The European Commission will table measures before the end of 2025 to prevent companies from avoiding the EU’s incoming carbon border levy, amid concern in Brussels that exporters could reshuffle trade flows to minimise their bills.
Officials fear producers—particularly in China—could send lower-carbon batches to the EU while continuing higher-emission output for other markets, leaving overall emissions unchanged.
The Carbon Border Adjustment Mechanism (CBAM) enters its definitive phase on 1 January 2026. From that date, importers of iron and steel, aluminium, cement, fertilisers, electricity and hydrogen will be required to purchase CBAM certificates to mirror the carbon costs faced by EU manufacturers under the Emissions Trading System. The move follows a transitional reporting period from 2023 to 2025 designed to gather emissions data and prepare traders for full compliance.
To underpin the 2026 start, the Commission in July opened a public consultation on extending CBAM to selected downstream products and on anti-circumvention rules. The exercise seeks feedback on policy design and on the social, economic and administrative impacts of potential changes, including how to treat complex supply chains. It also invites views on electricity-sector rules and on measures that would address the risk of “reshuffling” without imposing disproportionate burdens on trade.
One option under consideration is to assign imports a fixed emissions value by country or by company, rather than calculating shipment-specific footprints. Proponents say a standardised approach would prevent exporters from allocating only their greenest lots to Europe while using higher-carbon inputs elsewhere. It would also simplify verification for customs authorities. The Commission has indicated that proposals covering such anti-circumvention measures will be put forward by year-end.
Industry groups have pressed for clarity and for broader coverage. European Aluminium has urged Brussels to expand CBAM to encompass downstream aluminium products—such as extrusions and rolled goods—arguing that exemptions risk shifting emissions and distorting competition. The association has also supported a country-wide default emissions rating for aluminium imports to streamline enforcement and close perceived loopholes.
Standardised ratings could, however, affect the incentives for individual firms to invest in decarbonisation. If all producers in a country are assigned the same carbon intensity, those that cut emissions may see less direct benefit on their CBAM obligation. The Commission is separately gathering evidence on the methodology for the definitive period, including treatment of indirect emissions, the adjustment for remaining free allowances in the EU ETS, and recognition of carbon prices paid in third countries. Stakeholders can submit views until late September.
The anti-circumvention package sits alongside other elements intended to ease the transition. In July, the Commission outlined plans to compensate EU exporters for part of the carbon costs they incur at home, funded from CBAM revenues, with a view to maintaining a level playing field in external markets as free ETS allowances are phased out. While distinct from the import levy, that measure forms part of the broader policy framework as the EU prepares for CBAM’s full operation in 2026.
The Commission’s timetable is tight. Traders must finalise emissions reporting for the transitional phase and adapt contracts ahead of the first surrender of CBAM certificates in 2026. At the same time, anti-circumvention rules and any scope extension to downstream products will need to be crafted to withstand legal scrutiny and to be workable at the border. The stated objective is to align import carbon costs with those shouldered by EU industry, while ensuring that the system rewards genuine decarbonisation rather than accounting strategies.
Concerns Over EU Carbon Border Adjustment Mechanism & Its Impact on British Green Energy
