Brussels – The Council of the European Union has adopted its official position on strengthening the Carbon Border Adjustment Mechanism (CBAM), the EU’s instrument for combating carbon leakage and promoting global decarbonisation, ahead of negotiations with the European Parliament. The Council’s move—ahead of negotiations with the European Parliament—aims to combat “carbon leakage” more effectively and promote decarbonisation on a global scale.
Effective from 1 January 2026, the CBAM places a price on carbon emissions generated by the production of imported goods in the most carbon-intensive sectors: iron and steel, cement, fertilisers, aluminium, electricity, and hydrogen, and encourages cleaner industrial production in non-EU countries. The new regulatory framework aims to address some critical shortcomings of the current system. Until now, the CBAM has focused almost exclusively on raw materials, but this approach risked favouring the import of finished products manufactured outside the EU using high-emission materials. To address this issue, the updated legislation extends its scope to a selection of downstream products, particularly those that use significant quantities of iron, steel and aluminium.
The Council has also tasked the Commission with conducting an annual review to assess the inclusion of additional derivative products, as well as monitoring and taking action against misleading practices. The strengthening of the mechanism introduces measures described as “stringent” to prevent circumvention of the rules. And it has also defined more precisely how to deal with serious and unforeseen circumstances that could harm the internal market. The proposal provides for temporary exemptions from CBAM duties, but only on the basis of objective and rigorous criteria, such as the Union’s exposure to severe price increases.
It is now the turn of the negotiations between the EU Council Presidency and the European Parliament, which will begin as soon as the latter has adopted its position, with the aim of reaching a final agreement by the end of the year.
The outcome was welcomed by the Minister for the Economy, Giancarlo Giorgetti, who also hopes that improvements can be made to the text during negotiations with the European Parliament. “We welcome the Commission’s initiative aimed at extending the scope of the CBAM and strengthening its anti-circumvention safeguards,” he said during the public session of the Ecofin meeting in Luxembourg. “Our industries are, in fact, committed to decarbonising production and face competition from third countries which, conversely, have not yet embarked on the same path,” he added. With this in mind, “we have from the outset supported a mechanism applicable at all levels of production, both upstream and downstream of the supply chain, as well as the need to protect the most export-oriented companies. Although we would have preferred a more ambitious text, we appreciate the progress made during the negotiations and can support the Presidency’s compromise. We therefore hope, with a view to continuing negotiations with the European Parliament, that a further extension of the list of downstream products to be included within the scope of the CBAM will be considered,” he emphasised. For Italy, it is also “important to monitor, as part of the review process, the risks of distortions and circumvention of the Mechanism, so as to be able to intervene swiftly with further proposals that ensure the competitiveness of industrial sectors and consistency with environmental objectives.” Furthermore, “we consider it essential that the Mechanism be sufficiently flexible to be adapted, or even suspended, in the face of unforeseen circumstances affecting specific products that are strategic for European industry and agriculture.” In this regard, “the provision of an emergency clause is welcome, although we would have preferred a faster and more streamlined procedure than that set out in the text.”
English version by the Translation Service of Withub
