The European Commission’s CBAM Questions and Answers, updated on 15 October 2026, addresses how embedded emissions should be calculated for steel exports. The guidance states that steelmakers supplying the European Union cannot compute artificially lower embedded emissions for export batches based solely on EU destination. It also sets out that emissions accounting must follow the applicable production-process and functional-unit rules.
The Commission says an installation cannot have more than one production process per Combined Nomenclature (CN) code. It also states that operators cannot split production processes based on where goods are destined. Where multiple production routes produce the same functional unit, the methodology requires a single production process covering those routes.
Production-process and functional-unit rules for steel exports
The Commission’s clarification is aimed at steel mills with mixed production systems. Producers are not allowed to automatically link renewable electricity, higher-quality scrap, or their lowest-emission production campaigns to goods bound for the EU while excluding more carbon-intensive output sold elsewhere.
Any separation between production processes or functional units must be supported by the applicable CBAM methodology and evidence. The guidance adds that designating particular tonnes for European customers does not, by itself, justify a separate emissions calculation.
For producers in Serbia and other Western Balkan markets, the requirements are described as especially relevant where installations use combinations of grid electricity, self-generation, scrap and primary metallic inputs. The guidance notes that when several production routes manufacture the same CN-coded product within one installation, emissions allocation must reflect the full functional unit. It says this should be done rather than using a specially constructed emissions account for EU exports.
Investment decisions and market conditions for European steel
The clarification is issued as Europe’s steel industry seeks to restore production capacity while investing in decarbonisation. EUROFER reported that 10 million tonnes of crude steelmaking capacity restarted in 2026. The same report cited EUR 3.4 billion in investment decisions already taken by producers.
Market conditions were described as weak. EUROFER reported a sharp decline in EU steel exports to third countries during the first half of 2026. It also said apparent steel consumption in the EU is expected to remain almost flat over the year.
Against this backdrop, the Commission’s approach is described as limiting destination-based carbon differentiation. Non-EU producers are required to demonstrate emissions performance through their actual production routes, installation operations and verifiable inputs rather than assigning their lowest-emission output to EU customers after production.
Decarbonisation across installations and limits on shipment labelling
The rules increase the relevance of improvements that reduce emissions across the production process. Investment in lower-emission furnaces, renewable electricity, improved metallic inputs and process efficiency is described as able to strengthen an installation’s overall emissions performance.
The guidance contrasts this with strategies focused narrowly on producing selected low-carbon batches for European customers. It states such an approach may have limited value if resulting emissions calculations cannot be reconciled with the Commission’s functional-unit and production-process requirements.
EU importers and banks assessing steel suppliers are expected to distinguish between verifiable emissions performance and contractual claims that particular shipments are environmentally preferable. The guidance says labelling a shipment as low-carbon or designating it for the European market does not establish that it qualifies for a separate CBAM emissions calculation.
Verification expectations for embedded emissions reporting
Verification must determine whether emissions data and allocation methodology comply with applicable production-process rules. For steelmakers preparing to report actual embedded emissions under CBAM, the central requirement is consistency between the factory’s production configuration, supporting evidence and the emissions figures reported for covered goods.
The Commission’s guidance therefore links reporting expectations to how installations operate under CBAM methodology rather than to how specific export batches are marketed or allocated by destination.