BRUSSELS, 30 OCTOBER 2026 — The European Union is continuing technical negotiations on extending the Carbon Border Adjustment Mechanism (CBAM) beyond primary materials, with member-state representatives examining revised documents covering the inclusion of steel- and aluminium-intensive manufactured goods from 2028.
The Council’s Ad Hoc Working Party on CBAM is scheduled to meet in Brussels on 30 October. Preparatory material includes a revised four-column negotiating table and a presidency steering note dated 25 October and circulated on 26 October.
The discussions concern legislative file 2025/0419(COD), originating from the European Commission’s proposal of December 2025. The initiative combines an extension of CBAM product coverage with measures intended to strengthen protection against circumvention.
The updated negotiating documents represent another procedural stage in reconciling the positions of the European Commission, Council and European Parliament. However, the substantive contents of the latest restricted working papers have not been publicly established. No new political agreement or definitive list of downstream products has been confirmed.
Institutional positions differ on the scale of product coverage
The European Commission’s December 2025 proposal identified approximately 180 downstream product categories for potential inclusion, concentrating on manufactured goods containing significant quantities of steel or aluminium. The proposed starting date for the expanded framework is 1 January 2028, subject to the adoption of the legislation.
The Council established its negotiating position on 12 June 2026, supporting the extension while making adjustments to the Commission’s proposed product coverage. Its approach also incorporates additional products from industrial, construction and electrical-equipment sectors.
The European Parliament subsequently adopted its position on 15 September 2026, with 464 votes in favour, 50 against and 159 abstentions. Its amendments would extend the mechanism to more than 400 downstream product categories, encompassing additional metal components, machinery and manufactured goods.
Differences between published product counts reflect the classification methods used by institutions and analysts. Individual product types, customs headings, subheadings and eight-digit Combined Nomenclature (CN) codes do not produce identical totals. The final scope of CBAM obligations will therefore depend on the legally adopted CN list rather than headline comparisons between institutional proposals.
Steel and aluminium supply chains face different cost implications
Extending CBAM to downstream products addresses a potential competitive imbalance between European primary-material producers and manufacturers importing finished goods.
Within the EU, metal fabricators may purchase steel whose price already reflects carbon-related production or import costs. Meanwhile, manufacturers outside the Union can potentially process comparable materials into finished products that remain outside the current CBAM product scope and subsequently export them to European customers without an equivalent border-carbon obligation.
This difference could create incentives to move certain manufacturing operations outside the EU rather than maintain production within the European market. Extending coverage further along the value chain is intended to address this potential exposure for European steel and aluminium producers.
The commercial consequences would differ across manufacturing sectors. Automotive component suppliers, machinery manufacturers, electrical-equipment producers and construction businesses that rely on imported intermediate or finished products could face higher procurement costs and additional compliance responsibilities if their products enter the expanded framework.
The eventual effect on competitiveness will depend on the final customs classifications, embedded production emissions, contractual arrangements and the extent to which additional carbon-related expenses are transferred through industrial supply chains.
Scrap accounting and circumvention measures remain under discussion
The legislative negotiations also cover the treatment of pre-consumer metal scrap, material precursors and production practices that could undermine the effectiveness of CBAM.
The accounting treatment of scrap is relevant because primary metal production and recycled-metal processing have different emissions profiles. Distinguishing between pre-consumer and post-consumer scrap also affects how the framework recognises material recovery and circular production.
Council negotiators have broadly supported including pre-consumer scrap within the proposed framework, while the European Parliament has pursued further amendments concerning scrap treatment and anti-circumvention provisions.
Another issue is resource shuffling, whereby producers allocate their lower-emission production to customers in the European Union while directing more carbon-intensive output to other markets. The proposed regulatory safeguards are intended to prevent this practice from weakening the environmental objectives of CBAM.
The measures must also distinguish between arrangements designed to avoid carbon-border liabilities and legitimate differences in production technologies, sourcing and commercial supply chains.
Aluminium imports and electricity emissions methodology add regulatory questions
The existing CBAM framework generally provides a single mass-based exemption threshold of 50 tonnes annually for relevant goods. The European Parliament’s negotiating position supports a lower threshold for aluminium-related imports, which could bring additional businesses within the scope of compliance requirements.
This adjustment remains part of the legislative negotiations and has not become effective legislation.
The wider file also addresses the methodology used to determine emissions associated with electricity imports. This is particularly relevant to electricity producers outside the EU that supply European markets through interconnected transmission networks.
Potential amendments could affect the assessment of qualified actual-emissions claims, contractual documentation and the relationship between electricity generation and physical cross-border flows.
Until the legislative process is completed, electricity exporters must continue to comply with the requirements currently in force. Proposed changes cannot be treated as an effective relaxation or replacement of existing eligibility conditions.
Serbian and Western Balkan exporters could face wider CBAM exposure
The proposed expansion has implications for manufacturers supplying European customers from China, India, Türkiye, Ukraine, Serbia and other Western Balkan markets.
For Serbia, potential exposure would extend beyond primary steel production to metal processing, industrial components, machinery and other export-oriented manufacturing activities. Products currently outside the CBAM framework could become subject to additional emissions reporting and carbon-cost requirements if their CN classifications are included in the final legislation.
In Montenegro, relevant exposure includes aluminium-related industrial supply chains as well as potential changes affecting the treatment of cross-border electricity.
European importers may begin requesting product-level emissions information ahead of the proposed implementation date, reflecting the time required to establish monitoring procedures, verification arrangements and contractual data-sharing systems.
Nevertheless, inclusion in a proposed customs classification does not create an immediate legal obligation. Businesses must distinguish between products already covered by the applicable CBAM regulation and those appearing only in the negotiating positions of EU institutions.
Emissions verification and carbon exposure enter industrial investment planning
The prospect of wider coverage from 2028 is also relevant to investment decisions, long-term procurement contracts and industrial financing.
Manufacturers may need to establish systems capable of documenting emissions associated with purchased materials, production operations and relevant precursors if their products become subject to the expanded mechanism.
For industrial lenders, the additional requirements could affect assessments of product margins, export demand, working-capital needs and investments in lower-emission production technologies.
European importers may also seek more detailed contractual provisions covering emissions-data delivery, verification responsibilities and the allocation of future carbon-related costs between suppliers and buyers.
However, reliable calculations of additional landed costs cannot be established for products still under negotiation until their final CN classifications, applicable emissions methodologies and regulatory adjustments have been determined.
The revised negotiating documents demonstrate that member states are continuing technical work on the legislative file. Further institutional negotiations remain necessary before the proposed changes can be adopted.
The planned 1 January 2028 downstream expansion remains a legislative proposal rather than an obligation under the current law. The 30 October working-party meeting does not establish that a final political compromise has been reached.
