CBAM Revision Under the Microscope: Why the Expansion Debate Is a Fundamental Question

The European Parliament has published its first assessment of the planned CBAM expansion. The briefing by the European Parliamentary Research Service analyses the Commission's Impact Assessment on three topics, namely the expansion to downstream products, anti-circumvention measures and the treatment of electricity imports.

Solid Foundation with Substantial Gaps

According to the EPRS, the Impact Assessment provides an overall good evidence base. The objectives are clearly formulated and stakeholders were broadly consulted. At the same time, the briefing identifies weaknesses that are likely to become relevant for the further discussion. The central downstream study, on which many figures regarding the planned scope expansion are based, is not publicly accessible. This makes it difficult to independently assess the actual extent of the downstream leakage risk. On anti-circumvention measures, the analysis remains vague. The EPRS criticises that the baseline is unclearly defined and that the link between problem and solution is not presented in a comprehensible way. The Commission is to receive far-reaching powers, for example to specify tariff codes or to restrict the use of actual emission values in cases of suspected abuse. Such intervention powers require a robust justification.

The Impact Against the Background of the Measure's Purpose

The core objective of CBAM is to prevent carbon leakage and to motivate third countries to achieve comparable climate standards. In the long term, this should lead to mutual recognition and thus gradually make CBAM redundant. This logic comes under pressure when CBAM becomes a permanent solution for competitiveness issues. Every round of expansion that is based on theoretical possibilities rather than clear evidence of risk undermines the credibility of the system and strengthens the suspicion of being a hidden trade measure. Moreover, every expansion can unintentionally create new loopholes while closing old ones. Before CBAM is expanded horizontally to further sectors, the systematic questions should be resolved. How does CBAM relate to the phase-out of free allocation under the ETS? How are third-country carbon prices credited? And is an export exemption needed? As long as these issues remain open, vertical expansions should be approached cautiously and in a targeted manner.

Administrative Proportionality Remains the Litmus Test

The EPRS emphasises that the Omnibus simplifications of 2025 removed many importers from the CBAM scope. The expansion of the mechanism must not reverse this relief. Should the current minimum threshold of 50 tonnes of import volume per year be maintained, an estimated additional 7,500 companies would fall within the scope of the regulation according to the European Commission. If the tariff code remains the determining factor for whether goods are affected, the additional effort is manageable. However, if the Commission switches to more complex criteria such as examining material compositions at product level, companies would have to maintain large volumes of master data, even though only a fraction of it is CBAM-relevant. CBAM processes should therefore be set up in such a way that an expansion of the scope only requires an adjustment of existing processes within the company and does not demand entirely new structures.

Outlook

The CBAM revision now lies with the Environment Committee. A deadline runs until 7 April, by which national parliaments can raise objections on grounds of subsidiarity. The discussion about the balance between climate protection impact and administrative proportionality is likely to intensify in the coming weeks. Companies that have already built their processes in a modular way can respond to various scenarios. All others should examine whether their CBAM architecture would be adaptable in the event of a scope expansion.

Support

If you would like to explore how a potential expansion of the mechanism could affect your trade flows or whether your processes are prepared for regulatory changes, feel free to reach out to me at helge@kolum.earth.