Carbon border measures: verified low intensity becomes a price advantage

5.1 How the EU mechanism works

CBAM applies to imports into the EU of goods in six sectors: iron and steel, aluminium, cement, fertilisers, hydrogen and electricity [S27]. After a transitional period of reporting only, which began in October 2023, the definitive regime has applied since 1 January 2026 [S25]. Importers must be authorised CBAM declarants, buy CBAM certificates corresponding to the embedded emissions of the goods they import, and surrender them once a year.

The simplification regulation adopted in October 2025, Regulation (EU) 2025/2083, made several changes that matter to exporters [S29]:

• a single de minimis threshold of 50 t a year per importer across iron and steel, aluminium, fertilisers and cement, below which no obligation arises;
• applications for declarant authorisation by 31 March 2026, certificate sales from 1 February 2027 and the first annual declaration and surrender, covering 2026 imports, by 30 September 2027;
• a quarterly holding requirement reduced from 80% to 50% of the estimated annual obligation.

The certificate price follows the EU Emissions Trading System. In 2026 it is set quarterly from average auction prices: €75.36 for the first quarter, €75.28 for the second and €82.32 for the third, published on 5 October 2026; from 2027 it will be set weekly [S26]. For context, the EU ETS average auction price in 2025 was €73.43 per tonne [S82].

Table 5.1 The CBAM regime as it applies to steel, at 10 October 2026

Source: as listed.

5.2 The free-allocation shield falls to zero by 2034

EU steelmakers have long received most of their emission allowances free of charge, to limit "carbon leakage" to countries without carbon pricing. CBAM replaces that protection gradually. Each year, the number of certificates an importer must surrender is reduced by an amount reflecting the free allocation EU producers of the same good still receive: a CBAM benchmark, multiplied by a CBAM factor that follows the phase-out of free allocation in the revised EU ETS Directive [S28][S31]. Figure 5.1 shows that schedule.

The benchmarks matter as much as the factor. Implementing Regulation (EU) 2025/2620, adopted in December 2025, sets route-specific benchmark values for steel products [S104]. We have not extracted its values for wire rod and bars (CN 7213 and 7214). As reported by the trade press for hot-rolled coil, the values are 1.370 t CO₂e per tonne for the blast-furnace route, 0.481 t for DRI-EAF and 0.072 t for scrap-based EAF, with a dedicated benchmark for gas-based DRI so that its imports are not adjusted below zero [S31][S32]. This paper uses those hot-rolled-coil values as a proxy for long products. The proxy affects only the free-allocation adjustment: for RC-1 it is worth about €6 per tonne in 2026 and nothing from 2034. The benchmark that applies to a given import depends on its production route; according to a published compliance guide, a product whose crude steel comes more than half from scrap is classified as scrap-EAF [S93]. With about 70% scrap in its charge, RC-1 product would fall in the scrap-EAF category, where the benchmark, and therefore the adjustment, is small. In practice, RC-1 product would carry almost its full embedded emissions as a CBAM liability from the start. At about 0.36 t, those emissions are low against ore-based routes but more than three times those of an all-scrap furnace, because the DRI precursor counts in full.

Source: Directive (EU) 2023/959 amending the EU ETS Directive, free-allocation phase-out schedule [S28]; CBAM implementing rules [S31].

5.3 Illustrative exposure: what a tonne would pay

Figure 5.2 shows the gross exposure, before the free-allocation adjustment, of a tonne of product at the third-quarter 2026 price. Every bar is on the CBAM basis for steel: direct emissions plus the direct emissions of precursors, without purchased electricity [S27]. For RC-1 and for an all-scrap furnace, the values come from the WP06 model; the all-scrap case is RC-1 with no DRI in its charge. Published averages for the ore-based routes are not reported on the CBAM basis, so the figure shows them as ranges. The lower end is the IEA’s estimate of direct emissions by route, which leaves out the precursors a plant buys in [S05]; the upper end is worldsteel’s 2024 route average, which also counts electricity and other upstream inputs [S01]. The CBAM-relevant emissions of an average ore-based plant lie between the two.

Source: European Commission, price of CBAM certificates [S26]; Regulation (EU) 2023/956, Annex II [S27]; IEA [S05]; worldsteel [S01]; WP06 model on the Cameroon Steel reference configuration RC-1 (planning estimate) [S90].

On the CBAM basis, a tonne of RC-1 Phase 1 product embeds about 0.36 t of CO₂ (0.11 t direct and 0.25 t in the purchased DRI), which at €82.32 is about €30 gross. At full build-out, gas-fired reheating raises the direct share and the figure to about 0.41 t and €34. Each 10 points of DRI in the charge add about 0.085 t, or about €7 gross (derived). An all-scrap furnace would embed only its direct emissions, about 0.11 t, or €9: under CBAM, RC-1 product would pay more than scrap-based steel, not less. Applying the free-allocation adjustment at the scrap-EAF benchmark reduces the 2026 charge to about €24 for Phase 1, €28 for the full works and €3 for an all-scrap furnace, rising to the gross figures by 2034 (Figure 5.3 and Table 5.2).

Source: as Figure 5.2; benchmarks as reported for hot-rolled coil, used as a proxy for long products [S31][S104]; CBAM factor [S28].

Table 5.2 Illustrative CBAM arithmetic per tonne of product on the CBAM basis for steel (constant €82.32/t CO₂)

Source: WP06 model (Annex A); price [S26]; CBAM basis [S27]; benchmarks as reported for hot-rolled coil [S31]; CBAM factor [S28]; IEA [S05]; worldsteel [S01]. Net charge = (embedded emissions − benchmark × CBAM factor) × price, floored at zero. Not a forecast: prices, the long-product benchmarks of Implementing Regulation (EU) 2025/2620 [S104] and the route classification must be checked before any EU sale.

Three observations follow. First, RC-1’s CBAM advantage is against ore-based steel. By 2034, at today’s price, an average blast-furnace product would pay about €70 to €160 more per tonne than RC-1 product, and an average gas-based DRI-EAF product about €50 to €90 more. Against export reinforcing-bar prices of about US$620 to US$630 per tonne FOB Türkiye in early October 2026 [S96], those are large numbers. Second, an all-scrap furnace would pay about €21 per tonne less than RC-1 by 2034. CBAM prices the DRI precursor in full and ignores the electricity in which Cameroon’s grid gives RC-1 its lower total footprint, so the clean grid earns nothing at the EU border. RC-1’s CBAM lever is the carbon content of its DRI: each 0.1 t CO₂ per tonne of DRI is worth about €3 per tonne of product, and DRI bought at 0.5 rather than 0.7 t would save about €6. Third, the free-allocation adjustment protects high-carbon routes most in the early years, so the competitive effect of CBAM against ore-based steel grows steadily to 2034.

5.4 Default values punish the unmeasured

An importer that cannot document actual embedded emissions, verified under the CBAM rules, must use default values. These are set per country and product where reliable data exist, with mark-ups that rise from 10% in 2026 to 20% in 2027 and 30% from 2028 [S31]. Where no reliable data exist for a country, the default is the average emission intensity of the ten exporting countries with the highest emission intensities for that type of good [S30]. For a country with little steel export history, such as Cameroon, that rule could assign a product made in a clean electric works an intensity typical of the world’s most carbon-intensive producers.

The arithmetic is unforgiving. At €82.32, each tonne of CO₂ per tonne of steel by which a default exceeds the verified actual value costs about €82 per tonne of product. A producer whose verified embedded emissions are 0.36 t, but whose buyer must use a default of, say, 2 t, would hand that buyer a cost difference of more than €130 per tonne. Measurement is therefore not a reporting chore; it is the condition for monetising the plant’s low intensity.

5.5 Other carbon border measures are following

The EU is not alone. The United Kingdom’s CBAM applies from 1 January 2027 to imports of iron and steel, among other goods, with a registration threshold of GBP 50,000 of covered imports a year [S34]. Australia’s carbon leakage review, whose final report was released in February 2026, identified a border carbon adjustment as the preferred response for certain high-risk commodities and recommended a staged introduction starting with cement and clinker and extending later to other goods including steel [S35]. Other jurisdictions are considering similar instruments or product carbon standards. Table 5.3 summarises the measures relevant to a Cameroonian exporter.

Table 5.3 Carbon border measures relevant to Cameroonian steel, at 10 October 2026

Source: [S27][S33][S34][S35]. Market access to the EU is also limited by the steel tariff-rate quota that replaced the EU safeguard from 1 July 2026, with a 50% out-of-quota duty [S95].

5.6 What CBAM means, and does not mean, for RC-1

It would be easy to overstate the importance of CBAM for a works whose planned markets are mainly domestic and regional. Cameroon’s own demand for steel is supplied largely by imports of iron units and finished products, and the CEMAC region applies no carbon charge. RC-1 does not depend on European sales, and EU market access for steel is constrained by quotas as much as by carbon [S95].

CBAM nevertheless matters for three reasons. First, it creates an option: semi-finished products, sections or, later, HBI from a low-carbon Cameroonian works would be competitive in a market where ore-based competitors pay more, and that option is worth preserving. Second, it sets the template that buyers, lenders and other governments are adopting: the CBAM monitoring rules are becoming the de facto international standard for installation-level embedded emissions, and complying with them is the cheapest way to answer every other request. Third, it applies to iron-ore pellets and DRI, so any future export of Cameroonian iron units to Europe, discussed in Chapter 6, will be priced on its carbon content from the outset.

The next chapter looks further ahead: if verified low-carbon iron is becoming valuable, can Central Africa make it?