The European Commission has proposed expanding the Carbon Border Adjustment Mechanism (CBAM) to cover selected steel- and aluminium-intensive finished goods. The planned extension would bring certain downstream products within the mechanism from 1 January 2028. The change would extend carbon-related obligations beyond imports of basic metals.
The proposal responds to concerns about the existing CBAM product boundary. It could encourage manufacturers to shift fabrication and assembly operations outside the European Union. Companies could otherwise import finished goods that contain carbon-intensive steel or aluminium rather than importing underlying materials and processing them domestically.
The Commission’s initiative aims to extend carbon accounting to selected downstream products to address that potential shift in industrial activity. The legislative process is not complete, and final product coverage and implementation arrangements are still subject to negotiations between EU institutions.
Downstream product scope and customs classification
The proposed scope would focus on selected products that contain substantial quantities of steel or aluminium. It would not apply indiscriminately to all manufactured goods containing metals.
During the legislative process, products discussed for inclusion include machinery parts, fasteners, fabricated components and certain household goods. Including these categories would add additional stages of industrial manufacturing to the carbon-border framework.
Which products fall within the expanded mechanism would be determined by customs classification. Differences between individual commodity codes could lead to similar products facing different reporting requirements or regulatory treatment. Manufacturers therefore cannot rely only on general commercial descriptions such as equipment, machinery or industrial components when assessing potential exposure.
EU institutional timelines and electricity emissions amendments
The European Parliament adopted amendments in September 2026, following the Council’s agreement on its negotiating position in June 2026. Both institutions support extending CBAM to downstream products. Negotiations remain ongoing on product lists and anti-circumvention provisions.
The Commission’s original proposal also includes amendments related to electricity emissions rules. It also contains measures intended to address potential manipulation of emissions reporting. The 1 January 2028 implementation date and the precise range of covered goods depend on the final legislative text.
Emissions data requirements for machinery supply chains
Companies supplying machinery and equipment to the EU market would need to assess potential obligations at individual commodity-code level. An initial compliance assessment should identify relevant product classification and determine quantities of steel and aluminium incorporated into each product.
The assessment would also need to cover the countries and installations supplying those materials, along with the intended import route into the EU. Product portfolios can include hundreds of variants with different metallic compositions, which can make it difficult to apply a single embedded-emissions value across an entire range when material weights and supplier origins differ.
Manufacturers may need to connect bills of materials with supplier emissions declarations. This would create traceability between individual products and metal inputs used in production. Importers would also need to monitor which proposed customs codes are ultimately included in the adopted legislation.
The approach combines customs classification with engineering-level materials accounting. Compliance would therefore require more detailed information than recording a carbon-related cost when purchasing basic steel. Companies with quality-management systems and enterprise resource planning systems capable of tracing materials throughout manufacturing could have an advantage in meeting these requirements.
Embedded-carbon calculations across multiple suppliers
The accounting challenge increases when finished products incorporate materials from multiple manufacturing stages and geographical locations. A fabricated component may include steel sourced from multiple mills, purchased parts with different emissions profiles, and materials that undergo several processing operations before final assembly.
Calculations based only on emissions from a final assembly facility would not capture much of the relevant upstream material content. Manufacturers would therefore need systems linking purchase orders, individual material batches, supplier production installations, and emissions attributed to purchased components.
These links would be particularly relevant for industrial supply chains involving several component manufacturers and successive processing stages. Reliable product-level information would become increasingly important for determining carbon content associated with finished imports into the EU market.
Potential effects on sourcing, contracts, and industrial investment
The proposed downstream extension could affect commercial and investment decisions before legislation enters into force. European original equipment manufacturers may seek longer-term supply agreements for lower-carbon steel as part of their sourcing planning.
Component manufacturers outside the EU could introduce emissions warranties into commercial contracts. Logistics providers may also need to retain more detailed information about the composition and origin of transported goods under these arrangements.
Sourcing changes could affect where industrial processing takes place geographically. Some suppliers may consider establishing or relocating fabrication activities within the EU, while others could invest in lower-emissions steel inputs or improve emissions traceability at existing production facilities.
The eventual commercial impact would depend on product categories included in the final legislation and on methodologies for calculating embedded emissions. Regulators implementing the extension would need a workable approach for embedded-carbon pricing while managing added reporting and traceability requirements across complex industrial supply chains.