Since 1 January 2026, the EU Carbon Border Adjustment Mechanism (CBAM) has placed a price on carbon emitted during production of goods imported by the EU in the most carbon-intensive sectors: iron and steel, cement, fertilisers, aluminium, electricity and hydrogen.

The European Parliament and the Council discussions around the expansion of the CBAM product scope and other revisions to the regulation have intensified recently. The Commission published legislative proposals in December 2025 to (1) cover downstream products, (2) introduce anti-circumvention measures and (3) launch a fund to temporarily support EU producers of CBAM goods and mitigate carbon leakage risk (the Temporary Decarbonisation Fund). As discussed below, the Council adopted its position in June, and the relevant European Parliament committee has passed an indicative vote setting out its position that will be voted on by the full plenary in September, allowing the process to move to final negotiations and approval.

Once adopted, the scope expansion, anti-circumvention and other changes will have a significant impact on importers as CBAM moves from a limited border-carbon pricing instrument to a more robust mechanism affecting wider international supply chains.

In parallel, on July 6, the Commission published the carbon certificate price for Q2 2026, the second ever price set under CBAM – at EUR 75.28, marginally less than EUR 75.36 set for Q1. As companies continue to deal with CBAM compliance and carbon costs, including third-party verifications of suppliers’ emissions, the mechanism’s expansion adds another dimension.

Council Position

On 12 June, the EU Member States finalized their position regarding the expansion of the CBAM. The Council’s position is broadly aligned with the Commission’s December 2025 proposal but introduces several refinements:

• Downstream products: the Council extended further the scope of the selection of downstream products to which the CBAM regulation will apply. Where the Commission proposal added some 180 steel and aluminum products, the Council added on top some 200 metal-intensive industrial, construction, and electrical equipment goods, such as forklifts, conveyor machinery, and electric motor components. The extended scope is to apply from 1 January 2028.
• Anti-circumvention: the Council largely aligns with what the Commission proposed in terms of stricter reporting requirements and enhanced investigative authority.
• Annual Review: the Council suggested an annual review mechanism, requiring the Commission, starting from 2028, to report yearly to the European Parliament and the Council identifying further downstream products recommended for inclusion in Annex I.

European Parliament Position

After negotiators’ informal agreement in late June, the European Parliament (EP) lead Committee on CBAM, the Committee on Environment, Climate and Food Safety (ENVI), passed an indicative vote on the EP’s final position on 6 July. This position is scheduled for adoption in September, which will move the process to a trilogue negotiations with a view to adopt final update to the CBAM legislation in late 2026 or early 2027. The EP position broadly aligns with the Commission’s proposal but goes beyond in detail and introduces several other instruments aimed at further preventing carbon leakage.

• Downstream products: the EP expands the scope beyond the Council position, pushes to include total of 457 products, including solar panels, kitchen utensils and materials for electric motors and washing machines, as well as heat pumps.
• Anti-circumvention: Via several proposals, the EP aims at closing CBAM loopholes:
  • Deleting the proposed article 27a which would allow the Commission to exempt products or sectors from CBAM, for example when severe impact on prices would appear. The EP argues by predictability of the mechanism.
  • Shifting burden of proof to importers from countries with high risk of circumvention by introducing default emissions values.
  • Disallowing the use of international carbon credits for CBAM compliance, arguing by insufficient climate integrity.
  • Inclusion of importers of distance sales to ensure e-commerce platforms are in scope.
• Assistance to businesses: via a separate legislative process, the EP also moved forward with the Temporary Decarbonization Fund (TDF), a EUR 600 million financial support to energy-intensive industries in the EU. To benefit from the fund, entities must apply for it. The EP also pushes for stronger technical support for Ukraine to facilitate CBAM implementation and compliance.

Growing Concerns – Supply Chain Impact

As the reach of the CBAM regulation is poised to expand, some sectors are expressing concerns regarding the practical implications of the proposed changes. Most notably, the expanded CBAM will impact deeper into companies’ supply chains. The European Association of Automotive Suppliers (CLEPA) stresses the complex supply chain of the automotive sector and calls for a workable, proportionate and sustainable mechanism.

As the update to the EU CBAM legislation progresses this year and the scope and obligations crystalize, importers should look through their supply chains and go beyond carbon pricing and cost estimates to mitigate risks stemming from incomplete or unreliable information along those chains.