The Carbon Border

Adjustment
Mechanism

IRON & STEEL SECTOR

By:
Ayman Khalid
Emissions to Monitor (Direct CO ₂)
● From combustion (e.g. BFG)

● From chemical reduction & raw materials

● From heat generation & emission control

Mass Balance & Total Emissions
Total emissions = emissions – retained carbon

Applies to pig iron, DRI, steel, slag, waste

Indirect E missions (Transitional
Only)
● Electricity-related CO₂

Reported separately (transition period only)

Attribution Rules – Joint
Production
● Bubble reporting allowed

If precursors aren’t sold separately

Additional iron and steel sector parameters requested in
the CBAM report
Example for carbon steel production, blast furnace route – Overview
Overview – Integrated Steel Production (BOF
Route)
● 5 production processes (CBAM aggregated
goods)

● System boundaries defined for each stage

● Emissions traced through precursor inputs and

energy use
Production Process Breakdown

Process 1 – Sintered Ore

Inputs: Iron ore, coke fines, electricity
→ Output: Sinter (precursor for pig iron)
Process 4 – Formed Steel Products
Inputs: Crude steel, natural gas,
Process 2 – Pig Iron electricity
Inputs: Sinter, lime, coke, waste plastics, → Output: Bars, rods, rails
electricity
→ Output: Pig iron (embedded
emissions included) Process 5 – Electricity Recovery
Input: Blast furnace gas
→ Output: Electricity reused in
Process 3 – Crude Steel Processes 1–4
Inputs: Pig iron, lime, scrap steel, natural
gas, electricity
→ Output: Crude steel
Carbon Steel Production – Direct & Indirect
Emissions (BF Route)
Carbon Steel Production – Direct & Indirect
Emissions (BF Route)
Direct Emissions:

● Fuel combustion: coke fines, plastics, natural gas

● Process: coke as reducing agent, decomposition of lime
● Carbon releases from raw materials

Indirect Emissions:

● Electricity used in processes 1–4

● Includes on-site and grid-purchased electricity

Waste Gas:

● Blast furnace gas used for power generation → counted as direct emissions
Indirect Emissions – Electricity Use in BF Steel
Production
Indirect Emissions – Electricity Use in BF Steel
Production
● Electricity Sources:

○ Self-generated from blast furnace gas (Process 5)

○ Purchased from grid
● Simplification (Transitional
● Electricity Use: Period):

○ Entire self-generated electricity used internally ○ Plants may define a joint

○ Does not cover full plant demand → grid electricity “bubble” covering all related
supplements processes
○ Allowed if precursors are fully
● Emission Calculation: used for final steel products

○ Weighted average of:

■ Emission factor of self-generated electricity

■ Emission factor of grid electricity
Monitoring Emissions in Integrated Steel
Production
Monitoring Emissions in Integrated Steel
Production
● production route: Blast Furnace → Basic Oxygen Furnace (BOF)

● Bubble approach: Processes 1 to 4 grouped as one joint production process

● Why use the bubble approach?

○ Simplifies emissions monitoring

○ Avoids tracking precursors like sinter, pig iron, and crude steel
○ Focuses only on final iron or steel products

● Emissions categories:

○ Direct emissions
○ Indirect emissions
 Direct Emissions – What to
Monitor?
Fuel combustion sources: Monitoring method:
● Coke fines ● Mass balance approach
● Plastic waste ● Calculates carbon in
● Natural gas input/output streams
● Blast furnace gas ● Converts carbon to CO₂
Process-related emissions: equivalents

● Carbonates (lime) decomposition Output stream correction:

● Coke as a reducing agent ● Accounts for carbon not
● Carbon from iron and steel materials emitted (e.g., stored in
(e.g., scrap) products)
Indirect Emissions – Electricity Use and Emission
Factors
● Electricity consumption sources:
○ Purchased from the grid
○ Self-generated from blast furnace gas

● Key assumptions in monitoring:

○ All self-generated electricity is consumed internally
○ Self-generation does not fully meet demand

● Reporting requirements:
○ Track total electricity use for Processes 1 to 4
○ Apply weighted average of emission factors (grid vs. internal)

● Purpose:
○ Accurate calculation of indirect embedded emissions
○ Compliance with CBAM reporting standards
Example calculation for carbon steel production, BF route –
Mass balance for the installation's direct emissions.
Carbon steel, blast furnace route – Calculation of
the installation's indirect emissions
Waste Gas Deduction – Avoiding Double Counting in
Direct Emissions
Purpose: Ensure emissions from waste gas used for electricity are not double counted.

Step-by-step deduction:

● Electricity generated from waste gas: 1,244,133 MWh

● Assumed generation efficiency: 35%

Total fuel input (in MWh):

Fuel input in TJ:

Waste Gas Deduction – Avoiding Double Counting in
Direct Emissions
Example activity levels for goods produced in the
reporting period
Example Calculation – Specific Embedded Emissions (SEE)
under Bubble Approach
Example Calculation – Specific Embedded Emissions (SEE)
under Bubble Approach
Product: Iron or steel products (e.g., rails)

Quantity: 10,000 tonnes

Calculation under CBAM (Transitional Period):

● Direct embedded emissions:

10,000 t × 1.539 t CO₂/t = 15,390 t CO₂

● Indirect embedded emissions:

10,000 t × 0.204 t CO₂/t = 2,040 t CO₂

Total embedded emissions:

17,430 t CO₂
Example 2 – EAF Steelmaking
Route
Example 2 – EAF Steelmaking
Route
● Installation produces two goods categories:

○ Crude steel (Production Process 1)

○ Iron or steel products (Production Process 2)

● Production Process 1:

○ Crude steel via EAF/AOD

○ Inputs: steel scrap (incl. from process 2), alloys, fuels (natural gas), graphite electrodes, electricity
○ Outputs: slabs (some sold, some used in Process 2)
○ Bubble approach not allowed due to sale of precursor

● Production Process 2:

○ Final products: tubes, bars, rods, sheets

○ Inputs: crude steel (with embedded emissions), natural gas, electricity
○ Outputs: finished products, sold
EAF Route – Emissions Reporting & Alloy Grades

● High-alloy steels produced → multiple CN codes & alloy grades

● CBAM transitional rules:

○ Alloys in same category → average embedded emissions

○ Must report each CN code/alloy grade pair separately
○ Additional info: % of Cr, Mn, Ni, carbon content

● Monitoring summary:

○ Separate monitoring of Process 1 and 2

○ Embedded emissions calculated for each output
○ Report includes both quantity and composition details
EAF Route – Direct & Indirect Emissions Monitoring
EAF Route – Direct & Indirect Emissions Monitoring
Direct emissions result from:

● Fuel combustion (natural gas)

● Process emissions:

○ Graphite electrodes
○ Other additives
○ Carbon in steel materials

Indirect emissions:

● Result from electricity use in both Production Processes 1 & 2

● Shown in Figure 7-10 (system boundaries for indirect emissions)

Calculation-based monitoring approach applied

EAF High-Alloy Steel – Electricity Use for Indirect
Emissions
EAF Route – Complete Monitoring
Approach
EAF Route – Complete Monitoring
Approach
In this case, ‘bubble’ approach not applicable due to the diversion and sale of some crude
stainless-steel precursor before it reaches Production Process 2.

Specific embedded emissions must be calculated separately for each production process.

Inputs and outputs highlighted in red text in Table 7-11 require monitoring:

● Direct emissions (fuel combustion, process emissions)

● Indirect emissions (electricity consumption)

Monitoring includes:

● Quantitative (activity data)

● Qualitative (calculation factors)
● Purchased precursors include specific embedded emissions.
Mass Balance Method – Carbon Quantities in EAF Route
Mass Balance Method – Carbon Quantities in EAF Route
Mass balance method used due to installation complexity and multiple source
streams/material flows.

CO2 quantities calculated based on carbon content (CC) in each material.

● No distinction between fuels and process materials.

Non-emitted carbon accounted for in products, with negative activity data.

Output source streams that contain non-emitted carbon are highlighted in red text
EAF Installation – Embedded Emissions Calculation by
Production Process
EAF Installation – Embedded Emissions Calculation by
Production Process
The previous Table summarizes:

● Activity levels for two production processes.

● Natural gas & electricity energy and emissions attribution to production

process 2.

● Specific Energy Consumption (SEC) values for bars, sheets, and pipes.

Balance of direct emissions attributed to production process 1.

No embedded emissions are attributed to steel scrap from process 2, as it is recycled

internally to process 1.
EAF Installation – Embedded Emissions Calculation
(Process 1 & 2)
 EAF Installation – Embedded Emissions Calculation
(Process 1 & 2)

Example calculation of total embedded emissions for Process 1 (Crude steel/slabs).

Process 2 can be calculated similarly.

For guidance, The Previous Table shows:

● Specific embedded emissions and specific attributed emissions for complex

goods.
● Based only on Process 2 data.
● Activity level and total emissions for Process 2 are omitted.
Embedded Emissions of Complex Goods – Process
2
Embedded Emissions of Complex Goods –
Process 2
Embedded emissions for steel products in Process 2

Calculation uses mass ratio (Mi) of precursor (slabs to final products)

● Mi = 1,227,000 / 1,133,000 = 1.083

Adjust precursor SEEi values by Mi:

● SEEi_direct = 1.001 × 1.083 = 1.084 t CO₂/t

Total embedded emissions (example for 100 t steel pipe):

● Direct = 100 × 1.440 = 144 t CO₂

● Indirect = 100 × 1.732 = 173.2 t CO₂
● Total = 317.2 t CO₂
Example 3 – Screws and Nuts from Purchased Steel
Rods
Installation uses purchased precursors (steel rods):

● Carbon steel (from Example 1)

● High-alloy steel (from Example 2)

Manufacturing steps:

● Hot rolling → wires

● Cutting/forging → screws & nuts
● Machining → nuts

Own emissions:

● Direct: natural gas

● Indirect: electricity

Majority of emissions from precursors

Example 3 – Main Inputs & Outputs
Example 3 – Specific Embedded Emissions (SEE)
Example Installation No. 3 – Calculation of Specific Embedded
Emissions (SEE)
Example 3 – Screws and Nuts from Purchased Steel
Rods
Scrap generated during cutting/machining:

● Assigned zero embedded emissions

● Causes precursor mass > product mass (mi > 1)

Operator chooses to separately calculate emissions for:

● Carbon steel products

● High-alloy steel products