EC studies the potential CBAM extension to processed products

European Commission Directorate-General for Taxation and Customs Union (TAXUD) is conducting a study on the potential extension of the scope of application of CBAM to processed products.

The purpose of the study is to assess the feasibility of extending the mechanism to products further down the value chain (processed products) in relation to basic products to which CBAMalready applies.

The stakeholder survey is open from September 30 to October 25 this year. It is designed to gather relevant evidence and opinion on key issues, areas of consensus or contentious issues related to expanding the scope of CBAM. In particular, the agency is seeking information on administrative burdens and costs that importers may face.

The goal of potential expansion of the mechanism is to reduce the risk of carbon leakage. For example, companies that are currently located in the EU and manufacture processing products using as primary raw materials goods already subject to CBAM can transfer operations to non-EU countries with less stringent climate policies. In this way, European manufacturers will be able to access carbon-intensive raw materials without the costs associated with carbon pricing.

At the same time, end consumers in the European Union may prefer to buy processing products not from European companies, but from producers from countries that are not EU members and have a less strict climate policy and do not pay payments related to greenhouse gas emissions.

As noted, expanding the scope of CBAM will also reduce the likelihood of circumvention of this mechanism by changing the structure of trade towards processing products that are not currently covered by the CBM and contain a significant share of at least one of the basic goods already covered by the CBM. In addition, the expansion of the cross-border carbon adjustment mechanism will encourage producers of products from countries outside the bloc to reduce greenhouse gas emissions.

As GMK Center reported earlier, EU companies are preparing for the full implementation of CBAM in 2026. The business is studying the specifics of the mechanism and accelerating decarbonization efforts, spending on legal and consulting services to understand the regulatory framework and its impact on its supply chains. The mechanism also requires companies to create and implement new business processes to manage the relevant reporting.