Extend the CBAM protocol to processed goods as well, in order to reduce emissions

To apply the CBAM protocol not only to raw materials, but also to a list of processed products to be reviewed annually. This is the proposal that the Council of Europe approved yesterday and which now awaits scrutiny by the European Parliament. According to Makis Keravnos, Minister of Finance of the Republic of Cyprus, ‘the position agreed today is the first step towards making the system more robust’.

The CBAM, which comes into force on 1 January 2026, is an environmental tax that targets carbon emissions embedded in products imported into the EU from third countries in certain particularly polluting sectors, such as fertilisers or iron and aluminium. The aim is to encourage cleaner industrial production outside Europe as well. As things stand, there is a risk that goods produced in the EU using large quantities of materials subject to CBAM will increase emissions outside the Union, as well as replacing goods manufactured in the EU and therefore subject to the ETS (Emissions Trading Scheme).

To prevent circumvention of the protocol, the Council has approved the Commission’s proposal to introduce measures that would bring pre-consumer metal scrap> within the scope of the CBAM. The Commission is also to be empowered to take action in the event of misleading practices by high-risk companies.

To avoid potential negative effects on the single market, the Commission had suggested temporarily exempting goods from the scope of the CBAM. The Council sets out the procedure to be followed in greater detail and specifies the limits of the Commission’s power to grant exemptions. According to the Council, the power to grant exemptions from the tax should be based on clear and objective criteria, including Europe’s exposure to severe price increases. Negotiations between the two institutions will begin as soon as the Parliament has adopted its position, with the aim of reaching an agreement by the end of the year.