Europe’s steel border has two locks. The first, the Carbon Border Adjustment Mechanism (CBAM), raises the cost of imports by pricing their embedded carbon. The second, the EU’s new tariff-rate quotas (TRQs), restricts total import supply and where that supply can come from. An overseas mill can be carbon-competitive and still be locked out by quotas. Both locks are now in place: CBAM entered its definitive phase in January 20261, and the new TRQs replaced the old steel safeguards on 1 July 20262.
That distinction matters more as the import mix shifts. Fastmarkets forecasts EAF-based HRC imports to rise by more than 25% by 2035, with lower-emission DRI- and scrap-based EAF supply growing even faster.
Imports of green steel (below 0.8 tCO2e per tonne of steel) rise from just 0.3 million tonnes to 1.6 million tonnes over the decade. Even so, this remains a small fraction of EU low-emission production: over the decade, imported low- and near-zero-emission steel averages less than 20% of European equivalents.
A cleaner and smaller queue forms at the border
Total import volumes remain flat through to 2035, even as net EU deliveries increase. The rise in imported EAF steel is more than offset by a fall in blast furnace volumes, as mounting CBAM costs squeeze less efficient facilities.
Overall import volumes fall sharply between 2025 and 2027 as the TRQs take effect, and stay subdued thereafter because the 50% out-of-quota duty makes larger volumes unviable.
Near-zero and lower-emission steel nevertheless takes a larger share of the remaining import market. Medium-emission production (0.8–1.4 tCO2e per tonne of steel), largely made via gas-based DRI, falls from 2.3 million tonnes to 1.8 million tonnes as new capacity in the greener categories comes online and outcompetes higher-emission volumes.
CBAM changes the running order
CBAM was introduced to level the playing field and protect EU industry, and Fastmarkets’ modelling shows it is likely to do so. Importers must pay a carbon price designed to mirror EU ETS costs, and under a current-policy EUA trajectory, that cost will bite hard. For 2026 imports, the certificate price is set quarterly from EU ETS auction prices – €82.32/tCO2e for the third quarter – with certificates on sale from February 20273.
When CBAM costs are excluded, the EU ETS pushes most standalone European EAFs in our model to the top of the supply curve, with only Japanese and Chinese facilities hit by strong anti-dumping duties faring worse. Large volumes of cheaper Turkish flat steel threaten to outcompete the bloc on both price and quantity.
Adding CBAM costs lets EU production compete on a fairer playing field, and several facilities are expected to be competitive for European deliveries on a pure cost basis. A potential green premium on top allows even the greenest and most expensive hydrogen-based production to compete for the EU market.
Competition remains. Efficient overseas EAFs can still compete after CBAM, and higher-cost European plants do not become cheap by decree. The mechanism narrows the carbon-cost advantage of producing abroad and favours imported steel with lower verified emissions. It is best understood as an emissions filter, not a blanket import barrier.
A softer carbon price blunts the border
CBAM can be no stronger than the carbon price it mirrors. Recently proposed ETS reforms seek to ease the carbon cost burden on producers. The European Commission’s July 2026 ETS review proposal would reinstate 15% of phased-out free allocation for CBAM sectors from 2028, extending the phase-out to 2038 and slowing CBAM’s phase-in4. A flatter cap trajectory also points to a more moderate carbon price5. In our moderated-policy scenario, a significantly lower EUA trajectory keeps European costs down and reduces the border cost attached to imported emissions.
Including CBAM still reshuffles the curve, but less markedly. Costs for importers of EAF steel rise by 5% on average, but the overall curve is flatter. Many European facilities are already competitive without CBAM costs and move little further along the curve.
This creates a double effect. A softer ETS path keeps conventional EU steel competitive for longer, but it also weakens CBAM’s support for lower-emission European EAFs and for domestic production more generally. Producers arguing for ETS reform to lower their own costs may also make the imports they rail against more competitive.
Yesterday’s quotas clash with tomorrow’s capacity
Price is now only half the entry test. The EU’s new steel regulation sets tariff-free quotas totalling 18.3 million tonnes across 26 product categories – 47% below 2024 quota levels – and doubles the duty on volumes above the relevant quota from 25% to 50%6.
Country allocations reflect parameters including historical trade flows from 2022–2024, leaving countries without an allocation to compete for small residual quotas.
That legacy map does not line up neatly with projected low-emission capacity. Across categories 1A, 1B and 2, which cover most hot-rolled coil and downstream products, projected EAF capacity in some countries dwarfs their allocated quotas.
As a result, countries with less EAF production but larger quotas may export blast furnace steel to the EU, while low-emission steel from elsewhere is blocked. Saudi Arabia and Canada, have significant potential for EAF exports in the coming years but only nominal quotas – or none at all.
Capacity is not the same as export availability, and an EAF is not automatically near-zero emission. Feedstock and electricity still matter. Even so, the chart exposes an allocation problem. CBAM rewards carbon performance, but TRQs ration trade according to yesterday’s flows. The cheapest, cleanest tonne is not always the one that can get through the gate.
Two gates, one market
Europe’s border regime therefore pulls in two directions. CBAM makes the import mix cleaner and strengthens the relative competitiveness of EU EAFs, especially under an increasing carbon price trajectory. TRQs limit exposure to global overcapacity, but they may also shut out some of the very supply that CBAM would otherwise favour.
Under a moderated EUA scenario, the carbon filter weakens and the TRQ gate matters more. EU blast furnaces face less ETS pressure, but the advantage enjoyed by lower-emission EAFs narrows too. The outcome will not be a simple contest between imported and domestic steel, but a more selective market: carbon helps decide cost, and quotas decide access.
This short article series provides regular insights into the evolving European green steel market, focusing on supply developments, price premiums, project pipelines and demand trends. Drawing on our latest report, Green steel forecast for Europe to 2035, the series tracks how technological shifts, policy developments and market dynamics are shaping the competitiveness and growth outlook for low-carbon steel across Europe. For a complete view of how decarbonization, CBAM and ETS developments are reshaping steel supply chains, reach out to [email protected].
Which steel tonnes will clear Europe’s border?
See CBAM costs, import quotas and low-emission supply forecast by origin to 2035
- The CBAM definitive period began on 1 January 2026; certificates covering 2026 imports go on sale from 1 February 2027. Source: Karbonet, “CBAM deadlines: the definitive-period timeline for 2026 and 2027”, https://karbonet.com/cbam-deadlines ↩︎
- The new EU steel regulation applies from 1 July 2026, replacing the safeguard measures that expired on 30 June 2026. Source: Eurometal, “EC publishes new steel trade regime; country quota allocations still pending”, 24 June 2026, https://eurometal.net/ec-publishes-new-steel-trade-regime-country-quota-allocations-still-pending/ ↩︎
- Official Q3 2026 CBAM certificate price published by the European Commission on 5 October 2026 (Q1: €75.36; Q2: €75.28). Source: CBAM Guide, “CBAM Certificates: How to Buy, Hold the 50% Minimum, and Surrender in 2027”, https://cbamguide.com/compliance/certificates/ ↩︎
- European Commission proposal to revise the EU ETS, tabled 17 July 2026. Source: ICAP, “EU Commission publishes EU ETS review proposal”, https://icapcarbonaction.com/en/news/eu-commission-publishes-eu-ets-review-proposal ↩︎
- Source: Chatham Partners, “EU ETS Reform – Briefing”, https://chatham.partners/insights/eu-ets-reform-briefing/ ↩︎
- Tariff-free quotas of 18.3 million tonnes a year represent a 47% reduction on 2024 quotas; the out-of-quota duty rises from 25% to 50%. Source: European Commission, “Protecting EU steelmaking”, https://policy.trade.ec.europa.eu/enforcement-and-protection/protecting-eu-steelmaking_en; IEU Monitoring, “EU Commission welcomes political agreement on new EU steel measure”, 14 April 2026, https://ieu-monitoring.com/editorial/eu-commission-welcomes-political-agreement-on-new-eu-steel-measure/1005807 ↩︎
Source: www.fastmarkets.com
