Wind farms, solar installations, battery storage systems and electricity networks rely on equipment manufactured using steel, aluminium and other industrial materials. While these technologies support power-sector decarbonisation, their construction can involve substantial upstream emissions. This can create carbon-cost exposure for projects investing in the energy transition.
Wind turbine towers and foundations, solar mounting structures, battery energy storage system (BESS) containers, transformers, substations, transmission towers and aluminium conductors all incorporate materials with a carbon footprint from production. Under the current CBAM framework, how covered imports are treated can affect the economics of relevant supply chains. Proposed downstream measures for 2028 could extend the policy’s reach further into manufactured products.
Embedded emissions flow through renewable and grid supply chains
The supply chain starts with steel and aluminium producers, then moves through original equipment manufacturers (OEMs) and engineering, procurement and construction (EPC) packages. It ends with renewable energy and grid projects that use the delivered equipment. At each transfer point, information about the original production process can become separated from the equipment and its final installation.
This separation creates a traceability challenge for embedded-emissions values. Supporting actual embedded-emissions figures requires a reliable link between supplier production data, the quantities purchased and the equipment incorporated into a project. Carbon information therefore becomes part of the commercial documentation accompanying the physical product.
The cost implications can extend beyond entities that are directly responsible for CBAM declarations. The mechanism can influence prices charged by upstream suppliers, so businesses that never act as authorised CBAM declarants may still face material exposure through procurement contracts and EPC packages.
CBAM costs intersect with procurement choices for metals
CBAM-related costs can affect materials needed for decarbonisation while policy continues to drive investment in renewable generation and electricity networks. Project owners and contractors need to distinguish direct liabilities for CBAM certificates from indirect cost increases passed through by suppliers.
Procurement strategies may address exposure through lower-carbon metals, recycled content, efficient equipment and design choices, as well as longer-term supplier frameworks. Green equipment should not be assumed to have a low embodied-carbon footprint; its performance depends on the materials and production routes behind it.
Existing enterprise resource planning (ERP), production, procurement and quality systems can support management of required information. Product codes, supplier identities, production batches and material flows need to remain connected rather than being handled in a separate sustainability process disconnected from purchasing and project delivery.
Financing assessments for carbon-sensitive equipment after financial close
Lenders and investors need to evaluate EPC price firmness, contingency adequacy and sensitivity of internal rates of return (IRR) to steel and aluminium cost changes after financial close. A project’s exposure can persist even when its intended output is low-carbon electricity.
Credit assessments should translate potential carbon-related costs into scenarios for earnings before interest, taxes, depreciation and amortisation (EBITDA), working capital, capital expenditure and customer retention. Green investment status alone does not establish that a project is insulated from CBAM-related costs.
The evidence base should connect supplier emissions data and purchased quantities with equipment records and construction-document controls. This information needs to remain available after commissioning so lifecycle carbon claims can be supported by records of the equipment actually installed.
Where verified actual values show lower embedded emissions, they may strengthen a supplier’s commercial position. Incomplete or unusable documentation can lead to conservative assumptions or default values, potentially shifting additional costs to the EU buyer.
Contract terms linking emissions data delivery to CBAM obligations
Purchase, sales and EPC agreements need clear provisions covering emissions-data delivery, verification status, supplier substitutions, carbon-cost pass-through and remedies when evidence is late or unusable. Without these terms, the party carrying the legal CBAM obligation may inherit costs generated several supply-chain tiers upstream without an effective route to recover them.
Electricity-related claims also require separation because different claim types are not automatically equivalent. A renewable-energy claim, a guarantee of origin and a CBAM claim based on actual emissions are distinct references. Where electricity data is relevant, its commercial value depends on the applicable sector methodology and evidence linking generation, metering, schedules, contracts and the relevant consuming or importing entity.
Engineering, procurement and trading documentation must support carbon claims made about both electricity and the materials used to build infrastructure that supplies it. Renewable assets can generate low-carbon electricity while still incorporating carbon-intensive hardware.
For project developers and equipment suppliers, carbon performance is becoming an additional specification alongside quality, price and delivery. The assessment extends from electricity produced by an asset to steel, aluminium and other materials embedded in its construction.