Why the CBAM Scope Is Expanding
CBAM aims to level the playing field between EU producers—who face carbon costs under the EU Emissions Trading System (ETS)—and foreign competitors. Limiting CBAM to basic materials risks carbon leakage: companies may move production steps abroad or switch to importing slightly processed goods to avoid carbon costs.
To prevent this, the EU plans to expand CBAM coverage across the full value chain, ensuring that carbon pricing applies more consistently and effectively.
What Will Happen—and When
- Q3–Q4 2025: The EU Commission will publish a full scope review.
- Early 2026: A legislative proposal will define new CN codes to be included.
- From 2027 onwards: New products will be phased into CBAM, aligned with the gradual phase-out of free allowances under the EU ETS.
- By 2030, CBAM is expected to cover almost all sectors included in the EU ETS.
Vertical Expansion: Upstream and Downstream Coverage
Upstream – Closing Raw Material Loopholes
Some essential inputs to CBAM-covered goods are currently outside its scope. These include scrap, coke, lime, alumina, and ferro-silicon. Experts warn that their exclusion weakens CBAM’s effectiveness, and the EU is likely to bring them in by 2026 to ensure consistent carbon pricing across production stages.
Downstream – Adding Simple Finished Products
CBAM currently applies to raw and semi-finished materials, but many finished metal goods remain excluded. To prevent circumvention, the EU plans to extend CBAM to simple downstream products primarily made of steel or aluminium—such as:
- Structural frames
- Bars and brackets
- Shelving units
- Prefabricated components
For example, if steel tubes from Turkey are covered by CBAM but exhaust pipes made from them are not, companies may move manufacturing abroad to avoid compliance. Including downstream goods would remove this incentive.
Complex, multi-material goods—like vehicles, industrial machinery (e.g. HS 8419), and electronics—are expected to remain outside CBAM for now due to their low carbon intensity and the difficulty of calculating embedded emissions.
Horizontal Expansion: Adding Entire New Sectors
Beyond metals, CBAM is set to expand to other carbon-intensive sectors already covered by the EU ETS. Likely candidates include:
- Glass and ceramics (e.g., float glass, tiles, bricks)
- Basic chemicals (e.g., methanol, ethylene)
- Polymers and plastics (e.g., polyethylene, polypropylene)
- Oil refining products
- Pulp and paper
These sectors meet CBAM’s criteria and are responsible for a significant share of industrial emissions in the EU.
How the EU Will Decide What Gets Included
To ensure a consistent and enforceable expansion, the EU will apply four main criteria to new product categories:
- High embedded carbon – Measurable and significant emissions per unit.
- Trade exposure – Products heavily imported or exported.
- Leakage risk – Products that could be used to bypass CBAM.
- Data availability – Emissions must be traceable using reliable data or default values.
Products that meet all four criteria will likely be added to the scope in 2026.
Examples: What’s Likely In or Out
Product | Likely CBAM Status | Reason |
Steel storage racks (HS 7308) | Included | Mostly steel; simple assembly |
Aluminium shelving units | Included | High aluminium content; simple form |
Heat exchangers or furnaces (HS 8419) | Excluded | Multi-component; carbon not traceable |
Motor vehicles (HS 8703) | Excluded | Complex assembly; low leakage risk |
If ≥70% of a product’s weight or value comes from a CBAM-covered material, it’s a strong candidate for inclusion.
What Companies Should Do Now
To prepare for CBAM expansion, businesses should:
- Map product portfolios to identify items with high steel, aluminium, glass, or chemical content.
- Check HS codes against CBAM and EU ETS coverage.
- Request emission data from suppliers, especially for metal-based goods.
- Update pricing models to incorporate future CBAM certificate costs.
The Commission is also working on simplifying compliance. One proposal is to allow companies to use average emission intensities at the factory level, rather than tracking carbon at every process step. This would reduce the administrative burden while still supporting decarbonisation.
Conclusion
CBAM is entering its next phase. By expanding both within current sectors and into new industries, the EU aims to apply carbon pricing more fairly and effectively. The changes will close loopholes, protect local production, and strengthen the EU’s climate goals.
For businesses, early preparation is essential. Start identifying at-risk products, collecting emissions data, and adjusting pricing structures now to stay ahead of the regulatory curve.
Need help? Contact our experts at [email protected].
Resources
- European Commission
CBAM Regulation (EU) 2023/956 and official transitional guidance documents.
Link to EU CBAM page - Sandbag – Precursors: The Products That Will Eat Away at CBAM’s Effectiveness
Detailed analysis of upstream product loopholes like scrap and lime.
https://sandbag.be - Technopolis Group & ERCST – Studies on CBAM Policy Impact & Expansion
Reports on sector inclusion criteria, trade exposure, and emissions benchmarks guiding CBAM scope decisions.
https://ercst.org