The European Commission has proposed expanding the Carbon Border Adjustment Mechanism (CBAM) to include selected steel- and aluminium-intensive finished goods. The planned extension would apply from 1 January 2028, extending carbon-related obligations beyond imports of basic metals. The proposal targets machinery, industrial components and fabricated metal products within a broader carbon-accounting regime.
The initiative responds to concerns about the existing CBAM product boundary. It could encourage manufacturers to shift fabrication and assembly operations outside the European Union. In that scenario, companies might import finished goods containing carbon-intensive steel or aluminium instead of bringing underlying materials into the EU for domestic processing.
The Commission’s proposal aims to address this potential relocation of industrial activity by extending carbon accounting to downstream products. The legislative process is not complete, and final product coverage and implementation arrangements remain subject to negotiations between EU institutions.
Downstream product scope and customs classification
The proposed coverage would apply to selected products with substantial quantities of steel or aluminium rather than covering all manufactured goods containing metals. Products discussed during the legislative process include machinery parts, fasteners, fabricated components and certain household goods. Including these categories would bring additional stages of industrial manufacturing into the carbon-border framework.
Customs classification is expected to determine which products fall within the expanded mechanism. Differences between individual commodity codes could lead to different reporting requirements or regulatory treatment for otherwise similar products. Manufacturers therefore cannot rely only on general commercial descriptions such as equipment, machinery or industrial components when assessing exposure.
The European Parliament adopted amendments in September 2026, after the Council agreed its negotiating position in June 2026. Both institutions support extending CBAM to downstream products, while negotiations continue on product lists and anti-circumvention provisions. The Commission’s original proposal also includes amendments related to electricity emissions rules and measures intended to address potential manipulation of emissions reporting.
While 1 January 2028 is set as the proposed implementation date, the precise range of covered goods depends on the final legislative text. Final details are therefore still under negotiation among EU institutions.
Emissions data requirements for machinery suppliers
Companies supplying machinery and equipment to the EU market would need to assess potential obligations at individual commodity-code level. An initial compliance assessment would be expected to identify relevant product classification and quantify the steel and aluminium incorporated into each product. It would also need information on countries and installations supplying those materials, along as the intended import route into the EU.
Product portfolios may include hundreds of variants with different metallic compositions. Applying a single embedded-emissions value across an entire product range could be difficult where material weights and supplier origins differ. Manufacturers would therefore need approaches that reflect those differences within their portfolios.
Manufacturers may need to link bills of materials with supplier emissions declarations to create traceability between individual products and metal inputs used in production. Importers would also need to monitor which proposed customs codes are ultimately included in adopted legislation. This approach combines customs classification with engineering-level materials accounting rather than relying only on a carbon-related cost when purchasing basic steel.
Companies with quality-management systems and enterprise resource planning systems capable of tracing materials throughout manufacturing could have an advantage in meeting these requirements. The proposal links compliance expectations to the ability to track material inputs used for specific products.
Embedded-carbon calculations across multiple suppliers
The accounting challenge increases when finished products draw on materials from multiple manufacturing stages and geographical locations. A fabricated component may include steel sourced from multiple mills and purchased parts with different emissions profiles. Materials may also undergo several processing operations before final assembly.
In such cases, calculations based solely on emissions from the final assembly facility would not capture much of the upstream material content relevant for embedded-carbon reporting. Manufacturers would therefore be expected to use systems connecting purchase orders, individual material batches, supplier production installations and emissions attributed to purchased components.
Establishing these links would be particularly important for industrial supply chains involving several component manufacturers and successive processing stages. Reliable product-level information would become increasingly relevant for determining carbon content associated with finished imports into the EU market.
Potential effects on sourcing, contracts and investment
The proposed downstream extension could affect commercial and investment decisions before legislation enters into force. European original equipment manufacturers (OEMs) may seek longer-term supply agreements for lower-carbon steel. Component manufacturers outside the EU could introduce emissions warranties into commercial contracts, while logistics providers may need to retain more detailed information about composition and origin of transported goods.
Sourcing strategies could also influence where industrial processing takes place geographically. Some suppliers may consider establishing or relocating fabrication activities within the EU, while others could invest in lower-emissions steel inputs or improve emissions traceability at existing production facilities. The eventual commercial impact would depend on which product categories are included in the final legislation and which methodologies are adopted for calculating embedded emissions.
The downstream extension is intended to address a risk that carbon-intensive manufacturing activities migrate from European steel and aluminium production facilities to overseas factories producing finished goods for the EU market. Implementation would require regulators to establish a workable approach to embedded-carbon pricing while managing additional reporting and traceability requirements across complex industrial supply chains.