A European Parliament committee has backed the extension of the scope of the CBAM

The European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) has approved amendments to the legislative proposal to extend the CBAM to downstream products.

MEPs agreed with the European Commission’s proposal to extend the scope of the CBAM beyond basic materials, including a long list of processed products within the mechanism – finished steel and aluminium products such as fasteners, wire, springs and household goods. However, they insist that this must be based on transparent quantitative methodologies.

The committee also approved an exemption for electricity flows imported from non-EU countries, which are used by operators to maintain grid stability.

ENVI proposes stricter measures to prevent circumvention of the mechanism. MEPs clarified that the ban on ‘insignificant modification’ of goods should also cover minor processing. They tightened the rule so that it applies only to arrangements created solely to circumvent the CBAM, rather than to normal business decisions aimed at reducing a company’s costs.

They also authorised the European Commission to apply the actual default values of the country of origin if a circumvention scheme is detected.

Furthermore, the relevant committee removed the temporary provision suspending the application of the CBAM. Instead, a mechanism was added to temporarily redirect revenue from the cross-border carbon adjustment mechanism, derived from the relevant goods, to affected sectors.

A position was also adopted on the Temporary Decarbonisation Fund (TDF) to protect EU producers in export markets. MEPs want financial support from the TDF to run from 2027 to 2029, rather than just from 2028, as proposed by the European Commission. They also wish to extend the fund to fertiliser producers and their customers.

The committee has also proposed granting all downstream operators using products covered by the CBAM the right to support from the fund.

ENVI proposes that any unused revenue be channelled towards the EU’s international commitments to finance the fight against climate change under the Paris Agreement, rather than being returned to Member States, as originally proposed by the European Commission.

Both proposals are due to be adopted at the plenary session in September, after which trilogue negotiations with the Council of the EU may begin.

It should be recalled that the European steel industry has called on the EU institutions to preserve the integrity of the Emissions Trading System (ETS) and to strengthen the cross-border carbon adjustment mechanism.