BRUSSELS, Oct. 21, 2026 – A coalition of European industrial organisations is pressing EU lawmakers to extend the Carbon Border Adjustment Mechanism (CBAM) beyond basic materials and into a wider range of manufactured products, arguing that differences in carbon-cost exposure could disadvantage European factories competing with imported finished goods.
The initiative, announced on Oct. 19, brings together 20 European industry associations and industriAll European Trade Union. The group has called on the European Parliament, Council and Commission to pursue the broadest possible downstream extension as negotiations over the mechanism’s future scope continue.
Participating organisations include EUROFER, European Aluminium, EUROMETAL and Steel for Packaging Europe, alongside groups representing metal processors, component producers and wider industrial supply chains.
The campaign comes as CBAM, which entered its definitive period in January 2026, increasingly affects procurement decisions, production costs and cross-border trading relationships across energy-intensive sectors.
The coalition’s main concern is that European manufacturers face carbon-related costs through the EU Emissions Trading System (EU ETS) and the prices of covered steel and aluminium inputs, while certain finished products manufactured outside the EU can enter the bloc without equivalent border-carbon obligations. Industry representatives argue that leaving these downstream goods outside CBAM could weaken European processing and manufacturing rather than prevent carbon leakage.
Carbon costs extend beyond primary steel and aluminium
CBAM currently covers selected goods in six sectors: iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. Its purpose is to align the carbon costs of covered imports with those faced by comparable EU production, reducing incentives to move emissions-intensive manufacturing to jurisdictions with less stringent climate policies.
The mechanism’s product-specific structure can nevertheless produce different outcomes for basic materials and finished goods incorporating them. A European component manufacturer may buy steel or aluminium whose price reflects carbon costs, while an overseas competitor can process similar materials into a finished product that is not covered by CBAM and sell it in the EU without an equivalent border-carbon charge.
The issue becomes more significant as EU ETS free allowances are progressively withdrawn. European processors could face increasing carbon-related costs in their input supply chains while competing against imported products that do not incur corresponding obligations under the current CBAM scope.
The sectors potentially affected extend across automotive components, machinery, industrial equipment, construction products, electrical systems, packaging, household appliances, cookware and clean-energy equipment. In these industries, exposure is not limited to the price of imported raw materials; it also involves the cumulative effect of carbon pricing along the manufacturing chain.
Industrial associations warn that this disparity could weaken the business case for investing in lower-emission production facilities in Europe if competing imported finished goods remain outside equivalent carbon-cost rules.
Commission, Council and Parliament back different product lists
The European Commission presented COM(2025)989 in December 2025, proposing to add 180 steel- and aluminium-intensive downstream products to CBAM. The proposed extension would start on Jan. 1, 2028, if the legislation is adopted.
The Council’s June 2026 negotiating position supported broader product coverage and stronger safeguards against circumvention. The European Parliament subsequently adopted a more extensive position in September, backing 457 downstream product categories.
Parliament approved its amendments by 464 votes to 50, with 159 abstentions, establishing its mandate for negotiations with the Council.
The legislative file also addresses the treatment of steel and aluminium scrap, emissions associated with precursors, default emissions values for high-risk cases and practices involving the allocation of lower-emission production to goods exported to the EU.
Parliament’s position includes lowering the annual mass-based exemption threshold for aluminium goods from 50 tonnes to 5 tonnes. If adopted, that change could bring additional importers within the mechanism’s scope.
These provisions remain negotiating positions rather than adopted legislation. The final list of covered products, applicable thresholds and compliance obligations will depend on the outcome of negotiations between the EU institutions. Political-level talks were scheduled for Oct. 20, with the stated aim of reaching an agreement before the end of 2026. No final legislative compromise has been confirmed.
Downstream manufacturers raise concerns over compliance costs
Support for expanded protection is not uniform across European industry. Steel producers and metal processors generally favour stronger measures against imports that benefit from lower carbon costs, while some downstream manufacturers fear that rapid expansion could increase procurement expenses and impose additional reporting requirements on already pressured supply chains.
In an October statement, ACEA, CLEPA and TyresEurope raised objections to extending CBAM across hundreds of additional customs classifications before existing verification and implementation problems have been fully resolved. The organisations called for proportionate product coverage, workable exemptions and realistic implementation deadlines.
The disagreement reflects the different effects that an expanded mechanism could have within the same supply chain. Broader coverage could improve the position of European producers competing against imported finished goods, but it could also increase compliance costs for manufacturers, distributors and industrial buyers reliant on imported components.
The commercial consequences would depend on the products ultimately included, their embedded emissions, applicable carbon-price deductions, supply-chain arrangements and the availability of independently verified emissions data from suppliers.
Exporters face product-specific exposure in global markets
If the proposed extension is adopted, CBAM obligations could reach further into international trade in components and manufactured goods, rather than remaining concentrated on primary materials. Suppliers in China, India, Türkiye, Ukraine, the Western Balkans and other manufacturing markets could face additional requirements where their products fall within the final EU customs classifications.
The impact would vary by product and production route. Suppliers using lower-emission steel or aluminium and maintaining reliable installation-level emissions records could be better positioned than competitors relying on more carbon-intensive processes or unfavourable default values.
Conversely, manufacturers without credible emissions documentation could face higher calculated liabilities, more demanding compliance procedures or less favourable procurement terms from EU customers.
Country-level trade statistics alone cannot establish which exporters would gain or lose market share. A meaningful assessment requires the exact Combined Nomenclature (CN) codes included in the final legislation, alongside comparable EU import volumes, customs values and verified emissions data for the relevant products.
Changes in import shares must also be assessed against other influences, including tariffs, trade safeguards, sanctions, energy prices, freight costs, demand and inventory accumulation. Shifts in trade flows should not automatically be attributed to CBAM.
Emissions records become part of purchasing decisions
Broader downstream coverage would increase the importance of emissions monitoring, verification and traceability across industrial supply chains. Importers would need to account for carbon exposure when selecting suppliers, calculating landed costs and negotiating contracts.
Manufacturers, in turn, would face greater pressure to document links between production installations, purchased materials, precursor emissions, energy consumption and finished products. These records could become increasingly important where emissions from several facilities or intermediate production stages contribute to the final good.
Electricity procurement is another relevant consideration for energy-intensive manufacturers, although the treatment of electricity-related emissions varies between CBAM sectors and products. Renewable electricity contracts or certificates do not automatically establish a lower CBAM liability; any claimed reduction must meet the applicable product-specific methodology and verification requirements.
Carbon accounting could also feature more prominently in financing decisions. Banks supporting industrial expansion, equipment purchases or cross-border acquisitions may need to assess prospective CBAM exposure alongside energy-price volatility, raw-material availability and market demand.
For EU manufacturers, investment planning could become more sensitive to when downstream products enter the mechanism. For exporters outside the bloc, financing decisions may increasingly depend on whether projected sales remain commercially viable after potential carbon-border costs are included.
CBAM negotiations intersect with European industrial policy
The dispute unfolds as the EU seeks to balance industrial competitiveness, affordable energy, emissions reduction and economic security. Steel and aluminium producers face international competition alongside the costs of decarbonising production, while manufacturers using those materials must remain competitive in markets where prices are highly sensitive.
A narrower mechanism could leave gaps through which carbon-intensive production shifts into finished goods that remain outside CBAM. An overly broad or poorly designed extension, however, could create substantial administrative and financial burdens for manufacturers dependent on imported components.
The legislative challenge is to address genuine carbon-leakage risks without unnecessarily raising the cost of European manufacturing. The outcome will help determine how CBAM affects investment decisions and competition across the bloc’s industrial supply chains.
The industry coalition’s intervention underscores the extent to which manufacturers now regard the mechanism as an instrument of European trade and industrial policy as well as climate legislation. The unresolved question is how far carbon-cost obligations should extend from steel and aluminium production into the finished products that European factories purchase, manufacture and sell.
