Drafts reveal EU to extend carbon border tax to new products

Starting January 1, 2026, CBAM's scope will expand to include 180 steel and aluminium-intensive downstream products.

CBAM, an environmental measure developed in line with the commitments under the Paris Agreement and pivotal to reach the EU's climate objective of climate neutrality by 2050, now targets basic materials like aluminium, cement, electricity and steel.

Answering the call of the sector, a temporary support scheme is being introduced to protect EU producers vulnerable to carbon leakage, rewarding cleaner companies globally and fostering a fair, competitive environment, an official release said.

Today's proposals also take into account concerns raised by trusted international partners, which will benefit from some simplifications and flexibilities.

It introduces the concept of equivalence in carbon tax and price deduction, and includes a new clause allowing for negotiated trade facilitation measures, such as mutual recognition of trustworthy accreditation bodies, and new facilities on equivalence of carbon price deduction.

This will further strengthen CBAM's role in promoting decarbonisation beyond EU borders, facilitated by outreach and technical aid, which is confirmed in the CBAM Review report, unveiled today.

Promoting scrap usage to cut emissions in energy-intensive products, the Commission is now incorporating pre-consumer aluminium and steel scrap in CBAM calculations. This ensures fair carbon pricing for both EU-made and imported goods.

Key proposals include enhanced reporting requirements for better traceability of CBAM goods and addressing emission intensity mis-declarations. The Commission gains authority to tackle evidence-based abuses circumventing CBAM's financial responsibilities, requiring additional evidence when actual values are unreliable, and defaulting to country values in such specific cases.

The Commission has launched a fund to temporarily support EU producers of CBAM goods and mitigate carbon leakage risks. This addresses the competitiveness loss in third-country markets where EU goods might be supplanted by cheaper, more emission-intensive alternatives, potentially increasing global emissions.

The fund will reimburse a portion of the EU-ETS carbon costs for goods still facing carbon leakage risks, with support contingent upon demonstrated decarbonisation efforts.

Financing will come from member state contributions, constituting 25 per cent of revenues from CBAM certificate sales in 2026 and 2027, while the remaining 75 per cent will be the EU’s own resource.

ALCHEMPro News Desk (DS)