CBAM's next phase: downstream products, tougher anti-circumvention rules and a new fund

The Carbon Border Adjustment Mechanism is not a finished system. On 17 December 2025 the European Commission set out a package of proposals that signals where it is heading next, and the direction matters for businesses that consider themselves safely outside the current scope.

A much wider product list

The headline proposal would extend CBAM to downstream steel and aluminium products from 1 January 2028, capturing goods much further along the value chain than the raw materials covered today. Reporting around the proposal points to roughly 180 additional downstream products being drawn in. For manufacturers, fabricators and contractors who buy finished or semi-finished metal goods, this is the change to watch, because it could bring into scope businesses that have no direct exposure to raw cement, steel or aluminium imports at all.

Closing the gaps

The package also strengthens the anti-circumvention rules. Pre-consumer steel and aluminium scrap would be treated as a precursor, controls on misdeclaration are tightened, and the Commission would gain the power to restrict the use of actual emissions values in higher-risk situations. The intent is to stop the mechanism being undermined by reclassification or routing tricks.

A fund for EU producers

Alongside the scope changes, the Commission proposed a Decarbonisation Fund to support EU producers in the covered sectors that remain most at risk of carbon leakage as their free allowances are withdrawn. The fund is to be financed from 25 per cent of CBAM certificate revenues, covering production in 2026 and 2027 across the 2028 to 2029 period, and is framed as a temporary measure.

Planning ahead

None of this is law yet, and the detail will move during the legislative process. The sensible response is not to wait for certainty but to map your exposure across the full value chain now, including the finished and semi-finished goods you buy. Businesses that understand where a 2028 extension would touch them will adapt far more comfortably than those caught by surprise. Scenario-planning of this kind runs across our CBAM-enabled and CBAM-compliant stages.

‍