On 12 June 2026, the Council agreed its position on proposed changes to the EU Carbon Border Adjustment Mechanism (“CBAM”). If adopted, the changes would make CBAM relevant to a much wider group of businesses. In particular, CBAM would no longer be focused mainly on basic materials such as steel and aluminium, but would also apply to selected finished and semi-finished products that contain significant steel or aluminium content.
For importers, the practical message is clear: more products may be caught, supplier data will become more important, and CBAM costs may need to be managed much earlier in the supply chain. The proposal also strengthens anti-avoidance rules, meaning that businesses may need to show that their supply chains and emissions data reflect genuine production patterns rather than arrangements designed to reduce CBAM exposure.
The text is not yet final. The Council has agreed its negotiating position, but the proposal still needs to be discussed with the European Parliament before it can be adopted and published in the Official Journal. The European Parliament is expected to adopt its position in September 2026, after which negotiations between the EU institutions are expected to begin. The Council has indicated that it aims to reach agreement before the end of 2026.
Why is CBAM being expanded?
CBAM currently applies to a limited number of carbon-intensive goods, including cement, electricity, fertilisers, iron and steel, aluminium and hydrogen. These are sectors where the EU considers there to be a high risk of “carbon leakage”, meaning that production could move outside the EU to avoid the carbon costs that apply under the EU Emissions Trading System.
As the EU gradually reduces free allowances under the EU Emissions Trading System, the risk of carbon leakage may move further down the value chain. In practical terms, this means that instead of importing basic steel or aluminium, businesses could import more finished products containing those materials. If those downstream products were not covered, part of the carbon cost could fall outside CBAM.
The proposed changes are intended to address that risk by extending CBAM to selected downstream products and by giving the authorities stronger tools to challenge arrangements that appear designed to avoid CBAM obligations.
What are the main proposed changes?
The most important change is the proposed extension of CBAM to selected steel- and aluminium-intensive downstream products. The final list of products will depend on the outcome of the legislative process, but affected goods may include certain metal components, fittings, fasteners, parts and other finished or semi-finished products with significant steel or aluminium content.
This is important because businesses that have not previously considered themselves CBAM importers may be brought into scope. Companies importing metal-containing products into the EU should therefore assess whether their products could fall within the expanded CBAM list once the final text is adopted.
The proposal would also make supplier data more important. For many newly covered products, the CBAM cost will depend on the carbon footprint of the steel or aluminium used to make them. Importers may therefore need information about the materials used, where the product was produced, and the emissions associated with those materials. Where reliable data is not available, importers may have to rely on official default figures, which are likely less favourable – as they represent the ‘worst in class’ installations – and could reduce their ability to manage CBAM costs.
The treatment of scrap and recycled content would also become more important. Businesses seeking favourable treatment for post-consumer scrap should expect to need evidence showing the origin and nature of that scrap. In practice, claims about recycled content are likely to require stronger documentation than many supply chains currently provide.
Stronger anti-avoidance rules
The proposal also focuses on preventing avoidance of CBAM. The EU is concerned that businesses could seek to reduce CBAM exposure without actually reducing emissions, for example by changing trade flows, reallocating lower-carbon production to EU exports, or relying on incomplete or misleading information about where and how goods were produced.
Under the proposed approach, higher-risk supply chains may face additional checks. Importers may need to show that goods were produced at the declared production site, that the reported emissions data is reliable, and that the supplier is not simply sending its lowest-carbon products to the EU while selling higher-carbon production elsewhere.
If the authorities are not satisfied with the evidence provided, importers may have to use official default values for CBAM purposes. This could increase the cost of compliance and make it more difficult to demonstrate a lower carbon footprint.
Cash-flow and financial planning
CBAM is no longer only a reporting obligation. It also has financial consequences. Importers will need to purchase CBAM certificates during the year and ensure that they hold enough certificates to meet their obligations. For businesses newly brought into scope, this could create a new cash-flow requirement from the point the expanded rules begin to apply.
The proposal would also strengthen the role of financial guarantees. Competent authorities may have broader powers to require guarantees where there are concerns about an importer’s ability to meet its CBAM obligations. This means that CBAM should be considered not only by sustainability or customs teams, but also by finance, treasury and procurement teams.
What should businesses do now?
Businesses importing steel- or aluminum-intensive products into the EU should not wait until the rules are final before assessing their potential exposure. The first step is to identify whether any imported products could fall within the expanded CBAM scope. This will require a review of product classifications, material content and import flows.
The second step is to engage with non-EU suppliers. Importers should assess whether suppliers can provide reliable information on the materials used, production sites, emissions data and any recycled or scrap content. Where this information is not available, businesses should consider whether their contracts give them sufficient rights to obtain it.
The third step is to assess the likely cost impact. CBAM may affect pricing, margins, customs processes, procurement decisions and contractual cost pass-through mechanisms. Businesses should also consider whether they may need to purchase certificates during the year or provide financial guarantees.
How can we support?
Our team can help businesses prepare for the proposed expansion of CBAM by assessing whether imported products may fall within the new scope, reviewing supply-chain data and documentation, and identifying practical steps to manage compliance and cost exposure.
We can also support engagement with non-EU suppliers, including reviewing contractual rights to obtain emissions data, production information and evidence supporting claims about recycled or post-consumer content. For businesses likely to be newly captured by CBAM, early preparation will be important to avoid supply-chain disruption and unexpected cost exposure once the expanded regime begins to apply.
To support importers throughout the full CBAM cycle, from exposure assessment and supplier data collection to declaration and forecasting, PwC has developed Check Your Value Chain, a digital solution that automates CBAM compliance and integrates cost assessment and forecasting features. The platform also extends to other “value-chain-oriented” regulations (e.g. EUDR, PPWR, CS3D), offering a one-stop solution for sustainability and regulatory compliance.
Please reach out to your usual contact to discuss what these proposed changes may mean for your business.
Annex – Technical Notes: Key Differences Between the Current CBAM Regulation and the Council’s Proposal (12 June 2026)
The table below highlights the six most material changes introduced by the Council’s general approach of 12 June 2026 compared to the CBAM Regulation currently in force (Regulation (EU) 2023/956, as amended by the Omnibus package).
Topic |
Current CBAM Regulation |
Council proposal (12.06.26) |
Practical impact |
| Scope expansion
|
Limited to basic carbon-intensive goods: cement, electricity, fertilisers, iron & steel, aluminium and hydrogen.
|
Extended to steel- and aluminium-intensive downstream goods (e.g. metal components, structures, fittings, fasteners, tubes, wires, finished/semi-finished articles). Applicable from 1 January 2028.
|
Many businesses not previously in scope (e.g. automotive, machinery, construction) may be captured. Requires a full reassessment of import flows and product classifications.
|
| Treatment of scrap and recycled content
|
Pre-consumer and post-consumer scrap broadly treated as zero-emission inputs.
|
The zero-emission factor is limited to post-consumer scrap. Pre-consumer ferrous scrap (CN ex 7204) and pre-consumer aluminium scrap (CN ex 7602) are reclassified as input materials with embedded CO₂ emissions. Importers will also be required to declare the material composition of each downstream good.
|
Stronger documentary evidence required to claim post-consumer status; potential cost increase for recycled-content goods.
|
| Operator registry (O3CI registry)
|
Registration of third-country operators is voluntary.
|
Registration becomes a prerequisite to use actual verified emissions.
|
Strong incentive for non-EU suppliers to register. EU importers should secure contractual rights to obtain reliable supplier data.
|
| Anti-circumvention and traceability
|
No specific provision on harmful resource shuffling; general anti-avoidance principles only.
|
New definition of “abusive practices” and explicit framework targeting harmful resource shuffling. High-risk good × origin combinations require proof of production site and period (e.g. mill certificates). Otherwise, default values apply.
|
Higher-risk supply chains face additional checks. Robust supplier documentation becomes essential to avoid penalising default values.
|
| Financial guarantees
|
Required only for applicants not established for the two preceding financial years, with free-allocation adjustment.
|
Any applicant or existing declarant failing to demonstrate financial capacity, including a breach of the 50% quarterly certificate-holding rule, may be required to post a guarantee. Guarantees may be extended and are directly callable by the competent authority to recover unpaid liabilities.
|
Broader and continuous exposure to guarantee requests; higher financing cost of CBAM compliance. Treasury and finance teams must be involved early.
|
| Quarterly 50% certificate holding rule
|
At the end of each quarter, the declarant must hold at least 50% of the CBAM certificates required to cover that quarter’s embedded emissions.
|
Rule clarified and from 2028, only certificates purchased in the same calendar year count towards the quarterly obligation.
|
Tighter cash-flow planning required; legacy certificates from prior years can no longer be used to meet quarterly thresholds.
|
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