The European Commission (EC) plans to publish a report by the end of this year to evaluate the potential expansion of the Carbon Border Adjustment Mechanism (CBAM) to include more complex finished goods. This extension would target products further down the supply chain, particularly in industries like steel and aluminum, as a preventive measure against carbon leakage. According to Vicente Hurtado Roa, the EC’s CBAM unit head, without expanding CBAM to cover additional products, there could be an incentive for manufacturers to relocate production outside the EU to circumvent carbon costs.

One example highlighting this risk is in wind turbine components, which are primarily made of steel, aluminum, and iron, as noted by Laura Casuscelli of WindEurope. Beginning in 2026, importers of basic materials such as aluminum, steel, cement, and fertilizers will need to buy CBAM certificates based on the EU’s Emissions Trading System (ETS) carbon price. Meanwhile, EU producers of these goods will experience a phased reduction of free ETS allowances over nine years, eventually bearing more of the carbon cost directly. CBAM’s objective is to level the playing field for EU and non-EU producers, preventing a competitive edge based solely on location.

The EC is assessing which downstream products involve high proportions of these materials, along with their associated carbon costs and market vulnerability to non-EU competition. Projections focus on the impact of CBAM around 2030, when nearly half of the free ETS allowances for covered sectors are expected to be phased out. The Commission aims to avoid overly complex measures that could be easily bypassed and instead proposes standard default carbon values for specific goods, aiming to balance administrative efficiency with effectiveness.

As CBAM’s implementation nears, our team provides detailed reporting services to help companies align with CBAM compliance, calculate embedded carbon costs, and prepare for evolving regulations. Our expert reports can help businesses navigate these changes and maintain compliance, safeguarding their operations in the EU market.

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