Broadening the Carbon Border Tax to 180 New Products

What the problem is
The EU’s Carbon Border Adjustment Mechanism (CBAM) was created to stop “carbon leakage” – the shift of carbon‑intensive production to countries with weaker climate rules.

• The current CBAM only covers a few basic materials (steel, aluminium, cement, electricity, fertilisers, hydrogen).
• Products made from these materials – the downstream goods – are not covered, so companies can move production to third‑country factories that use the same raw materials but pay less for carbon.
• The rules that let importers use the actual emissions of the electricity they buy are too strict, discouraging trade in low‑carbon power and giving no incentive for foreign producers to decarbonise.
• Importers can also try to avoid the CBAM by mis‑declaring the emissions of their goods or by using “pre‑consumer scrap” that is counted as zero‑emission material.

How the proposal solves it

1. Extend the scope – add selected steel‑ and aluminium‑intensive downstream products (e.g. certain car parts, machinery, construction materials) to the CBAM list.
2. Tighten anti‑circumvention rules – require evidence that the declared emissions are correct, limit the use of “pre‑consumer scrap” as a loophole, and give the Commission powers to add or remove goods if abuse is found.
3. Make electricity rules fairer – replace the fossil‑fuel default value with the average grid emission factor of the exporting country, and relax the conditions for using actual emissions.
4. Simplify administration – keep the single 50‑tonne de‑minimis threshold, allow operators to share verified data, and streamline record‑keeping.
5. Strengthen enforcement – give customs authorities the right to request guarantees, and give the Commission tools to monitor and penalise non‑compliance.

What changes as a result of the document

• Scope – about 180 new CN codes added; around 3,800–3,900 SMEs will now be subject to CBAM.
• Threshold – the 50‑tonne rule remains, covering >90 % of emissions while excluding most small importers.
• Electricity – from 1 Jan 2026 the default emission factor is the average grid mix; the congestion test is removed.
• Scrap – only pre‑consumer scrap is counted as a CBAM precursor; post‑consumer scrap is excluded.
• Guarantees – importers may be required to provide a bank guarantee if they fail to meet certificate obligations.
• Revenue – the extension is expected to bring about €0.58 billion per year in 2030, rising to €0.69 billion by 2035.
• Budget impact – the proposal will cost about €0.2 billion per year on the EU budget (2028‑2034).
• Implementation dates – transitional period ends 31 Dec 2025; definitive CBAM starts 1 Jan 2026; new scope and electricity rules take effect 1 Jan 2028.
• Monitoring – the Commission will publish a report every two years on CBAM’s impact on leakage, trade, prices, and the internal market.

Other important information

• The proposal is part of the Clean Industrial Deal and the Industrial Accelerator Act, and it aligns with the EU’s 2030 GHG‑reduction target (55 % cut) and 2050 climate neutrality goal.
• Stakeholder consultation (July–Aug 2025) showed broad support for extending CBAM to downstream goods and for simplifying electricity rules.
• The impact assessment favoured a “balanced” extension (Option 2) that covers the most at‑risk downstream goods while keeping administrative costs low.
• The legal basis is Article 192(1) TFEU; the measure is uniform across all Member States to preserve the internal market.
• The proposal includes detailed amendments to Regulation (EU) 2023/956, Annex I (new goods), Annex VIII (precursor list), and procedural rules for guarantees, declarations, and certificates.
• The Commission will continue to monitor for circumvention and may use delegated acts to remove goods from the scope if serious harm to the internal market occurs.

This summary captures the key points of the legislative proposal while keeping the technical details and numbers that are essential for understanding its scope, impact, and implementation.