The European Union is negotiating an expansion of its Carbon Border Adjustment Mechanism (CBAM), with potential coverage extending beyond current steel and aluminium imports. The changes under discussion could widen carbon-related obligations to manufactured goods, affecting how European industrial customers source products from outside the EU. The markets cited include production centres in China, Türkiye and other non-EU locations.
The European Commission tabled a proposal on 17 December 2025 that would add 180 downstream products with significant steel or aluminium content to CBAM. If implemented, the new obligations would start on 1 January 2028. The Council agreed its negotiating position on 12 June 2026, refining the proposed product scope and strengthening anti-circumvention provisions.
On 15 September 2026, the European Parliament adopted amendments by 464 votes to 50, with 159 abstentions. Parliament’s position supports broader coverage and envisages an expanded list covering up to 457 product categories. The figures reflect the positions of EU institutions during negotiations, and the final list has not been enacted.
Gap in current CBAM coverage for finished goods
The proposed expansion targets a gap in the existing CBAM framework. Current rules cover specified imports of steel and aluminium, but products manufactured outside the EU using those materials may enter the European market without an equivalent obligation on the finished goods. The Commission says this can create incentives for manufacturing activity to shift abroad rather than reducing emissions.
According to the Commission, about 94% of the products included in its proposal are linked to industrial value chains. The list includes mountings, cylinders, industrial radiators and specialist machinery. The remaining products include selected household goods.
If adopted, the changes would extend carbon-cost considerations into manufacturing and procurement decisions. European importers could face obligations related not only to emissions from producing a finished product but also to emissions embedded in precursor materials, depending on the final rules.
A component supplied by a third-country manufacturer may incorporate steel produced elsewhere. Assessing CBAM exposure would therefore require importers to determine the applicable product classification, trace the relevant production chain and identify emissions attributable to covered inputs under the final adopted rules.
Potential implications for China and Türkiye supply chains
The proposed downstream coverage could affect China and Türkiye due to their roles in fabricated metals and machinery components used by European industry. Extending CBAM to downstream goods could change delivered costs for products supplied from these markets. The proposal would not automatically remove any existing price advantages.
The effect would depend on the final product scope, applicable origin rules and the share of covered materials contained in individual goods. Products that appear similar could receive different treatment if their classifications, material composition or production characteristics differ under the final legislation.
For manufacturers and importers, this creates a need for product-level analysis rather than reliance on broad assumptions. The source notes that assumptions based only on appearance or country of origin may not show whether an item falls within the expanded mechanism or how liability would be calculated.
Anti-circumvention measures and traceability requirements
The legislative proposals also address resource shuffling, potentially misleading emissions data and pre-consumer metal scrap. The provisions could influence whether reported production figures are accepted. They also increase the importance of documenting material provenance.
These measures are part of efforts to ensure that CBAM reflects emissions associated with covered goods and materials. Their practical implications depend on which provisions remain in the final legislation and what accounting requirements apply under the expanded scope.
The downstream proposal is separate from an EU steel quota measure that entered into application in July 2026. That quota restricts tariff-free steel import volumes and imposes a 50% out-of-quota duty. The quota regime and the proposed CBAM expansion address different aspects of import costs and are not interchangeable measures.
Steps companies may take before final rules are set
Companies importing manufactured metal products are advised to assess exposure without assuming that the proposed product list is already law. A starting point described is building a product-level inventory that covers current and proposed Combined Nomenclature (CN) classifications. It also includes identifying suppliers and precursor materials and modelling potential liabilities under several plausible legislative outcomes.
Procurement contracts may need adjustments to preserve access to production-site data. They may also clarify how parties would allocate costs arising from regulatory changes. Such preparation is intended to support responses once details are confirmed on final scope, implementation timing and accounting requirements.
The negotiations will determine which products are covered, when new obligations begin and how embedded emissions are accounted for. The proposed expansion would extend CBAM beyond primary commodities into manufactured goods and industrial supply chains where European businesses compete and generate margins.