COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT 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

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 17.12.2025  SWD(2025) 989 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  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) 987 final} - {SWD(2025) 988 final}  
 
 
Executive Summary Sheet  

Impact assessment on the revision of the Carbon Border Adjustment Mechanism Regulation 

A. Need for action 

What is the problem and why is it a problem at EU level?  

Regulation (EU) 2023/956 establishing the Carbon Border Adjustment Mechanism (CBAM) came into force 
in  October 2023.  It  is  in its transitional phase until  end-2025. The definitive regime,  which will include 
financial obligations, will apply from 2026 onwards. 

CBAM ensures that imports are subject to a carbon price equivalent to that faced by domestic producers 
under the EU Emissions Trading System (EU ETS). It is a key instrument to ensure that the EU’s increased 
climate ambition is not undermined by carbon leakage, which could occur when companies based in the EU 
move the production of carbon-intensive goods to countries with less stringent climate policies, or when EU 
products  are  replaced  by  more  carbon-intensive  imports.  CBAM  also  plays  a  key  role  in  helping  curb 
greenhouse gas (GHG) emissions beyond the EU’s borders. It achieves this by encouraging foreign exporters 
to decarbonise their production and, as CBAM deducts the carbon price effectively paid in the country of 
origin,  by  incentivising  third  countries  to  implement  or  strengthen  their  own  carbon  pricing  systems. 
However, the current design of the CBAM is not fully effective in preventing carbon leakage, incentivising 
decarbonisation and has given rise to some implementation difficulties. More specifically it does not address 
downstream  carbon  leakage  risks,  the  risk  of  CBAM  avoidance,  and  does  not  sufficiently  take  the 
decarbonisation efforts of third country electricity producers into account. 

What should be achieved? 

The overall objective of the legislative proposal is to strengthen the effectiveness of CBAM, including by 
addressing the risk of downstream carbon leakage and encouraging decarbonisation in a feasible and cost-
effective way, thus reducing GHG emissions and fighting climate change globally.  

More  specifically,  it  intends  to  (i)  mitigate  the  risk  of  downstream  carbon  leakage,  (ii)  strengthen 
enforcement of the CBAM and deter avoidance practices, and (iii) encourage decarbonisation of electricity 
imports. 

What is the value added of action at the EU level (subsidiarity)?  

Reducing  GHG  emissions  is  fundamentally  a  cross-border  issue  requiring  effective  action  at  the  largest 
possible scale. The EU as a supranational organisation is well placed to establish effective climate policy on 
its territory, as it has already done with the introduction of CBAM and the EU ETS. The only meaningful 
way to ensure equivalence between the carbon pricing policy applied in the EU’s internal market and the 
carbon pricing policy applied on imports is to take action at the level of the Union. Additionally, the need 
for  minimal  administrative  costs  is  best  achieved  by  consistent  rules  for  the  entire  single  market.  Any 
revision of the CBAM should therefore take place at EU level. 

B. Solutions 

What are the various options to achieve the objectives? Is there a preferred option or not? If not, 
why? 

1 

 
 
 
 
 
 
There are three distinct but interrelated problems. For each of them, various options were assessed, and a 
preferred option was identified. 

Downstream carbon leakage: Three options were examined, each reflecting a different level of coverage in 
extending  the  scope  to  downstream  products.  These  are  based  on  (i)  filters  reflecting  the  risk  of  carbon 
leakage (namely the carbon cost push and the trade intensity) plus (ii) an EU production emissions floor to 
limit  the  scope  extension  to  downstream  products  with  significant  climate  relevance.  The  technical 
feasibility of attributing emissions to selected downstream goods was also considered. The proposal focuses 
on  goods  that  are  downstream  to  steel  and  aluminium-intensive  sectors,  as  also  announced  in  the 
Commission’s Steel and Metals Action Plan. 

Option  1  is  a  targeted  extension  to  downstream  goods  that  have  the  highest  risk  of  carbon  leakage  and 
significant  climate  relevance.  Option  2  is  a  balanced  extension  to  downstream  goods  at  risk  of  carbon 
leakage  and  with  significant  climate  relevance.  Option  3  is  a  broad  extension  to  all  downstream  goods 
considered at risk of carbon leakage. 

Anti-avoidance: Two options were considered to address issues of avoidance such as the misdeclaration of 
emissions and abusive practices. 

Option  1  provides  for  the  inclusion  of  pre-consumer  scrap  as  CBAM  precursor.  It  also  provides  an 
empowerment for the Commission to request, in case actual emissions are declared, additional evidence to 
prove the place of production. This empowerment to improve the traceability of goods would be limited to 
a sub-set of CN codes and origins with the highest risk of mis-declaration of emission intensities.  

Option 2 provides for the inclusion of both pre-and post-consumer scrap as CBAM precursors. In addition, 
the empowerment to request additional evidence on the place of production would apply to all CN codes 
and origins.  

Both options also  share two common policy  measures:  1) 
 to  provide the  Commission  with  an 
empowerment to further detail CN codes to better capture the specific material composition of the different 
products falling within any given CN code under the CBAM scope, 2) to provide the Commission with an 
empowerment to attach to the use of actual emissions additional conditions for identified goods at high risk 
of abusive practices. 

Electricity 

Four options have been considered. These differ regarding the methodology to calculate the emission factor 
and the conditions to declare actual values. They cover the four possible combinations of two main policy 
choices:  (i)  retaining  the  CO2  emission  factor  of  the  exporting  country  or  changing  to  an  average  grid 
emission factor of the exporting country; (ii) modifying the criterion related to congestion by referring to 
the  absence  of  structural  congestion  or  removing  it  altogether.  All  options  include  a  modified  criterion 
relating  to  power  purchase  agreements  (PPAs)  clarifying  that  it  only  includes  physical  PPAs  whilst 
broadening its scope also to indirect PPAs. The options also all include changes to the condition relating to 
nominations of capacity, which should only apply in case of explicit capacity allocation.   

Preferred options 

This impact assessment supports a combination of option 2 for the downstream extension, option 1 for 
the anti-avoidance strand and option 4 for electricity (change to an average grid emission factor of the 
exporting country, modified criteria relating to power purchase agreements and nomination of capacity, and 

2 

 
 
 
 
 
 
removal of the criterion  related to  congestion) as they are expected to  deliver clear environmental gains 
compared  to  CBAM’s  current  design,  while  remaining  proportionate  to  the  scale  of  the  problems  and 
keeping the additional administrative burden to a minimum.  

What are different stakeholders' views? Who supports which option?  

The public consultation suggested that the risk of downstream carbon leakage is widely acknowledged as 
an issue, which needs to be addressed by means of including downstream goods in the scope of CBAM. 
Similarly,  a  clear  majority  confirmed  that  there  are  circumvention  risks  that  necessitate  a  further 
strengthening  of  the  CBAM  regulation.  Furthermore,  there  was  support  for  greater  granularity  in  the 
information  on  the  material  composition  of  different  products  within  CN  codes.  For  electricity,  a  large 
majority of stakeholders indicated in the public consultation that the current default values used in CBAM 
are inadequate and supported amending the conditions for using actual emissions. Regarding the latter, the 
consultation also resulted in specific recommendations to revise criteria around power purchase agreements, 
network congestion, interconnector nominations, which are seen as impractical or misaligned with market 
realities. The outcome of the public consultation confirmed stakeholder feedback received via other fora. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise of main ones)?                                     

The preferred option is a combination of Option 2 to address downstream carbon leakage risks, Option 1 to 
address avoidance and Option 4 to address electricity. This policy package provides clear  environmental 
benefits, reduces the risk of carbon leakage, and encourages decarbonisation in a feasible and cost-effective 
way. More specifically for the downstream  extension,  under Option  2, the estimated reduction in  yearly 
GHG emissions is approximately 0,7 Mt of CO2 equivalent emissions (CO2e) by 2030. This option is also 
estimated to significantly reduce carbon leakage. The preferred option to address CBAM avoidance provides 
the  necessary  safeguards  to  ensure  that  the  effectiveness  and  environmental  benefits  of  CBAM  are  not 
undermined.  When  it  comes  to  electricity,  the  preferred  option  will  ensure  a  better  reflection  of  the 
decarbonisation efforts of exporting countries while simplifying the reporting of actual emission values. 

The macroeconomic impacts are minimal and mostly stemming from the downstream extension. A minor 
increase  in  EU  output  in  some  downstream  sectors  is  expected.  Regarding  social  impacts,  for  the 
downstream  extension,  the  preferred  option  foresees  a  small  increase  in  employment  by  0,05%  in  the 
downstream sectors covered. 

What are the costs of the preferred option (if any, otherwise of main ones)?                                    

The  macroeconomic  costs  are  negligible,  with  an  estimated  change  in  EU  GDP  of  less  than  -0,001%. 
Similarly, the impact on private consumption prices is also marginal.  

Administrative  and  compliance  costs  are  expected  for  businesses  and  authorities  (national  competent 
authorities and customs authorities) mostly stemming from the downstream extension. While it is difficult 
to assess these costs with precision, estimates based on stakeholder surveys show that under the preferred 
option for a downstream extension, aggregate recurrent costs for businesses could amount to EUR 8 to 43 
million yearly, in addition to one-off costs of EUR 31 million. Estimated recurrent enforcement costs for 
authorities range between EUR 1,3 and 10,0 million for all Member States combined. The preferred option 
to address avoidance would result in negligible additional administrative cost for authorities and its impact 
on  business  is  also  limited.  The  preferred  option  for  the  electricity  strand  is  not  expected  to  entail  any 

3 

 
 
 
 
 
 
additional administrative and compliance costs for EU importers or third-country electricity producers but 
rather reduce them as a result of streamlining the conditions to declare actual emissions.  

What are the impacts on SMEs and competitiveness?  

In October 2025, the Council and European Parliament adopted Regulation (EU) 2025/2083 regarding the 
simplification of CBAM, which, among other improvements, introduced a de-minimis threshold exemption 
of 50 tonnes mass that would keep 99% of emissions still in the CBAM scope, while exempting around 90% 
of  the  importers.  This  significantly  limits  the  administrative  burden  for  SMEs  and  benefits  smaller 
downstream importers. The CBAM downstream extension has a moderate impact on the absolute number 
of SME importers brought into CBAM’s scope. The proportion of SME importers is around 50% of the 
additional  importers  in  scope.  This  amounts  to  an  additional  3800-3900  SME  importers.  The  preferred 
policy package has marginally positive impacts on competitiveness overall. Among the three strands, the 
downstream extension would have the most significant competitiveness implications because it levels the 
playing field for domestically produced and imported steel- and aluminium-intensive downstream products 
with respect to the carbon costs they face. 

Will there be significant impacts on national budgets and administrations?  

The downstream extension under option 2 is estimated to generate around EUR 0.58 billion of revenues in 
2030, while the anti-avoidance measures will contribute to ensuring that revenues are actually collected. 

Will there be other significant impacts?  

No other significant impact. 

Proportionality?  

The preferred option meets the objectives of the initiative in a proportionate manner.  

D. Follow up 

When will the policy be reviewed?  

The CBAM will be subject to regular reviews as provided for in the CBAM Regulation. The application of 
the  proposed  changes  to  the  Regulation  assessed  under  this  impact  assessment  will  be  reviewed  in  the 
context of the bi-annual review reports on CBAM implementation foreseen under Article 30 of the CBAM 
Regulation.  

4