CBAM after the simplification: what just changed, and what's coming downstream.

Where CBAM stands as of mid-2026

The Carbon Border Adjustment Mechanism, Regulation (EU) 2023/956, has three lives. It entered into force on 17 May 2023. It applied in a transitional reporting-only phase from 1 October 2023 until 31 December 2025. Since 1 January 2026, the definitive period has been live, and importers of CBAM goods now face actual financial obligations — purchasing certificates, surrendering them annually, paying for embedded emissions at a rate tied to the EU Emissions Trading System (ETS).

The product scope today still consists of six sectors: cement, iron and steel, aluminium, fertilisers, hydrogen, and electricity. That much hasn't changed since 2023. What did change, and consequentially, is how all of it works.

What the October 2025 simplification did

Regulation (EU) 2025/2083 — the CBAM Simplification Regulation — was published in the Official Journal on 17 October 2025 and entered into force three days later. It is the first amendment to the CBAM Regulation. It does five consequential things.

First, it introduces a 50-tonne de minimis threshold. An importer bringing in 50 tonnes or less of CBAM goods in a calendar year (cumulative net mass, across cement, iron and steel, aluminium, and fertilisers) is exempt from CBAM obligations for those imports. Hydrogen and electricity are excluded from the exemption. The Commission must review the threshold annually to ensure that at least 99 percent of embedded emissions remain captured. Splitting imports artificially to stay below the threshold is expressly prohibited.

Second, it extends the annual declaration deadline from 31 May to 30 September of the year following imports. The first declaration, covering 2026 imports, is due by 30 September 2027.

Third, it reduces the quarterly certificate holding requirement from 80 percent of year-to-date embedded emissions to 50 percent.

Fourth, it changes how embedded emissions are calculatedfor steel, iron, and aluminium. Emissions from precursor inputs are counted; emissions from finishing and shaping processes are no longer counted. This aligns CBAM's system boundaries with EU ETS rules. Default values are introduced for countries lacking reliable data, set at the highest emission intensity observed among countries with reliable data for the same product type.

Fifth, it builds in an adjustment factor for the gradual phase-out of free allocation under the EU ETS between 2026 and 2034. EU producers still receive some free allowances during the transition; CBAM offsets imports proportionally to keep the playing field level.

The headline effect: the smallest importers are now out of CBAM entirely, the technical methodology is closer to EU ETS, and the calendar is more workable. This took the Commission two years and a major political consultation to settle. The next phase of changes will probably take longer.

The phase timeline

What the December 2025 proposal actually does

COM(2025) 989 final, published on 17 December 2025, is a proposal to amend the CBAM Regulation. As of writing, it is moving through the ordinary legislative procedure — Parliament and Council. It is not yet law. The Commission asked for adoption in time for entry into force on 1 January 2028.

The proposal's main move is adding roughly 180 additional CN tariff linesto Annex I. The addition is steel-and-aluminium-intensive downstream products: machinery, gearboxes, vehicle bodies, car doors, washing machines, freezers, drying machines, certain household articles, construction equipment, fabricated metal hardware, metal furniture, certain scrap metal categories, and a new umbrella category called “combined metal products.” The Commission's own impact assessment estimates that approximately 7,500 additional importers would fall into scope.

The legal basis is Article 30(3) of the original regulation, which always envisaged that downstream goods could be added based on a Commission review of carbon-leakage risk. The political basis is the Steel and Metals Action Plan of 19 March 2025, which flagged the risk that carbon leakage in basic-materials-CBAM might simply shift one step further along the value chain — instead of importing rebar from country X, a buyer imports finished steel doors from country X.

A subtle but important detail: the proposal does not count emissions from the downstream processing or assembly itself. Only the embedded emissions in the precursor materials — the steel, the aluminium — are counted. The Commission's worked example: a car door manufactured in a non-EU country attracts CBAM obligations on the embedded emissions of the steel that went into it, not on the energy used to stamp and weld the door. This keeps the obligation tractable for goods with complex global supply chains.

Why this looks like a redraw of CBAM, not an extension

CBAM was never purely a basic-materials regulation. The original Annex I already included a number of downstream goods. Iron and steel screws, bolts, washers, and similar fasteners under CN heading 7318 have been in scope from the start. So have aluminium wire and cables under CN 7614, and certain semi-finished steel articles. The downstream question, therefore, is not whether CBAM extends past raw materials — it always has — but how much further down the chain it should go.

The current line was drawn at goods one or two processing steps from the basic material. A steel ingot is in. A steel bolt is in. A steel-framed bicycle is not. A washing machine, of which a non-trivial share by mass is steel and aluminium, is not. The proposal moves the line. After 2028, if adopted, the washing machine is in.

The political logic is straightforward. CBAM raises the cost of basic-material imports. If the downstream good is not also covered, a non-EU manufacturer can simply do one more processing step at home and ship the finished product into the EU duty-free on the carbon dimension. This is what carbon leakage means in practice. The downstream extension closes that gap.

The compliance logic is much harder. A downstream good has multiple precursors, possibly from multiple countries, possibly with different emission intensities. Tracing the embedded steel in a washing machine back to a specific mill, in a specific country, in a specific quarter, is a real supply-chain question, not a paperwork question. The proposal's response is to make default values easier to use for multi-precursor downstream goods — specifically, by removing the punitive “mark-up” on default values for these specific goods, so importers can rely on defaults without paying a penalty for doing so.

This is the design choice that makes the extension administratively possible. It is also the choice that determines who in your supply chain has to give you data and who doesn't.

The screws-and-bolts question

The CN heading 7318 example — fasteners — is the one that comes up first in every conversation. They've been in CBAM Annex I since the start. Every importer of a few cardboard boxes of bolts has wondered whether they really need to file a CBAM report.

The answer until October 2025 was: probably yes, with some pain. The answer after the simplification is: probably not, if you import less than 50 tonnes of CBAM goods per year cumulatively across the four mass-eligible sectors. Fifty tonnes of bolts is a lot of bolts. For most SME (small and medium-sized enterprise) importers, the de minimis exemption resolves this. For larger industrial buyers — anyone bringing in tens of thousands of bolts a quarter — the obligation remains, and the methodology now requires data on the embedded emissions of the steel that went into them.

After 2028, if the downstream proposal is adopted as drafted, the same logic would extend to the brackets, the chassis, the housings, the gear assemblies, and the washing machines themselves. The de minimis threshold remains, but the products that count toward it expand.

Anti-circumvention — the proposal's other half

The December 2025 proposal does more than expand scope. It introduces a new concept of “abusive practices” in proposed Article 3(35) — conduct that seeks to gain a benefit by unduly avoiding, in whole or in part, CBAM financial liability. Under proposed Article 6(6a), the Commission could require additional supporting documentation for declarations relating to the identification, combination, and origin of goods.

Proposed Article 17(5a) introduces a financial guarantee provision: a competent authority can require an authorised CBAM declarant to post a guarantee corresponding to its estimated annual quantity of imports if the declarant cannot demonstrate adequate financial capacity to fulfil its CBAM obligations. This is aimed primarily at thinly-capitalised import vehicles set up to absorb CBAM exposure with no actual ability to pay.

The existing CBAM enforcement framework already addressed misclassification and under-declaration. The new provisions address structural avoidance — splitting imports across multiple legal entities to stay under thresholds, routing through a third country, or routing through a jurisdiction with weaker emissions monitoring. The full effect of these provisions, like the rest of the proposal, depends on what the co-legislators do over the next 18 months.

What you can do now

If you are already an authorised CBAM declarant, two things to track:

First, the methodology changes from the October 2025 simplification are live for your 2026 imports. Your first annual declaration on 30 September 2027 will use the new boundaries — precursor emissions counted, finishing not counted — and will benefit from the lower 50 percent quarterly holding requirement. Your existing supplier-emissions data may need to be re-cut to match.

Second, the December 2025 proposal is in legislative process, not law. The shape of the final text — which CN codes make it in, what the de minimis interaction looks like for downstream goods, what the anti-circumvention provisions actually require — will not be settled until late 2026 or 2027. If your products fall under any of the proposed downstream categories, your job for the next eighteen months is to get the supplier emissions data infrastructure ready as ifthe proposal will pass roughly as drafted. If it doesn't, you have better data than your competitors. If it does, you are not scrambling at the last minute. The downside of the early-prep position is small. The downside of the late-prep position is a 2028 in which the same Tuesday-morning container at Antwerp belongs to you.

How Bindu handles it

Bindu maintains the CBAM regulation, the simplification amendments, the December 2025 downstream proposal, the implementing acts, and the country-of-origin emissions defaults as a single versioned rules file. Bindu's compliance agent reads a shipment, identifies CBAM scope, calculates embedded emissions using the appropriate boundary rules, generates the annual declaration, and produces the surrender quantities for certificate purchase. When the proposal becomes law — whatever shape it takes — the rules file updates and your filings adjust. If you want to see how it works on a real bill of materials, book a 30-minute demo.

Priya Ramaswamy leads regulations at Bindu. She wrote the original CBAM article on this site and continues to be sceptical that the next set of amendments will be the last.