The European Commission’s CBAM Questions and Answers, updated on 15 October 2026, addresses how embedded emissions should be calculated for steel exports to the EU. The guidance says steelmakers cannot compute artificially lower embedded emissions for export batches solely because the tonnes are destined for the EU. It states that emissions accounting must follow the applicable production-process and functional-unit rules.
The Commission also specifies limits on how production processes may be structured for accounting purposes. It says an installation cannot have more than one production process per Combined Nomenclature (CN) code. Operators are also not allowed to split production processes based on the destination market of their goods.
Production-process and functional-unit rules for steel exports
The guidance further explains how to treat cases where multiple routes produce the same output. Where several production routes generate the same functional unit, the methodology requires a single production process covering those routes. The approach is designed to prevent selective allocation of lower-emission output tied to EU-bound sales.
For mills with mixed production systems, the Commission says producers cannot automatically attribute renewable electricity, higher-quality scrap, or their lowest-emission production campaigns to goods sold into the EU while excluding more carbon-intensive output sold elsewhere. It adds that any separation between production processes or functional units must be supported by the applicable CBAM methodology and evidence.
Under the same clarification, designating particular tonnes for European customers does not by itself justify a separate emissions calculation. The Commission’s position links emissions accounting to how production is configured and documented at the installation level rather than to shipment destination.
Implications for Serbia and Western Balkan steel installations
The clarification is described as particularly relevant for producers in Serbia and other Western Balkan markets. This includes installations that combine grid electricity, self-generation, scrap inputs, and primary metallic inputs within a single operating setup. In such cases, emissions allocation is expected to reflect the full functional unit.
The guidance states that when several production routes manufacture the same CN-coded product within one installation, allocation must correspond to the full functional unit. It says this should not be replaced by a specially constructed emissions account for EU export batches. The requirement is tied to evidence and compliance with CBAM allocation rules.
Steel capacity restarts alongside weak export conditions
The Commission’s clarification comes as Europe’s steel industry seeks to restore production capacity while investing in decarbonisation. EUROFER reported that 10 million tonnes of crude steelmaking capacity had restarted in 2026. The association also cited EUR 3.4 billion in investment decisions already taken by producers.
Market conditions remain weak, according to EUROFER reporting referenced in the guidance context. The association said EU steel exports to third countries declined sharply during the first half of 2026. It also reported that apparent steel consumption in the EU is expected to remain almost flat over the year.
Scrutiny of supplier claims for CBAM embedded emissions
The Commission’s approach limits destination-based carbon differentiation under CBAM. Non-EU producers are expected to demonstrate emissions performance through actual production routes, installation operations, and verifiable inputs rather than by assigning lowest-emission output to EU customers after production.
The rules also affect how importers and banks assess supplier information. They are expected to distinguish between verifiable emissions performance and contractual claims that particular shipments are environmentally preferable. Labelling shipments as low-carbon or designating them for the European market does not establish eligibility for a separate CBAM emissions calculation.
Verification is described as needing to confirm whether emissions data and allocation methodology comply with applicable production-process rules. For steelmakers preparing to report actual embedded emissions under CBAM, consistency is highlighted between factory production configuration, supporting evidence, and the emissions figures reported for covered goods.
Decarbonisation across installations versus selective batch claims
The guidance increases the relevance of improvements that reduce emissions across the full production process. It points to investment in lower-emission furnaces, renewable electricity, improved metallic inputs, and process efficiency as factors that can strengthen an installation’s overall emissions performance.
By contrast, it notes that strategies focused narrowly on producing selected low-carbon batches for European customers may have limited value if resulting calculations cannot be reconciled with CBAM requirements on functional units and production processes. The emphasis remains on whether reported allocations align with the applicable methodology and evidence requirements.