On September 15, the European Parliament voted to approve revisions to the European Union’s Carbon Border Adjustment Mechanism (CBAM). The revisions seek to expand the mechanism's coverage, close loopholes, and provide additional support to European industries affected by the related costs of carbon emissions. The Parliament’s position was approved with 464 votes in favor, 50 against, and 159 abstentions. The changes will now be negotiated with EU member states before the final rules are adopted.
On January 1, 2026, CBAM entered its definitive phase, following a transitional period that began in October 2023.
One of the main changes supported by Members of the European Parliament (MEPs) is expanding CBAM significantly beyond basic raw materials. The revised mechanism will cover a long list of downstream steel and aluminum products, including fasteners, wires, springs, and household items. Other products, such as washing machines and car parts, are also expected to be included in the broader expansion of the system. This approach would reduce the risk of carbon-intensive products entering the EU market after being processed outside the region and thus avoiding the carbon border charge.
Closing Loopholes and Expanding CBAM
The Parliament also wants stronger measures against circumvention. Its proposal states that smaller modifications to imported products could be considered circumvention if they are part of arrangements designed to avoid CBAM obligations. However, the rules would not target normal business decisions companies make to reduce production costs.
If authorities identify repeated patterns of circumvention, MEPs want the European Commission to be able to apply default emission values corresponding to the product's actual country of origin. This would make it more difficult for importers to benefit from inaccurate or strategically selected information about where goods were produced.
Another important point of disagreement is about the proposed "emergency brake." The European Commission proposed allowing products to be temporarily exempted from CBAM in the event of serious and unforeseen price increases. EU member states support maintaining the mechanism, even when the price of a product increases by more than 50% within six months.
However, the European Parliament rejected this approach. Rather than suspending the carbon charge, MEPs propose redirecting CBAM revenues from the affected goods to sectors experiencing higher costs. This reflects concerns that suspending the mechanism could weaken incentives for low-carbon investment and reduce the protection that CBAM provides to European producers competing with imports that do not face equivalent carbon costs.
The Parliament has also said it's thinking about lowering the threshold for aluminum shipments that are subject to the mechanism from 50 tonnes to five tonnes. This change would capture smaller, higher-value aluminum components used in products such as cars, doors, and solar panels.
Economic Support for European Countries
In addition, the Parliament approved the CBAM reforms and a temporary decarbonization fund to help European companies remain competitive in international markets while reducing their emissions. MEPs approved their position on the fund by a vote of 433 to 97, with 146 abstentions.
The Parliament wants the fund to operate from 2027 to 2029, which is one year earlier than what was originally proposed by the European Commission. They also wants to expand eligibility beyond primary producers. This would include fertilizer manufacturers and downstream companies that use fertilizers, which are considered important for food security. Products such as urea, ammonium nitrate, and ammonium sulfate would therefore be included.
Also, they propose that companies using CBAM-covered goods as inputs in their own production should also qualify for support. Any remaining funds could be allocated to the EU’s international climate finance commitments under the Paris Agreement instead of being returned to member states. The Parliament's proposal also includes simplified reporting procedures for least developed countries, technical assistance measures, and an exemption for certain electricity flows from non-EU countries when needed by grid operators to maintain system stability.
The next stage will be negotiations between the European Parliament and EU member states. These discussions will determine the final design of the revised CBAM, including how price shocks will be handled, the expanded product scope, anti-circumvention measures, and financial support for European industries.
ClearBlue is actively monitoring these developments. For more information regarding ClearBlue’s advisory services or market intelligence coverage, please contact us.