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31 Jul 2026

Econ Digest

CBAM scope expands to downstream products: Key product categories to watch and latest regulatory status

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  • The European Union (EU) is set to expand the Carbon Border Adjustment Mechanism (CBAM) from upstream products to downstream goods with high iron and aluminum content.
    • The original CBAM covers six major carbon-intensive product groups: iron and steel, aluminum, fertilizers, cement, electricity, and hydrogen. Its objective is to align carbon pricing with the measures applied to these industries within the EU.
    • CBAM has been fully implemented since January 1, 2026. The draft legislation reflects the European Union's move toward stricter regulation by extending its scope to certain downstream products that make intensive use of steel and aluminum, aiming to prevent circumvention through product processing or transformation.
    • Under the current draft, the expanded scope covering downstream products is expected to take effect on January 1, 2028, pending the completion of the legislative process. 
  • The products included in the proposed expansion are not limited to basic metals but also encompass various categories of processed and downstream goods.
    • Most of the product categories added under the proposed CBAM expansion are goods that use steel or aluminum as key components and are positioned further downstream in the supply chain than the original upstream products.
    • Product categories that should be monitored under the current proposal include metal products and accessories, such as wire mesh, nails, springs, and fasteners; machinery and equipment, such as engines, pumps, burners, conveyor belts, and industrial robots; electrical equipment, such as motors, transformers, inductors, and insulated cables; vehicles and components, such as freight vehicles, chassis, body structures, gearboxes, wheels, suspension systems, and trailers; as well as metal furniture, prefabricated buildings, and certain types of gas or smoke analyzers.
    • However, this is not yet the final list of products covered by the legislation and may change, following further review and negotiations within the European Union.
       
  • The draft CBAM expansion is not yet final legislation, although its progress is becoming clearer.
    • The current status of the draft legislation is that the proposal has been finalized and is undergoing its first reading. The European Commission submitted the draft on December 17, 2025; the Council of the European Union adopted its position on June 12, 2026; and the Environment, Climate and Food Safety Committee (ENVI) adopted its position on July 6, 2026.
    • The next step involves a plenary vote in the European Parliament, followed by trilogue negotiations among the European Parliament, the Council of the European Union, and the European Commission to finalize the legislative text and the final product list.
    • For Thai businesses, this is not yet an immediate compliance burden, but it is a development worth monitoring. Companies exporting to the European Union or participating in supply chains for steel- and aluminum-intensive products may need to begin assessing the relevance of their products and continue monitoring developments regarding the final product list.​

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