Steel exporters can improve their electricity mix while still facing significant CBAM exposure if direct process emissions and carbon-intensive precursors do not change. Lenders are advised not to treat a green power purchase agreement (PPA) as a stand-in for a company’s full decarbonisation approach. Credit reviews are expected to separate electricity procurement from production-related drivers of emissions exposure, while accounting for how the risks interact commercially.
Separating electricity procurement from production-related emissions
Lenders are expected to assess process and electricity risks separately. The review scope includes furnace technology, fuels, scrap or ore inputs, precursor emissions, electricity prices, and renewable sourcing. These factors affect operating costs and competitiveness, but they do not affect every CBAM calculation in the same way.
For iron-and-steel and aluminium goods currently listed in Annex II, the existing CBAM calculation includes direct emissions. Renewable electricity procurement can support operating performance, customer relationships, financing, and decarbonisation without automatically reducing current certificate liability through purchased-electricity emissions.
The transition approach described in the guidance combines renewable power procurement with measures addressing process emissions and precursor data. The guidance also notes that relying on only one element can leave either carbon-related exposure or operating costs insufficiently managed.
Renewable PPAs and creditworthiness under CBAM
A renewable PPA can support creditworthiness by stabilising electricity costs. The same framework links this to customer retention and improved access to green-finance products.
The guidance also states that a PPA may help producers prepare for a future policy environment with broader downstream coverage and more extensive carbon-data requirements. It cautions that the presence of a PPA or a Guarantee of Origin (GoO) does not establish that material process-carbon risks have been addressed.
Lenders are directed to assess the actual benefits of any contract alongside the company’s wider transition plan. Loan covenants should focus on material exposures including product classification, emissions-data quality, customer concentration, electricity-price risk, and capital expenditure needed for process decarbonisation. A requirement to hold a PPA or GoO is described as not an adequate substitute for this analysis.
Planned CBAM expansion to downstream goods from 2028
The legislative file referenced in the guidance proposes extending CBAM coverage from 2028 to selected steel- and aluminium-intensive downstream goods. The Council and the European Parliament support expansion, but their proposed product lists differ and remain subject to negotiation.
Until final legislation is adopted, the current scope is treated as the operating baseline. Downstream manufacturers are advised to map future CN codes potentially relevant to their sales and identify products with the greatest exposure to EU customers.
The guidance links this mapping to targeting renewable procurement, emissions-data improvements, and other investments where commercial benefits are most likely. It also specifies that this should be done without assuming proposed coverage is already law.
European Commission guidance on implementation timing
The European Commission published definitive-period sector guidance on 14 August 2026. The package includes dedicated guidance for electricity, iron and steel, and aluminium.
The Commission refreshed its general CBAM questions and answers on 15 October 2026. These materials are described as explaining implementation while not replacing the binding regulation and implementing acts.
For steel buyers, renewable electricity evaluation is framed around defined energy, customer, or decarbonisation benefits rather than a generic CBAM saving that current product methodology does not support. For lenders, the central transition question is whether electricity, production-process, and market-access risks are assessed as distinct but connected exposures within the financing structure.