CBAM: Expansion of CO₂ border adjustment in the pipeline

Quick read

The European Commission has proposed changes to the carbon border adjustment mechanism (CBAM) that will regulate the transition to the final application phase from 1 January 2026. The CBAM Regulation was last amended as part of the CBAM Omnibus (Omnibus Package I), with the specific aim of exempting smaller importers from certain administrative obligations.

The transition phase will end on 1 January 2026. From this date onwards, the regular CBAM obligations will apply, in particular the determination and reporting of embedded emissions and the purchase of CBAM certificates. Simplified calculation methods for electricity imports will also apply from this date. The extension of the scope to additional downstream products is planned for 2028.

Extension of the scope

According to the Commission’s proposals, around 180 additional industrial and consumer goods are to be included in the CBAM from 2028. The prerequisite is a high average proportion of steel or aluminium. This would affect the sectors of mechanical engineering, manufacturing equipment, vehicle components, hardware, household appliances and construction machinery. Complex products based on several CBAM raw materials will also be covered.

New obligations and control mechanisms

The planned changes provide for extended verification and control powers from 2028 onwards. This is to ensure the correct determination of embedded emissions and to counteract abusive practices, such as incorrect emission data or supply chain adjustments. In addition, emissions from industrial scrap are to be considered in the calculation to avoid distortions of competition.

Simplifications for electricity imports

An adjustment to the calculation method is planned for electricity imports into the EU. In future, standard emission values will be based on the entire electricity mix of the exporting country. According to the Commission’s assessment, this will lead to lower reference values. In addition, the requirements for verifying actual emissions will be simplified to facilitate their application in practice. These changes will apply from 1 January 2026.

Temporary decarbonisation fund

In a separate regulation, the Commission proposes the establishment of a temporary fund for the years 2026 and 2027. It is aimed at EU producers who, despite CBAM, continue to be exposed to carbon leakage risk, particularly considering the expiry of free allowances in the EU Emissions Trading System (EU ETS). The fund is to be financed proportionally from Member States’ CBAM revenues; a longer-term solution is envisaged as part of the ETS reform.

Classification

The planned changes will lead to an expansion of the material scope and adjustments to the calculation and reporting requirements. For companies with international supply chains, this will result in additional testing and implementation requirements, particularly regarding product classification, emissions data and import processes.

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