Insetting for steel, cement and concrete
Low-carbon steel and cement cost more to make, and few buyers will pay that premium alone. Shared between several buyers, it becomes affordable.
Why insetting fits steel and cement
Green steel needs more buyers willing to pay
Steel chains are short and traceable. The hard part is finding enough buyers willing to pay the premium for green steel made with hydrogen, scrap or captured carbon.
Green cement rarely travels to the buyer
Ready-mix concrete is poured within about 90 minutes of batching, so green cement almost never reaches the buyer who paid for it. That is why cement needs book and claim, and why it is the stronger insetting case of the two.
One measurement, used twice
For exports to the EU, the embedded-emissions data already reported under CBAM can serve as the source of truth for issuance, so the same tonne is not measured twice.
Illustrative
One coil, one baseline
- Baseline
- The plant’s verified embedded emissions
- Credits
- Follow the funding
- Issued to
- The project developer
Typical inset projects in steel and cement
- 01
Hydrogen-based ironmaking
Iron ore is reduced with hydrogen instead of coke, producing direct reduced iron that is melted in an electric arc furnace. This removes most of the CO₂ from ironmaking but needs large volumes of low-carbon hydrogen and power, so the premium per tonne of steel is high. Carmakers and other buyers fund it through offtake and receive credits for their share.
- 02
Higher scrap use
Electric arc furnaces melt scrap with electricity instead of making new iron in a blast furnace. Raising the scrap share, or replacing blast furnace capacity with an electric arc furnace, lowers emissions per tonne. The reduction depends on the power supply and is measured against the plant’s own baseline.
- 03
Carbon capture at cement plants
Most of cement’s CO₂ comes from the limestone itself as it is heated, so switching fuel cannot remove it. Capture units take CO₂ from the kiln exhaust for permanent storage. Credits cover the tonnes captured and stored, net of the energy the capture plant uses, and go to the builders and developers that fund it.
- 04
Clinker substitution
Clinker is the most carbon-intensive ingredient of cement. Calcined clay, limestone, slag or other materials replace part of it, within the limits of product standards. The reduction is measured per tonne of cement against the plant’s current clinker ratio.
How a materials inset works
Embedded emissions per tonne of steel or cement set the baseline. Buyers fund the premium for the lower-emission product.
01Scoping and project definitionPlant and buyers
The plant defines the change (less clinker, a cleaner kiln fuel, carbon capture or more scrap in an electric arc furnace), its embedded emissions per tonne before the change, and each buyer’s share.
02Validation reportIndependent verifier
An independent verifier confirms the scope, the baseline, the methodology and how the project relates to the plant’s EU ETS or CBAM reporting.
03ImplementationPlant
The plant makes the change and records production, fuel, power and process data for each monitoring period.
04Verification reportIndependent verifier
The verifier checks the data and states the verified reduction in tonnes of CO₂e.
05Issuance to the project developerProject developer, on the Carbon3 registry
Realized credits, one per tonne in the verification report, are issued to the producer and recorded on the Carbon3 registry. Future credits can also be issued to it earlier, once the project is validated. They stay labeled Future, and buyers who take them carry the delivery risk.
06AllocationProducer
Credits go to each buyer by what it paid, even where the low-emission product went to another site.
07Retirement or saleBuyers
Each buyer retires its share against purchased goods or capital goods in Scope 3, or sells surplus.
Lower-emission material, shared premium
The plant carries the process change. Buyers with large material footprints share the premium.
Plant
Steelworks or cement plant
- Pays or brings
- The new process or equipment, and the production and emissions data.
- Gains
- Buyers who fund the premium per tonne, a lower carbon cost under the EU ETS or CBAM, and credits for its own share.
Builders and carmakers
Buy steel and cement for buildings, infrastructure and vehicles
- Pays or brings
- A share of the premium, sized to their expected volumes of steel or cement.
- Gains
- Credits for purchased materials (Scope 3 categories 1 and 2), tied to a named plant, even where their own sites cannot receive the low-emission product.
Data center developer
Owner of a large concrete and steel build-out
- Pays or brings
- A share of the premium if it co-funds.
- Gains
- Credits for the embodied emissions of its construction program.
The plant’s verified embedded emissions set the baseline. Credits follow the funding.
Lower-clinker cement at one plant
A cement plant replaces part of its clinker with calcined clay and limestone. A housebuilder, a carmaker building a new factory and a data center developer fund the change.
Who pays what
Builder A
Carmaker B
Data center C
| Funder | Share | Pays | Credits, years 1 to 5 | Of which future credits (years 1 and 2) |
|---|---|---|---|---|
| Builder A | 50% | €1,250,000 | 42,000 t | 12,000 t |
| Carmaker B | 30% | €750,000 | 25,200 t | 7,200 t |
| Data center C | 20% | €500,000 | 16,800 t | 4,800 t |
| Total | 100% | €2,500,000 | 84,000 t | 24,000 t |
Future and realized credits in this example
1At validation
The 24,000 tonnes planned in years 1 and 2 are bought as future credits, so the money funds the implementation and the holders carry the delivery risk.
2After each verification
The 60,000 tonnes verified in years 3 to 5 are issued as realized credits, one per tonne in the verification report.
Cost per verified tonne
Spread over 5 years of credits, the project cost comes to €30 per verified tonne, a figure to compare with the internal carbon price or with the CBAM certificate cost an importer faces. Real prices are not shown.
Assumptions
- Project cost €2,500,000.
- Full rate of 20,000 t a year from year 3.
- Year 1 at 40% while the new blend is approved.
- Credits are split in line with what each funder paid.
- One credit equals one verified tonne of CO₂e.
- No real companies, prices or projects. Fees are not shown.
- Illustrative split: the credits for years 1 and 2 are bought as future credits at validation; later years are taken as realized credits after each verification. The real split is agreed project by project.
Five years of lower-clinker cement
Credits per year by buyer.
Credits per year, in tonnes
- Builder A (50%)
- Carmaker B (30%)
- Data center C (20%)
- Future credits, bought at validation
84,000 t in total over 5 years
Assumptions
- Same output and mix each year.
- Output may vary with demand.
- Real results depend on verification.
- Illustrative split: the credits for years 1 and 2 are bought as future credits at validation; later years are taken as realized credits after each verification. The real split is agreed project by project.
Materials rules and claims
CBAM and the EU ETS set the carbon cost of the material. The GHG Protocol decides what a buyer can report.
Carbon Border Adjustment Mechanism (CBAM)
- What the standard is
- CBAM puts a carbon price on imports of cement, iron and steel, aluminum, fertilizers, electricity and hydrogen into the EU. Its definitive regime has applied since 1 January 2026. Importers of more than 50 tonnes of CBAM goods a year must be authorized declarants, declare the emissions embedded in what they import, and surrender CBAM certificates priced on EU ETS auctions. A carbon price already paid in the country of production can be deducted.
- A reduction in the company’s own supply chain
- When the company imports CBAM goods itself, lower verified embedded emissions in those goods lower its own CBAM liability.
- One in its industry, outside its chain
- A reduction at a producer whose goods the company does not import does not change its CBAM liability.
- What an inset credit does
- Inset credits are not CBAM certificates and cannot be surrendered against a CBAM liability. What lowers the liability is lower verified embedded emissions in the goods themselves. The same verified embedded-emissions data can serve as the baseline of an inset project, so a tonne is measured once.
EU Emissions Trading System (EU ETS) for industry
- What the standard is
- The EU ETS is a cap-and-trade system. Covered installations, including EU steelworks and cement plants, must surrender one allowance for each tonne of CO₂ they emit, and the cap falls every year. Plants at risk of carbon leakage receive part of their allowances free, based on benchmarks. Under current law, free allocation for sectors covered by CBAM is phased out between 2026 and 2034. A Commission proposal of July 2026 would slow that phase-out, but it is not yet adopted.
- A reduction in the company’s own supply chain
- The obligation sits with the plant. A supplier plant that reduces its emissions surrenders fewer allowances. Its customers have no ETS obligation for those tonnes.
- One in its industry, outside its chain
- A reduction at a plant outside the company’s chain lowers only that plant’s allowance costs.
- What an inset credit does
- Inset credits are not allowances. For a plant inside the EU ETS, a reduction already lowers its allowance costs, so scoping and validation have to show what the inset credit adds beyond that and that the same tonne is not counted twice.
GHG Protocol: Scope 3 Standard
- What the standard is
- The Greenhouse Gas Protocol sets the accounting rules most companies use for their emissions. Its Corporate Value Chain (Scope 3) Standard, published in 2011, covers the emissions in a company’s value chain in 15 categories, from purchased goods and transport to the use of sold products. It has no market-based method for Scope 3, so purchased certificates or credits do not change the Scope 3 figure, unlike electricity in Scope 2.
- A reduction in the company’s own supply chain
- A reduction at a supplier the company buys from lowers its Scope 3 inventory when it shows up in the data the company uses, for example a supplier-specific emission factor for the goods it purchases. A spend-based average will not show it.
- One in its industry, outside its chain
- A reduction at a producer outside the company’s own supply chain is not part of its inventory under any method. It can be disclosed separately as an action, not as a lower Scope 3 figure.
- What an inset credit does
- When a supplier in the buyer’s own chain reduces emissions, the buyer’s Scope 3 goes down through lower supplier emissions data. The inset credit is the proof of that emissions reduction and who funded it, and it is not counted a second time. An emissions reduction outside the buyer’s own chain is reported separately, not as a lower Scope 3 figure. The GHG Protocol’s Actions and Market Instruments workstream is developing a market-based approach for Scope 3. A consolidated draft is expected for public consultation in the second quarter of 2027, and the revised standard in the fourth quarter of 2028. Each Carbon3 credit records the supplier, project, baseline and verification report, so it can be reported under the current rules and reassessed under the new ones.
Science Based Targets initiative (SBTi)
- What the standard is
- The SBTi validates whether a company’s emissions reduction targets are consistent with climate science. Its Corporate Net-Zero Standard V2.0 was published on 11 June 2026. Validations under it open on 1 February 2027, and it becomes mandatory for new target submissions from 1 February 2028. Targets already validated under the earlier version stay valid for their cycle. Target ambition is always set on the company’s physical inventory.
- A reduction in the company’s own supply chain
- Reductions that show up in the company’s inventory support emissions reduction claims. A project implemented by or on behalf of the company in its own value chain, with measured outcomes reported in proportion to its contribution, can support target implementation and an “alignment” claim.
- One in its industry, outside its chain
- Action in a shared system the company draws on, such as a supply shed or logistics network, or at sector level, counts only where direct action in its own chain is constrained. It supports a separate “system contribution” claim, reported apart from the inventory.
- What an inset credit does
- Projects must be measured, additional and verifiable. Their outcomes must be uniquely attributed, with serialized tracking to prevent double counting. Credits a company sells on cannot also count for that company. The SBTi plans interim guidance on reporting projects and market instruments for consultation in the fourth quarter of 2026, so how a received inset credit is assessed is not yet fully settled.
Counting each tonne once
- What the standard is
- Double counting happens when two companies claim the same tonne, when one tonne is sold twice, or when a reduction is credited by two programs. Standards such as the SBTi’s now require serialized tracking to prevent it.
- A reduction in the company’s own supply chain
- Several companies in one chain can fund the same project. Each receives its own serialized credits, so no tonne has two holders.
- One in its industry, outside its chain
- The same rule applies wherever the tonne sits: one serial number, one holder, and no credit for a reduction already credited by another program.
- What an inset credit does
- Each credit has a serial number and exactly one holder on the Carbon3 registry. A transfer moves it rather than copying it, and retirement closes it permanently. A reduction already credited elsewhere is excluded at validation.
General information as of October 2026, not legal, accounting or reporting advice. Standards and regulations change; check the current text.
Steel and cement questions
No. Ready-mix concrete has to be poured close to where it is batched, and steel moves through stockholders and service centers, so the low-emission product rarely reaches the buyer that paid for it. The credit records the reduction at the plant, and the buyer claims it once through book and claim.
Talk to us about low-carbon steel or cement
Producers and buyers of steel or cement can see how the premium would be shared.