What happened
The European Parliament approved its negotiating mandate for changes to the EU Carbon Border Adjustment Mechanism (CBAM), with 464 votes for, 50 against and 159 abstentions. The mandate calls for CBAM to cover a broader set of downstream steel and aluminium products.
Goods identified for inclusion include fasteners, wire, springs and household articles. The proposal would therefore move the mechanism further along industrial value chains than its current focus on basic materials.
MEPs also proposed revised anti-circumvention provisions. Small modifications to products could face a lower scrutiny threshold, but the provision would be confined to arrangements established specifically to avoid CBAM duties. Where circumvention is found, Parliament wants the European Commission to use default emissions values linked to the goods’ actual origin country.
The mandate includes an exemption for electricity imported from outside the EU where grid operators need those flows to preserve network stability. Parliament also rejected a Commission safeguard that could have temporarily excluded products from CBAM during price shocks. Instead, it favours the potential temporary allocation of revenue from affected goods to exposed sectors.
In a separate vote, Parliament endorsed its approach to a temporary decarbonisation fund: 433 votes supported it, 97 opposed it and 146 members abstained. The proposed fund would provide support from 2027 until 2029 for EU producers and downstream businesses exposed to carbon-related costs.
Why it matters
For importers, manufacturers and suppliers, a wider product scope would increase the importance of traceable origin information and robust data on embedded emissions. Companies selling more processed steel or aluminium products into the EU should assess whether their product portfolios could be captured if the final law follows Parliament’s approach.
The narrower focus on intentionally evasive arrangements is intended to distinguish such conduct from ordinary commercial decisions. Nevertheless, sourcing and product-design changes that alter CBAM exposure may receive closer attention under the proposed rules.
The fund proposal would extend potential support to fertiliser producers and downstream users with higher carbon-related input costs. Urea, ammonium nitrate and ammonium sulphate are named among potentially eligible products. It would also cover downstream companies using materials within CBAM’s scope as inputs.
What businesses should do next
Businesses should map relevant steel and aluminium inputs, finished products, supplier locations and available emissions data. They should also monitor negotiations between Parliament and EU member states, as the agreed text will determine the final scope and any funding arrangements.
Parliament also proposed simplified reporting for least-developed countries and technical assistance. It removed the option for Paris Agreement Article 6 credits to reduce CBAM obligations. Neither the CBAM changes nor the proposed fund are final legislation.
