ENVI takes up CBAM expansion and Decarbonisation Fund together

ENVI begins consideration of both reform proposals

On 5 May 2026, the ENVI committee jointly considered two draft reports. They concern the planned CBAM expansion and the Temporary Decarbonisation Fund (TDF), a temporary fund supporting the decarbonisation of European industrial producers. Mohammed Chahim as rapporteur for the CBAM expansion and Pascal Canfin as rapporteur for the TDF support the Commission's direction and propose targeted adjustments. There was no vote. The consideration marks the formal start of the parliamentary process. Importers should follow the parallel deliberations closely.

Chahim's line from the April report

We covered Chahim's draft report of 10 April in detail in Edition 90. Three points stand out for the upcoming committee deliberations. He deletes Article 27a, an emergency exit clause the Commission had reserved for crisis situations, as well as the provision on the possible recognition of international carbon credits under Article 6 of the Paris Agreement. He also calls for a gradual extension to indirect emissions, combined with a coordinated phase-out of national compensation schemes for indirect ETS costs. The committee will now deliberate along these three axes.

The TDF: Brussels' answer to the exporter problem

The Temporary Decarbonisation Fund addresses the other half of the CBAM system. CBAM raises the cost of importing emissions-intensive goods and offsets the costs European ETS producers face on the home market. As soon as EU producers export, however, CBAM no longer applies. With the gradual phase-out of free ETS allowances, their position on third-country markets becomes more difficult as well. The TDF is meant to cushion this exporter gap by funding decarbonisation investments in the most affected sectors.

The Commission's proposal from December 2025 (COM(2025) 990) foresees a fund volume of around 600 million euros, financed through 25 percent of Member States' revenues from the sale of CBAM certificates. Eligible recipients would initially be producers in the aluminium, fertiliser, and iron and steel sectors, alongside other energy-intensive industries at significant risk of carbon leakage. Entry into force is foreseen for 1 January 2028, in parallel with the planned CBAM expansion. The rapporteur in Parliament is Pascal Canfin (Renew, France), holding the mandate since 27 February 2026. The TDF belongs to the same negotiating package as the CBAM expansion and shapes its political viability.

Where Canfin wants to tighten the Commission's model

Canfin's draft report follows the Commission's direction in its main lines but tightens it in three places. He wants to extend eligibility to certain categories of downstream operators, including producers beyond pure aluminium and steel production who sit in the same value chain. Disbursement should happen more quickly, so that investment decisions are not held up by long processing cycles. He also calls for greater predictability in funding allocation, meaning clearer eligibility criteria and more stable disbursement rhythms. The aim is to turn the TDF into a more reliable funding instrument for the affected sectors.

Who pays, who benefits: the package's refinancing logic

The parallel handling of both files reveals a logic that remains underexposed in most CBAM discussions. Importers pay for CBAM certificates, 25 percent of whose sale proceeds flow into the TDF. From this fund, decarbonisation investments are financed for exactly those EU producers in the aluminium, fertiliser, and iron and steel sectors that the importers compete with.

Part of the costs raised through CBAM thus returns as funding to the European competition. This refinancing logic changes the political reading of CBAM. Every increase in the CBAM burden feeds the EU budget and at the same time strengthens the competitive position of EU producers in the same sectors. This makes it easier to understand why the Commission presented both proposals as a package on 17 December 2025. They cannot be separated politically.

For importers, two practical consequences follow. The two reports should be tracked together throughout the reform process. The TDF also belongs in their own procurement and supplier strategy, because it shapes the speed at which their EU competitors transform over the coming years. Importers that operate as pure trading companies benefit from this dynamic in particular and should examine whether they can adapt their customs processes accordingly through suspensive procedures (Nichterhebungsverfahren).

Outlook

The Council's ad hoc working party meets on 19 and 27 May on the same dossiers, positioning Member States in parallel with the parliamentary work. In ENVI, the deadline for amendments will follow, then the committee vote on both reports, and after that plenary and trilogue. The negotiations are now entering their active phase.

Support

If you would like to know how the linking of the CBAM expansion and the Temporary Decarbonisation Fund could affect your CBAM strategy, whether through the refinancing logic in competition with EU producers or through the question of how to monitor your European competitors' transformation speed, please write to me at helge@kolum.earth.