How to Calculate Embedded Emissions for Steel Under CBAM

Calculating Embedded Emissions for Steel Under CBAM

The EU CBAM regulation requires that embedded emissions in steel products be calculated using one of two methodologies: actual verified emissions or EU default values. This guide explains both approaches and their implications for South African steel exporters.

The Two Methodologies

1. Actual Verified Emissions You calculate the actual embedded emissions in your specific production process, have them verified by an accredited third-party verifier, and use this verified figure for CBAM purposes.

Advantages: If your actual emissions are lower than the EU default, you pay less CBAM. Demonstrates environmental performance.

Disadvantages: Requires investment in emissions monitoring systems, data collection, and third-party verification. Ongoing annual cost.

2. EU Default Values The European Commission publishes default emission values for each CBAM product category. These are set at a level that represents the average emission intensity of production in non-EU countries, with a 10% markup penalty (rising to 30% from 2028).

Advantages: Simple to use. No verification required.

Disadvantages: May result in higher CBAM liability than actual emissions. The 10% markup means you pay more than the actual average.

The Embedded Emissions Formula for Steel

For steel products, embedded emissions are calculated as:

Embedded Emissions = Direct Emissions + Indirect Emissions

Where:

• Direct Emissions = Process emissions from iron ore reduction + fuel combustion in the steelmaking process
• Indirect Emissions = Electricity consumption × grid emission factor

For Blast Furnace / Basic Oxygen Furnace (BF/BOF) route:

• Coke consumption: ~450 kg/t crude steel × 3.14 tCO₂/t coke = ~1.41 tCO₂/t
• Coal injection: ~150 kg/t × 3.14 tCO₂/t = ~0.47 tCO₂/t
• Limestone flux: ~200 kg/t × 0.44 tCO₂/t = ~0.09 tCO₂/t
• Total direct: ~1.97 tCO₂/t crude steel

Indirect emissions (electricity):

• Electricity consumption: ~400 kWh/t
• At Eskom grid intensity (0.95 tCO₂/MWh): ~0.38 tCO₂/t
• Total indirect: ~0.38 tCO₂/t

Total embedded emissions (BF/BOF, SA conditions): ~2.35 tCO₂/t

This is slightly above the EU default of 2.18 tCO₂/t (with markup), suggesting that for most SA BF/BOF producers, the default value approach may be more favourable.

Data Requirements for Actual Emissions Verification

If you choose to use actual verified emissions, you will need to collect and report:

1. Fuel consumption data — tonnes of coke, coal, natural gas, etc. consumed per tonne of steel produced
2. Electricity consumption data — MWh consumed per tonne of steel produced
3. Grid emission factor — the carbon intensity of the electricity grid (Eskom publishes this annually)
4. Production volumes — tonnes of each product category produced
5. Allocation methodology — how emissions are allocated across different product types

Verification Requirements

Actual emissions must be verified by an accredited third-party verifier. In South Africa, accredited verifiers include:

• Bureau Veritas
• SGS South Africa
• TÜV Rheinland South Africa
• DNV South Africa

The verification must comply with the EU CBAM Implementing Regulation (EU) 2023/1773 and ISO 14064-3 standards.

Use the CBAM Calculator

The CBAM Calculator [blocked] allows you to input your actual emission factors or use the EU default values to model your CBAM liability.