The European Parliament has voted to strengthen the Carbon Border Adjustment Mechanism (CBAM). With 464 votes in favor, 50 against, and 159 abstentions, the European Parliament backed the European Commission's proposals to significantly extend the mechanism's application to a broad list of downstream products. Moreover, the position approved by MEPs goes well beyond the approximately 180 new steel or aluminium intensive goods indicated by the EU Executive, reaching a list of more than 450 products that include categories such as industrial components, household appliances, solar panels, and heat pumps.
The need to extend the instrument's effectiveness emerged during the CBAM transitional phase. It was raised by steel companies and industry associations during the dialogue promoted by the European Commission to draft the Steel and Metals Action Plan presented in March 2025. During those meetings, sector representatives presented their proposals for a revision of the mechanism, including the extension of its scope to certain downstream products alongside a reinforcement of anti-circumvention measures. The main risks highlighted by participants in the institutional roundtables were primarily linked to the relocation of carbon-intensive steel production to countries with less stringent climate rules in order to bypass EU restrictions and access the eurozone market. In this regard, the EU Parliament adopted a position proposing to tighten anti-circumvention measures as well, widening the range of potential minor modifications to a product that should be considered an attempt to circumvent the CBAM. Furthermore, it requested that the Commission be authorized to apply the default emission values of the country of origin when systematic circumvention or repeated patterns of non-compliance are established.
Conversely, the European Parliament rejected the Commission's proposal on the temporary exclusion of certain CBAM products in the event of sharp price spikes. Instead, Parliament suggested redirecting revenues generated by the CBAM toward the hardest-hit sectors. Similarly, the option to use Article 6 carbon credits under the Paris Agreement to offset CBAM obligations was also rejected, as the issue is expected to be addressed within the framework of the upcoming ETS revision.
On the same day, a position was also adopted on the Temporary Decarbonisation Fund (TDF), designed to support industries most exposed to the risk of carbon leakage during the phase-out of free ETS allowances. MEPs called for financial aid to be brought forward and for support to be extended to the fertilizer sector and other activities heavily impacted by the costs of the climate transition.
On the ETS front, Parliament approved two distinct interventions. On the one hand, it confirmed amendments to the ETS1 Market Stability Reserve (MSR), raising the threshold from 400 to 650 million allowances above which the automatic cancellation of excess permits will be triggered starting February 1, 2027. On the other hand, the green light was given to the agreement with the Council concerning the stability reserve for the ETS2 system, which covers buildings, road transport, and other sectors. The goal is to curb potential sharp price fluctuations and protect consumers and businesses.
The ball now passes to the Council of the European Union, which is called upon to complete the legislative process leading to the final approval of the measures and their entry into force.
For further insights on these topics, the full articles are available on siderweb.com:
