The European Parliament's Environment Committee has voted through a significantly strengthened version of the EU's Carbon Border Adjustment Mechanism (CBAM), closing a string of loopholes that risked undermining the policy and extending its reach well beyond raw materials (European Parliament). The committee backed the changes 56 to 11, with 12 abstentions, alongside a related temporary decarbonisation fund (TDF) that passed 59 to 16.
The loophole-closing is the headline news for compliance teams. MEPs clarified that "slightly modifying" imported goods to dodge CBAM must also cover slight processing, not just cosmetic changes. They tightened anti-circumvention rules so they target arrangements set up purely to avoid CBAM — while still allowing normal cost-driven business decisions. Where a pattern of circumvention is detected, the Commission can now apply the true country of origin's default carbon values instead of the declared one. Notably, MEPs also deleted the Commission's proposed "price shock" safeguard, which would have let goods be pulled out of scope if prices spiked — replacing it instead with a mechanism to temporarily redirect CBAM revenues to sectors hit by such shocks. A new online-imports loophole is being closed too, with a single weight-based limit applied across a seller's total shipments rather than parcel by parcel, closing the door on splitting shipments to dodge thresholds, with retroactive liability if they do.
On scope, MEPs backed the Commission's plan to extend CBAM from basic materials to a long list of downstream goods — think finished steel and aluminium products like fasteners, wire, springs and household articles — provided the expansion is based on transparent, quantitative methodologies. They also removed the Commission's proposed option to let importers offset CBAM obligations using Paris Agreement Article 6 carbon credits, a move that tightens the mechanism's environmental integrity considerably.
CBAM rapporteur Mohammed Chahim (S&D, NL) called it "a balanced package that protects European industry as it decarbonises while safeguarding the environmental integrity of the mechanism," adding that the compromise makes CBAM "stronger, fairer and more resilient." Pascal Canfin (Renew, FR), rapporteur for the accompanying decarbonisation fund, framed it as a competitiveness move too, saying it strengthens "anti-circumvention rules, notably against resource shuffling from China," while offering fertiliser producers and export-facing companies more support.
The temporary decarbonisation fund itself would run from 2027–2029 (the Commission had proposed a 2028 start), covering strategic inputs like urea, ammonium nitrate and ammonium sulphate, with all downstream operators using CBAM-covered goods as inputs eligible for support. Leftover fund revenue could be redirected to the EU's international climate finance commitments rather than returned to member states.
This builds on the simplification measures Parliament adopted in 2025, which exempted 90% of importers from CBAM's administrative requirements while still keeping 99% of relevant CO2 emissions inside scope. Parliament is expected to adopt its full negotiating mandate with member states at the September plenary session — the file to watch for any business with EU-facing supply chains in steel, aluminium, fertiliser, or other covered goods.