CBAM system boundaries for iron and steel inputs
The European Commission’s latest sector-specific guidance distinguishes between iron ore pellets, whose embedded emissions can be included in downstream steel calculations, and coke and lime, which are not treated as CBAM precursors under the iron and steel methodology. The distinction is tied to the legal scope and prescribed system boundaries of the EU Carbon Border Adjustment Mechanism (CBAM), rather than indicating that coke or lime production has zero emissions. Iron ore pellets fall under CN code 2601 12 00 and are covered by CBAM, while lime kilns and coke-oven plants fall outside the defined system boundaries for iron and steel because their outputs are not themselves CBAM goods.
Precursor status and downstream emissions accounting
For integrated steelmakers, the guidance creates an emissions-accounting chain that differs from a conventional cradle-to-gate carbon footprint. Pellets can carry verified embedded emissions into downstream calculations as a recognised precursor. By contrast, coke and lime may generate emissions across the wider industrial complex, but those emissions are not carried forward as CBAM precursor values under the steel methodology.
The distinction also affects procurement and data collection requirements. Steelmakers in Serbia and Türkiye sourcing iron ore pellets from multiple origins may need to obtain actual verified emissions data or apply relevant default values for those materials. The same precursor-verification process does not apply to coke and lime in the steel calculation.
For EU importers and producers, identifying the legal status of each input is therefore described as essential when establishing the evidence needed for CBAM reporting. The guidance links which emissions enter calculations to whether a material is treated as a recognised CBAM precursor within the applicable methodology.
Direct versus indirect emissions categories
The Commission also specifies that indirect emissions are within scope for agglomerated iron ore, while iron and steel are generally subject to direct-emissions accounting under the current CBAM methodology. This creates a further separation between upstream pellet production and downstream steelmaking. The categories included in a calculation depend on the product and its applicable CBAM rules rather than on the physical contribution of each input to overall manufacturing.
Evidence requests for CBAM declarations
The clarification highlights the importance for EU importers of requesting evidence that corresponds to the statutory calculation. Collecting emissions information for every physical input without distinguishing recognised CBAM precursors from other materials can result in extensive documentation without improving the accuracy of the required declaration.
A more targeted approach maps each input to its legal classification, identifies the applicable system boundary, and establishes which emissions data must be verified or reported. The guidance also indicates that these distinctions affect how lower-carbon steel supply chains are assessed under CBAM.
Lower-emission pellet sourcing can provide an advantage in the embedded-emissions calculation carried into a complex steel good. Decarbonising coke, lime, and other inputs may still have commercial or broader corporate emissions benefits, but those improvements do not necessarily translate directly into a lower CBAM figure under the current methodology.
Implications for border-cost calculations
As CBAM certificate costs become a factor in import economics, the legal treatment of individual precursors influences which upstream emissions reductions directly affect the border-cost calculation. Other reductions may instead primarily contribute to broader industrial decarbonisation objectives rather than changing the CBAM figure under the existing rules.