MEPs back proposed expansion of EU carbon border mechanism ahead of negotiations

The European Parliament’s Environment Committee has adopted its position on proposed changes to the EU’s Carbon Border Adjustment Mechanism (CBAM), backing an expansion of the scheme to cover a wider range of downstream products and supporting the creation of a temporary fund to assist industry’s low-carbon transition.

The Committee on the Environment, Climate and Food Safety approved its position on the proposed CBAM revisions by 56 votes to 11, with 12 abstentions.

MEPs endorsed the European Commission’s proposal to extend CBAM beyond basic materials to include additional downstream products, such as finished steel and aluminium goods including fasteners, wire, springs and household articles. However, they said the expansion should be based on transparent, quantitative methodologies. The committee also proposed an exemption for electricity flows from non-EU countries used by grid operators to maintain network stability.

The committee also proposed changes aimed at addressing potential circumvention of the mechanism. These include clarifying that “slight modification” of goods also covers slight processing, while limiting anti-circumvention measures to arrangements established solely to avoid CBAM obligations rather than ordinary business decisions aimed at reducing costs.

MEPs also proposed allowing the European Commission to apply default values based on the true country of origin where a pattern of circumvention is identified. They removed the Commission’s proposed safeguard that would have allowed certain goods to be excluded from the mechanism during price shocks.

To address online imports, the committee proposed applying a single weight-based threshold to a seller’s total shipments instead of assessing parcels individually. It also called for new reporting requirements and retroactive liability where consignments are deliberately split to remain below the threshold.

The committee further proposed simplified reporting requirements for least-developed countries together with a technical assistance framework. It also removed the Commission’s proposal to allow carbon credits under Article 6 of the Paris Agreement to count towards CBAM obligations, noting that the issue is expected to be examined during the forthcoming revision of the EU Emissions Trading System (ETS).

Separately, the committee adopted its position on a proposed Temporary Decarbonisation Fund (TDF) by 59 votes to 16, with six abstentions.

Under the committee’s position, financial support from the fund would run from 2027 to 2029 instead of beginning only in 2028 as proposed by the Commission. MEPs also proposed extending eligibility to fertiliser producers and downstream users facing higher carbon-related input costs, adding products including urea, ammonium nitrate and ammonium sulphate to the list of eligible goods.

The committee further proposed that all downstream operators using CBAM-covered goods in their production should be eligible for support. It also suggested that any remaining revenue from the fund should be directed towards the EU’s international climate finance commitments under the Paris Agreement rather than returned to member states.

Parliament is expected to vote during its September plenary session on its negotiating mandate for talks with EU member states on the final legislation.