The European Council has finalised its negotiating position on expanding and strengthening the Carbon Border Adjustment Mechanism (CBAM), the European Union’s primary legislative tool to prevent carbon leakage and incentivise global industrial decarbonisation.
The agreement establishes the Council’s mandate ahead of formal trilogue negotiations with the European Parliament, which are expected to commence later this year with the aim of reaching a final legislative agreement before the end of December.
The CBAM framework, which became fully operational on 1 January 2026, places a carbon price on carbon-intensive goods imported into the EU, currently targeting raw materials within the iron, steel, cement, fertilisers, aluminium, electricity, and hydrogen sectors.
Under the Council’s newly agreed position, the scope of the mechanism will be extended to encompass a selected list of downstream manufactured products. The amendment addresses a structural vulnerability in the original framework, where raw materials were taxed but finished components were not. This discrepancy created a risk that EU manufacturers using domestic, carbon-taxed metals would be undercut by imported downstream products manufactured outside the EU using untaxed inputs.
To maintain market parity, the Council has refined the specific list of downstream items subject to the tariff and has mandated the European Commission to conduct an annual review to assess further downstream fabrications for future inclusion.
To prevent international manufacturers from bypassing the tariff, the Council backed provisions to bring pre-consumer metal scrap directly into the CBAM scope. Furthermore, the updated text grants enhanced enforcement powers to the European Commission, allowing regulators to intervene and apply corrective measures when deceptive reporting practices or circumvention patterns are detected among high-risk importing companies.
The Council position also refines the emergency mechanisms originally proposed by the Commission to handle severe, unforeseen disruptions to the EU internal market. The revised text clarifies the boundary of the Commission’s power to temporarily exempt specific goods from CBAM tariffs.
The Council insists that any such emergency suspension must be bound to objective criteria, explicitly including the exposure of the EU internal market to severe, destabilising commodity price spikes.
