The transition of the Carbon Border Action Mechanism (CBAM) to its definitive phase represents a major turning point for global exporters and European importers. Greenhouse gas emissions are no longer just a reported environmental indicator; they are transformed into direct economic costs, which can directly affect prices, margins and overall competitiveness in the European market.

In a broader sense, CBAM is part of a long-term structural shift in the regulation of global trade. Companies that can integrate emissions management, supply chain decarbonization, and sustainable sourcing into their business strategy will be much better prepared to face new regulatory risks.

1. Avoiding double pricing of carbon

An important feature of the whole system is the pursuit of fairness and recognition of the costs of decarbonisation already paid in the country of origin. For example, if Korean manufacturers have demonstrably spent carbon funds under their domestic (Korean) emissions trading scheme, they can apply for corresponding adjustments to reduce its CBAM liabilities. This mechanism serves as a key tool to mitigate the risk of double pricing.

2. Significant expansion of scope from 2028

The European Commission presented a legislative proposal on 17 December 2025, which plans to significantly extend the scope of this mechanism from 2028. The rules should once again apply to approximately 180 related products, that contain steel or aluminum, which will affect a number of other industries.

According to the proposal, CBAM will include, for example:

• Trucks and selected commercial vehicles;
• Engines and various industrial machines;
• Construction and handling equipment;
• Transformers, electric motors and other selected electrical equipment;
• Home appliances including refrigerators, washing machines, and dryers;
• A wide range of other industrial products containing aluminum or steel components.

3. Selective targeting of components and closing legislative gaps

A key complication for businesses is the fact that CBAM obligations may apply to selective for specific materials and components within a complex product, rather than across the entire final product. Manufacturers must therefore know in detail not only the customs classification of the goods, but also the exact material composition of each component.

Moreover, in June 2026, the EU Council proposed a further extension of the CBAM to approximately 200 items with high consumption of steel and scrap metal. The move is intended to effectively plug loopholes in the law that would allow companies to escape carbon costs. The proposal also strengthens the enforcement powers of the European Commission, which will be able to take direct action against high-risk companies submitting false or misleading reports.

4. Practical recommendations for businesses to ensure compliance

To maintain their position in the European market, companies must shift their efforts from simple reporting to strategic planning. Experts recommend focusing on these three pillars:

1. Implementation of internal measurement systems: Companies should build systems capable of accurately measuring emissions directly at the product level and maintaining verifiable data. Using actual emissions rather than tabulated (default) values is the best way to minimize the financial burden resulting from CBAM.
2. Closer coordination in the supply chain: The purchase of carbon certificates requires precise coordination between foreign exporters and importers within the EU. Trade agreements should clearly define in advance data sharing, responsibility for emissions auditing and the precise distribution of financial costs associated with CBAM.
3. Comprehensive risk assessment: Given the expansion of the mechanism and downstream products, companies must reassess their risks comprehensively. It is not enough to know just the customs code - it is necessary to analyze the entire supply chain structure and the profiles of embedded emissions in all inputs. JRi&CO2AI