The European Commission has recently published an evaluation report on the implementation of the Carbon Border Adjustment Mechanism (CBAM) during its transitional phase. Based on this evaluation, the Commission has proposed several important adjustments to the CBAM regulation. These proposals are currently under consideration by the European Council and the European Parliament.
Key Proposed Changes
- Expansion to Downstream Products (from 1 January 2028)
CBAM will be expanded to cover additional composite products containing iron, steel, and aluminium that are further processed in the value chain. The proposed expansion includes around 180 CN codes and covers products such as:
- Prefabricated steel building elements, pipes, tubes, and profiles
- Components for vehicles and machinery
- Household appliances and household items
- Various composite metal products
The aim is to level the playing field for European industries by extending the CO₂ price to more downstream products.
- Strengthened Anti-Circumvention Measures
To prevent avoidance of CBAM obligations, the European Commission can impose additional reporting and verification requirements for products at increased risk of circumvention.
- Importers who opt not to use standard emission values must report actual emissions.
- Producers outside the EU must register in the European CBAM registry if their goods are to be imported under CBAM.
- Proposed Temporary Decarbonisation Fund
A temporary fund has been proposed to support EU ETS operators most at risk of carbon leakage.
- The fund targets operators whose free emission allowances are being phased out in 2026 and 2027 due to CBAM implementation.
- Financing comes from the proceeds of CBAM certificate sales by Member States.
- Additional Clarifications and Improvements
The proposal also includes minor adjustments aimed at improving the effectiveness and practicability of the CBAM system, including reporting, data collection, and administrative processes.
Implications for Businesses
Businesses should prepare for:
- The expansion to downstream products in 2028
- Increased reporting obligations in cases of potential circumvention
- Possible interactions with the temporary decarbonisation fund for eligible EU ETS installations
Businesses are advised to review their supply chains and CBAM compliance processes to anticipate these upcoming changes.
