Members of the European Parliament’s Environment Committee have voted to extend the scope of the Carbon Border Adjustment Mechanism (CBAM) to a range of steel- and aluminium-based products. A number of concessions proposed by the European Commission were rejected. In particular, a controversial amendment regarding the power to suspend the CBAM in exceptional circumstances was scrapped.
According to the European Parliament’s website, 56 MEPs voted in favour of stricter CBAM requirements, whilst 11 voted against and 12 abstained.
The aim is to protect the competitiveness of European businesses
The scope of the Carbon Border Adjustment Mechanism has been extended to products made from base materials – steel and aluminium. Specifically, this includes finished products such as wires, springs and fasteners. At the same time, MEPs insist that carbon taxation must be based on clear and transparent calculation methods. An exception has been made for electricity from countries outside the EU, provided it is used to support the stability of European energy systems.
It will become more difficult to circumvent the CBAM. For example, one method involves making a minor modification to a product so that it no longer falls under the scheme. However, such modifications will now also include minor processing. An exception is made for standard business decisions aimed at reducing a company’s costs, rather than avoiding the CBAM.
If such a circumvention scheme is detected, MEPs have authorised the European Commission to use default values rather than actual figures when calculating the carbon duty.
The European Commission’s proposal for an emergency ‘circuit breaker’ for the CBAM was rejected. This measure was proposed for specific goods or products in the event of market shocks.
Another controversial decision, which was also rejected, was to count carbon credits towards CARB obligations. MEPs argued that there are likely to be changes to the application of this instrument, which will be discussed during the review of the EU Emissions Trading System (EU ETS).
For less developed countries, the European Parliament proposed simplified reporting requirements, as well as a system of technical assistance. Ukraine is among these countries.
Temporary Decarbonization Fund
To protect European producers in export markets, a Temporary Decarbonization Fund (TDF) will be created. However, the European Parliament’s vision differs from the European Commission's proposal regarding the fund’s operational terms and the use of any remaining funds.
MEPs have pushed back the start of financial support to 2027 instead of the proposed 2028. Additionally, the European Parliament proposes to add fertilizer sector participants-those who produce or use fertilizers-to the beneficiaries, considering this a strategic factor for food security. The extended list will include urea, ammonium sulfate, and ammonium nitrate.
The European Parliament holds that all companies dependent on goods covered by CBAM should be eligible for support from the fund.
It is proposed that surplus revenues from the mechanism be redirected to fulfill the EU's international climate finance commitments. In contrast, the European Commission proposed to return these funds to EU Member States.
“This compromise makes the CBAM stronger, fairer, and more resilient. We have closed significant loopholes, strengthened enforcement measures against circumvention, and expanded the scope of the mechanism where it is most needed. This is a balanced package that protects European industry during its decarbonisation while also safeguarding the environmental integrity of the mechanism,” emphasised parliamentarian Mohammed Chahim.
The changes passed their first reading at the committee level. The indicative date for voting on the proposals in the European Parliament is 14 September 2026.
EcoPolitic previously reported that the European Commission published the rules for verification and accreditation of verifiers who will be responsible for recording emissions under CBAM.
