Posted on 18 Dec 2025
The European Commission has confirmed it will extend the Carbon Border Adjustment Mechanism (CBAM) to cover various steel-containing downstream products from 1 January. It will also establish a fund to reimburse EU mills’ ETS costs to ensure competitiveness in export markets, and include pre-consumer scrap in CBAM calculations, Kallanish notes.
The products now covered include internal combustion piston engines, refrigerator-freezers, washing machines, drying machines, electric wire and cables, electric conductors, certain motor vehicles and parts thereof, and furniture.
They were chosen based on an assessment of the risk of carbon leakage, their climate relevance and the technical feasibility of including the products in CBAM. Only the emissions of the precursors should be considered and not those of the downstream processes, the European Commission says. For example, car doors produced in a third country will face CBAM costs for the steel sheet embedded emissions, not for the fabrication of sheet into parts.
Since these goods’ composition is complex, resorting to actual emissions will be administratively difficult. The Commission therefore proposes the default values that apply to them do not include a mark-up.
Promoting scrap usage to cut emissions in energy-intensive products, the Commission is now incorporating pre-consumer steel scrap in CBAM calculations. This ensures fair carbon pricing for both EU-made and imported goods, it adds. It will also help address the risk of carbon leakage.
The European Commission has launched a two-year fund to temporarily support EU producers of CBAM goods and mitigate carbon leakage risks. This addresses the competitiveness loss in third-country markets where EU goods might be supplanted by cheaper, more emission-intensive alternatives, potentially increasing global emissions.
The support is not linked to exports, but to the production of certain types of goods which are at increased remaining risk of carbon leakage. Decarbonisation support is awarded regardless of whether these goods are sold on the EU market or on third country markets, the Commission points out.
The fund will reimburse a portion of the EU-ETS carbon costs for goods still facing carbon leakage risks, with support contingent upon EU producers demonstrating decarbonisation efforts. Financing will come from member state contributions, constituting 25% of revenues from CBAM certificate sales in 2026 and 2027, while the remaining 75% will be an EU Own Resource.
The fund will use existing reporting infrastructure and processes of the EU Emissions Trading System as much as possible to minimise additional administrative burden.
Products eligible for the fund include one hot and cold rolled coil code each – 72081000 and 72099020 – as well as various coated flat steel products and stainless steel products, seamless and welded pipe.
Once the fund validity expires after two years, “we will solve this more in full with additional free allowances”, European Commissioner Wopke Hoekstra said during a press conference on Wednesday. He suggested the ETS directive could be revised to “create the opportunity for more free allowances for those sectors that are heavily exporting. And how you would exactly structure that we would, of course, need to look at.”
The risk of misdeclaration of emission intensity will meanwhile be tackled by introducing additional reporting requirements in specific cases.
Eurofer has said the CBAM reform does not go far enough (see separate story).
Source:Kallanish
