CBAM is paid on every tonne that crosses the border, including the offcuts that never reach the product. Standard costs built on the bill of materials miss them.
CBAM adds to the unit cost of an EU-made product the certificate cost per imported tonne times the gross tonnes of imported material each unit consumes, offcuts included. For an illustrative part made from 0.60 tonnes of imported steel at an 80 per cent yield, steel at 2.05 tCO2e a tonne and 80 euros a certificate, that is 42.85 euros a unit in 2026, rising to 80.67 in 2030 and 123.00 in 2034. Costing on the net weight in the bill of materials understates it by 20 per cent.
Worked in full in The CBAM Compliance Handbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Most CBAM work stops at the border: certificates per tonne, euros per tonne. The controller who sets standard costs and the sales team who set prices need a different number, the cost per unit sold. Getting there takes one step that is easy to miss, because CBAM is owed on what is imported, not on what ends up in the product.
| Input | Value |
|---|---|
| Verified specific embedded emissions of the coil, tCO2e per tonne | 2.05 |
| Product benchmark for the free allocation adjustment, tCO2e per tonne | 1.37 |
| Certificate price, euros | 80.00 |
| Steel in the finished part, tonnes | 0.60 |
| Material yield of the pressing line | 80% |
| Selling price per unit, euros | 4,000 |
| Units a year | 5,000 |
The importer of record pays the certificates; here it is the manufacturer itself. If it buys from an EU distributor that imports, the same cost arrives through the purchase price instead. The certificate price is held flat so the phase-in is the only thing that moves.
Certificates per tonne = embedded emissions − benchmark × share of free allocation retained
2026: 2.05 − 1.37 × 97.5% = 2.05 − 1.33575 = 0.71425 certificates, × 80.00 = 57.14 euros a tonne
The deduction is the free allocation an EU producer of the same product still receives, worked through in detail in how the free allocation adjustment is calculated. It shrinks every year to 2034, which is why the cost per tonne climbs while the steel stays the same.
The part contains 0.60 tonnes of steel, but at an 80 per cent yield the line consumes 0.60 ÷ 0.80 = 0.75 tonnes of coil to make it. The other 0.15 tonnes leave as offcuts and are sold as scrap. Every one of the 0.75 tonnes crossed the border and carries certificates; selling the offcuts does not return them.
CBAM per unit = cost per imported tonne × net steel per unit ÷ yield = 57.14 × 0.75 = 42.85 euros
In Excel, with cost per tonne in B2, net steel in B3 and yield in B4: =B2*B3/B4. On net weight alone the figure is 34.28, so 8.57 a unit, a fifth of the true cost, never reaches the standard cost.
| Year | Share retained | Certificates per tonne | Euros per tonne | Euros per unit | % of selling price | On net weight |
|---|---|---|---|---|---|---|
| 2026 | 97.5% | 0.7142 | 57.14 | 42.85 | 1.07% | 34.28 |
| 2027 | 95.0% | 0.7485 | 59.88 | 44.91 | 1.12% | 35.93 |
| 2028 | 90.0% | 0.8170 | 65.36 | 49.02 | 1.23% | 39.22 |
| 2030 | 51.5% | 1.3444 | 107.56 | 80.67 | 2.02% | 64.53 |
| 2032 | 26.5% | 1.6869 | 134.96 | 101.22 | 2.53% | 80.97 |
| 2034 | 0.0% | 2.0500 | 164.00 | 123.00 | 3.07% | 98.40 |
Across 5,000 units the manufacturer imports 3,750 tonnes a year and owes about 2,678 certificates for 2026, 214,275 euros. By 2030 the same volume costs 403,335 euros and by 2034 615,000. A unit cost set once in 2026 and indexed only to the certificate price will be about a third of the true figure by 2034, which is 2.87 times higher, even if the price never moves. The cost per tonne of steel from 2026 to 2034 shows the same curve at the border; here it has reached the product.
| Yield | Coil per unit, tonnes | 2026 | 2030 |
|---|---|---|---|
| 70% | 0.857 | 48.98 | 92.19 |
| 80% | 0.750 | 42.85 | 80.67 |
| 90% | 0.667 | 38.09 | 71.70 |
| 100%, the net weight | 0.600 | 34.28 | 64.53 |
Yield is the lever the manufacturer controls without changing supplier: ten points of yield are worth 8.97 euros a unit in 2030. The supplier's intensity matters more. At 2030 shares, coil at 1.60 tCO2e a tonne costs 53.67 a unit and coil at 2.50 costs 107.67, against 80.67 at 2.05.
The offcuts matter twice. Their certificates are a sunk cost of the unit, and if the scrap is sold the CBAM paid on it is not part of what the buyer pays you back. Do not net the scrap credit against the CBAM line.
Building the CBAM line of the standard cost from the bill of materials. The bill of materials holds net weight: what is in the product. CBAM is owed on gross imports: what was bought. The two differ by the yield, and on a pressing or machining line with 20 to 30 per cent scrap the CBAM cost per unit is understated by the same share. The second mistake is fixing the per-unit figure in 2026 and indexing it to the certificate price, which misses the phase-in that nearly doubles the cost by 2030 at a constant price. How the line is then carried, in inventory or straight to expense, is a separate decision covered in whether CBAM costs go into inventory.
CBAM per unit = (embedded emissions − benchmark × share retained) × certificate price × net weight ÷ yield. On this part that is 42.85 euros today and 123.00 when free allocation ends. The CBAM Compliance Handbook covers embedded emissions, certificates and supplier data from the declarant's side, and the free workbook for this case builds the cash profile of the certificates that this unit cost eventually has to recover.
Yes. CBAM is owed on the goods imported, by mass, whatever happens to them in the EU afterwards. Offcuts and process scrap carry certificates that are never recovered. On an illustrative part with an 80 per cent yield, 0.15 t of the 0.75 t imported per unit becomes scrap, and the certificates on it are a fifth of the CBAM cost of the unit.
It rises as the free allocation EU producers keep is phased out: 97.5 per cent retained in 2026, 51.5 per cent in 2030 and zero in 2034. With steel at 2.05 tCO2e a tonne, an illustrative 1.37 benchmark and 80 euros a certificate, the cost per unit goes from 42.85 euros in 2026 to 80.67 in 2030 and 123.00 in 2034, 2.87 times the 2026 figure.
Directly, because fewer tonnes are imported per unit. In the illustrative case, raising yield from 80 to 90 per cent cuts the 2030 CBAM cost from 80.67 to 71.70 euros a unit. It is the one lever in the formula the EU manufacturer controls without changing supplier.
This article is one calculation from The CBAM Compliance Handbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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