The European Parliament’s Committee on International Trade has published a draft opinion proposing amendments to the Carbon Border Adjustment Mechanism (CBAM), focusing on extending its scope to downstream products and strengthening anti-circumvention measures.
The proposal aims to ensure consistent carbon cost coverage across industrial value chains as the EU phases out free allowances under the Emissions Trading System.
Focus on preventing carbon leakage
According to the draft, the gradual phase-out of free ETS allowances combined with CBAM implementation could shift carbon leakage risks from upstream sectors such as steel to downstream products.
Expanding CBAM coverage to include these goods is therefore seen as necessary to maintain the effectiveness of the mechanism and ensure that carbon costs are applied consistently across the entire value chain.
Recognition of carbon pricing in third countries
The committee also proposed recognizing dual carbon pricing systems in third countries. Under such arrangements, exporters subject to additional carbon-related charges in their home markets could have these costs recognized as a “carbon price effectively paid”, reducing their CBAM obligations.
This approach is intended to incentivize the global adoption of carbon pricing mechanisms and support decarbonization efforts in sectors including steel.
Support measures for developing countries
The draft includes provisions to support developing countries in complying with CBAM requirements. Proposed measures include technical assistance for monitoring, reporting and verification systems, emissions accounting and regulatory capacity building.
In addition, the proposal highlights the importance of technology transfer and industrial partnerships to improve access to low-carbon technologies in developing economies.
Allocation of CBAM revenues for climate finance
A key recommendation is that at least 25 percent of CBAM revenues should be allocated to international climate finance. These funds would support decarbonization projects in developing countries, aiming to improve the fairness and global acceptance of the mechanism.
Special provisions and ongoing monitoring
The committee also proposed special provisions for least developed countries, including potential exemptions from CBAM financial obligations while maintaining reporting requirements. Simplified procedures may also be introduced for small and medium-sized enterprises in lower-income countries to ease compliance burdens.
The European Commission will be tasked with continuously monitoring CBAM’s impact on developing countries, including trade effects, administrative challenges and carbon leakage risks, and may introduce mitigation measures if significant negative impacts are identified.
