EU Parliament Backs Wider CBAM and Industry Fund - ESG News
... - EU lawmakers backed extending CBAM to a broader range of downstream steel and aluminium products, increasing its reach across industrial supply chains. - Parliament tightened anti-circumvention provisions while rejecting a safeguard that could remove goods from CBAM during price shocks. - A temporary decarbonisation fund would run from 2027 to 2029, supporting EU producers and downstream companies exposed to carbon-related costs. ... The European Parliament has backed a broader Carbon Border Adjustment Mec...
EU Parliament Backs Wider CBAM and Industry Fund
by ESG News Editorial Team • September 16, 2026
- EU lawmakers backed extending CBAM to a broader range of downstream steel and aluminium products, increasing its reach across industrial supply chains. - Parliament tightened anti-circumvention provisions while rejecting a safeguard that could remove goods from CBAM during price shocks. - A temporary decarbonisation fund would run from 2027 to 2029, supporting EU producers and downstream companies exposed to carbon-related costs.
The European Parliament has backed a broader Carbon Border Adjustment Mechanism (CBAM), pushing the EU carbon levy deeper into industrial supply chains while tightening rules designed to prevent circumvention.
Lawmakers adopted Parliament’s negotiating position by 464 votes to 50, with 159 abstentions. The vote clears the way for negotiations with EU member states on the final legislation.
The changes would extend CBAM beyond basic materials to a wider range of downstream products. Finished steel and aluminium goods, including fasteners, wire, springs and household articles, would come within its scope.
Closing routes around the carbon border
CBAM is designed to address carbon leakage by applying a carbon cost to emissions-intensive imports entering the EU. Parliament’s latest position places particular emphasis on enforcement as the mechanism expands.
MEPs want to lower the threshold at which small changes to a product can qualify as circumvention. At the same time, they narrowed the provision so it targets arrangements established specifically to avoid CBAM obligations.
This distinction is intended to protect legitimate business decisions. Companies making normal commercial changes to reduce costs would not automatically fall within the rule.
Where authorities identify a pattern of circumvention, Parliament wants the European Commission to apply default emissions values from the product’s true country of origin.
Lawmakers also added an exemption for electricity flows from non-EU countries when grid operators require those flows to maintain network stability.
CBAM rapporteur Mohammed Chahim said: “This compromise makes the CBAM stronger, fairer and more resilient. We have closed important loopholes, strengthened enforcement against circumvention, and expanded the mechanism’s scope where it matters most. It is a balanced package that protects European industry as it decarbonises while safeguarding the environmental integrity of the mechanism.”
CBAM rapporteur Mohammed Chahim
Parliament rejects price-shock safeguard
MEPs rejected a Commission proposal that could have temporarily removed goods from CBAM during price shocks.
Instead, Parliament wants a mechanism that could temporarily redirect CBAM revenues generated by affected goods towards exposed sectors.
The position also introduces simplified reporting requirements for least-developed countries and proposes a technical assistance framework.
Lawmakers removed the Commission’s option to allow Paris Agreement Article 6 carbon credits to count against CBAM obligations. The issue is expected to be considered as part of the forthcoming revision of the EU Emissions Trading System.
The decision leaves the treatment of international carbon credits to the wider debate over the EU’s emissions trading architecture.
Decarbonisation fund targets export competitiveness
Parliament separately adopted its position on a Temporary Decarbonisation Fund by 433 votes to 97, with 146 abstentions.
The fund is intended to protect European producers competing in export markets as domestic carbon costs rise.
MEPs want financial support to run from 2027 through 2029, starting a year earlier than the Commission proposed. They also want fertiliser producers and downstream users exposed to higher carbon-related input costs to qualify.
Eligible products would include urea, ammonium nitrate and ammonium sulphate. Parliament’s approach would also extend support to downstream companies using CBAM-covered materials as production inputs.
Any remaining revenue could be directed towards the EU’s international climate finance commitments under the Paris Agreement rather than returned to member states.
CBAM moves deeper into corporate supply chains
Parliament’s position would broaden CBAM’s significance for manufacturers, importers and investors. The mechanism would reach beyond basic materials into finished products and more complex industrial supply chains.
For companies, that increases the importance of emissions data, product origin and supplier transparency. It could also increase the financial relevance of carbon exposure when sourcing materials or planning access to the European market.
The legislation is not yet final. Parliament must now negotiate with EU member states before the changes can become law.
The outcome will help determine how far Europe extends carbon pricing through international supply chains while balancing industrial competitiveness, trade exposure and its wider climate objectives.