CBAM in its definitive phase: what the downstream extension means for importers and manufacturers

The Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase on 1 January 2026. Imports of iron and steel, aluminium, cement, fertilisers, hydrogen and electricity now carry a carbon cost, even though certificates only go on sale in February 2027 and the first annual declaration is due by 30 September 2027. Meanwhile, Parliament and Council are negotiating a Commission proposal to extend CBAM from 1 January 2028 to around 180 steel- and aluminium-intensive downstream products, from fasteners and radiators to machinery parts, and to tighten the rules against circumvention. Both aim to agree before the end of 2026. For manufacturers that source metal-intensive components outside the EU, CBAM is becoming a supply-chain issue.

How CBAM works in 2026 and 2027

CBAM is set out in Regulation (EU) 2023/956, as amended by the simplification Regulation (EU) 2025/2083, in force since 20 October 2025. Importers of the goods listed in Annex I pay for the greenhouse gases emitted in producing them abroad, at the carbon price EU producers pay under the EU Emissions Trading System (ETS).

The de minimis threshold (Article 2a and Annex VII) is 50 tonnes net mass per importer and per calendar year, aggregated across all CN codes; it does not apply to electricity and hydrogen. An importer that exceeds it during the year becomes subject to all obligations.

Embedded emissions are declared on the basis of actual, verified data from the producing installation, or of default values set by the Commission. The default values in Implementing Regulation (EU) 2025/2621 include a mark-up of 10% in 2026, 20% in 2027 and 30% from 2028 (1% for fertilisers), which makes verified actual data increasingly worthwhile.

What it costs

For 2026, the Commission sets a price per quarter of import, based on the average EU ETS auction clearing price (Article 21(1a)); from 2027 it will publish weekly prices.

The number of certificates owed is reduced to reflect the free allocation that EU producers still receive under the ETS (Article 31 of the CBAM Regulation; Implementing Regulation (EU) 2025/2620). That free allocation is phased out in step with CBAM: the share retained falls from 97.5% in 2026 to 95% in 2027, 90% in 2028, 77.5% in 2029 and 51.5% in 2030, reaching zero in 2034 (Article 10a(1a) of the ETS Directive). Because the adjustment is based on EU benchmarks, goods produced well above benchmark emission levels pay for the difference from the start; for goods close to the benchmarks, the net charge stays limited in 2026–2027 and rises steeply from 2028.

That trajectory may change. On 17 July 2026 the Commission proposed an ETS revision under which, for CBAM sectors, ‘the reduction of free allocation will be slowed and the phase-out extended until 2038’. According to the International Carbon Action Partnership, 15% of the phased-out free allocation would be reintroduced from 2028. If adopted, the CBAM charge would rise more slowly too. Parliament and Council have yet to take positions.

The extension to downstream goods

The Commission’s proposal of 17 December 2025 (COM(2025) 989) has four main elements.

• Scope. From 1 January 2028, Annex I would cover around 180 steel- and aluminium-intensive downstream products with an average metal content of 79%. According to the Commission, 94% are industrial supply-chain products such as base metal mountings, cylinders, industrial radiators and casting machines; 6% are household goods. The first declaration for these goods would then be due by 30 September 2029.
• Anti-circumvention. Pre-consumer steel and aluminium scrap would be treated as a precursor; post-consumer scrap stays out. A new definition of circumvention in Article 27(2) covers ‘artificially adjusting the supply chains to make the goods benefit from lower default values’. The Commission could require additional evidence for high-risk combinations of goods and origins, and apply country default values where actual values prove unreliable.
• Crisis clause. A new Article 27a would allow the Commission to remove a good from Annex I by delegated act in serious and unforeseeable circumstances, until those have passed.
• Electricity. The default emission factor would reflect all generation sources, not only fossil fuels, and the use of actual values would become easier.

A companion proposal (COM(2025) 990) would set up a Temporary Decarbonisation Fund for EU producers of CBAM goods still exposed to carbon leakage, notably in third-country markets, financed from 25% of the revenue from CBAM certificates for 2026 and 2027.

Where the file stands (14 October 2026)

• Council. Member States agreed their general approach on 12 June 2026. They back the extension but refine the product list, ask the Commission to review possible further downstream products every year, largely follow the Commission on anti-circumvention, and keep the crisis clause with clearer limits: any temporary exemption should rest on objective criteria, including the EU’s exposure to severe price increases.
• European Parliament. On 15 September 2026 the plenary adopted its position by 464 votes to 50, with 159 abstentions, on a report by Mohammed Chahim (S&D, Netherlands) for the environment committee. Parliament broadens the scope well beyond the Commission’s list — the committee text listed 457 products — and excludes electricity flows used by grid operators for network stability. It deletes the crisis clause and would instead temporarily redirect CBAM revenue to sectors hit by severe disruption. Its anti-circumvention design is stricter: country default values would apply in advance to high-risk combinations of goods and countries, unless operators show there is no abuse. Parliament also requires reporting of scrap content and of distance sales, and drops the option of counting Paris Agreement Article 6 credits. Its position on the Temporary Decarbonisation Fund (rapporteur Pascal Canfin, Renew Europe) was adopted the same day.
• Trilogues. The Irish Presidency has said it will facilitate trilogues on both files. According to law firm Mayer Brown, technical meetings started on 28 September, the first political trilogue is scheduled for 20 October and a second, possibly final, round provisionally for 30 November. The Council aims for agreement before the end of 2026. The main open points are the length of the product list, the crisis clause and the anti-circumvention rules.
• Trading partners. On 8 October 2026 the US Trade Representative opened a consultation on the effect of CBAM and its proposed extension on US trade, including whether enforcement action may be appropriate. Comments are due by 9 November.

What it means in Belgium

CBAM is a directly applicable EU regulation, but enforcement is national. Belgium laid down its rules in the Law of 14 April 2024 on the establishment of a carbon border adjustment mechanism (Belgian Official Gazette, 30 April 2024). It sets the penalties for failing to surrender certificates on time — €100 per tonne of CO₂ equivalent, indexed (Article 22) — and for importing without authorisation: €300 to €500 per tonne (Article 23).

The competent authority is the FPS Health, Food Chain Safety and Environment (Climate Change Service), which decides on authorised declarant status and applies penalties; customs check imports at the border. In January 2026 the federal government approved at first reading a draft law assenting to a cooperation agreement between the federal state and the three regions. It designates the federal state to sell CBAM certificates for Belgium on the common central platform.

For Belgian companies the exposure is twofold. Importers of base materials are in the compliance and cash cycle now. Manufacturers that buy metal-intensive components outside the EU — machinery, electrical equipment, construction products, metalworking — would join them if the extension is adopted. Because Parliament’s list is much broader than the Commission’s, products absent from the Commission annex may still be caught by the final text.

What to do now

1. Confirm whether you are in scope. Add up your 2026 imports of CBAM goods against the 50-tonne threshold and check that you or your indirect customs representative holds authorised declarant status.
2. Budget for 2026 imports. Certificates for this year’s imports are bought from February 2027 at the published quarterly prices and surrendered by 30 September 2027. For imports from 2027, at least 50% must be covered at the end of each quarter.
3. Replace default values with verified data. With mark-ups rising to 30% from 2028, verified actual emissions from non-EU suppliers are worth securing in supply contracts now.
4. Screen your bill of materials. Check which purchased components fall under the CN codes in the annex to COM(2025) 989 — and under the wider Council and Parliament lists — and which suppliers would have to provide emissions data from 2028.
5. Engage before the November trilogue. The product list, the evidence rules for high-risk origins and the crisis clause are being settled now, and the ETS review will decide how fast CBAM costs rise after 2027. In Belgium, that means both the federal level and the regions.

Sources

1. EUR-Lex, Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism, 10 May 2023 (Articles 26 and 31).
2. EUR-Lex, Regulation (EU) 2025/2083 amending Regulation (EU) 2023/956 as regards simplifying and strengthening the CBAM, 8 October 2025 (Articles 2a, 5, 6(1), 17(7a), 20(1), 21(1a), 22 and Annex VII).
3. European Commission, Price of CBAM certificates, consulted 14 October 2026.
4. EUR-Lex, Commission Implementing Regulations (EU) 2025/2621 on default values and (EU) 2025/2620 on the free allocation adjustment, 16 December 2025.
5. EUR-Lex, Directive (EU) 2023/959 amending the EU ETS Directive, 10 May 2023 (Article 10a(1a) of Directive 2003/87/EC; recital 46).
6. European Commission, Proposal COM(2025) 989 extending the CBAM to downstream goods and press release IP/25/3088, 17 December 2025.
7. Council of the EU, Council moves to strengthen the EU’s carbon border adjustment mechanism, 12 June 2026.
8. European Parliament, Legislative Observatory, procedure 2025/0419(COD), summary of the decision of 15 September 2026 and procedure 2025/0418(COD) on the Temporary Decarbonisation Fund.
9. European Parliamentary Research Service, Extension of CBAM scope to downstream goods and anti-circumvention measures, 7 September 2026.
10. European Commission, press release IP/26/1596 on the Electrification Action Plan and ETS review, 17 July 2026; International Carbon Action Partnership, EU Commission publishes EU ETS review proposal, July 2026.
11. Irish Presidency of the Council of the EU, Programme, 1 July – 31 December 2026.
12. Mayer Brown, EU’s CBAM downstream extension and anti-circumvention amendments: the road to trilogue, 7 October 2026.
13. Office of the United States Trade Representative, Request for comments on the effect of the EU’s CBAM and the proposals to expand coverage on US trade, Federal Register, 8 October 2026.
14. Belgian Official Gazette, Law of 14 April 2024 on the establishment of a carbon border adjustment mechanism, published 30 April 2024 (text via etaamb.openjustice.be).
15. Belgian federal government, Cooperation agreement on the carbon border adjustment mechanism (CBAM), Council of Ministers, 16 January 2026.
16. FPS Health, Food Chain Safety and Environment, CBAM — description and competent authority.

This analysis reflects the state of the file on 14 October 2026. We update it when the file moves.