CBAM transition period report published, scope expansion under review for post-2026

From 1 January 2028, the scope of the Carbon Border Adjustment Mechanism (CBAM) will be expanded to include steel and aluminium-intensive downstream products. This step aims to protect EU producers vulnerable to carbon leakage, reward cleaner companies globally, and create a fair and competitive environment.

The new measures take into account concerns raised by trusted international partners and introduce the concept of equivalence for carbon taxes and price reductions. The Commission is also facilitating trade through a new provision enabling mutual recognition of trusted accreditation bodies.

The EU's existing CBAM framework targets basic materials such as aluminium, cement, electricity, and steel. From 2028, importers will need to pay a carbon price for emissions linked to these goods, creating a level playing field with EU-produced materials subject to the Emissions Trading System (ETS). However, the increased costs of steel and aluminium used in final products such as household appliances risk shifting production to countries with weaker climate policies or replacing EU goods with more carbon-intensive imports.

To mitigate this risk, the Commission plans to expand CBAM coverage to approximately 180 steel and aluminium-intensive products, including machinery and household appliances. The vast majority (94%) of these products consist of heavy machinery and specialised equipment with high steel and aluminium content used in industrial supply chains, while a smaller share (6%) covers household goods. This expansion aims to ensure that emissions are reduced rather than merely relocated. The Commission is also encouraging the use of scrap in reducing emissions from energy-intensive products by including pre-consumer aluminium and steel scrap in CBAM calculations. Enhanced reporting requirements and measures addressing the misreporting of emission intensities are expected to strengthen CBAM's effectiveness against abuses beyond its financial obligations.

25% of CBAM certificate revenues will remain with member states in 2026 and 2027

A temporary Decarbonisation Fund has also been established to support EU producers and reduce carbon leakage risks. The Fund will cover part of the carbon costs under the EU Emissions Trading System (ETS) and provide support linked to producers' decarbonisation efforts. Financing will come from member state contributions and EU Own Resources: in 2026 and 2027, 25% of CBAM certificate revenues will remain with member states, while the remaining 75% will be transferred to the EU budget.

Additionally, the European Commission published a report evaluating CBAM's implementation throughout the October 2023–2025 transition period. The report highlights the important role CBAM plays in combating carbon leakage and promoting global carbon pricing, while also outlining the implementation roadmap and measures needed to ensure an efficient and effective regime from 2026.

CBAM will gradually move to financial implementation from 1 January 2026

CBAM was positioned as a key tool for the EU to achieve its 2050 climate neutrality target under the Paris Agreement. While the EU Emissions Trading System (EU ETS) prices carbon emissions within the EU, CBAM sets a carbon price for goods sold to the EU from outside its borders. Launched in its transition phase in October 2023, CBAM will gradually move to financial implementation from 1 January 2026, in parallel with the gradual phase-out of free allocation under the EU ETS by 2034.