Recycled feedstock and alternative steelmaking routes can reduce embedded emissions, but commercial benefits depend on production boundaries, electricity sourcing and independently substantiated data.
ANALYSIS · 5 NOVEMBER 2026
BRUSSELS, 5 NOVEMBER 2026 — The expansion of carbon-border pricing in the European Union is increasing the commercial importance of how steel is produced. Electric-arc furnaces (EAFs), which melt scrap and other metallic inputs, can offer a different emissions profile from conventional blast-furnace/basic-oxygen-furnace (BF-BOF) production. This distinction is becoming increasingly relevant to steel suppliers competing in the EU market under the Carbon Border Adjustment Mechanism (CBAM). However, furnace technology alone does not establish a product’s carbon performance. Feedstock composition, electricity consumption and emissions associated with precursor materials all influence the final calculation.
Electric-arc furnaces using high proportions of clean scrap generally avoid much of the coke-based iron reduction required by the integrated steelmaking route. Nevertheless, EAF production remains electricity-intensive and can involve carbon-containing materials, oxygen, fluxes and metallic inputs with their own emissions histories. Where direct-reduced iron (DRI) or hot-briquetted iron (HBI) is included in the charge, the emissions associated with upstream production also become relevant. Assessing only the direct fuel consumption of the electric furnace can therefore underestimate the emissions embedded in the resulting steel products.
The integrated blast-furnace route also presents considerable differences between installations. Coke consumption, iron ore quality, energy recovery, burden preparation and process efficiency all influence emissions intensity. Producers can achieve improvements through operational optimisation and technological investment without fundamentally changing their production route. Consequently, buyers should not assume that all integrated steelworks have identical emissions profiles. Comparisons must reflect consistent production boundaries, relevant inputs and the applicable CBAM rules for calculating precursor and embedded emissions.
Scrap availability and quality introduce additional commercial and metallurgical constraints. Some steel grades can incorporate substantial quantities of recycled material, while others have stricter requirements concerning residual elements, chemical composition and product consistency. Maximising scrap consumption is therefore not technically or commercially feasible for every product. The competitiveness of recycled steel will depend not only on its emissions profile but also on whether producers can consistently meet the required chemical composition, mechanical properties and production volumes.
There is no universal carbon threshold at which one steelmaking route becomes more competitive in every market. Electricity prices vary across regions and operating periods, while scrap markets face their own supply, pricing and quality constraints. An EAF producer may benefit from lower direct process emissions but encounter high electricity costs or dependence on more emissions-intensive metallic inputs. A meaningful comparison must therefore consider the relevant production chain, operating costs and the emissions boundaries recognised by CBAM.
For industrial buyers, supplier assessments increasingly need to combine two categories of information. The first concerns technical specifications, including steel grade, chemical composition and mechanical performance. The second covers embedded emissions and supporting evidence prepared according to the prescribed calculation methodology. Maintaining this connection is essential because a lower-emission material cannot replace an existing supply if it fails the customer’s technical requirements. Automotive, construction and machinery manufacturers may also need extensive qualification procedures before accepting steel produced through a different manufacturing route.
Long-term competitiveness will depend on the pace of technological development across both primary and secondary steelmaking. Hydrogen-based iron reduction, cleaner electricity and improved scrap recovery offer potential pathways for reducing emissions, but each involves investment, infrastructure and operational challenges. CBAM creates additional incentives to measure and reduce embedded emissions, but it does not guarantee access to affordable low-carbon electricity, sufficient scrap supplies or the financing required for industrial transformation. Producers must demonstrate that technological improvements can deliver reliable, commercially viable steel production.
Electricity sourcing remains a particularly important factor in emissions comparisons. Renewable electricity procurement can reduce a steelmaker’s broader operational footprint and exposure to fossil-based energy prices. However, CBAM distinguishes between direct and indirect emissions according to the relevant product category and applicable calculation rules. Buyers must therefore separate a product’s overall environmental footprint from the specific emissions metric used to determine CBAM certificate requirements. Environmental marketing claims and regulatory emissions calculations are not necessarily equivalent.
Reliable monitoring systems are required for both production routes. Integrated steelworks need to document coke and fuel consumption, process emissions, relevant precursor production and product output. Electric-arc furnace operators must maintain records of metallic charge composition, electricity consumption, injected carbon and the allocation of emissions to individual steel products. In both cases, independently verified actual emissions data can provide a commercial advantage when they allow EU importers to use eligible figures below the applicable default values.
The investment implications differ between production routes. Establishing an electric-arc furnace requires sufficient grid capacity, reliable electricity supplies, competitive scrap procurement and equipment capable of manufacturing the targeted grades. Producers considering a transition from integrated steelmaking cannot base investment decisions exclusively on potential CBAM savings. Capital expenditure, operating efficiency, raw-material availability, infrastructure readiness and customer acceptance must all be included in the assessment. The financial case for decarbonisation remains inseparable from the economics of producing and selling steel.
CBAM may strengthen demand for efficiently manufactured recycled steel, but it does not make all electric-arc production equally low-carbon or automatically render primary steelmaking uncompetitive. The emerging market advantage will depend on demonstrable differences in embedded emissions, calculated within consistent boundaries and supported by reliable evidence. Steelmakers will increasingly need to substantiate their production routes and emissions performance, while European buyers will have stronger reasons to examine the actual inputs and processes behind every low-carbon steel claim.
