The European Commission’s CBAM Questions and Answers, updated on 15 October 2026, says steelmakers supplying the European Union cannot compute artificially lower embedded emissions for export batches solely because the tonnes are destined for the EU. The guidance states that emissions accounting must follow the applicable production-process and functional-unit rules. It also indicates that lower-emission output cannot be selectively allocated to European customers in a way that departs from those requirements.
The Commission further specifies that an installation may not have more than one production process per Combined Nomenclature (CN) code. Operators are also not allowed to split production processes based on the destination market of their goods. 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 accounting
The clarification is aimed at steel mills with mixed production systems. Under the guidance, producers cannot automatically link renewable electricity, higher-quality scrap, or their lowest-emission production campaigns to EU-bound goods while excluding more carbon-intensive output sold elsewhere. The Commission’s position ties emissions accounting to how production routes and functional units are defined under CBAM.
The Commission says any separation between production processes or functional units must be supported by the applicable CBAM methodology and evidence. Designating specific tonnes for European customers does not, on its own, justify a separate emissions calculation. For installations with multiple routes producing the same CN-coded product, allocation must reflect the full functional unit.
For producers in Serbia and other Western Balkan markets, the requirements are described as especially relevant when installations combine grid electricity, self-generation, scrap and primary metallic inputs. Where several production routes manufacture the same CN-coded product within one installation, emissions allocation should reflect the full functional unit rather than a specially constructed emissions account for EU exports.
Investment decisions and weak EU steel export conditions
The guidance 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 association also cited EUR 3.4 billion in investment decisions already taken by producers.
Market conditions remain weak, according to EUROFER reporting. The association said EU steel exports to third countries declined sharply during the first half of 2026. It also reported that apparent steel consumption in the EU is expected to remain almost flat over the year.
Against this background, the Commission’s approach is described as limiting destination-based carbon differentiation under CBAM. Non-EU producers are expected to demonstrate emissions performance through their actual production routes, installation operations and verifiable inputs. The guidance frames this as applying rather than assigning lowest-emission output to EU customers after production.
Implications for decarbonisation reporting across installations
The rules increase the relevance of measures that reduce emissions across the overall production process. Investment in lower-emission furnaces, renewable electricity, improved metallic inputs and process efficiency is described as capable of strengthening 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 that such a batch-focused strategy may have limited value if resulting emissions calculations cannot be reconciled with CBAM requirements tied to functional units and production processes. The Commission’s clarification therefore places emphasis on whether reported embedded emissions align with how production is configured within an installation.
Verification expectations for importers and financial institutions
EU importers and banks assessing steel suppliers will need to distinguish between verifiable emissions performance and contractual claims that particular shipments are environmentally preferable. 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.
The Commission says verification must confirm whether emissions data and allocation methodology comply with applicable production-process rules. For steelmakers preparing to report actual embedded emissions under CBAM, it highlights consistency between the factory’s production configuration, supporting evidence and the emissions figures reported for covered goods.