New Measures to Prevent Carbon Leakage: What the European Steel and Metals Action Plan Means for CBAM

The European Commission continues to implement and adapt the CBAM mechanism to effectively prevent carbon leakage. A key element of this effort is the recently introduced European Steel and Metals Action Plan, which provides solutions to existing challenges in the international competition within the metals industry. Particularly relevant for companies are the planned expansion of CBAM to cover additional products and new measures against circumvention strategies.

Expansion of the CBAM Mechanism to Exports

CBAM was introduced to ensure that imported goods are subject to European emission costs. However, the mechanism does not yet address the opposite challenge: European manufacturers exporting their goods to third countries compete directly with producers from regions with lower climate protection requirements. This creates a risk of production capacity shifting abroad or European exports losing competitiveness. The Commission is therefore planning a legislative adjustment to offer a solution for exported CBAM goods as well, aiming to reduce this competitive distortion and establish a level playing field for exports.

Extending CBAM to Downstream Products

Another issue arising from the current regulation is the potential shift of carbon leakage along the value chain. CBAM currently focuses mainly on basic materials such as steel and aluminum but does not sufficiently cover processed products. This could lead to an increased demand for imported finished goods from third countries, as these products are not subject to CBAM obligations. To counteract this development, the European Commission is planning to extend CBAM to certain downstream products. The exact product groups to be included will be determined by the end of 2025.

Measures Against Circumvention and Greenwashing

In addition to directly expanding the CBAM framework, the EU is also planning targeted measures against circumvention strategies. One of the biggest challenges is so-called "resource shuffling," where low-emission production capacities are deliberately used for exports to the EU while carbon-intensive production continues for other markets. Similarly problematic is greenwashing in emissions accounting. Certain metal-processing industries use electricity market mechanisms to present themselves as low-emission, even though they continue to rely on carbon-intensive energy sources. The Commission is currently working on an anti-circumvention strategy, which is expected to be introduced in the second half of 2025.

Next Steps and Implications for Businesses

By the end of 2025, the European Commission will present concrete legislative proposals to adapt CBAM. Companies should prepare in advance for the expansion of CBAM’s scope, which may include additional product groups. This is particularly crucial for export-oriented businesses and downstream industries, which must closely monitor regulatory developments and adjust their strategic planning accordingly. Companies that already establish structures to efficiently manage emissions documentation will be better positioned to adapt to upcoming changes.

Conclusion

The European Steel and Metals Action Plan demonstrates the EU’s commitment to further developing CBAM and closing existing loopholes. The planned measures could have far-reaching implications for international trade in metal products. Companies should prepare for both exports and downstream products to be increasingly integrated into the CBAM framework. At the same time, stricter measures against circumvention strategies are to be expected. A proactive approach to these developments is essential for maintaining long-term competitiveness.

Support for Implementing the New Requirements

If you need assistance in analyzing the impact of the European Steel and Metals Action Plan on your business or preparing for the upcoming adjustments, feel free to contact us directly (helge@kolum.earth). Best regards, Helge Wieggrefe