EU CBAM to include new sectors in 2026

The European Commission is preparing to extend CBAM to new sectors in 2026, according to Martin Becker, who spoke at a recent report launch event by a leading European think tank.

Becker confirmed that the Commission will present a legislative proposal by the end of 2025. The plan includes ‘horizontal’ expansion to sectors such as paper or chemicals, and ‘vertical’ extension to downstream goods like automotive parts and cookware. The latter products are made from CBAM-covered materials such as steel and aluminium, and are already flagged as carbon leakage risks.

The Commission's guiding principle for expansion will be to find a balance between emissions relevance, leakage risk, and administrative feasibility.

Sectoral expansion raises specific technical challenges. Emissions tracking in the chemical products sector, to take one key example, faces the problem of a highly complex value chain, and a diverse set of feedstock sources. A single manufacturing process may yield multiple products with varying footprints, and there is a lack of a standard allocation methodology.

Panel members emphasised the need to focus on CBAM as it stands today, and to finalise all implementing details before the Definitive Period, before expanding to new sectors.

Becker agreed. He told the audience that anti-circumvention measures, default values, emission benchmarks, and an export solution must indeed be finalised before new sectors are added.

EU bodies agree on new 50 tons de-minimis threshold

The European Parliament and EU member states have struck a deal on how to simplify the EU CBAM with impressive speed.

As this newsletter was being finalised, the final text from the so-called 'trilogue' process had yet to be published.

But the outlines of the agreement are clear enough: importers bringing in less than 50 tonnes of covered goods annually will be exempt from CBAM. This change, part of the Omnibus simplification package proposed earlier this year, will exclude 90% of importers—mainly SMEs and occasional traders.

The updated system also includes streamlined procedures for declarant authorisation, emissions reporting, and third-party verification. Anti-circumvention measures have been reinforced to ensure the new threshold does not become a loophole.

“We have answered calls from companies to simplify and streamline the process and exempted 90% of importers to facilitate competitiveness and growth for our businesses.” said Parliament rapporteur Antonio Decaro.

Although the swift political agreement shows broad support for the proposal, both the European Parliament and the Council of Ministers must still formally adopt the regulation. Final details will only become clear at that stage.

Taiwan outlines Asia’s first CBAM for launch in 2027

Taiwan is set to become the first Asian economy to introduce a carbon border fee, reshaping trade for emissions-intensive industries across Asia.

The Ministry of Environment will trial a CBAM-style reporting system for steel and cement imports in 2026, with full implementation planned for 2027. The scheme mirrors the EU’s phased rollout, combining industry dialogue and expert consultations to finalise the full framework by the end of this year.

The move follows Taiwan’s introduction of a domestic carbon fee in January 2025. The government set the price at NT$300 per tonne ($9.32), offering discounts for emitters with credible transition plans. Unlike the EU, Taiwan’s carbon pricing does not rely on a trading system but consists of a direct tax on emissions.

Industry groups had raised concerns over the lack of carbon costs on imports, warning of unfair competition. The new carbon tariff aims to protect local manufacturers from carbon leakage while aligning trade policy with climate goals.

Transitional support for high-risk sectors is also on the agenda.

Taiwan’s plan marks a policy turning point in Asia, signalling a shift towards expansion of trade-based carbon pricing measures beyond the European continent.

Australia urged to lead push for Asian carbon border tax

A top Australian think tank called for an Asian Carbon Border Adjustment Mechanism to drive industrial decarbonisation across the region.

In a new report, Tim Buckley and Matt Pollard from Climate Energy Finance argue that pricing carbon in trade is the most cost-effective way to reduce emissions in heavy industries. A regional CBAM would accelerate decarbonisation while attracting private capital to the energy transition, creating economic opportunities for Australia and its trading partners.

The report targets emissions from steel, aluminium, and cement, three key commodities for net zero, all already covered by the EU CBAM. Production in countries like China, Japan, Korea, and Singapore accounts for 15% of global emissions. While all of these economies already price carbon, albeit below an effective carbon price, harmonising their systems would cut costs and boost efficiency.

Adopting a regional approach to carbon pricing would also help key manufacturers handle the impact of the EU CBAM, as suggested by the Asian Development Bank. Asia’s role in global trade and its high emissions make it a prime region for carbon pricing. Unlike current subsidies, CBAMs embed the social cost of carbon directly into markets, offering a least-cost path to decarbonisation.

Australia currently relies heavily on mining exports. Leading this effort could reposition the country as a low-carbon producer and unlock long-term value.

The proposal comes as Australia Energy Minister Chris Bowen confirmed on 1 June that a unilateral carbon border fee could be implemented in the near future, with consultations still underway.

Vietnam accelerates carbon pricing rollout in response to EU CBAM

Vietnam has fast-tracked its first emissions trading scheme (ETS) to shield exporters from the EU's carbon tariff.

Starting in June 2025, the pilot scheme will cover steel, cement, and thermal power, collectively accounting for roughly half of national CO₂ emissions, and mostly all CBAM-exposed. By 2029, the system will expand to include cargo transport and commercial buildings.

Companies must hold allowances reflecting their carbon intensity, with up to 30% of emissions offset via domestic or international credits, a new approach to compliance carbon markets. Industrials will also benefit from free allocations in the first few years, leaving time for adaptation.

The EU is the top destination for Vietnam's iron and steel exports. Critics say free allowances and crediting schemes slow emissions cuts. But firm-level accounting helps exporters meet data demands and stay competitive. Since October 2023, Vietnam has promoted CBAM readiness through training for key sectors like steel.

Trade-based climate measures stall pre-COP climate talks in Bonn

The start of the UN climate negotiations in Bonn was delayed this week, as countries clashed over the inclusion of trade-related issues, particularly CBAM, in the agenda.

The Like-Minded Group of Developing Countries (LMDC), led by Bolivia and including China and Vietnam pushed to add two agenda items: one on climate finance, and another on trade-related unilateral measures such as the EU’s CBAM. Talks were scheduled to begin on 16 June but were suspended for two days due to disagreements.

The LMDC’s trade proposal aims to address the risks of measures that could restrict exports from developing countries. The EU opposed the wording and suggested referencing other provisions of the Paris Agreement that expand the definition of finance providers. The LMDC rejected this.

CBAM remains a sensitive issue internationally. While the EU sees it as a tool to level the playing field and drive global climate ambition, some developing countries argue it risks unfairly burdening them without adequate compensation and contradicts the concept of “common but differentiated responsibilities” under the Paris Agreement.