Trends - EU expands CBAM to downstream products to prevent carbon leakage
The European Council has agreed to expand the Carbon Border Adjustment Mechanism (CBAM), the EU’s carbon tax on imports, to include downstream products
[Last update July 2026] The European Council has agreed to expand the Carbon Border Adjustment Mechanism (CBAM), the EU’s carbon tax on imports, to include downstream products such as machinery, construction equipment, and vehicle components. This move aims to prevent "carbon leakage"—where production shifts from EU manufacturers to countries with weaker climate policies.
Key Updates:
- The Council’s position goes beyond the European Commission’s proposal, adding more industrial products (e.g., forklifts, conveyor equipment, electric motor components) to CBAM’s scope.
- Annual reviews will assess further expansions to address loopholes and carbon leakage risks.
- The expansion builds on CBAM’s 2026 launch, which initially targeted basic materials like steel, aluminum, and cement.
The Council’s stance aligns with the Commission’s anti-circumvention measures, including enhanced reporting and authority to tackle abuses. Negotiations with the European Parliament (expected to finalize its position in September) will follow.
The EU Commission stated: “This demonstrates strong support for CBAM and a firm commitment to ensuring it remains effective in advancing the EU’s climate objectives.”
Source: ESG Today
