every Tonne of Steel Entering the EU
The Carbon Border Adjustment Mechanism — CBAM — is the European Union’s carbon levy on imported goods, and steel is one of its primary targets. After a transitional reporting phase that began in October 2023, the definitive regime starts in 2026: importers must buy CBAM certificates priced against the EU Emissions Trading System (EU ETS) for the embedded carbon of the steel they bring in. For a European buyer comparing a Chinese mill quote against a European one, the carbon content of the imported steel is no longer a sustainability talking point — it is a landed-cost line item, right next to freight and duty.
The scope covers iron and steel (Chapter 72), aluminium, cement, fertilisers, electricity and hydrogen. Within steel, the goods list is broad: flat-rolled products, tubes and pipes, hollow sections, and downstream articles such as structures of iron or steel. For buyers of welded and seamless pipe, hollow sections and fabricated steel, CBAM touches the import directly — and it also touches it indirectly, because EU fabricators who incorporate imported steel into CE-marked structures pass their CBAM obligations downstream in the price.
Transitional Phase vs Definitive Regime
| Aspect | Transitional (Oct 2023 – end 2025) | Definitive (from 2026) |
|---|---|---|
| Obligation | Quarterly CBAM reports — embedded emissions data only | Authorised CBAM declarant status; annual declaration with verified emissions |
| Data quality | Default values allowed (with penalties for poor data after mid-2024) | Verified actual emissions required; defaults charged at worst-case with penalty uplift |
| Cost | No certificate purchase | CBAM certificates priced weekly off EU ETS auction averages |
| Who reports | EU importer (or indirect customs representative) | Only authorised CBAM declarants may import covered goods |
| Free-allocation phase-out | — | EU producers lose ETS free allocation progressively (2.5% in 2026 rising to 100% by 2034), so the carbon price gap widens every year |
The phase-in schedule matters commercially: in 2026 only 2.5% of the embedded emissions are payable, but the percentage climbs each year — 48.5% in 2027, 61% in 2028, 71.5% in 2029, reaching 100% from 2034. A two-year supply contract signed in 2026 at a price that ignores CBAM will hurt one side by 2028.
Who Pays — and How the Money Flows
The obligation sits with the EU importer of record, not with the exporter. But the economics travel upstream: importers either embed the expected CBAM cost in their purchase price, or demand emissions data from the mill to reduce their exposure. This creates three practical consequences for a Chinese or third-country steel exporter:
- Your emissions data becomes part of your price competitiveness. Two mills quoting the same FOB price are not equal once the buyer adds CBAM: a mill at 1.2 tCO2/t embedded steel can be €60–100/tonne cheaper landed in 2030 than a mill at 2.2 tCO2/t, at an ETS price around €90/t.
- Actual verified data beats defaults. Where the exporter cannot or will not provide real emissions data, the declarant must use default values set at the worst-performing decile of the relevant production route — deliberately punitive. Mills that can document their route (EAF vs BF-BOF, scrap share, direct reduction, on-site solar) give their EU buyers a legitimate way to cut the bill.
- Data must come through the CBAM registry/communication channel with the declarant’s authorisation — a PDF emailed to the buyer is not sufficient for the definitive regime.
What Emissions Data the Exporter Must Provide
For steel products, the installation reports direct embedded emissions (scope 1 of the production process) and, for electricity-consuming steps, indirect emissions attributable where relevant. The calculation follows the CBAM methodology: activity data (coke, coal, natural gas, electricity consumed) multiplied by emission factors, allocated to each product via the installation’s production route. Key data points per product group:
- Production route identification: BF-BOF (blast furnace), DRI-EAF, scrap-EAF, EAF with hot metal, and specific downstream routes for tubes and hollow sections (e.g. welded from strip produced by which route).
- Specific embedded emissions in tCO2 per tonne of goods, split direct and indirect.
- Precursor materials: for a welded pipe, the embedded emissions of the incoming hot-rolled coil count too — the pipe is charged with its strip’s emissions plus the pipe mill’s own fuel and electricity use.
- CBAM certificates already paid on precursors imported into the EU, where applicable.
Note the detail that catches tube buyers: a welded pipe inherits the carbon of its coil. A pipe mill running on efficient EAF-sourced strip will report far lower embedded emissions than a mill drawing from BF-BOF strip — same pipe, same EN standard, very different CBAM bill.
How to Price Carbon Into an EU Steel Quotation
A defensible landed-cost model for CBAM-period contracts has four steps:
- Get the mill’s real numbers. Ask for specific embedded emissions per product (direct + indirect, in tCO2e/t), ideally verified or at least computed on the EU methodology template. Treat “defaults will apply” as a red cost flag.
- Forecast the certificate price. Anchor on EU ETS forward curves, not today’s spot. Add the phase-in percentage for each delivery year: a 2027 delivery bears 48.5% of embedded emissions, not 100%.
- Compute the per-tonne charge. CBAM cost ≈ embedded emissions (tCO2/t) × phase-in % × certificate price (€/tCO2) − any carbon price already paid in the country of origin (a £/¥ carbon price paid at the mill can be credited, subject to rules).
- Contract for volatility. Fix the emissions data, not the carbon price: index the CBAM element of the price to the published ETS auction average so both sides share movement in the carbon market instead of gambling on it.
Worked example: 20,000 t of welded pipe, embedded emissions 1.6 tCO2/t, ETS assumed €95/t, 2027 delivery (48.5% phase-in): 20,000 × 1.6 × 0.485 × 95 ≈ €1.47 million of CBAM certificates — roughly €74/tonne added to landed cost. At 1.0 tCO2/t the charge falls to about €46/t. The data gap between mills is now a price gap.
Common Pitfalls
- Treating CBAM as a customs formality. It is a supply-chain data requirement. The exporter’s ability to produce verified emissions data is now part of the product.
- Assuming the transitional reports count for nothing. Data submitted since late 2024 carries penalty exposure for inaccuracy — and the definitive regime builds on that data infrastructure. Mills that ignored the transitional phase are behind.
- Ignoring precursor chains. Hollow sections made from purchased strip, or forgings from purchased billet, need upstream data. Ask whether the mill has data agreements with its own suppliers.
- Forgetting the 150 € de minimis consignment exemption is tiny. Effectively every commercial steel shipment is in scope.
- Confusing CBAM with the EU ETS. CBAM mirrors ETS economics for imports; it does not replace the ETS obligations of EU producers, and the free-allocation phase-out schedule is what equalises treatment by 2034.
How CREATEEL Supports EU Deliveries
CREATEEL prepares CBAM-oriented export documentation for its European customers: production-route data for welded and seamless tube, embedded-emissions figures per product group computed on the EU methodology, and coordination with upstream suppliers so that strip, plate and billet inputs are included. We quote CBAM as a transparent, indexable line — emissions data from the mill, phase-in percentage and ETS reference priced per contract year — so European buyers can compare our offers against EU and third-country alternatives on true landed cost. Where a project needs verified data, we scope third-party verification of the emissions report as part of the documentation package.
Importing steel into the EU after 2026? CREATEEL provides mill-level embedded-emissions data and CBAM-ready documentation with every offer. Get a quote.
