On 17 December 2025, the European Commission presented measures to strengthen the Carbon Border Adjustment Mechanism (CBAM) to prevent circumvention, ahead of its full entry into operation in 2026. The package includes a proposal for a regulation to extend to additional steel- and aluminum-related downstream products, a temporary decarbonisation fund (estimated at €600 million), the CBAM review report assessing the transitional period, and secondary legislation to simplify methodology and calculation criteria.
After two years of transitional period, the CBAM financial adjustment will be progressively phased in as of 1 January 2026. This will mirror the phase-out of free allocations under the EU ETS, which will take place until 2034.
Starting from 2026, the scheme will include additional steel- and aluminum-related downstream products. To further promote decarbonization beyond the EU and prevent carbon leakage, while complementing ETS, importers will pay a carbon price on around 180 additional downstream products, such as machinery and appliances.
Potential extensions to other downstream products and other additional ETS sectors such as chemicals (e.g., ceramics, glass, polymers) have been postponed to 2027.
The methodology for calculating emissions from electricity has been simplified with a reduction in the default electricity emission values by over 30% on average (and up to 60% for certain countries such as Ukraine), resulting from a new basis of calculation that takes into account the emission intensity of electricity generation sources rather than just fossil fuels.
The Commission also published a report reviewing the experience with the delivery of the CBAM during the transitional period from October 2023 to the end of 2025. It evaluates CBAM’s contribution in addressing carbon leakage and fostering global carbon pricing, and examines governance, administration and enforcement as well as CBAM’s international dimension. Read the full report to see how your business might be affected.
