Extending CBAM to downstream goods: the Council takes its position

The Council has shaped its negotiating position

On 3 June, the responsible Council working party discussed the Cyprus Presidency's compromise text on extending CBAM to downstream goods. A draft general approach emerged from that meeting. The Committee of Permanent Representatives (Coreper) is now preparing the text for formal adoption by ministers at the ECOFIN Council on 12 June. The Council's negotiating position is taking concrete shape.

From around 180 to around 200 downstream goods

The compromise keeps the extension in place and even goes a little beyond it. The Commission's original proposal of December covered around 180 downstream goods. The Presidency text now refers to around 200. These are consistently steel- and aluminium-intensive products, including machinery, vehicle components, domestic appliances, construction supplies and fabricated metal goods. The obligations apply from 1 January 2028. For many companies this means a fundamentally new status. According to the Commission's estimate, the roughly 180 customs tariff codes alone already brought in around 7,500 importers who were previously outside the CBAM scope. Anyone importing finished goods or components made of steel and aluminium should check accordingly whether their products will be covered and CBAM obligations apply.

The product list becomes flexible

A new element is that the list of covered goods will not stay static. An annual review is foreseen that would identify further downstream goods for possible inclusion. The relevant criteria are embedded emissions, the tradeability of the good, the circumvention risk and coherence with other policy objectives. This shifts the planning basis for companies. The question is no longer only whether a product is covered today, but whether it could be added at the next review. Companies that know the steel and aluminium content of their supply chain can anticipate a later inclusion earlier.

No permanent emergency exit: Article 27a stays, but narrower

The much-discussed Article 27a is retained, though in a considerably narrower form. A temporary exemption from CBAM would apply only in serious and unforeseen circumstances that cause severe harm to the EU internal market. One possible trigger under discussion is a rise in import prices of more than 50 percent against the previous ten years over at least six months. These figures are not yet fixed. The link to the EU Emissions Trading System matters here. If a good is temporarily exempted, the reduction of free allocation would not apply to the corresponding share of EU production. The exemption therefore relieves not only importers but also shields domestic production from a one-sided burden.

Resource shuffling becomes the test case

Enforcement against circumvention moves to the centre. The Commission's proposal already treated the artificial adjustment of supply chains to secure lower default values as a circumvention practice. The Presidency text presses further. For particularly risky combinations of product and country of origin, importers would have to prove that producers are not deliberately directing their cleanest output to Europe while leaving higher-emission production elsewhere unchanged. This so-called resource shuffling is hard to detect and shifts the burden of proof onto importers. Anyone sourcing from affected countries should clarify with suppliers early how the actual emission intensity of the delivered volumes can be documented.

2027: the quarterly obligation stays, with one data relief

The obligation to hold 50 percent of expected certificates on a quarterly basis from 2027 remains in place. For 2027, however, a relief is foreseen. Verified actual embedded emissions from 2026 may be used as the reference for this quarterly requirement. This gives companies a more reliable basis for calculating their certificate needs, instead of having to fall back on estimates or default values. Companies that have their 2026 emission data properly verified can plan their liquidity needs for 2027 more precisely. However, the suppliers' verified data would naturally also have to be available as early as Q1 2027, which for many will likely not be feasible.

Outlook

The formal general approach is expected at the ECOFIN Council on 12 June. Once the Council has set its position, trilogue negotiations begin with the European Parliament, whose Environment Committee (ENVI) has already tabled several hundred amendments. Individual figures, such as the precise number of products or the price trigger in Article 27a, may still shift before the final text. We will continue to monitor these developments for you.

Support

If you would like to understand whether your downstream products will fall within the CBAM scope from 2028, and how the resource-shuffling proof requirements or the 2027 quarterly rule affect your CBAM strategy, please get in touch at helge@kolum.earth.