CBAM system boundaries for iron ore pellets versus other 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 is emissions-free. Iron ore pellets fall under CN code 2601 12 00 and are covered by CBAM.
Lime kilns and coke-oven plants are described as falling outside the defined system boundaries for iron and steel because their outputs are not themselves CBAM goods. As a result, the precursor classification determines whether emissions are carried into downstream accounting under the iron and steel approach. This framework links the treatment of upstream materials to what qualifies as a CBAM good.
How precursor status affects emissions accounting for integrated steelmaking
For integrated steelmakers, the pellet-versus-coke-and-lime distinction 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. In contrast, coke and lime may generate emissions across a wider industrial complex, but those emissions are not carried forward as CBAM precursor values under the steel methodology.
The guidance also points to implications for procurement and data collection. Steelmakers in Serbia and Türkiye sourcing iron ore pellets from multiple origins may need 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 importers and producers, identifying the legal status of each input is described as essential when establishing evidence required for CBAM reporting. The evidence needs to align with what is required under the statutory calculation framework. This approach focuses on whether an input is treated as a recognised precursor within the iron and steel methodology.
Direct versus indirect emissions rules across upstream and downstream steps
The Commission 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 separation between upstream pellet production and downstream steelmaking in how emissions categories are handled. The emissions categories included depend on the product and its applicable CBAM rules.
The categories included in the calculation are therefore not determined solely by each input’s physical role in manufacturing. Instead, they follow the applicable CBAM methodology for the product being declared. This affects how upstream material characteristics translate into downstream reporting requirements.
Evidence requests for EU importers and implications for lower-carbon supply chains
The clarification highlights that EU importers need to request evidence that corresponds to the statutory calculation. Collecting emissions information for every physical input without distinguishing recognised CBAM precursors from other materials can produce extensive documentation without improving 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 distinction also affects assessment of lower-carbon steel supply chains under CBAM accounting. 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 wider corporate emissions benefits, but those improvements do not necessarily translate directly into a lower CBAM figure under the current methodology.
As CBAM certificate costs become a factor in import economics, the legal treatment of individual precursors influences which upstream emissions reductions directly affect border-cost calculations. Other reductions may primarily contribute to broader industrial decarbonisation objectives rather than changing CBAM figures under the existing rules.