News Details

On 17 December 2025, the European Commission announced a package of measures to strengthen the EU’s Carbon Border Adjustment Mechanism (CBAM), including a proposed expansion of its scope, enhanced anti-circumvention rules, and temporary support for EU producers at risk of carbon leakage. The mechanism supports the EU’s objective of climate neutrality by 2050, in line with the Paris Agreement, by complementing the EU Emissions Trading System (ETS).

CBAM has been in a transitional reporting phase since in October 2023. From 1 January 2026, importer will be required to purchase CBAM certificates corresponding to the embedded emissions of covered goods, in parallel with the gradual phase-out of free ETS allowances until 2034.

Under the proposed package the European Commission aims to extend CBAM ‘s scope to selected steel and aluminium-intensive downstream products from 1 January 2028, introduce temporary support measures for EU producers exposed to carbon leakage risks, and provide additional flexibilities for international partners through mechanisms such as carbon price equivalence, trade facilitation, and enhanced outreach and technical assistance.

Extension to downstream products

From 2028, CBAM would be expanded to cover 180 steel- and aluminium-intensive downstream products, including machinery, appliances, and some household items. While CBAM currently applies to basic materials such as steel, aluminium, cement, and electricity, the proposed extension would apply carbon pricing to products with high embedded emissions further along the industrial supply chain,

According to the Commission, most products affected are industrial supply chain goods with high steel and aluminium content, commonly used in heavy machinery and specialized equipment. The measure aims to ensure that  emission reductions occur within supply chains  rather than being relocated outside the EU.

Additional anti-circumvention measures

The European Commission also proposes strengthening CBAM’s anti-circumvention framework. Measures include the treatment of pre-consumer aluminium and steel scrap in emission calculations, enhanced reporting and traceability requirements, and safeguards to address the risk of emission misdeclarations.

Competent authorities would be granted powers to request additional supporting evidence and, where reported emissions data are considered unreliable, to apply country-average emissions values to ensure consistent and fair carbon pricing.

Temporary Decarbonisation Fund

To address residual carbon leakage risks, he European Commission proposes establishing  a Temporary Decarbonisation Fund to support EU producers of CBAM-covered goods. The fund would partially compensate eligible ETS compliance costs for at-risk goods, subject to conditions linked to decarbonisation efforts.

Under the proposal, the fund would be financed 25% by member states and 75% by EU revenues from CBAM certificate sales in 2026–2027.

CBAM review report

Alongside the proposal, the Commission published a review report covering CBAM’s transitional period (October 2023–2025). The report assesses early implementation experience, governance and enforcement arrangements, and outlines the roadmap for an efficient definitive regime starting in 2026.

The review also highlights CBAM’s role in preventing carbon leakage, promoting global carbon pricing, and encouraging decarbonisation beyond the EU through outreach and technical support.