Canadian heavy industry already monitors and reports emissions under domestic carbon pricing programs. CBAM does not create a data problem — it creates a new reporting obligation with its own taxonomy and structure. What protects Canadian exporters at the EU border is the decarbonization already underway.
Canadian heavy industry enters the CBAM era with structural advantages built over decades of investment in clean electricity and process technology. Hydro-powered smelters put Canadian primary aluminium near 2 tCO₂ per tonne against a global average around 15. The steel fleet’s electric-arc furnaces draw on grids below 30 grams per kilowatt-hour, and even the remaining integrated mills benchmark among the least carbon-intensive blast furnaces globally. Seven of eight Canadian ammonia plants recycle process CO₂ into urea, holding net intensity around 1.3 tCO₂e per tonne against a CBAM default of 2.82.
These facilities already collect, monitor, and report emissions data under domestic carbon pricing programs — the federal OBPS, Alberta’s TIER, Ontario’s EPS, British Columbia’s OBPS, and Quebec’s cap-and-trade system. Emissions monitoring and data quality are not the challenge. What CBAM introduces is a new reporting obligation that requires existing data to be mapped to the EU’s taxonomy: installation-level emissions per product, coded to CN product classifications, calculated using CBAM’s specific methodology for system boundaries and precursor accounting. The data exists; it needs to be translated into the EU’s structure.
What determines a Canadian facility’s CBAM exposure is its emissions intensity. The lower the embedded emissions per tonne of product, the fewer CBAM certificates the EU importer must purchase. The decarbonization investments Canadian industry is making — in EAF conversion, inert-anode smelting, carbon capture, and low-carbon process routes — are what safeguard these facilities against CBAM costs when exporting to the EU.
Algoma Steel is the clean break. Its first electric-arc furnace was commissioned in July 2025; in mid-January 2026 the company permanently closed its blast furnace, ending 125 years of coal-based steelmaking at Sault Ste. Marie, and Q1 2026 was its first full quarter of 100 percent EAF production under the low-carbon “Volta” brand — up to a 70 percent emissions reduction, with a second EAF following. For European buyers comparing embedded-emissions numbers, an Ontario EAF slab now reads like domestic green steel without the green-steel order book.
ArcelorMittal Dofasco illustrates a different trajectory. The flagship $1.8-billion DRI-EAF conversion in Hamilton has slipped: the coal phase-out horizon extended from 2028 to 2050, the on-site DRI furnace was dropped from the plan (DRI production shifted to Contrecoeur, Quebec), and provincial funding remains unspent — even as the No. 3 coke plant closure was announced in April 2026. Until the conversion is complete, the facility’s emissions intensity reflects its current blast-furnace-based production route.
These two cases show how decarbonization investments directly affect embedded emissions per tonne of product. Under CBAM, the EU declarant’s certificate cost is determined by the emissions intensity of the specific producing installation. Facilities that have completed lower-carbon conversions carry lower embedded emissions, reducing CBAM exposure for any future EU-bound exports.
In November 2025, the Rio Tinto–Alcoa joint venture ELYSIS started up its first commercial-size 450-kiloampere inert-anode cell at Alma, Quebec — a smelting process that emits oxygen rather than CO₂ at the anode. By March 2026, ELYSIS-blend rod was being supplied to Prysmian for low-carbon cable production. The incumbent fleet’s hydro-powered metal already carries one of the lowest carbon intensities in global aluminium production, and European physical trade now shows two-tier pricing with low-carbon aluminium clearing above standard metal.
CBAM currently charges aluminium’s direct emissions, where Canadian hydro-powered smelters are already well below global averages. When indirect electricity emissions enter the CBAM calculation in a later phase, the gap between hydro-powered and coal-powered aluminium will be reflected directly in certificate costs. Canadian producers are positioned for that shift — and ELYSIS-equipped facilities will carry near-zero process emissions on top of the hydro grid advantage.
Indirect emissions and CBAM
When CBAM extends to indirect electricity emissions for aluminium, the carbon intensity of the grid powering each smelter will determine the certificate cost at the border. Canadian hydro-powered production carries a structural advantage that coal-powered competitors cannot replicate.
Climate Decode supports Canadian producers with CBAM reporting structure, emissions methodology mapping, and the abatement planning that reduces embedded emissions per tonne of product.
Neither sector ships meaningfully to the EU today. Both are investing in emissions reduction driven by domestic carbon pricing and long-term market positioning.
Heidelberg Materials Edmonton is building the world’s first full-scale carbon capture facility on a cement plant — over a million tonnes of CO₂ a year, with a total federal MOU of up to $275 million ($49 million secured in Phase 1, up to $226 million conditional on final investment decision in Phase 2) — targeted operational late 2026. Nutrien discontinued its Geismar clean-ammonia expansion in 2024 but retains approximately one million tonnes a year of low-carbon ammonia capability across Alberta and Louisiana. Fertilizer Canada is contesting the EU default values that it considers unrepresentative of the Canadian fleet’s actual emissions intensity.
| Priority | What it means |
|---|---|
| Reduce emissions intensity | EAF conversion, inert anodes, CCS, process efficiency — lower embedded emissions per tonne directly reduces the CBAM certificate cost at the border and compliance cost under domestic carbon pricing |
| Map data to CBAM structure | Restructure existing emissions data to CBAM’s product-level, CN-code-mapped, route-specific methodology with EU-accredited verification |
| Provide verified actuals | Installation-level verified data prevents the EU declarant from falling back to marked-up defaults, which phase to +30% from 2028 |
| Document the carbon price paid | Assemble the evidence file for the carbon price effectively paid under Canadian compliance programs — the subject of Paper 4 |
Continue the series with Paper 1 on the exposure map, Paper 2 on the compliance machinery, and Paper 4 on the carbon-price deduction — the rulemaking that determines how much of the C$95 industrial price Canadian operators already pay comes off the EU bill.
TerraNova, Climate Decode’s decarbonization workspace, runs the playbook end to end: the verified installation inventory, the customer-facing data package, the benchmark-gap analysis that targets abatement where the border pays for it, and the deduction evidence file.
Climate Decode maps Canadian emissions data to CBAM reporting structure and supports the decarbonization planning that reduces embedded emissions per tonne.
Notes and sources for the figures in this paper.