CBAM Before the Expansion: End Products and Supply Chains in Focus

A New Chapter in CO₂ Regulation

On July 1, 2025, the European Commission launched a public consultation that could fundamentally change the CBAM system. For the first time, the focus is no longer just on basic materials like steel or cement – end products such as household appliances or machine components could also fall under the mechanism in the future. The message is clear: emissions throughout the entire supply chain are coming into regulatory focus.

Why now?

The initiative is driven by the upcoming start of the regular CBAM phase in 2026. The Commission aims to close existing loopholes – such as the relocation of emission-intensive processing steps to non-EU countries. Materials like aluminum or steel are further processed there and re-enter the EU market as end products – without the embedded emissions being fully captured or priced. At the same time, the ETS reform is on the table: the gradual phasing out of free allowances and the expansion to additional sectors (e.g., transport) increases the pressure to extend CBAM to downstream products as well.

What is planned?

At the center of the consultation is the potential expansion of CBAM to complex industrial products with high emission footprints and trade volumes. These include mechanical components, power tools, household appliances, and selected machinery parts. The goal is to make embedded emissions in these product groups visible and include them in CO₂ pricing. The European Roundtable on Climate Change and Sustainable Transition recently presented a comprehensive analysis of the impacts. According to the study, products with high metal content and multi-step manufacturing processes are particularly affected. It becomes clear that while the risk of carbon leakage decreases with deeper processing stages, metal-rich consumer goods such as vehicle parts remain vulnerable. Here, the benefit depends strongly on the ratio between embedded carbon and product value – as well as on the structure of the respective supply chains. At the same time, deeper processing also increases administrative effort and data collection uncertainties.

What does this mean for companies?

A new chapter is beginning for many companies. Firms that have not been affected by CBAM so far could now face comprehensive reporting obligations, emissions analyses, and strategic adjustments. This affects both manufacturers and traders and brands, especially in the mechanical engineering, electronics, and consumer goods industries.

CBAM Becomes More Systemic – Even Beyond End Products

The consultation is part of a comprehensive package of measures. In parallel, the Commission is working on new rules for electricity imports, more precise calculation models for indirect emissions, and stricter anti-circumvention measures. Horizontal extensions are also coming into view – for industries such as chemicals, paper, glass, or ceramics. The challenge lies in finding the right balance: between regulatory ambition and practical feasibility. Not every product with a CO₂ footprint is automatically CBAM-relevant. But in emission-intensive trade flows, the pressure to adapt is steadily growing.

What Needs to Be Done Now

What matters most now is to capture emissions and reliably document them along the supply chain – a task that becomes more demanding with increasing product complexity. Industries with complex, international value chains – such as machinery and vehicle manufacturing – must expect significant administrative efforts. Even though the details are still open, early action makes sense. Companies should review their product portfolio for CBAM relevance, analyze their supply chains, and begin collecting emissions-related data. Especially in downstream industries, transparency is key: those who understand their input products maintain strategic flexibility.

Conclusion

CBAM is evolving from a tool for CO₂ pricing at the EU border to a building block of global climate regulation. The planned expansion shows that emissions in complex end products are becoming relevant for regulation. Companies that act early not only ensure compliance but also gain advantages in procurement, planning, and communication. You also have until August 26 to participate in the European Commission’s survey and share your assessment on the scope expansion. Take the opportunity before decisions are made without your input. A draft for the expansion of the mechanism is expected by the end of the year or early next year.

Support With Strategic Alignment

If you’d like to understand how the CBAM expansion could impact your products, supply chains, or procurement strategy, feel free to reach out to us directly at helge@kolum.earth.