The European Commission has proposed a set of changes to the Carbon Border Adjustment Mechanism (CBAM). They are aimed at closing loopholes, preventing circumvention of the rules, and improving the effectiveness of the instrument.
Details of the innovations and additional regulatory documents that enshrine them have been published on the website of the EU's main executive body. Officials noted that they took into account feedback from industry and EU member states when preparing the proposals. Some details were also disclosed by European Commissioner for Climate, Clean Growth, and Zero Emissions Vopke Hoekstra.
Key innovations regarding CBAM
1. Extension of the mechanism to downstream products from 2028
From January 1, 2028, the scope of the CBAM will be extended to downstream steel and aluminum-containing products. This covers approximately 180 types of goods with a high steel and aluminum content, in particular machinery and equipment, industrial equipment, and household appliances (e.g., washing machines, kitchen and garden equipment).
The aim is to prevent carbon leakage downstream when the production of finished products is relocated outside the EU or replaced by more carbon-intensive imports due to the rising cost of steel and aluminum in the EU.
According to the analysis, 94% of the goods covered are industrial products from supply chains with a high share of steel and aluminum (79% on average) used in heavy machinery and specialized equipment. 6% are household goods.
The European Commission estimates that expanding coverage will increase CBAM revenues by 23% and could bring in up to €500 million by 2030.
2. Strengthening measures to prevent circumvention
Taking into account the experience of the transition period, European officials are strengthening mechanisms to combat circumvention of the CBAM:
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stricter reporting and traceability requirements for CBAM goods are being introduced;
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the European Commission will have the authority to respond to confirmed cases of abuse and fraud, to require additional evidence when actual figures are unreliable;
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aluminum and steel scrap not previously in use will be included in CBAM calculations to ensure fair pricing, incentivize secondary raw materials usage, and promote the use of scrap to reduce emissions in energy-intensive products.
3. Simplification and flexibility for international partners
Taking into account the comments of the EU's "reliable trading partners," the concept of carbon tax equivalence and a mechanism for crediting paid carbon prices are being introduced. The possibility of coordinated measures to simplify trade is also provided for, in particular:
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mutual recognition of approved accreditation bodies;
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new tools to confirm equivalence of carbon pricing.
4. Simplification of Rules for Electricity Imports
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emissions will be calculated based on the average carbon intensity indicator of the energy system instead of marginal production, in order to further incentivize decarbonization;
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Technical adjustments to the CBAM are envisaged to facilitate market integration with countries ready for this.
5. Temporary Decarbonization Fund
The European Commission is launching a temporary Decarbonization Fund to support EU producers in CBAM sectors that remain vulnerable to carbon leakage in export markets. It will compensate for part of the EU ETS carbon costs for goods from these sectors. The amount of this support will depend on the decarbonisation efforts demonstrated by the manufacturer.
The fund will be financed from the following sources:
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25% – revenues from the sale of CBAM certificates in 2026 and 2027;
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75% – the EU’s own resources.
Recently, EcoPolitic reported that the EU plans to expand the scope of CBAM.
