The European Parliament has backed an expansion of the European Union’s Carbon Border Adjustment Mechanism (CBAM) to cover a much wider range of downstream products containing steel and aluminium. The vote on September 15 sets out Parliament’s negotiating position, but it does not yet make the expanded rules final, as negotiations with EU member states still have to take place. The development is important for steel and aluminium exporters because the proposed expansion moves CBAM further down the manufacturing value chain.
From basic metals to downstream products
CBAM currently applies to imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. The European Commission had proposed adding 180 downstream products with significant steel or aluminium content, particularly products considered exposed to carbon leakage. Parliament’s Environment Committee had gone further and proposed expanding the list to 457 products, which became the basis for Parliament’s position in the September plenary.
The proposed coverage goes beyond primary steel and aluminium products. Examples include products such as fasteners, wires, springs, base-metal mountings, cylinders, industrial radiators and machinery for casting, along with certain household products. The European Parliament's research service said around 94% of the downstream products under consideration are industrial supply-chain products with high steel or aluminium content.
Why downstream steel products are being added
The central issue is what happens when a carbon-intensive basic material is covered by CBAM but the finished product manufactured from that material is not. EU institutions have argued that this can create a gap in the system because production of a downstream product could move outside the EU while the finished imported product enters without the same carbon-related cost.
The Commission's original proposal therefore focused on products with a high share of steel or aluminium and a high risk of carbon leakage. The products identified in the proposal contain an average of around 79% steel or aluminium, according to the European Parliament's research service.
Parliament also wants tougher anti-circumvention rules
The September vote was not limited to expanding the product list. Parliament's position also includes measures intended to prevent companies from avoiding CBAM obligations through changes in product classification, composition or supply-chain arrangements. The parliamentary committee had proposed provisions dealing with practices such as resource shuffling and misdeclaration of emissions intensity.
The proposed framework would also introduce additional reporting requirements in specific circumstances to obtain better information about the composition of imported CBAM goods. Online platforms facilitating imports would also be brought within the proposed compliance framework.
Aluminium scrap also comes into focus
Another important part of the September 15 development concerns aluminium. Parliament supported extending CBAM treatment to post-consumer aluminium scrap, while also lowering the threshold for certain aluminium shipments to 5 tonnes from the current 50-tonne level. The changes are intended to address concerns that smaller shipments or the use of scrap could otherwise create routes around the carbon charge.
For the aluminium supply chain, this could increase the importance of accurate classification and documentation of material entering the EU. It also shows that the proposed changes are not limited to finished manufactured products but include measures covering potential circumvention routes.
Emergency brake becomes a major point of difference
The Parliament's position also differs from the approach supported by EU member states on the proposed emergency mechanism. Parliament voted to remove the provision that would allow CBAM-covered goods to receive a temporary exemption in serious and unforeseen circumstances that cause significant price increases. Instead, lawmakers proposed using CBAM revenue to compensate affected industries when the mechanism contributes to higher prices.
EU member states have supported retaining an emergency brake under specified conditions. The difference will therefore have to be addressed during negotiations between Parliament and the Council before the final legislation can take effect.
What this means for Indian steel exporters
For Indian exporters, the proposed expansion matters because access to the European market could increasingly involve carbon-related compliance beyond primary steel products. India has recently secured an annual steel export quota of 1.64 million tonnes under its new EU trade agreement, but the trade agreement does not remove the separate carbon-related obligations associated with CBAM.
This means Indian companies exporting downstream steel products to Europe will need to follow the legislative process closely. The final product list, calculation methodology, reporting requirements and implementation dates will determine which Indian exporters are directly affected and how much additional compliance will be required.
The timeline is not final yet
The Parliament vote is an important legislative step, but it is not the end of the process. The European Parliament and EU member states will now have to negotiate the final text, and differences remain over several elements of the proposal. The original legislative proposal envisages the downstream expansion from 2028, although the final timing will depend on the outcome of the negotiations and the final regulation.
For the steel industry, the immediate focus will therefore be on the final list of covered products and the rules governing embedded emissions. Exporters will also need to monitor how the EU defines circumvention, how scrap is treated and what reporting requirements will apply to downstream products.
A wider carbon compliance net for steel
The September 15 vote marks another step in the expansion of CBAM from basic carbon-intensive commodities towards a broader industrial supply chain. Steel and aluminium producers were already within the mechanism, but the proposed downstream coverage could bring a much larger group of processors, fabricators and manufacturers into the system.
For Indian steel exporters, the issue is particularly relevant because the EU remains an important destination for value-added steel products. The final rules will determine the practical impact, but the direction of the legislation is clear: CBAM compliance is moving further down the steel and aluminium value chain, with greater emphasis on product-level emissions information and anti-circumvention controls.
Source note: This article is based on the European Parliament's September 2026 legislative position and related EU institutional documents. The Parliament's position is subject to negotiations with the Council and should not be treated as the final CBAM legislation.