The European Union is moving to broaden its Carbon Border Adjustment Mechanism (CBAM) to include manufactured goods such as car parts, household appliances, and construction equipment, signaling a shift from targeting raw materials to addressing embedded emissions deeper in global supply chains.
The expansion, currently in draft form, comes as Brussels seeks to close loopholes that could allow polluting imports to bypass climate costs while protecting domestic industries from carbon leakage.
CBAM, which officially starts in January, is a world-first policy charging importers for the carbon footprint of goods entering the EU. Its initial scope has been limited to high-emission commodities, including steel, cement, and aluminum. Under the proposed extension, the levy would cover items further along the production chain, including refrigerators, washing machines, power transformers, cables, and farming machinery, products identified as particularly vulnerable to companies relocating production abroad to escape strict European climate rules.
By pricing carbon into imports, the EU aims to maintain competitiveness for local manufacturers while incentivizing cleaner production internationally. However, the policy has already drawn criticism from trading partners such as China, India, and South Africa, who argue that CBAM could disproportionately affect emerging economies reliant on exports of industrial goods. European policymakers counter that the mechanism is designed not to block trade but to internalize environmental costs that domestic companies already face.
CBAM revenues are expected to reach approximately €2.1 billion by 2030. The EU has proposed allocating 25% of these funds to support domestic manufacturers between 2028 and 2029, contingent upon investments in decarbonization. This provision introduces a feedback loop intended to accelerate technology adoption, upgrade manufacturing processes, and reduce overall carbon intensity across the continent’s industrial base.
The expansion also raises practical questions about enforcement, reporting, and verification of carbon content in complex manufactured goods. Accurately assessing the lifecycle emissions of products like washing machines or automotive components requires extensive supply chain transparency and auditing, a challenge the EU will need to address to prevent disputes and ensure policy integrity.
