The European Union has announced that it has reached a provisional agreement on significant amendments to the Carbon Border Adjustment Mechanism (CBAM), expanding its scope, tightening compliance requirements and introducing new measures aimed at preventing circumvention and carbon leakage. According to the EU, the revisions are intended to strengthen the effectiveness of CBAM while reducing administrative burdens and improving emissions reporting accuracy.
CBAM scope expanded to downstream products
One of the most significant changes is the expansion of CBAM coverage to a broader range of downstream and processed products. In addition to basic materials such as iron and steel, aluminum, cement, fertilizers, electricity and hydrogen, the mechanism will apply to a wider range of manufactured goods containing these materials.
New product categories include certain machinery, metallurgy equipment, cranes, forklifts, conveyors, refrigeration equipment, water heaters and various industrial components. The expanded coverage is intended to reduce the risk of carbon leakage further down the value chain.
Greater focus on actual emissions data
The revised framework places greater emphasis on the use of actual emissions data. Embedded emissions from input materials and precursors will be included in emissions calculations for finished products, particularly in the iron and steel, aluminum and combined metal goods sectors. Operators will be required to maintain detailed records and provide more comprehensive information to support emissions calculations.
New anti-circumvention measures introduced
To address circumvention concerns, the European Commission is introducing provisions targeting abusive practices and so-called “harmful resource shuffling,” where lower-emission products are directed to the EU market while higher-emission products are sold elsewhere.
The Commission will have the authority to identify high-risk product-country combinations, require additional evidence from importers, establish special conditions for the use of actual emissions data and adopt corrective measures when necessary.
Verification and compliance requirements tightened
The proposal strengthens verification and traceability requirements. Competent authorities and the Commission will be able to request evidence demonstrating that imported goods were produced at the declared installation and during the declared production period. Additional documentation may also be required for certain products to verify the origin of raw materials and associated emissions.
Authorized CBAM declarants may be required to provide financial guarantees if authorities determine that their financial capacity is insufficient to meet CBAM obligations. Authorities will also gain broader powers to recover unpaid liabilities through these guarantees. Importers and declarants will face enhanced reporting requirements, including the disclosure of additional identification and management information.
Changes to emissions calculations and CBAM certificates
The calculation of default emissions values will also change. For most products, default values will be based on the average emissions intensity of the exporting country plus an additional markup. Where reliable country-specific data are unavailable, values will be derived from the highest-emitting exporting countries. Special provisions have also been introduced for electricity imports, allowing the use of alternative default values when lower verified emissions factors can be demonstrated.
From 2027 onward, authorized CBAM declarants will be required to maintain CBAM certificates covering at least 50 percent of the embedded emissions associated with their imports during the year. The proposal also refines the calculation and publication of CBAM certificate prices to align them more closely with EU Emissions Trading System (ETS) allowance prices.
Temporary exemptions and stronger customs oversight
The amendments introduce temporary exemption mechanisms for serious and unforeseen circumstances. Under specific conditions, the Commission will be able to suspend CBAM obligations for certain products for up to two years. During such periods, affected EU producers would continue to benefit from existing ETS-related support measures.
To improve enforcement, customs authorities will be required to provide the Commission with more detailed import information, including importer identification data, product codes, quantities, countries of origin and customs documentation.
EUROFER welcomes progress but highlights remaining concerns
The European Steel Association (EUROFER) welcomed several improvements introduced by EU member states, including stronger references to “melt and pour” rules and greater recognition of resource-shuffling risks. However, the association stated that significant loopholes remain regarding circumvention, downstream products and exports. According to EUROFER, the proposal continues to rely mainly on corrective measures to address resource shuffling rather than preventing the practice from occurring. The association also noted that while the proposal extends CBAM coverage to around 200 additional steel-containing products, it does not provide comprehensive coverage for many steel-intensive goods, leaving parts of Europe’s manufacturing value chain exposed to imports that do not face comparable carbon costs.
EUROFER further expressed concern over the inclusion of pre-consumer steel scrap as a CBAM precursor without a dedicated impact assessment, warning that the measure could have unintended consequences for scrap markets and Europe’s circular economy. The association also criticized amendments to Article 27a concerning the temporary removal of products from the CBAM scope, arguing that adjustments to the transition between CBAM and free allocation would be a more effective solution. Finally, EUROFER stated that the proposal does not address the long-term issue of European exports, as EU producers continue to face carbon costs when competing in international markets where many foreign competitors do not incur similar expenses.