Introduction

On June 12, 2026, the EU Council agreed its general approach to expand the Carbon Border Adjustment Mechanism to 180 downstream steel- and aluminum-intensive products, effective January 1, 2028. The agreement brings approximately 7,500 new importers into compliance scope and signals that CBAM is evolving from a raw-materials levy into a full-value-chain carbon pricing instrument. With the European Parliament expected to adopt its position in September 2026, the legislative window before the 2028 effective date is narrower than it appears.

Key Takeaways

• EU Council agreed its general approach on June 12, 2026, advancing the downstream expansion through the ordinary legislative procedure.
• 180 additional product codes will be added to CBAM scope from January 1, 2028, covering machinery, vehicle components, domestic appliances, fabricated metals, and construction equipment.
• Approximately 7,500 new importers will enter compliance scope, required to register as authorized CBAM declarants and purchase certificates.
• Embedded emissions attribution covers precursor materials only — the steel or aluminum content — not the energy used in downstream fabrication or assembly.
• The Council’s position goes further than the Commission’s original proposal, adding more product categories and mandating an annual review for future scope expansions.
• China faces the largest financial exposure at EUR 4 billion in affected imports, followed by the United Kingdom and Japan at EUR 2 billion each.
• Companies already importing CBAM-covered upstream goods face their first certificate surrender deadline on September 30, 2027 — a parallel compliance clock running alongside the downstream expansion.

What Is the CBAM Downstream Expansion and Why Did the EU Council Act Now?

CBAM entered its definitive phase on January 1, 2026, requiring importers of six upstream sectors — iron and steel, aluminum, cement, fertilizers, hydrogen, and electricity — to purchase and surrender carbon certificates linked to the EU ETS price. The mechanism works as designed for raw materials, but a structural gap remains: non-EU manufacturers can import CBAM-covered steel and aluminum, process it into finished machinery or appliances outside the EU, and re-export those finished goods into the EU market without facing any equivalent carbon cost.

This downstream gap creates an incentive to shift fabrication and assembly operations offshore — precisely the carbon leakage dynamic CBAM was designed to prevent. The European Commission flagged this risk in its March 2025 Steel and Metals Action Plan. The December 2025 legislative proposal and the June 12, 2026 Council agreement represent the EU’s response: extending CBAM down the value chain to capture embedded emissions in finished goods before they cross the EU border.

From Raw Materials to Finished Goods: How CBAM Currently Works and Where the Gap Is

Under the current definitive phase, CBAM applies at the point of import of basic materials. A Turkish steel producer exporting hot-rolled coil to the EU faces a CBAM certificate cost. A Turkish manufacturer that buys that same coil domestically, stamps it into automotive body panels, and exports those panels to the EU faces no CBAM cost at all — even though the embedded carbon content is identical.

This asymmetry disadvantages EU downstream manufacturers, who bear both EU ETS costs on their inputs and production, while non-EU competitors using equivalent carbon-intensive inputs face no border charge on their finished goods. The downstream expansion eliminates that asymmetry for the highest-risk product categories by applying CBAM to the embedded steel and aluminum content of finished manufactured goods at the border.

The 180 Downstream Products: Which Sectors Face Exposure from 2028

The proposal targets products where steel and aluminum represent the dominant share of embedded content — averaging 79% by composition, according to the Commission’s Impact Assessment. The sectors facing the most significant exposure are:

Approximately 94% of affected downstream products are industrial supply chain goods, according to the Commission’s Impact Assessment. Consumer household products represent approximately 6% of the affected import volume, limiting retail price impact.

How Does the Council’s June 12 Position Differ from the Commission’s Original Proposal?

The European Commission’s December 2025 proposal defined 180 downstream product codes for inclusion. The EU Council’s June 12, 2026 general approach advances that proposal with two material differences:

The Council’s insistence on an annual review mechanism is the most consequential long-term signal: it institutionalizes CBAM as a dynamic instrument, not a fixed list. Importers in sectors adjacent to the current proposal — chemicals, downstream fertilizer products, additional ETS sectors — should treat the annual review as a forward compliance risk.

How Embedded Emissions Will Be Calculated for Downstream Products

The emissions accounting methodology for downstream goods is intentionally simplified to make the expansion administratively practicable for 7,500 new importers. Three principles govern the approach:

Precursor-only attribution. CBAM for downstream goods covers only the embedded emissions of the steel or aluminum precursor materials, not the energy consumed in fabrication, assembly, or finishing. A manufacturer of washing machines exporting to the EU will face a CBAM cost based on the steel content’s embedded carbon, not on the electricity used to run the production line.

Default values where actuals are impracticable. For complex multi-component products where obtaining verified actual emission values from every upstream supplier is not feasible, the Commission will publish default values. These defaults apply without mark-ups, reducing the administrative burden for first-year declarants.

Verified actuals where documentation exists. Where a non-EU producer can provide verified, installation-level emissions data for their steel or aluminum inputs — prepared to EU methodological standards — they may use actual values. This allows producers in jurisdictions with robust carbon pricing or emissions tracking to potentially reduce their certificate cost below the default.

ASUENE supports both pathways: automated collection of supplier-specific emissions data for verified actuals, and default value benchmarking for suppliers where actuals are unavailable.

Who Is In Scope: The New Importer Population from 2028

The expansion applies to EU importers — or their indirect customs representatives — bringing more than 50 tonnes of newly covered downstream goods into the EU per year. The 50-tonne de minimis threshold, introduced by the CBAM Omnibus Simplification Regulation (EU) 2025/2083, carries over to the downstream expansion.

Trading partner financial exposure based on the Commission’s Impact Assessment:

EU importers sourcing steel- or aluminum-intensive finished goods from any of these jurisdictions should conduct a product portfolio review immediately to assess which of their import lines fall within the proposed product codes.

The trialogue phase — negotiations between the Council and Parliament — will determine the final product list. Companies should base their compliance preparation on the Commission’s original 180 product codes as the minimum scope, with the Council’s broader position as the upside risk scenario.

What Must New Importers Do Now to Prepare for CBAM Compliance by 2028?

The 18 months between now and January 1, 2028 is sufficient preparation time only if companies begin immediately. The compliance infrastructure CBAM requires — supplier data collection, emissions calculation, third-party verification, and declarant registration — cannot be built in the final quarter before the deadline. ASUENE’s CBAM module supports each of the following steps:

1. Conduct a product portfolio review. Map your EU import lines against the Commission’s proposed 180 downstream product codes and the Council’s broader list. Identify which product codes are confirmed in scope and which are at risk of inclusion through trialogue.
   
2. Apply for authorized CBAM declarant status. New importers must register via the CBAM Registry before importing covered goods. Given competent authority processing times, applications submitted in 2026 provide the largest operational buffer.
   
3. Map your supply chain to installation level. CBAM requires emissions to be calculated at the level of the individual production installation, not company-wide averages. Begin identifying which suppliers produce the steel and aluminum precursors in your downstream products.
   
4. Collect supplier emissions data. Engage Tier 1 suppliers now to collect installation-level embedded emissions data prepared to EU methodological standards. Where actuals are unavailable, identify the applicable Commission default values.
   
5. Assess third-party verifier availability. Accredited CBAM verifiers are already constrained by demand from current definitive-phase declarants. Securing a verification partner 12–18 months in advance is a practical necessity.
   
6. Model certificate cost exposure. Using the official Q1 2026 CBAM certificate price of EUR 75.36/tonne (published by the European Commission on April 7, 2026) and your supplier emissions data or applicable default values, calculate the financial exposure your import portfolio faces from 2028. Present this to board-level stakeholders as a procurement and sourcing risk.

Risks of Non-Compliance and the Anti-Circumvention Framework

The existing CBAM penalty for failing to surrender sufficient certificates is EUR 100 per tonne of unreported CO2 — a rate set above the prevailing ETS price to deter under-declaration. This penalty structure carries over to the downstream expansion.

Beyond the certificate penalty, the June 2026 proposal strengthens the anti-circumvention framework in three ways. First, the Commission gains authority to investigate and act against supply chain restructuring designed to exploit the 50-tonne de minimis threshold — for example, artificial shipment splitting or the use of multiple legal entities to remain below the threshold. Second, emission intensity misdeclaration — reporting a lower carbon content for imported steel or aluminum than is verifiable — becomes an explicit enforcement target. Third, pre-consumer aluminum and steel scrap is brought within the CBAM accounting framework, closing the scrap loophole that allowed certain lower-emission precursor substitutions to avoid CBAM costs.

The Strategic Case for Acting in 2026, Not 2027

The June 12 Council agreement is not a formality — it is the strongest legislative signal yet that the downstream expansion will proceed. Companies that treat Council general approach as a compliance trigger gain 18 months to build the supplier data infrastructure, embedded emissions methodology, and declarant registration that CBAM requires. Those that wait for formal adoption risk compressing that preparation into 6 to 9 months while competing for third-party verifier capacity in an already constrained market.

The downstream expansion also creates a secondary strategic opportunity. Companies that build verified embedded emissions data for their supply chains ahead of the 2028 deadline gain a procurement advantage: they can differentiate low-carbon suppliers, model alternative sourcing scenarios, and present board-level carbon cost transparency before it becomes a regulatory requirement. ASUENE’s carbon accounting platform is designed to support exactly this transition — from reactive compliance to proactive supply chain decarbonization.

What’s Next

The European Parliament is expected to adopt its position on the downstream expansion in September 2026, at which point trialogue negotiations between the Council and Parliament will begin. The final product list — and any adjustments to the emissions attribution methodology — will be determined during trialogue, with formal adoption targeted for 2027. In parallel, the Commission will publish default emission values for downstream product categories ahead of the 2028 effective date, and will conduct its first annual review of potential further scope expansions under the mechanism introduced by the Council’s position. Companies should monitor the trialogue process closely: product codes adjacent to the current proposal may be added during negotiations, and the Council’s annual review mandate means the boundary of CBAM’s downstream scope will continue to shift beyond 2028.

Why Work with ASUENE Inc.?

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