The European Union is transforming the Carbon Border Adjustment Mechanism (CBAM) from a climate policy into a powerful industrial and trade instrument that will increasingly determine access to the European market. The latest agreement reached by the Council of the European Union signals that CBAM is moving beyond raw materials to cover downstream manufactured products, while introducing stricter anti-circumvention measures designed to ensure imported goods meet the same carbon standards expected from European producers.
If negotiations with the European Parliament proceed as planned, the revised framework could be finalized before the end of 2026, marking another major step in the EU’s strategy to reduce carbon leakage while strengthening the competitiveness of domestic industry.
CBAM Enters a New Phase of European Climate Policy
Since 1 January 2026, CBAM has entered its definitive implementation phase, applying to imports of high-emission sectors including:
- Iron and steel
- Aluminium
- Cement
- Fertilizers
- Electricity
- Hydrogen
The mechanism requires importers to report the embedded carbon emissions of imported products and purchase CBAM certificates linked directly to prices in the EU Emissions Trading System (EU ETS). Importers exceeding regulatory thresholds must become authorized CBAM declarants, submit verified emissions data and surrender certificates reflecting the carbon intensity of imported goods. The objective is to ensure imported products face carbon costs comparable to those already paid by European manufacturers under the EU ETS.
Downstream Products Become the Next Target
The most significant change proposed by the Council addresses one of CBAM’s original weaknesses. Until now, the mechanism primarily covered raw and semi-finished materials, leaving many finished products outside its scope. This created opportunities for manufacturers to relocate downstream production outside the EU while continuing to sell finished steel- or aluminium-intensive goods into the European market.
The revised proposal seeks to eliminate this gap. Under the Council’s negotiating position, CBAM would gradually expand to cover a wide range of downstream products beginning 1 January 2028, giving businesses roughly 18 months to prepare.
The proposed expansion includes products such as:
- Structural steel components
- Metal tanks
- Tubes and pipe fittings
- Wire ropes
- Fasteners
- Springs
- Fabricated steel products
- Metal office furniture
- Prefabricated buildings
- Products containing significant quantities of steel or aluminium
The reform effectively extends carbon pricing deeper into industrial manufacturing.
Carbon Data Is Becoming a Competitive Asset
For exporters supplying the European market, CBAM compliance is no longer limited to customs documentation.
Manufacturers will increasingly need detailed information covering:
- Production methods
- Source of steel or aluminium inputs
- Embedded emissions
- Electricity used during manufacturing
- Verified carbon accounting methodologies
- Supply chain traceability
The European Commission already requires actual emissions data to be verified by third-country producers, with CBAM declarations for 2026 imports scheduled for submission by 30 September 2027. Companies unable to provide credible emissions data risk losing access to premium European customers.
Carbon Costs Are Becoming Financially Significant
The financial implications are becoming increasingly tangible. The first official CBAM certificate price published for the first quarter of 2026 reached €75.36 per tonne of CO₂, based on EU ETS auction prices.
While certificate prices are currently published quarterly, beginning in 2027 they will be updated weekly, creating a dynamic carbon pricing benchmark for international trade. As a result, verified low-carbon production is becoming a commercial advantage. Manufacturers capable of documenting lower emissions may enjoy stronger pricing power, while producers relying on incomplete or unverifiable data could face higher compliance costs and reduced competitiveness.
EU Targets Carbon Circumvention Strategies
The revised CBAM framework also introduces stronger measures to combat carbon avoidance. One major concern involves resource shuffling, where producers allocate their lowest-carbon production to European customers while selling higher-emission products elsewhere without reducing overall emissions.
Under the proposed rules, the European Commission would have greater authority to request additional documentation for transactions considered high risk. If sufficient evidence cannot be provided, authorities may reject company-specific emissions data and instead apply default emissions values established by the Commission. Those default values could significantly increase CBAM liabilities.
Scrap Metal Rules Become More Strict
Another important revision focuses on pre-consumer scrap. The Council is seeking to close potential loopholes where imported products containing industrial scrap might receive artificially low carbon values.
Under the proposal, emissions associated with pre-consumer steel and aluminium scrap would be included in carbon calculations whenever such materials are used as production inputs. Companies claiming to use post-consumer recycled materials would need to provide robust, verifiable documentation. Without sufficient evidence, imported scrap could automatically be treated as pre-consumer material, increasing calculated carbon emissions.
Mining and Metals Producers Face Indirect Pressure
Although the revised CBAM framework does not directly expand to cover all mining operations or mineral extraction activities, it carries important implications for the broader mining and metals industry.
The greatest impact will be felt across processing and refining operations supplying:
- Steel production
- Aluminium manufacturing
- Industrial components
- Semi-finished metal products
- Fabricated equipment
For mining companies, competitiveness will increasingly depend not only on resource quality but also on the carbon intensity of downstream processing. As European buyers demand verified emissions data throughout their supply chains, low-carbon mineral processing will become a growing commercial advantage.
Electricity Becomes a Strategic Component
Electricity remains one of the most strategically sensitive sectors under CBAM. The Council recognizes that electricity flows frequently differ from commercial contracts due to transmission system operations and interconnected grids.
Future treatment of electricity imports will increasingly depend on factors including:
- Electricity market integration
- Grid coupling
- Carbon pricing compatibility
- Transmission system cooperation
- Renewable energy verification
For countries including Serbia, Montenegro and other members of the Energy Community, electricity exports to the EU will increasingly require:
- Reliable hourly metering
- Verified carbon intensity
- Renewable energy documentation
- Harmonized market rules
Electricity trade is therefore becoming closely linked with broader European climate policy.
Carbon Reporting Is Becoming a Financing Requirement
Beyond regulatory compliance, CBAM is rapidly becoming a factor in project finance.
Banks, institutional investors and industrial buyers increasingly expect exporters to maintain comprehensive monitoring, reporting and verification (MRV) systems.
Companies exporting steel, aluminium, electricity, fertilizers or hydrogen-related products will need robust documentation covering:
- Production emissions
- Electricity sourcing
- Renewable energy contracts
- Guarantees of origin
- Carbon accounting methodologies
- Verified monitoring systems
Carbon transparency is becoming an essential component of industrial bankability.
Importers Also Face Greater Responsibilities
Responsibility under CBAM extends beyond exporters.
European importers and customs representatives will carry legal responsibility for:
- Carbon declarations
- Certificate purchases
- Record keeping
- Emissions verification
At the same time, the EU’s Omnibus I simplification package introduces a 50-tonne annual de minimis threshold per importer, exempting smaller import volumes while maintaining coverage for approximately 99% of embedded emissions associated with CBAM products. The result is a more targeted regulatory system that reduces administrative burdens for small businesses while strengthening enforcement for major industrial imports.
Early Preparation Will Create Competitive Advantages
Companies preparing early for expanded CBAM requirements are likely to enjoy significant commercial advantages.
Manufacturers capable of providing:
- Installation-level emissions data
- Product traceability
- Verified production routes
- Reliable electricity documentation
- Transparent carbon accounting
will offer European customers greater certainty while reducing compliance risks. For many buyers, verified emissions information will become as important as product quality and delivery schedules.
CBAM Will Continue Expanding
The Council’s proposal also makes clear that CBAM will remain a dynamic regulatory framework.
Rather than establishing a fixed list of products, the Council wants the European Commission to conduct annual reviews evaluating whether additional downstream products should be brought within CBAM’s scope. This means companies currently outside the mechanism should not assume permanent exemption.
Industries relying heavily on steel, aluminium, electricity and other carbon-intensive inputs may gradually become subject to future CBAM requirements as the EU continues strengthening its climate and industrial policies.
Carbon Transparency Is Becoming Essential for Access to the European Market
The revised CBAM demonstrates that Europe is moving beyond carbon pricing toward comprehensive supply chain carbon governance. Market access will increasingly depend not only on competitive pricing but also on the ability to demonstrate verified environmental performance throughout production and processing. For exporters across the Western Balkans, Turkey, North Africa, the Gulf, India and China, carbon reporting is evolving from an administrative obligation into a strategic business requirement.
Companies investing early in transparent emissions reporting, low-carbon production and verified supply chains will be better positioned to remain competitive as Europe’s industrial policy increasingly links trade, climate policy and supply chain resilience.
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