EU steel buyers braced for CBAM price volatility 

The European Commission revealed plans to widen the scope of CBAM before revealing the provisional emissions data central to calculating steel buyers’ emissions-based taxes.

Speaking at the press conference yesterday (December 17), executive vice-president Stéphane Séjourné and climate commissioner Wopke Hoekstra outlined a package of implementation documents and policy proposals that mark a decisive shift in CBAM policy development.  

The European Commission confirmed the plans to broaden CBAM’s scope as part of new plans to support EU producers as the system moves from reporting into full financial enforcement from January 1, 2026.  

Yesterday’s press conference came just hours ahead of the publication of CBAM’s country-specific default values and free allocation adjustment factors (commonly known as the European benchmarks), both of which are central to determining the final carbon cost faced by importers.  

However, as MEPS continued its analysis of the data, steel market analyst Jon Carruthers-Green highlighted that CBAM taxes will have to be calculated on a case-by-case basis. 

“This release from the Commission covers a wide cross section of information that is key to understanding the effects of CBAM. However, with over 2,000 pages of material published, the market will need time to fully digest and interpret the implications,” Carruthers-Green said. 

“Crucially, the confirmation of benchmarks and default values allows us to better frame the potential price impacts of CBAM and, at the very least, reduce the margin of error in cost estimates. That said, the single most important variable remains the EU ETS carbon price, which will continue to move week by week. This ongoing volatility means a degree of uncertainty will persist for importers and steel buyers attempting to plan and manage their future carbon costs.” 

The value of carbon determined by the EU ETS is currently around EUR84 per tonne. These ETS values, which determine the cost of CBAM certificates used to pay EU importers’ emissions-based taxes, are forecast to rise above EUR120 per tonne between now and 2030. 

Provisional default values and emission benchmarks 

Two other key factors in determining the cost of CBAM taxes are the EU’s country- specific default emissions values and European emissions benchmarks. These parameters, previously the subject of leaked documentation only, have now been officially published in their provisional form, defining the emissions thresholds used when calculating CBAM liabilities. 

In 2026, imported steel products with an embedded emissions below the Commission’s EU benchmarks will be taxed at 2.5% of the EU carbon cost. Embedded emissions above the benchmark will be taxed at 100%. Importers will pay their taxes using CBAM certificates. Consequently, the higher the benchmark emissions figure set by the Commission, the fewer CBAM certificates an importer will need to surrender.   

Where verified, plant-specific emissions data is unavailable, default emissions values will determine producers’ emissions liability, ensuring CBAM remains enforceable even in the absence of full disclosure from suppliers.

Earlier this week, MEPS reported that many of its research respondents were now expecting CBAM taxes to be significantly higher than previously thought.

Downstream steel products made subject to CBAM costs 

At yesterday’s press conference, the Commission confirmed that CBAM will be extended to cover 180 downstream products. These include steel-containing items such as internal combustion engines, household appliances, electric cables and selected vehicles and automotive parts.  

These products were selected based on carbon-leakage risk, climate relevance and administrative feasibility. For such goods, CBAM taxes will apply only to the emissions embedded in their steel content, not downstream fabrication processes. 

Due to the complexity of product composition, the Commission proposes the use of default emission values without markups for these downstream goods, rather than requiring full plant-level emissions data. The downstream expansion of CBAM’s scope remains a legislative proposal but is expected to affect CBAM from January 2028, if adopted. 

Steelmakers to benefit from support fund 

At the same time, the Commission announced the introduction of a temporary two-year decarbonisation support fund to help EU producers remain competitive in export markets as free EU ETS allowances are phased out. The EUR600 million fund will reimburse part of domestic producers' carbon costs for goods still exposed to carbon-leakage risks, provided producers demonstrate active decarbonisation efforts. 

Among the products eligible for support are hot rolled and cold rolled coils, coated flat products, stainless steel and both seamless and welded pipe. Commissioner Hoekstra noted that once the fund expires, the issue may be addressed through revisions to the ETS directive, potentially allowing additional free allocations for export-exposed sectors. 

Other CBAM changes outlined 

Further changes include the incorporation of pre-consumer steel scrap into CBAM calculations to promote circularity, tighter reporting requirements to address misdeclaration risks, and refined default-value methodologies based on the worst-performing 10% of countries. 

The Commission also confirmed adjustments to CBAM rules for imported electricity, moving to country-average grid emission factors and easing constraints that previously penalised renewable-heavy power systems.