The definitive start of the Carbon Border Adjustment Mechanism (CBAM) on 1 January 2026 marked the first major implementation milestone. A proposed extension to downstream products could make 1 January 2028 the next critical date, particularly for manufacturers of steel- and aluminium-intensive goods that are not currently covered. If the legislation is adopted on the European Commission’s proposed timetable, companies have less than two years to prepare their data systems and compliance processes.
The Commission’s strengthening package proposes applying the downstream extension from 1 January 2028. The Council and Parliament have adopted negotiating positions, but the final product scope, methodology and transitional arrangements remain unresolved. Alongside proposed anti-circumvention measures and changes to electricity rules, the extension could make 2028 a broader redesign point for CBAM rather than simply an expansion of its product list.
A More Demanding Entry Point for Downstream Manufacturers
Manufacturers entering the mechanism in 2028 could face a more demanding cost environment than importers of basic materials faced at the start of the definitive regime. Under the existing schedule described for most covered steel and aluminium goods, default-value mark-ups rise to 30% in 2028, while free allocation under the EU Emissions Trading System continues to phase down. The combination could increase the financial consequences of relying on default values or entering the system without adequate emissions evidence.
Preparation should prioritise records that require continuity over time. These include supplier installation identity, precursor emissions, bill-of-material quantities, production allocation and product classification. If the final legislation requires evidence relating to 2028 production, reconstructing these relationships after the reporting period closes may be difficult or unreliable.
Manufacturers should begin mapping their products and supply chains now, even where the final legal scope remains uncertain. Product classification, supplier data access, installation identification and controlled emissions monitoring can support preparation under several potential legislative outcomes.
Keep Current Law Separate from the Proposed Reform
Legal-status management will be essential as negotiations continue. Companies should distinguish between current legislation, adopted implementing rules, Commission guidance and proposals that remain under negotiation, recording the source and date for each interpretation.
This separation helps prevent contracts, customer presentations and internal procedures from treating a negotiating position as an existing legal requirement. It also allows the organisation to update a controlled interpretation when the final text changes instead of correcting numerous spreadsheets and documents maintained by different teams.
A scenario-based approach can make progress possible without prejudging the outcome. Companies can compare the current-law position with the Commission proposal and the principal differences between the Council and Parliament positions, then identify actions that remain useful across all scenarios.
Capital expenditure whose viability depends on a narrow legislative outcome may require further legal certainty. By contrast, improving product classification, securing supplier data rights and establishing reliable monitoring procedures can begin earlier.
Contracts, Financing and Carbon-Cost Exposure
The proposed date has implications for agreements signed before the final scope is known. Multi-year supply contracts concluded in 2026 or 2027 may extend into 2028, creating a need to consider change-in-law provisions and carbon-cost pass-through clauses.
Contracting parties should establish how additional costs would be allocated if a product enters CBAM coverage, what emissions evidence the supplier must provide and how changes in the applicable methodology would be handled. The provisions should distinguish existing legal obligations from potential future requirements.
Banks and investors financing industrial expansion should also test whether project margins, customer pricing and debt assumptions remain viable under a 2028 CBAM scenario. The analysis should account for uncertainty around the final product list and methodology rather than treating the proposed extension as settled law.
For Western Balkan manufacturers supplying EU customers, the proposed date could coincide with broader changes in market-access expectations, electricity decarbonisation and pressure for lower-carbon products. Aligning emissions data with investment and commercial planning could help companies avoid treating CBAM preparation as a separate last-minute compliance exercise.
Set Readiness Milestones Before the Final Law
Management should establish internal milestones before the final legislation is adopted. Priorities include completing CN-code screening, securing supplier data rights, piloting product-level emissions allocation and defining contractual procedures for potential carbon-cost changes.
These measures can advance while capital spending remains conditional on the final scope. A readiness plan should identify responsible teams, deadlines, data owners and approval procedures, ensuring that the organisation can move quickly once the legal requirements become clear.
The underlying compliance file should connect purchasing, production, customs and finance records. Companies should be able to explain their calculations to both a verifier and a commercial manager using the same evidence, including the assumptions behind the result and the circumstances under which it might change.
A minimum decision file should document the legal status, customs treatment, data owner, implementation deadline and change-control decision. It should also specify who approves key assumptions and what fallback applies if the preferred treatment cannot be substantiated. Defining these arrangements early can reduce the risk of discovering material exposure only when a verifier, customs authority or authorised declarant challenges a claim.
The Second Shock Will Reward Early Preparation
The proposed downstream extension remains subject to negotiations, so companies should not treat 1 January 2028 as a confirmed start date for every product under discussion. Nevertheless, the proposed timetable provides a clear planning horizon for industrial exporters, importers, lenders and investors.
If 2026 brought CBAM to basic materials, 2028 could extend its reach to factories that transform those materials into finished goods. Businesses that begin building reliable product and supplier data now will be better prepared to assess the final rules, update contracts and respond to new obligations without reconstructing their records at the last minute.
