The European Parliament’s Committee on the Environment, Climate and Food Safety (ENVI) has adopted its position on proposed revisions to the Carbon Border Adjustment Mechanism (CBAM), supporting the extension of the mechanism to downstream products and endorsing the creation of a Temporary Decarbonization Fund (TDF) to support the low-carbon transition of European industry.
Under the adopted position, MEPs support extending CBAM beyond basic materials to include a broad range of downstream steel and aluminum products, such as fasteners, wire, springs and household articles, while stressing that the scope extension should be based on transparent and quantitative methodologies. The committee also approved an exemption for electricity imported from non-EU countries by grid operators for the purpose of maintaining electricity network stability.
Committee proposes stronger anti-circumvention measures
The committee proposed strengthening anti-circumvention provisions by clarifying that the prohibition on “slightly modifying” products should also cover slight processing and specifying that the rules should target only arrangements established solely to circumvent CBAM rather than legitimate business decisions aimed at reducing costs. In addition, the committee proposed allowing the European Commission to apply the default emissions values of the true country of origin where circumvention patterns are identified.
MEPs also rejected the Commission’s proposal to remove products from the CBAM scope during price shocks and instead proposed a mechanism allowing CBAM revenues generated from the affected products to be temporarily redirected to the impacted industrial sectors.
To address potential loopholes in online trade, the committee recommended replacing the parcel-by-parcel exemption with a single weight-based threshold covering all shipments from the same seller, accompanied by new reporting obligations and retroactive liability for shipments deliberately split to remain below the threshold. The committee also proposed simplified reporting requirements for least-developed countries together with a technical assistance framework.
At the same time, MEPs removed the Commission’s proposal to allow Paris Agreement Article 6 carbon credits to offset CBAM obligations, arguing that the issue should instead be considered during the forthcoming revision of the EU Emissions Trading System (EU ETS).
MEPs back earlier launch of Temporary Decarbonization Fund
Regarding the Temporary Decarbonization Fund, the committee proposed that financial support should be available from 2027 to 2029, rather than beginning in 2028 as proposed by the Commission. The committee further proposed making all downstream operators using CBAM-covered products eligible for support from the fund. It also suggested that any unused revenues should be allocated to the EU’s international climate finance commitments under the Paris Agreement instead of being returned to member states as originally proposed by the Commission.
The European Parliament is expected to adopt its negotiating mandate for talks with the Council of the European Union during its September plenary session.
