The Definitive Phase of CBAM Takes Shape with New Implementing Acts and Draft Regulation on Downstream Products
This blog was originally posted on 14th January, 2026. Further regulatory developments may have occurred after publication. To keep up-to-date with the latest compliance news, sign up to our newsletter.
AUTHORED BY CÉLIA LE LIÈVRE, SENIOR REGULATORY COMPLIANCE SPECIALIST, COMPLIANCE & RISKS
On 17 December 2025, the European Commission published a draft Regulation proposing to extend the Carbon Border Adjustment Mechanism (CBAM) to downstream products and to introduce anti-circumvention measures. In parallel, the Commission issued eight implementing acts providing clarification on the application of CBAM from 1 January 2026.
These secondary legislative measures come at a crucial moment, as CBAM officially entered its definitive phase on 1 January 2026, marking the end of the two-year transitional period.
This blog summarises the key elements of the draft Regulation and CBAM implementing acts.
Secondary Legislation on the Application of CBAM
Authorisation of CBAM Declarants
The implementing act amends Commission Implementing Regulation (EU) 2025/486 on the conditions and procedures related to the status of an authorised CBAM declarant to reflect the simplifications introduced by the Omnibus simplification Regulation (EU) 2025/2083. This regulation has made the consultation of other competent authorities voluntary when granting and revoking the status of authorised CBAM declarant. The Omnibus Regulation also postpones the deadline for submitting CBAM declarations and surrendering CBAM certificates via the CBAM registry to 30 September each year, starting in 2027 for 2026 imports. Furthermore, it introduces a grace period allowing importers who apply for authorised declarant status before 31 March 2026 to continue importing CBAM goods throughout 2026 until the competent authority issues a decision on their application. Consistent with these changes, the act makes the consultation with other competent authorities optional under Regulation 2025/486 and maintains the transitional measure for importers who have submitted an application to obtain the status of authorised declarant before 31 March 2026.
Calculation of Embedded Emissions
This act provides rules for third country producers on how to monitor and calculate embedded emissions in goods they produce. Regardless of whether embedded emissions are determined on the basis of actual or defaults values, emissions shall be calculated in accordance with Annex IV to the CBAM Regulation. To quantify and calculate the specific embedded emissions of goods, the act specifies that producers are expected to first monitor emissions at installation level, determine which of those emissions are to be attributed to a production process and then to attribute those emissions to goods covered by that production process. To ensure accuracy and consistency, the act aligns the system boundaries and monitoring rules with those of the EU ETS.
Default Values
This act sets out the default values by Combined Nomenclature (CN) code and country of origin applicable for the definitive period starting on 1 January 2026. For goods other than electricity, the default values for embedded emissions include a mark-up to account for potential deviations where individual installations have emission levels higher than the average emission intensity in the producer country. The mark-ups will be introduced gradually to avoid immediate disproportionate impacts on goods prices and to give operators adequate time to adapt. The gradual approach is also necessary given the expected increase in the number of verifiers over the coming years. During the initial years following the transition period, CBAM declarants should be permitted to use default values and switch to actual emissions data thereafter. These default values and their mark-ups must be reviewed by the Commission at the latest by December 2027.
Verification of Declared Embedded Emissions
The CBAM Regulation requires that embedded emissions that are determined based on actual values must be verified by an accredited verifier. In the first year of verification, the verifier must conduct an on-site inspection of the installation where the relevant CBAM goods are produced. The verifier may replace the physical site visit with a virtual inspection or waive on-site visit in the second consecutive year, provided that a site inspection was carried out in the preceding year. All the conditions for virtual site visits, as listed in Article 3 of this delegated act, must also be satisfied. A physical site visit must take place at least once every two years. The act further clarifies that a risk-based approach to verification should be applied to provide reasonable assurance that the declared emissions are not materially misstated and that the report can be verified as satisfactory.
Price of CBAM Certificates
This implementing act outlines how the price of CBAM certificates is calculated and made available to declarants. From 2027 onwards, the price will reflect the weekly average price of ETS allowances. For goods imported in 2026, the price of CBAM certificates will be calculated on the basis of four quarterly averages of EU ETS allowance prices. The Commission should determine the price of CBAM certificates promptly once the required information is available, to avoid unnecessary delays. The certificate price should be finalised after all auctions for the relevant period have taken place and after auction platforms have made information on all auction clearing prices and volumes available to the Commission.
Free Allocation Adjustment
This act sets out the methodology for calculating adjustments to the number of CBAM certificates to be surrendered in order to reflect the extent to which EU ETS allowances are allocated free of charge. The adjustment may be based on actual data or, alternatively, on the default CBAM benchmarks provided in the Annex.
Accreditation of Verifiers
This act establishes the conditions under which national accreditation bodies will grant accreditation to verifiers for CBAM purposes, specifically the supporting documentations involved and the expected capacity of the applicants. It also clarifies the conditions for the control and oversight of accredited verifiers by the national competent authorities and the Commission, including the requirements and verification activities of verifiers, the applicable administrative measures, and the information exchange between them.
Information to be Shared by Customs Authorities
This act specifies the frequency, method, and scope of the information that customs authorities must transmit to the European Commission. Data collected by customs on CBAM goods declared for import will be stored in the CBAM registry and used to cross-check the information submitted by authorised CBAM declarants.
Functioning of CBAM Registry
This act sets out the rules governing the definitive CBAM Registry. The rules aim to standardise and enhance the security of the registry, streamline access for authorised declarants and delegated users, ensure access for customs authorities and verifiers, and facilitate information exchange between the EU Commission and national competent authorities.
CBAM Extension to Downstream Products
In its current form, the CBAM applies to a limited set of basic material goods, listed in Annex I of the CBAM regulation (aluminium, cement, electricity, fertilisers, hydrogen, and iron and steel). These basic materials serve as intermediate inputs for manufacturing goods further down the production chain (known as downstream products).
According to the European Commission, EU producers of these products face a “dual cost pressure”. Producers not only bear the direct carbon costs of their own production but also the increased input costs from suppliers covered by the CBAM. As highlighted in the Steel and Metals Action Plan published in 2025, the situation may encourage companies to relocate production outside the EU, thereby shifting emissions abroad and undermining the objectives of the EU’s climate policy.
To address carbon leakage risks, the draft regulation proposes to extend the scope of CBAM to include approximately 180 downstream products. If adopted, the extension of scope will apply from 1 January 2028. The complete list can be found in the Annex accompanying the draft Regulation. Examples of affected sectors include:
- A range of household or laundry-type washing machines (as listed in the Annex),
- Hardware,
- Construction equipment,
- Refrigerator-freezers,
- Steam or sand blasting machines,
- Various machinery (as listed in the Annex),
- Vehicle parts, such as gear boxes and chassis.
Note that while the expansion currently concerns selected steel and aluminium intensive downstream products, a potential expansion to downstream products related to cement, fertilisers and hydrogen will be considered for future legislation.
Anti-Circumvention Measures
The draft Regulation includes several anti-circumvention safeguards to address risks of mis-declaration of emission intensities and abusive practices. In particular, the draft includes pre-consumer aluminium and steel scrap (i.e. materials discarded during the manufacturing process before a product reaches consumers) as a CBAM precursor in the calculation of embedded emissions. It also empowers the Commission and competent authorities to request evidence to prove that the imported goods were produced in the declared installation (and for the declared production period), thereby addressing the risk of mis-declaration of emissions intensities due to the lack of traceability.
Likewise, to tackle risks of abusive practices, the draft regulation empowers the European Commission to determine, in specific cases involving certain combinations of goods and origins, that actual emissions data may only be used if additional supporting documentation is provided to demonstrate that the relevant producers have not engaged in such practices. When the Commission has gathered sufficient evidence indicating a high risk of abuse, it must take action within three months to mitigate these risks.
Last but not least, national competent authorities would be able to request a financial guarantee in further cases when the authorised CBAM declarant does not surrender the sufficient amount of CBAM certificates at the end of each quarter.
Ratio of CBAM Certificates
Following the Omnibus Regulation amending the CBAM, authorised CBAM declarants must, from 2027 onwards, ensure that the number of certificates held in their CBAM registry account at the end of each quarter equals at least 50% of the emissions embedded in goods imported into the Union since the beginning of the year. This requirement applies to declarants importing CBAM goods exceeding the annual mass-based threshold of 50 tonnes.
The draft regulation further clarifies that this obligation operates on an annual cycle. Accordingly, only certificates purchased within the current calendar year are to be considered in the quarterly calculation (certificates acquired in previous years are excluded).
Temporary Decarbonisation Fund
A central innovation of the package is the establishment of a Temporary Decarbonisation Fund. The fund is designed to provide targeted financial support to EU producers of selected CBAM goods that remain exposed to carbon leakage risks. The list of eligible goods is set out in the Annex to the implementing act.
The support mechanism will operate exclusively in 2028 and 2029, serving as a transitional measure pending a broader review of long-term approaches to carbon leakage from 2028 onwards. The fund will be financed through contributions from Member States, equivalent to 25% of the revenues generated from the sale of CBAM certificates in 2026 and 2027, while the remaining 75% will constitute an EU Own Resource. To access the support, producers of eligible goods must apply to the competent authority in their Member State by 31 March 2028 and demonstrate their decarbonisation efforts – including, where applicable, through the adoption of a climate neutrality plan – in line with the criteria of Article 7 of the act.
Entry Into Force
The CBAM implementing acts came into force on 25 December 2025, three days after their publication in the Official Journal of the EU.
The draft Regulation expanding the scope of CBAM to downstream products and introducing anti-circumvention measures must be subject to the ordinary legislative procedure before it can be enacted. The regulation is scheduled to enter into force on the third day following its publication in the EU Official Journal.
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