# Which upgrades cut a steel plant's CBAM cost the most per rupee spent?

Canonical: https://senseible.earth/answers/which-steel-plant-upgrades-cut-cbam-most

For steel, CBAM counts direct emissions and the embedded emissions of bought precursors, not electricity. So the biggest savings usually come from replacing default values with verified actual data and from sourcing lower-emission billets or DRI. Furnace fuel switches and heat recovery come next. Electricity savings cut costs but not CBAM.

## Ranked by typical CBAM effect for a re-roller

1. Verified actual emissions instead of EU default values. Defaults for steel carry a mark-up of 10% in 2026, 20% in 2027 and 30% from 2028. If your actual figure is at or below the default, verified data removes the mark-up and any excess.
2. Precursor choice. Billets and DRI you buy bring their embedded emissions with them. Scrap-based EAF billet carries far less than blast furnace billet.
3. Fuel switch in the reheating furnace, for example furnace oil to natural gas.
4. Furnace efficiency: recuperators, regenerative burners, better insulation and hot charging cut fuel per tonne.
5. Electricity efficiency: no CBAM saving for steel today, but lower bills and lower Scope 2.

## Why electricity savings do not count

Annex II of the CBAM Regulation lists iron and steel among goods for which only direct emissions are counted in the definitive period. Power from the grid or a captive plant is an indirect emission, so a more efficient motor or rolling drive does not lower the CBAM bill. Article 30 asks the Commission to assess adding indirect emissions, so this could change.

## How to compare upgrades per rupee

For each option, divide the annualised cost, capital spread over its life plus any change in running cost, by the tonnes of CO2 it removes from embedded emissions each year. Then compare that rupees per tonne figure with the CBAM cost per tonne at the certificate price. An upgrade cheaper per tonne than the certificate price pays for itself on CBAM alone, before fuel savings.

## What to measure before you spend

- Fuel per tonne rolled, by month, from fuel invoices and production logs.
- Embedded emissions data from each billet or DRI supplier, with the route used.
- Tonnes exported to the EU under each CN code, since only those carry CBAM cost.

## Illustration: three options per tonne of exported product

- Fuel switch: furnace oil 30 litres per tonne x 2.97 kg CO2 = 89.1 kg CO2
- Natural gas for the same heat: 89.1 x 56.1 / 77.4 = 64.6 kg CO2, saving 24.5 kg, about 27%
- At €82.32: 0.0245 t x 82.32 = about €2.02 per tonne
- Verified data at the default value for a blast furnace route: 10% x 2.1 t = 0.21 t removed, 0.21 x 82.32 = about €17.29 per tonne in 2026
- Scrap EAF billet instead of blast furnace billet: 2.1 minus 0.4 = 1.7 t, 1.7 x 82.32 = about €139.94 per tonne

Labelled estimate. The 2.1 and 0.4 t CO2 per tonne figures are the Senseible calculator's indicative default intensities; 77.4 and 56.1 t CO2 per TJ are IPCC 2006 defaults for residual fuel oil and natural gas. A saving in embedded emissions lowers certificates one for one because free allocation is set by the EU benchmark, not your actual emissions.

## What Senseible does here

Senseible reads fuel invoices before and after an upgrade to show the measured change in Scope 1, and its CBAM calculator turns embedded emissions into an estimated euro cost by year. It does not verify installation data for CBAM or rank capital projects for you.

- [Does CBAM count electricity for steel?](https://senseible.earth/answers/does-cbam-count-electricity-emissions-steel)
- [CBAM cost calculator](https://senseible.earth/cbam-calculator)
- [Cost per tonne of CO2 abated](https://senseible.earth/answers/cost-per-tonne-of-co2-abated)
- [CBAM cost for Indian steel exporters](https://senseible.earth/climate-intelligence/cbam-compliance-cost-indian-steel-exporters-2026-2034)

Sources: [Regulation (EU) 2023/956, consolidated text (Annex II and Annex IV)](https://eur-lex.europa.eu/eli/reg/2023/956/2025-10-20), [Implementing Regulation (EU) 2025/2621, CBAM default values](https://eur-lex.europa.eu/eli/reg_impl/2025/2621/oj/eng), [2006 IPCC Guidelines, Volume 2 Energy, Table 1.4 default CO2 emission factors](https://www.ipcc-nggip.iges.or.jp/public/2006gl/vol2.html)

Last reviewed 2026-10-15. The point that power savings do not reduce steel CBAM depends on Annex II staying unchanged; recheck after the Commission's review of indirect emissions.