The European Commission has proposed a new package of measures aimed at closing loopholes, preventing circumvention and strengthening the effectiveness of the Carbon Border Adjustment Mechanism (CBAM), responding directly to feedback from industry stakeholders. The proposals are designed to reinforce CBAM’s core objective of preventing carbon leakage, while supporting the competitiveness of EU producers as the bloc transitions toward low-carbon production.
Extension of CBAM to downstream products from 2028
From January 1, 2028, the Commission proposes extending CBAM beyond basic materials such as steel, aluminum, cement and electricity to cover steel- and aluminum-intensive downstream products.
Around 180 downstream products would be brought into the scope of CBAM, including machinery, appliances and specialized industrial equipment. Approximately 94 percent of these products are industrial supply-chain goods with a very high steel or aluminum content, averaging around 79 percent, such as base metal mountings, cylinders, industrial radiators and casting machinery. The remaining six percent consists of household goods. The Commission argued that this extension is necessary to prevent emissions from being shifted along the value chain or relocated outside the EU.
Anti-circumvention measures reinforced
Building on lessons from the transitional phase and priorities set out in the Steel and Metals Action Plan, the Commission proposes stronger anti-circumvention safeguards.
A key change is the inclusion of pre-consumer aluminum and steel scrap in CBAM calculations, aiming to support recycled material use while ensuring consistent carbon pricing between EU-produced and imported goods. Additional measures include stricter reporting and traceability requirements, enhanced scrutiny of declared emission intensities, and stronger powers for the Commission to intervene in cases of suspected abuse. Where actual emission data is considered unreliable, the Commission would be able to require additional proof or apply country-level default values in specific cases.
International dimension and trade facilitation
The proposals also respond to concerns raised by trusted international partners. To address these, the Commission introduces simplifications and flexibilities, including the concept of equivalence for carbon taxes and carbon price deductions.
A new clause would allow for negotiated trade facilitation arrangements, such as mutual recognition of accredited verification bodies and agreements on the equivalence of carbon price deductions. These elements aim to strengthen CBAM’s international dimension and promote decarbonisation beyond EU borders.
Temporary Decarbonisation Fund proposed
To complement the reforms, the Commission proposes creating a Temporary Decarbonisation Fund to support EU producers of CBAM goods that remain exposed to carbon leakage risks, particularly in third-country markets.
The fund would partially reimburse EU ETS carbon costs, provided beneficiary companies demonstrate credible decarbonisation efforts. Financing would come from member state contributions equivalent to 25 percent of CBAM certificate revenues in 2026–2027, with the remaining 75 percent allocated as an EU own resource.
EUROFER: Measures positive but not enough
Meanwhile, the European Steel Association (EUROFER) has stated that the European Commission’s latest proposals on the Carbon Border Adjustment Mechanism (CBAM) recognize several structural weaknesses that could undermine the instrument’s effectiveness. These include shortcomings related to EU exports, downstream sectors and circumvention practices. However, EUROFER has warned that the proposed measures do not yet amount to a comprehensive or durable solution capable of preventing carbon and jobs leakage
