EU Council Agrees Position on Strengthening CBAM

Source: Council of the European Union, press release of 12 June 2026

On 12 June 2026, the Council of the European Union agreed on its negotiating position regarding strengthening the Carbon Border Adjustment Mechanism (CBAM), with a corresponding press release published on the Council’s website.

According to the release, the key objective of the proposed changes is to eliminate circumvention risks by expanding the scope of the mechanism in such a way that “the new framework would extend the CBAM’s scope to new products and close loopholes.”

Expanding the Scope of CBAM

Currently, CBAM primarily covers carbon-intensive basic commodities, including steel, cement, aluminium, fertilisers, electricity, and hydrogen. As the Council of the EU notes, “non-EU products using a significant proportion of CBAM goods in their manufacture […] could contribute to an increase of emissions outside the EU and replace similar EU products that are subject to the emissions trading scheme.”

To address this issue, CBAM tariffs have been extended to include certain downstream products, namely approximately 180 additional lines covering:

selected iron and steel products, including sheet piling, railway materials and gas containers

fabricated metal products such as wire mesh, fencing, nails and furniture fittings

machinery and equipment, including engines, pumps, refrigeration equipment, industrial robots, cranes, lifts, agricultural and household appliances, electric motors and transformers

vehicles and related components

certain medical devices made of steel or aluminium

metal furniture and prefabricated buildings.

The Council has specified the list of products concerned, while the European Commission will receive a mandate to review and potentially expand this list on an annual basis.

According to estimates by the European Commission, the proposed expansion could add an further 2.5% of EU imports to CBAM’s scope. As a result, the mechanism would go beyond basic materials to cover a significant share of industrial products and manufacturing value chains.

For Ukrainian exporters, the expansion of CBAM may result in additional product categories becoming subject to its requirements. As noted by Oleksandr Baskov, Manager, Sustainability and ESG at KPMG in Ukraine, although the European Commission considers the overall impact of adjustment mechanism on Ukraine’s economy to be manageable, the implications could be significant for certain large enterprises, as well as many small and medium-sized businesses operating in specific sectors. According to Oleksandr, extending the mechanism to downstream products broadens the range of goods that could potentially fall within its scope, including a wider and less obvious range of products that contain raw materials or intermediate inputs that are already covered by CBAM. Keeping this in mind, Ukrainian manufacturers should closely monitor further regulatory developments in the EU and proactively assess how future CBAM requirements may affect their products and overall market access.

Focus on Preventing Circumvention

A separate set of amendments has been prepared, aimed at preventing CBAM requirement circumvention. The Council broadly supports the European Commission’s approach in this regard and has proposed the following:

including metal process scrap within CBAM’s scope

strengthening oversight of high-risk companies

expanding the Commission’s powers to address circumvention practices and other forms of non-compliance.

Temporary Exclusions Subject to Stricter Oversight

A previously proposed mechanism, allowing for certain products to be temporarily excluded from CBAM’s scope, will remain in place but with additional safeguards. Specifically, the Council insists that such decisions should be based on:

clear and objective criteria

an assessment of risks to the EU market, including the risk of sharp price increases.

CBAM Already in Force

CBAM has been fully operational since 1 January 2026 and serves as a key instrument in addressing carbon leakage (i.e. relocating production to countries with less stringent climate regulations).

CBAM applies a carbon tariff to imports from carbon-intensive sectors as a means of encouraging "cleaner industrial production in non-EU countries," according to the Council of the EU.

Implementation Timeline

The Council’s agreed position will form the basis for negotiations with the European Parliament. Once the Parliament adopts its own position, interinstitutional negotiations are expected to begin with the aim of reaching a final agreement by the end of 2026.