EU Committee Backs Expanding Carbon Border Tax to 180 More Products

The European Parliament's Environment Committee has backed expanding the EU's Carbon Border Adjustment Mechanism to cover 180 additional downstream products, while adding new anti-circumvention measures designed to close loopholes that have let some importers dodge the carbon levy. The vote, confirmed on 7 July 2026, brings Parliament closer to a negotiating position on CBAM just as EU Council member states adopted their own stance in June. Parliament is expected to finalise its position during the September plenary session, setting up three-way talks with the Commission and Council.

 

Why CBAM Exists and What Is Changing

 

CBAM was adopted in 2023 and entered into force at the start of 2026 to prevent carbon leakage, the practice of companies shifting production of emissions-intensive goods to countries with weaker climate rules to avoid the cost of carbon. The mechanism equalises the carbon price paid by EU producers under the bloc's Emissions Trading System with the price effectively paid by foreign producers, requiring importers to buy CBAM certificates to cover the difference. Until now it has applied to basic materials including aluminium, cement, electricity and steel.

The expansion targets the next layer of the supply chain. The Commission's December 2025 proposal, following feedback from CBAM's transitional phase, added 180 products with high carbon leakage risk and a high share of steel or aluminium content, spanning machinery, hardware and fabrications, vehicle components, domestic appliances and construction equipment. The logic is straightforward: taxing raw steel and aluminium but not the finished goods made from them risked simply pushing production of those downstream products offshore instead, undermining the mechanism's purpose. The Council's position goes further than the Commission's in the breadth of downstream products it wants covered, while ENVI's own position instead concentrates on tightening enforcement.

 

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Closing the Loopholes

 

The Committee's central addition is a set of anti-circumvention measures aimed at stopping importers from working around the covered product list. One existing loophole lets goods that are only slightly modified fall outside CBAM's scope, and ENVI's position extends that rule to cover slight processing as well, while limiting it to changes made specifically to evade the levy rather than ordinary business decisions. The Committee also added rules targeting online sales, addressing a route through which imports have reportedly bypassed the mechanism, and gave the Commission power to apply default values based on a good's true country of origin where it detects a pattern of circumvention.

Two further changes reshape how the mechanism responds to economic shocks and trade politics. Rather than allowing goods to be removed from CBAM's scope during price shocks, as the Commission proposed, the Committee opted to temporarily redirect CBAM revenues to the sectors affected, keeping the mechanism intact while still cushioning the impact. It also stripped out the Commission's proposal to let companies count Article 6 Paris Agreement carbon credits against their CBAM obligations, arguing the issue is better addressed in the coming revision of the EU's Emissions Trading System, a decision that keeps two carbon-pricing tools from becoming entangled before that separate reform is settled.

 

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A Parallel Fund for Exposed Producers

 

Alongside CBAM itself, the Commission proposed a temporary decarbonisation fund to support EU producers of covered goods that remain vulnerable to carbon leakage risk. ENVI broadened that fund's product coverage to include fertiliser producers and downstream users facing higher carbon-related input costs, adding urea, ammonium nitrate and ammonium sulphate to the eligible list, and extended its running period to 2027 through 2029 rather than starting only in 2028 as the Commission had proposed. That earlier start and wider scope reflects an attempt to cushion sectors squeezed by rising carbon costs before the expanded CBAM regime fully bites.

CBAM rapporteur Mohammed Chahim described the package as balanced, saying it closed important loopholes, strengthened enforcement against circumvention and expanded the mechanism's scope where it matters most, while protecting European industry through its decarbonisation and safeguarding the system's environmental integrity. Whether that balance holds now depends on the trilogue negotiations between Parliament, Council and Commission expected once Parliament adopts its final position in September, where the gap between Council's preference for a wider product list and Parliament's enforcement-first approach will need to be reconciled before CBAM's expanded scope can take effect.