If you're a manufacturer that imports to the European Union, you probably know CBAM. But what you might not know is that the European Commission's Directorate-General for Taxation and Customs Union (TAXUD) has just conducted a survey on expanding it to manufactured products outside of its original scope.

CBAM compliance is one of the key reasons our Product Carbon Footprint customers choose Glassdome, so we're here to help you stay ahead of the curve.

Already know all about CBAM as it stands today? Feel free to skip the first section and jump right to the news and references.

What is CBAM?

CBAM stands for the Carbon Border Adjustment Mechanism . The regulation was enacted in 2023 as part of the Fit for 55 package of environmental laws, and is designed to complement the existing EU Emissions Trading System (EU ETS) .

It was developed to deal with “ carbon leakage ” - the practice of producing goods in countries with laxer environmental regulations to save money. A very intentional side effect of the mechanism is to essentially create a tariff on imported CBAM goods, as Europe leads the world in green regulations and energy generation.

CBAM currently covers imported cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.

Under the mechanism, manufacturers of CBAM goods need to quantify direct emissions from the production process of those goods, including heating and cooling, and indirect emissions from the production of electricity consumed during the production process.

The reported emissions have to be specified for each supplier, each type of CBAM good, and include data on how many CBAM goods were imported and any carbon price paid abroad. That information will also need to be provided on a per-product and per-production installation basis.

Financial penalties for non-compliance include a financial penalty that ranges from €10-50 per ton of unreported emissions. If the failure extends beyond six months, the penalties will grow.

Why expand CBAM?

CBAM was already a major regulatory and administrative lift. So why expand it?

A broad reason is that the EU would like the mechanism to include over half of emissions in EU ETS sectors by 2034.

But the survey had a narrower focus. It specifically looked at the necessity and feasibility of expanding CBAM further down the value chain to manufactured downstream goods.

That is because regulators are worried that customers might move manufacturing and processing operations that use basic CBAM goods as inputs outside of the EU. They could then use those carbon-intensive inputs and import the finished goods to Europe without ever being subject to carbon pricing. That would cause not only carbon leakage, but also a loss of skilled manufacturing jobs to outside countries.

And much like the thought process behind the initial scope of CBAM, expansion will also help EU products compete on a more even pricing playing field with foreign goods.

What industries are being considered for expansion?

Any manufacturer who makes finished goods using CBAM inputs outside of the EU should be concerned about CBAM expansion reaching their company.

Automobiles, agricultural products, construction tools and materials, shipbuilding, and more should look out.

What other developments should my company look out for?

Europe is leading the charge on carbon protectionism. But it won't be alone for long.

The United States has seen a rise in protectionism and tolerance for tariffs from both parties. Green policies can help put a cuddly face on higher consumer prices.

Meanwhile, California is using its economic heft to experiment with bills like SB 253 and SB 261 . 

On the flipside, exporting countries may feel the need to respond with new or more aggressive carbon pricing. Even if they don't get the same level of benefit as wealthy importers, tit-for-tat policies can be popular at home.

What should I do to protect my company?

Smart choices start with informed visibility. That's where a solution like the Glassdome Product Carbon Footprint platform comes in. It gives you real data and benchmarking, updated monthly, along with automated ISO 14067 verified reporting, at a price that doesn't break the bank compared with traditional sustainability consultants.

When you're ready to future-proof your company, it's time to talk to one of our experts .