The European Union is negotiating an expansion of its Carbon Border Adjustment Mechanism (CBAM) that could extend carbon-related obligations beyond steel and aluminium to additional manufactured goods. The changes under discussion could affect the cost of supplying European industrial customers from production centres in China, Türkiye and other non-EU markets.
The European Commission submitted a proposal dated 17 December 2025. It would bring 180 downstream products with significant steel or aluminium content into CBAM from 1 January 2028. The Council agreed its negotiating position on 12 June 2026, adjusting the proposed product scope and strengthening anti-circumvention provisions.
On 15 September 2026, the European Parliament adopted amendments by 464 votes to 50, with 159 abstentions. Parliament’s position foresees an expanded list covering up to 457 product categories. The figures reflect institutional positions during negotiations, and the final list has not been enacted.
CBAM coverage gap for finished goods using covered materials
The proposed expansion targets a gap in the existing system. Current CBAM rules cover specified imports of steel and aluminium, but products manufactured outside the EU using those materials may enter the European market without an equivalent obligation applying to the finished goods.
The Commission says this can create incentives for manufacturing activity to shift abroad to avoid carbon-related costs rather than reduce emissions. If adopted, the approach would extend carbon-cost considerations further into manufacturing and procurement decisions for importers.
The Commission estimates that about 94% of the products included in its proposal serve industrial value chains. The industrial categories cited include mountings, cylinders, industrial radiators and specialist machinery, while the remaining products include selected household goods.
Embedded emissions and precursor material treatment
If implemented, importers could face obligations linked not only to emissions from manufacturing a finished product but also to the treatment of embedded precursor materials, depending on the final rules. This means compliance exposure may depend on how covered inputs are handled within the supply chain.
A component sourced from a third-country manufacturer may incorporate steel produced in a different country. Under the proposed framework, assessing potential CBAM exposure would require importers to establish applicable product classification, trace the relevant production chain and determine emissions attributable to covered inputs under the rules ultimately adopted.
China and Türkiye in focus for downstream product scope
China and Türkiye are described as particularly exposed due to their roles in fabricated metals, machinery components and supply chains serving European industry. Extending CBAM to downstream goods could change delivered costs for products from these markets, although it would not automatically remove existing price advantages.
The size of any effect would depend on the final product scope, applicable origin rules and the proportion of covered materials contained in individual goods. Products that appear similar could receive different treatment if their classifications, material composition or production characteristics differ under the final legislation.
For manufacturers and importers, this creates a requirement for product-level analysis. Broad assumptions based only on a product’s appearance or country of origin may not show whether an item falls within the expanded mechanism or how potential liability would be calculated.
Anti-circumvention measures and material provenance requirements
The legislative proposals also address resource shuffling, potentially misleading emissions data and pre-consumer metal scrap. The provisions could affect whether reported production figures are accepted and increase the importance of documenting material provenance.
The measures are intended to ensure that the mechanism reflects emissions associated with covered goods and materials. Their practical implications would depend on provisions retained in the final legislation and on accounting requirements set for the expanded scope.
Distinction from July 2026 EU steel quota measure
The downstream proposal is separate from an EU steel quota measure that entered into application in July 2026. That quota restricts tariff-free steel import volumes and applies a 50% out-of-quota duty.
The quota regime and the proposed CBAM expansion address different aspects of import costs. They are described as not interchangeable measures within EU policy developments affecting industrial imports.
Preparation steps for importers ahead of final legislation
Companies importing manufactured metal products are advised to assess exposure without assuming that the proposed product list is already law. A practical starting point is building a product-level inventory covering current and proposed Combined Nomenclature (CN) classifications, identifying suppliers and precursor materials, and modelling potential liabilities under several plausible legislative outcomes.
Procurement contracts may also need to preserve access to production-site data. They may require clarification on how parties would allocate costs arising from regulatory changes once implementation details are defined.
The negotiations will determine which products are covered, when new obligations begin and how embedded emissions are accounted for. The proposed expansion is described as extending CBAM beyond primary commodities into manufactured goods and industrial supply chains where European businesses compete and generate margins.