COMMISSION STAFF WORKING DOCUMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards the extension of its scope to downstream goods and anti-circumvention measures
Date: 2025-12-17
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: EU Emissions Trading Scheme, European Economic Area, carbon, emission allowance, goods, greenhouse gas, import (EU), reduction of gas emissions, surveillance concerning imports, third country

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   EUROPEAN COMMISSION  Brussels, 17.12.2025  SWD(2025) 987 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards the extension of its scope to downstream goods and anti-circumvention measures {COM(2025) 989 final} - {SEC(2025) 989 final} - {SWD(2025) 988 final} - {SWD(2025) 989 final}  
 
 
Subsidiarity Grid 

1.  Can the Union act? What is the legal basis and competence of the Unions’ intended action? 

1.1 Which article(s) of the Treaty are used to support the legislative proposal or policy initiative? 

The proposal amends an existing regulation. Therefore, the legal basis for the proposal is the same 
as the legal basis of the amended Regulation, namely Article 192(1) of the Treaty on the Functioning 
of the European Union (‘TFEU’) in the area of environment protection. In accordance with Articles 
191  and  192(1)  of  TFEU,  the  Union  shall  contribute  to  the  pursuit,  inter  alia,  of  the  following 
objectives:  preserving,  protecting  and  improving  the  quality  of  the  environment,  promoting 
measures at international level to deal with regional or worldwide environmental problems, and in 
particular combating climate change.  

Article 30(3) of the CBAM Regulation sets out that the Commission present a report to the European 
Parliament and to the Council that identifies downstream products to be considered for inclusion 
within the scope of this Regulation.   

1.2 Is the Union competence represented by this Treaty article exclusive, shared or supporting in 
nature? 

In the case of environment, the Union’s competence is shared. 

Subsidiarity does not apply for policy areas where the Union has exclusive competence as defined 
in Article 3 TFEU1. It is the specific legal basis which determines whether the proposal falls under 
the subsidiarity control mechanism. Article 4 TFEU2 sets out the areas where competence is shared 
between the Union and the Member States. Article 6 TFEU3 sets out the areas for which the Unions 
has competence only to support the actions of the Member States. 

2.  Subsidiarity Principle: Why should the EU act? 

2.1 Does the proposal fulfil the procedural requirements of Protocol No. 24: 

-  Has there been a wide consultation before proposing the act? 
- 

Is there a detailed statement with qualitative and, where possible, quantitative indicators 
allowing an appraisal of whether the action can best be achieved at Union level? 

The Commission engaged in an array of public and targeted consultations, for the preparation of 
this  proposal.  A  Call  for  Evidence  and  a  public  consultation  were  carried  out  from  1  July  to  26 
August 2025 with  the  aim  to  collect  feedback  on  the  problems,  objectives  and  policy options  to 
improve  the  functioning  of  CBAM.  In  addition  to  these,  the  Commission  services  engaged  in 
extensive consultations with public authorities within the EU and third countries, as well as with 
industry  representatives,  civil  society  representatives  and  international  or  intergovernmental 
organisations. These took the form of bilateral meetings, discussions at the CBAM informal expert 
working group, interviews in the context of studies dedicated to the downstream scope extension 
and electricity, as well as surveys of the national competent authorities and customs authorities in 
the context of the CBAM risk management framework.  

1 https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:12008E003&from=EN  
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The explanatory memorandum of the proposal and the impact assessment, under chapters 3.2 
and 3.3, contain a qualitative appraisal of how the proposal is in conformity with the principle of 
subsidiarity. More information is available in the answer to question 2.2. below. 

2.2 Does the explanatory memorandum (and any impact assessment) accompanying the 

Commission’s proposal contain an adequate justification regarding the conformity with the 
principle of subsidiarity? 

The  explanatory  memorandum  and  accompanying  impact  assessment  clearly  explain  why  the 
objectives of this initiative cannot be adequately achieved by Member States acting alone and can 
be  better achieved by taking action at  Union level. The  three  problem strands addressed by the 
initiative,  namely  the  risks  of  downstream  carbon  leakage,  CBAM  avoidance,  and  limited 
decarbonisation incentives for electricity imports, arise from causes that are common to all Member 
States. If Member States were to act separately, they would likely exhibit diverging approaches, risk 
legal  uncertainty  and  could  create  market  distortions,  undermining  the  integrity  of  the  internal 
market.  

2.3 Based on the answers to the questions below, can the objectives of the proposed action be 

achieved sufficiently by the Member States acting alone (necessity for EU action)? 

The three problems of downstream carbon leakage, CBAM avoidance and ineffective treatment of 
electricity imports addressed by the proposal stem from the incomplete design of the CBAM, which 
is an EU-level environmental policy tool. CBAM is designed to complement and reinforce the EU ETS, 
which is itself an EU-wide instrument. The effectiveness of both mechanisms depends on a uniform 
carbon price signal applied consistently for the relevant sectors across all EU Member States. Action 
to safeguard CBAM’s environmental  integrity going  forward can  thus  only  be effectively  taken at 
Union level.     

(a)  Are there significant/appreciable transnational/cross-border aspects to the problems 

being tackled? Have these been quantified? 

All three  problem strands addressed  have  significant cross-border and transnational dimensions, 
which  is  why  they  cannot  be  effectively  tackled  by  individual  Member  States.  In  the  case  of 
downstream carbon leakage, production of carbon-intensive downstream goods may be replaced 
by imports from third countries with lower or no carbon pricing compared to the EU. The risk arises 
because of persistent carbon price gaps between  the EU and third countries and because supply 
chains and trade flows operate across borders. CBAM avoidance practices are also cross-border by 
nature as they are inseparable from CBAM being an EU-wide instrument whose integrity requires 
consistent  enforcement  along  the  EU’s  external  border.  Electricity  imports  equally  involve 
transnational aspects as decarbonisation incentives for third country grid operators depend in part 
on CBAM being applied in a way that acknowledges and rewards their decarbonisation efforts. 
The magnitude of the risks has been quantified for the problem of downstream carbon leakage and 
electricity, while for anti-avoidance they have been qualitatively assessed based on evidence from 
the transitional period and stakeholder feedback. 

(b)  Would national action or the absence of the EU level action conflict with core objectives of 

the Treaty5 or significantly damage the interests of other Member States? 

National  responses  to  deal  with  downstream  carbon  leakage, avoidance risks,  and  electricity 
imports  would likely  exhibit diverging approaches,  risk  legal  uncertainty  and could  create market 

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distortions, undermining the integrity of the internal market. In the absence of EU level action, the 
identified problems would remain unaddressed, risking negative impacts on meeting EU and global 
climate goals.   

(c)  To what extent do Member States have the ability or possibility to enact appropriate 

measures? 

Member States do not have the possibility to enact appropriate measures as they cannot amend 
the CBAM itself, which is necessary to effectively address the risks related to downstream carbon 
leakage, CBAM avoidance, and limited decarbonisation of electricity imports. Any national measures 
could  therefore  not  address  the  root  causes  (e.g.  CBAM’s  limited  product  scope)  but  only  the 
symptoms,  for  instance,  by  providing  direct  support  to  affected  downstream  producers.  These 
would likely have significant unintended consequences as outlined in the answer to question 2.3.(b) 
above.  

(d)  How does the problem and its causes (e.g. negative externalities, spill-over effects) vary 

across the national, regional and local levels of the EU? 

For downstream carbon leakage, the underlying drivers (i.e. carbon price gap, limited product scope) 
are common to all Member States, however, exposure is geographically concentrated. Specifically, 
the  problem  is  more  significant  in  countries,  regions  and  towns  with  a  large  ‘fabricated  metal 
products’ sector, where cost pass-through from basic materials is strongest, and deep integration 
into global value chains.  
For CBAM avoidance,  the main causes (i.e. carbon price gap, limited product  scope, sub-optimal 
monitoring structures, remaining regulatory oversight vulnerabilities) are also EU-wide, but practical 
risks and enforcement challenges may vary by Member State due to differences in administrative 
capacity.  
For  electricity  imports,  the  problem  arises  in  Member  States  (and  regions)  that  are  physically 
interconnected with non-EU power systems, and its magnitude depends on the carbon intensity of 
those systems and the volume of cross-border flows.  

(e)  Is the problem widespread across the EU or limited to a few Member States? 

The problem drivers are the same across the EU, while exposure to the problems is likely to be 
higher in some Member States as outlined in the answer to question 2.3.(d) above.  

(f)  Are Member States overstretched in achieving the objectives of the planned measure? 

No, the preferred policy options have been selected in part to keep the administrative burden and 
enforcement costs to a minimum. The proposed balanced scope extension to at-risk downstream 
goods with significant climate relevance would cover mostly goods with a high basic material share 
for  which  assigning  embedded  emissions  is  expected  to  be  more  straightforward  than  for  more 
targeted  approach 
complex  goods. 
that focuses enforcement efforts  on  the  highest and  most  material avoidance risks rather  than 
imposing blanket obligations on all importers. As concerns electricity, the administrative impacts of 
the proposed amendments are expected to be limited, as the assessed policy options for electricity 
do not entail a change in the CBAM scope but rather an adjustment of the methodology. Therefore, 
the preferred policy option will not affect the number of electricity importers covered by CBAM or 
the number of declarations submitted. 

the  preferred  option 

For avoidance, 

reflects a 

(g)  How do the views/preferred courses of action of national, regional and local authorities 

differ across the EU? 

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Feedback received from Member States’ authorities either in the context of bilateral consultations 
or in discussions in Council, the CBAM Committee, the CBAM informal expert working group, 
dedicated surveys have confirmed general support to the proposed targeted interventions to 
strengthen the effectiveness of CBAM. Notwithstanding these different views exist among 
Member States to the extensiveness of the proposed action. For example, certain Member States 
favour a more extensive downstream extension outright, while others supporting a more 
measured approach in the beginning followed by further waves of scope extension in the future. 
Similarly certain Member States have favoured more stringent approaches to address avoidance  
than others.  Regarding electricity, there is broad support for a change of the existing rules, with 
Member States importing electricity from third countries that have a considerable share of 
renewables in their electricity grid being particularly interested in a review of the current approach 
to the calculation of the default values.   

2.4 Based on the answer to the questions below, can the objectives of the proposed action be 

better achieved at Union level by reason of scale or effects of that action (EU added value)? 

EU-level  action  to  strengthen  and  adapt  CBAM  delivers  clear  added  value  compared  to 
uncoordinated national measures or inaction. It ensures that a uniform carbon price continues to 
be  applied  consistently throughout  the  EU,  thereby  upholding  the  principle  of  fair  competition 
between  businesses  across  Member  States  based  on  a  level  playing  field.  Furthermore,  only 
coordinated EU-level action can ensure continued coherence between CBAM and the EU ETS as well 
as sectoral decarbonisation initiatives, such as the Clean Industrial Deal. This integrated approach 
strengthens  the  effectiveness  of  the  EU’s  clean  transition framework  as  a  whole. Lastly, EU-level 
action  sends  a  far  stronger  and  more  credible  signal  to  the  world  than  fragmented  national 
measures, affirming that decarbonisation investments and ambitious climate policies are necessary 
and worthwhile.   

(a)  Are there clear benefits from EU level action?  

Yes, as only a strengthening of CBAM at EU-level can effectively address the risk of downstream 
carbon leakage, close avoidance channels, and provide adequate incentives for decarbonisation of 
electricity imports.  

(b)  Are there economies of scale? Can the objectives be met more efficiently at EU level 

(larger benefits per unit cost)? Will the functioning of the internal market be improved? 

Yes, as only coordinated EU-level action can ensure continued coherence between CBAM and the 
EU  ETS  as  well  as  sectoral  decarbonisation  initiatives,  such  as  the  Clean  Industrial  Deal.  This 
integrated  approach  strengthens  the  effectiveness  of  the  EU’s  clean  transition framework  as  a 
whole. Lastly, EU-level  action  sends  a  far  stronger  and  more  credible  signal  to  the  world  than 
fragmented national measures, affirming that decarbonisation investments and ambitious climate 
policies are necessary and worthwhile.   

(c)  What are the benefits in replacing different national policies and rules with a more 

homogenous policy approach? 

The revision of CBAM will not replace national policies.  

(d)  Do the benefits of EU-level action outweigh the loss of competence of the Member States 
and the local and regional authorities (beyond the costs and benefits of acting at national, 
regional and local levels)? 

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The revision of CBAM will not lead to any loss of competence of the Member States nor of the local 
and regional authorities.  

(e)  Will there be improved legal clarity for those having to implement the legislation? 

Yes,  action  at  Union  level  to  revise  CBAM  ensures  that  a  uniform  carbon  price  continues  to  be 
applied  consistently throughout  the  EU,  thereby  upholding  the  principle  of  fair  competition 
between businesses across Member States based on a level playing field. For the simplification of 
declaring actual values for electricity imports, specifically, the preferred option is explicitly designed 
to improve legal clarity for importers.  

3.  Proportionality: How the EU should act 

3.1  Does the explanatory memorandum (and any impact assessment) accompanying the 

Commission’s proposal contain an adequate justification regarding the proportionality of the 
proposal and a statement allowing appraisal of the compliance of the proposal with the 
principle of proportionality? 

The proposal is limited to targeted adjustments of an existing EU-level mechanism. These were in 
part  already  foreseen  at  the  time  of  CBAM’s  adoption  (in  the  case  of  the  scope  extension  to 
downstream  products)  and  do  not  go  beyond  what  is  necessary  to  address  clearly  identified 
shortcomings (in the case of avoidance and electricity). 

3.2 Based on the answers to the questions below and information available from any impact 
assessment, the explanatory memorandum or other sources, is the proposed action an 
appropriate way to achieve the intended objectives? 

Yes, as the initiative concerns the strengthening of CBAM, an EU-level instrument, to address the 
risk of downstream carbon leakage and encourage decarbonisation in a feasible and cost-effective 
way, thus reducing GHG emissions and fighting climate change globally. The proposed changes to 
CBAM, including its scope (downstream), enforcement capability (avoidance), and methodological 
simplification (electricity), can only be delivered at Union level.   

(a)  Is the initiative limited to those aspects that Member States cannot achieve satisfactorily 

on their own, and where the Union can do better? 

Yes, as outlined in the answer to question 3.2 above. 

(b)  Is the form of Union action (choice of instrument) justified, as simple as possible, and 
coherent with the satisfactory achievement of, and ensuring compliance with the 
objectives pursued (e.g. choice between regulation, (framework) directive, 
recommendation, or alternative regulatory methods such as co-legislation, etc.)? 

The preferred options to address the three problem strands were in part chosen because they keep 
the administrative burden for importers and third country producers low relative to the expected 
environmental gains. The proposal also simplifies CBAM further where it can and aims to make its 
enforcement mechanisms more robust.  

(c)  Does the Union action leave as much scope for national decision as possible while 

achieving satisfactorily the objectives set? (e.g. is it possible to limit the European action to 
minimum standards or use a less stringent policy instrument og approach?) 

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Yes,  as  the  initiative  adjusts  only  the  EU-level  design  features  of  CBAM  to  strengthen  its 
effectiveness. Member States remain free to adopt national measures in the concerned domain of 
environment, for instance, through complementary national decarbonisation policies.  

(d)  Does the initiative create financial or administrative cost for the Union, national 

governments, regional or local authorities, economic operators or citizens? Are these costs 
commensurate with the objective to be achieved? 

The  proposed  downstream  extension  and  the  additional  anti-avoidance  measures  will  entail  an 
increase in enforcement costs for National Competent Authorities and Customs Authorities as well 
as increased compliance costs for some EU importers and their suppliers in third countries. These 
enforcement  and  administrative  costs  have  been  quantified  in  the  accompanying  impact 
assessment. The preferred options have been chosen precisely because they exhibit the strongest 
cost/benefit  ratio,  that  is  they  aim  to  keep  the  administrative  burden  low  relative  to  the 
environmental gains.  
The adjusted treatment of electricity imports, on the other hand, will reduce the reporting burden 
when  actual  emissions  are  declared  compared  to  the  current  situation.  They  may  also  lower 
enforcement costs for National Competent Authorities, though this effect is less certain.  

(e)  While respecting the Union law, have special circumstances applying in individual Member 

States been taken into account? 

Not applicable  

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