EU Council Backs Wider CBAM Expansion to Include More Downstream Industrial Products

The European Council agreed on a position to expand the Carbon Border Adjustment Mechanism to additional downstream industrial products, going beyond the European Commission's December 2025 proposal to add 180 steel and aluminium-intensive products. The Council's position adds a wider range of metal-intensive industrial, construction, machinery and electrical-equipment products including fork lifts, conveyor equipment and electric motor components.

CBAM entered into force at the beginning of 2026, targeting basic materials including aluminium, cement, electricity, fertilisers and steel. The Commission's December 2025 proposal sought to close carbon leakage loopholes by adding 180 downstream products with high steel or aluminium content and high carbon leakage risk, including machinery, hardware, vehicle components and domestic appliances. The Council's position adds further product categories and proposes an annual Commission review of the scope to consider further downstream expansion.

Carbon leakage occurs when companies shift production of emissions-intensive goods to countries with less stringent climate policies, undermining the emissions pricing effectiveness of the EU Emissions Trading System. By extending CBAM to downstream products, the EU aims to prevent production migration along the value chain, protecting EU manufacturers who bear the cost of the ETS. The Council's position also aligns with the Commission's anti-circumvention proposals, including enhanced traceability reporting and authority to act against emission intensity misdeclarations.

The European Parliament is expected to adopt its position on the proposed CBAM updates in September, after which trilogue negotiations between the Parliament, Council and Commission will begin. For Indian exporters of steel and aluminium-intensive manufactured goods to the EU, the expansion of CBAM to downstream products is a significant trade and competitiveness development that could increase the cost of EU market access. India's government and industry bodies have previously raised concerns about CBAM's impact on Indian exporters during the initial rollout.

Key figure — 180 downstream products added in the Commission's original proposal, expanded further by the Council