Wind farms, solar installations, battery storage systems and electricity networks rely on equipment manufactured from steel, aluminium and other industrial materials. While these technologies support power-sector decarbonisation, their construction can involve substantial upstream emissions. That upstream footprint can translate into carbon-cost exposure for projects funding the energy transition.
The embedded emissions associated with these assets can affect supply-chain economics under the current CBAM framework. How covered imports are treated can influence the costs faced by relevant parts of the supply chain. Proposed downstream measures for 2028 could extend the policy’s reach further into manufactured products, but they are not rules already in force.
Embedded emissions in equipment used for renewable and grid build-outs
Key components used in renewable and grid projects include wind turbine towers and foundations, solar mounting structures, battery energy storage system (BESS) containers, transformers, substations, transmission towers and aluminium conductors. These elements incorporate materials whose production carries a carbon footprint. The upstream emissions linked to those materials can therefore become part of project cost exposure.
Carbon-related exposure is described as running from metal production to project delivery. In practice, information about the original production process can become separated from equipment once it moves through multiple stages. That separation can occur between supplier production data and the equipment’s final installation on site.
Traceability requirements across OEM and EPC supply chains
The supply chain starts with steel and aluminium producers, then moves through original equipment manufacturers (OEMs) and engineering, procurement and construction (EPC) packages. The chain ends with renewable energy and grid projects that incorporate the manufactured equipment. At each transfer, the link between production processes and installed quantities can be disrupted.
Supporting actual embedded-emissions values requires a reliable connection between supplier production data, quantities purchased and the equipment ultimately incorporated into a project. Carbon information therefore needs to be included in commercial documentation that accompanies the physical product. This documentation challenge extends beyond parties that directly handle CBAM declarations.
The mechanism can also affect prices charged by upstream suppliers. As a result, businesses that never become authorised CBAM declarants may still face material exposure through procurement contracts and EPC packages. The cost implications therefore reach across multiple roles involved in purchasing and delivery.
Procurement strategies for CBAM-linked cost pressures
CBAM-related costs can influence materials required for decarbonisation while policy continues to drive investment in renewable generation and electricity networks. Project owners and contractors are expected to distinguish direct liabilities for CBAM certificates from indirect cost increases passed through by suppliers. This separation matters when assessing how costs flow through procurement arrangements.
Procurement strategies can address exposure through lower-carbon metals, recycled content, efficient equipment and design choices, alongside longer-term supplier frameworks. The availability of “green” equipment does not automatically mean a low embodied-carbon footprint. Its embodied impact depends on the materials used and the production routes behind them.
Using enterprise systems to keep carbon data connected to purchasing
Existing enterprise resource planning (ERP), production, procurement and quality systems can support management of required information. Product codes, supplier identities, production batches and material flows need to remain linked to purchasing records. Keeping those links intact helps avoid maintaining carbon-related details in a separate sustainability process detached from project delivery.
This approach is intended to preserve traceability between supplier inputs and installed assets. When carbon information is disconnected from procurement controls, embedded-emissions evidence may become harder to substantiate later. Maintaining consistent identifiers across systems is therefore part of managing carbon-sensitive documentation.
Project finance considerations for steel and aluminium cost sensitivity
Lenders and investors need to evaluate how carbon-sensitive equipment costs affect project economics after financial close. That assessment includes firmness of EPC prices, adequacy of contingencies and sensitivity of internal rates of return (IRR) to steel and aluminium cost changes. Exposure can persist even when a project’s intended output is low-carbon electricity.
Credit assessments should translate potential carbon-related costs into scenarios covering earnings before interest, taxes, depreciation and amortisation (EBITDA), working capital, capital expenditure and customer retention. Green investment status alone does not establish that a project is insulated from CBAM-related costs.
The evidence base should connect supplier emissions data with purchased quantities, equipment records and construction-document controls. The information needs to remain available after commissioning so lifecycle carbon claims can be supported by records of equipment actually installed. Verified actual values demonstrating lower embedded emissions may strengthen a supplier’s commercial position.
Where documentation is incomplete or unusable, conservative assumptions or default values may be applied instead. That outcome can shift additional costs toward the EU buyer under the described evidence limitations.
Contract provisions aligning emissions evidence with commercial responsibilities
Purchase, sales and EPC agreements need clear provisions covering emissions-data delivery, verification status, supplier substitutions, carbon-cost pass-through and remedies when evidence is late or unusable. Without such terms, the party carrying the legal CBAM obligation may inherit costs generated several supply-chain tiers upstream without an effective route to recover them.
Electricity-related claims also require separation because different claim types are not automatically equivalent. A renewable-energy claim, a guarantee of origin and a CBAM claim based on actual emissions are treated as distinct categories in terms of equivalence. Where electricity data is relevant, its commercial value depends on the applicable sector methodology and evidence linking generation, metering, schedules, contracts and the relevant consuming or importing entity.
Supporting carbon claims for both electricity attributes and embedded hardware
Engineering, procurement and trading documentation needs to support carbon claims made about both electricity delivered by an asset and the materials used to build infrastructure supplying it. Renewable assets can generate low-carbon electricity while still incorporating carbon-intensive hardware within their construction.
For project developers and equipment suppliers, carbon performance becomes an additional specification alongside quality, price and delivery. The assessment extends from electricity produced by an asset to steel, aluminium and other materials embedded in construction.