The European Commission has unveiled a new package of proposals to strengthen the Carbon Border Adjustment Mechanism (CBAM), aiming to close loopholes, prevent circumvention and enhance protection against carbon leakage, following extensive feedback from industry stakeholders.
CBAM to cover downstream products from 2026
From January 1, 2026, CBAM would be extended beyond basic materials to include around 180 steel- and aluminum-intensive downstream products, such as machinery, industrial equipment and appliances. Approximately 94% of these products are industrial goods with very high metal content, averaging 79% steel or aluminum, according to the Commission.
The move is intended to prevent emissions shifting along value chains or outside the EU, ensuring a level carbon pricing framework for both domestic and imported products.
Stronger anti-circumvention safeguards
The proposals also introduce enhanced anti-circumvention measures, including the integration of pre-consumer steel and aluminum scrap into CBAM calculations. Additional provisions would strengthen reporting, traceability and verification requirements, while granting the Commission broader powers to intervene where declared emissions data is deemed unreliable.
International cooperation and trade facilitation
To address concerns from trading partners, the Commission proposes carbon price equivalence mechanisms, mutual recognition of verification bodies and negotiated trade facilitation arrangements, aimed at reinforcing CBAM’s global dimension.
Temporary Decarbonisation Fund
A Temporary Decarbonisation Fund is also proposed to support EU producers of CBAM-covered goods that remain exposed to carbon leakage in third-country markets. The fund would partially compensate EU ETS costs, financed through 25% of CBAM certificate revenues in 2026–2027, with the remainder allocated as EU own resources.
While the European Steel Association (EUROFER) welcomed recognition of CBAM’s structural weaknesses, it cautioned that the proposals do not yet provide a fully comprehensive or long-term solution to carbon and job leakage risks.
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