The future CBAM scope.

Background and rationale for the CBAM expansion

The European Commission is introducing new measures to strengthen the Carbon Border Adjustment Mechanism. These measures respond to practical challenges identified during the transitional period, in particular risks of circumvention and carbon leakage. The central element of the proposal is an expansion of the CBAM scope from 1 January 2028 onwards, which would apply carbon costs to a significantly broader range of imported products.

The proposal was published on 17 December 2025, although its direction had been anticipated for some time. The European Steel and Metals Action Plan of March 2025, for example, already announced forthcoming amendments to CBAM later that year. While the core objective of CBAM remains unchanged, protecting the EU internal market while encouraging lower-carbon production globally, two years of experience with the transitional phase have highlighted several areas requiring adjustment.

Limitations of the current CBAM scope

One of the main weaknesses identified is that CBAM currently applies primarily to raw materials such as cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. It does not yet cover most finished or semi-finished goods that incorporate these materials. This gap creates a risk that emissions are effectively shifted downstream, with production relocated outside the EU to avoid carbon costs.

For importers, manufacturers, and supply chain decision makers, this limitation has become increasingly relevant, as carbon costs may influence sourcing and production decisions without fully reflecting emissions across the value chain.

Extension of CBAM to downstream products

A key element of the proposal is the extension of CBAM to a defined set of downstream products. At present, the regulation applies only to a limited group of basic goods. Under the proposed changes, around 180 additional commodity codes would be brought into scope, primarily covering iron and steel and aluminium products further along the value chain.

The Commission has published a proposed list of affected goods, although this list is not yet final. It includes fabricated metal products, certain machinery, and other widely used industrial and consumer goods. The intention is to reduce incentives for companies to avoid carbon costs by shifting production stages outside the EU.

In practical terms, this extension would mean that a much broader range of imported products becomes subject to CBAM obligations. Importers would need to assess whether their goods fall within the expanded scope and, where applicable, purchase additional CBAM certificates reflecting the embedded emissions of those products.

Anti-circumvention and anti-underreporting measures

The proposal also strengthens measures aimed at preventing circumvention and underreporting. Although the current regulation already contains anti-circumvention provisions, experience during the transitional phase has revealed loopholes and enforcement challenges.

To address these issues, the Commission proposes stricter safeguards against the misclassification of goods, enhanced controls to detect underreporting of embedded emissions, and greater flexibility for the Commission to impose additional requirements on specific commodity codes where higher risks are identified.

These measures are intended to reduce opportunities for manipulation and to ensure that reported emissions more accurately reflect the carbon content of imported goods. For importers, this increases the importance of accurate classification, robust emissions data, and clear documentation across the supply chain.

Revised rules for electricity imports under CBAM

Another important change concerns the treatment of electricity imports. Under the current framework, the conditions for declaring actual emissions for imported electricity are very strict. Where these conditions cannot be met, importers must rely on relatively high default emission values.

In cases where electricity production in third countries is already largely decarbonised, this approach can lead to outcomes that do not reflect actual environmental performance. The proposal therefore relaxes the conditions for using verified actual emissions data and updates default values to better reflect decarbonisation progress outside the EU.

As a result, electricity imports with genuinely lower emissions would no longer be disproportionately penalised, strengthening incentives for cleaner electricity generation beyond the EU’s borders.

Administrative and implementation improvements to CBAM

In addition to substantive changes, the proposal introduces a series of administrative and procedural improvements. These include clearer rules on data sharing between importers, producers, and authorities, as well as enhanced powers for authorities to verify reported emissions data.

Authorities would be able to request additional documentation or guarantees where necessary to ensure data accuracy. At the same time, certain registration and reporting procedures are expected to be streamlined to reduce unnecessary administrative burden, while maintaining effective oversight.

These adjustments aim to improve consistency in enforcement across Member States and to provide greater legal certainty for businesses operating under the CBAM framework.

Conclusion: Preparing for the expanded CBAM scope

Overall, the proposal represents a significant step in strengthening and future-proofing CBAM. While its core objective remains the prevention of carbon leakage and the protection of fair competition, the proposed changes directly reflect lessons learned during the transitional phase.

The extension of CBAM to downstream products addresses the risk of emissions shifting along the value chain. Stronger anti-circumvention rules enhance the integrity of the system, while revised electricity rules and administrative refinements improve fairness and practical implementation.

From 1 January 2028 onwards, many more products are expected to fall within the scope of CBAM. For affected importers, early assessment and preparation will be essential. Taken together, these measures reinforce CBAM as a central pillar of EU climate policy and underline the growing role of carbon considerations across international trade.