December 18, 2025

European Commission Issues CBAM Operational Rules and Proposes Downstream Extension of the CBAM Scope

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On 17 December 2025, the European Commission released a package of adopted draft implementing and delegated acts to make the Carbon Border Adjustment Mechanism (“CBAM”) operational for its definitive phase starting on 1 January 2026, alongside a proposal to amend Regulation (EU) 2023/956 (the “CBAM Regulation”) to expand its scope to downstream products and introduce further anti-circumvention measures. The implementing and delegated texts have been published on a provisional basis, and official versions still need to be published in the Official Journal of the European Union. The proposal to extend the CBAM scope to downstream products and to introduce anti-circumvention measures will have to undergo the ordinary legislative procedure before it can be adopted.

Key Elements of the CBAM Implementing Framework

Overall, the package comprises eight implementing acts and one delegated act that cover the following aspects of the CBAM:

Implementing act on the methodology for the calculation of emissions: This act sets out rules for third-country producers on how to monitor and calculate embedded emissions in goods they produce. Under its framework, producers will have to monitor emissions at the installation level, determine which of those emissions are to be attributed to a production process, and then attribute those emissions to goods covered by that production process. For consistently of reporting, this act aligns CBAM system boundaries, processes, and monitoring rules with those of the EU Emissions Trading System (“EU ETS”). Finally, to ensure flexibility in their choice of using actual values or default values, it also allows third-country producers to combine the use of actual values for one or more precursors with the use of default values for other precursors.
Implementing act on the calculation of the free allocation adjustment: This implementing act establishes the methodology for adjusting the number of CBAM certificates to be surrendered to account for the extent of free allocation under the EU ETS. The adjustment for free allocation can be based on actual data or determined using default CBAM benchmarks set out in the Annex to the act. In addition, the act introduces a sector-specific refinement for gas-based direct-reduced iron (“DRI”). The Commission found that, during the initial years of CBAM compliance, imports of steel produced via natural gas-based DRI would, after applying the free allocation adjustment, be attributed to embedded emissions being lower than the adjustment itself, resulting in no CBAM certificates being due for DRI-based goods. To ensure the environmental integrity of the CBAM, the act therefore establishes a dedicated CBAM benchmark for natural gas-based DRI.
Implementing act on default values: This act sets out default values by Combined Nomenclature code and country of origin for the definitive period. For goods other than electricity, the default values for embedded emissions include a markup to reflect potential divergences where an individual installation’s emissions exceed the relevant average emission intensity in the producer country. These markups will be introduced gradually to mitigate any immediate and disproportionate impact on goods prices. The default values will be subject to regular review and should be reassessed no later than by December 2027.
Implementing act on the price of CBAM certificates: This act outlines how the price of CBAM certificates will be established by the European Commission and made available to the CBAM declarants. From 2027, the certificate price will mirror the weekly average price of ETS allowances. For goods imported in 2026, the price of CBAM certificates will reflect the average price of ETS allowances during the relevant quarter. For transparency and certainty, the European Commission will publish the applicable price directly in the CBAM Registry accounts of authorised declarants. To avoid undue delay, the Commission will determine and publish the price as soon as the necessary information becomes available.
Acts on verification of emissions and accreditation of verifiers (one implementing and one delegated act): In the first year of verification, verifiers are required to conduct an on-site inspection of the installation where the relevant goods are produced. In the second consecutive year, to mitigate cost and administrative burden, the verifier may substitute the physical site visit with a virtual visit or waive the site visit. In all cases, a physical site visit must occur at least every two years. Verifiers must adopt a risk-based approach with the aim of reaching a verification opinion that provides reasonable assurance that the total emissions are not materially misstated and that the report can be verified as satisfactory. The delegated act further clarifies that applicants for accreditation may be established in any third country, as well as in the European Union, but they must obtain accreditation from EU accreditation bodies.
Implementing act on the conditions and procedures related to the status of authorised CBAM declarant: This act aims at adjusting Commission Implementing Regulation (EU) 2025/486 on the conditions and procedures related to the status of authorised CBAM declarant to reflect changes brough by the CBAM Simplification Regulation published on 17 October 2025. Following the CBAM simplification package, the authorisation procedure is simplified by making the consultation of other competent authorities voluntary. Additionally, the revised act reflects the new rule that importers who have applied for authorisation before 31 March 2026 can provisionally continue importing CBAM goods until the date on which a decision on the application takes effect.
Implementing act on the rules for the definitive CBAM Registry: The new rules standardise and secure the registry, facilitate access for authorised declarants and persons with delegated access rights, as well as to customs authorities, and improve information exchange between the Commission and competent authorities. The CBAM registry will enhance communication, notification, registration, and checks, allowing seamless information exchanges among the Commission, competent authorities, customs authorities, CBAM declarants, applicants, operators, and verifiers.
Implementing act on the scope of communicating with customs authorities: This act lays down which information is to be shared by the national customs authorities with the Commission, in which frequency and by which means.

CBAM Scope Expansion to Downstream Goods and Anti‑Circumvention Proposal

The European Commission’s proposal to amend the CBAM Regulation follows directly from the European Union’s Steel and Metals Action Plan issued in March 2025, which flagged the risk that carbon leakage in CBAM-covered goods could shift further downstream in the value chain, as well as the risk of circumvention of CBAM objectives.

Under the proposal, the Commission aims to: (i) extend the scope of the CBAM to address the risk of carbon leakage for products further down the value chain of the steel and aluminium products currently in CBAM’s scope; (ii) tackle attempts to avoid compliance with CBAM obligation; and (iii) improve the technical rules for attributing emissions to electricity with the aim of encouraging the decarbonisation of electricity imports. The proposal will be subject to negotiations between the Council and the European Parliament, and, if adopted, will result in the second amendment to the CBAM Regulation after the CBAM Simplification Regulation.

First, the Commission proposes to extend CBAM to an additional 180 goods, including:

Iron and steel products such as ores, sheet piling, railway materials, gas containers and other articles;
Fabricated metals such as netting and fencing, nails, furniture fittings, and stoppers;
Machinery and equipment such as engines, pumps, burners, fridge/freezers, industrial robots, cranes, hoists, elevators, agricultural and household machines, casting and metalworking equipment, electric motors and transformers, and welding equipment and electrical conductors;
Vehicles such as motor vehicles, chassis, gear boxes, wheels, goods and hand-pushed vehicles, and trailer parts;
Medical instruments such as tubular needles and nerve-stimulation apparatus containing steel or aluminium; and
Metal furniture and buildings such as seats with metal frames, metal office furniture, and prefabricated buildings containing steel or aluminium.

To provide sufficient predictability, the extension of the scope of CBAM should apply from 1 January 2028.

Second, the Commission’s proposal strengthens the CBAM anticircumvention framework to address new risks identified by stakeholders during the CBAM transitional phase. The Commission proposes to include preconsumer aluminium scrap and preconsumer steel scrap (i.e., materials discarded before reaching consumers) as a CBAM precursor. Accordingly, emissions of preconsumer scrap will be taken into account for the calculation of embedded emissions of the CBAM goods.

Furthermore, to address the risk of misdeclaration of the embedded emissions determined on the basis of actual emissions, the Commission and the competent authority would be allowed to request the authorised CBAM declarant to provide evidence that the imported goods were produced in the declared installation and for the declared production period.

In addition, where there is sufficiently evidenced high risk of abusive practices, the Commission would be empowered to require that actual emissions values be used only if additional supporting documentation is provided to demonstrate that relevant producers have not engaged in such practices. Once the Commission determines that sufficient evidence of a high‑risk scenario exists, it will act within three months to address the risk. Actual values may be used only upon submission of the prescribed additional evidence; absent that evidence, country‑specific default values must be applied.

Third, with respect to the technical rules for attributing emissions to electricity, the Commission’s proposal would modify the method for calculating the emission factor for imported electricity to account for electricity produced from all sources, including non‑fossil‑fuel sources. As a result, the Commission will calculate and publish revised default values for imported electricity. In addition, to facilitate the determination of embedded emissions in electricity on the basis of actual emissions, the conditions for applying actual embedded emissions to imported electricity will be made more flexible, and certain power purchase agreements concluded between intermediaries may be used.