EU member states have agreed a negotiating position to expand and tighten the bloc’s carbon border adjustment mechanism (CBAM), which charges for the carbon emissions linked to certain imported goods.
The revised framework would extend CBAM to additional products and add measures intended to prevent companies avoiding the system, the Council of the EU said on Friday ahead of talks with the European Parliament.
CBAM has been in operation since 1 January 2026 and applies to imports in some of the most carbon-intensive sectors, including iron and steel, cement, fertilisers, aluminium, electricity and hydrogen.
It works by putting a price on carbon emitted during production of those imported goods.
Makis Keravnos, Cyprus’s finance minister, said strengthening CBAM and closing loopholes was part of the EU’s efforts to reduce climate emissions in and beyond the bloc.
The Council noted the system currently targets mostly raw materials, which it said created a risk that some EU-made products using large amounts of CBAM-covered inputs — particularly iron, steel and aluminium — could be replaced by similar goods produced outside the EU.
Wider product list and new anti-avoidance measures
To address that, the Council said its position would extend CBAM to a selection of “downstream products” — manufactured goods made using covered materials — and would require the European Commission to carry out an annual review of additional downstream products that could be added later.
It also backed new anti-circumvention measures, including bringing pre-consumer metal scrap into CBAM’s scope and giving the Commission powers to act when “deceptive practices” are detected in reporting by high-risk companies.
The Council also set out a more detailed approach for temporarily exempting goods from CBAM in “serious and unforeseen circumstances” that cause severe harm to the EU’s internal market.
Any exemption should be based on clear and objective criteria, including the EU being exposed to severe price increases.
Negotiations between the Council presidency and the European Parliament are expected to begin once MEPs have adopted their own position, with the aim of reaching an agreement before the end of the year.
