by TIAN Heqi
The European Union plans to extend its carbon border levy from raw materials to a broad range of downstream manufactured goods, a shift that could sharply raise compliance costs for Chinese exporters.
Under a draft revision unveiled on Dec. 17, the European Commission plans to expand its carbon border adjustment mechanism (CBAM) to cover around 180 downstream products for the first time. Most of the additions are industrial goods with high steel or aluminum content, including machinery, metal products, auto parts, household appliances and construction equipment.
CBAM is designed to prevent carbon leakage by requiring EU importers to buy certificates for the carbon emissions embedded in covered goods, aligning import costs with those faced by EU producers under the bloc's carbon market. During the current transition phase, importers report emissions data but do not yet pay the levy.
The draft revision also tightens enforcement. Where exporters cannot provide credible, plant-level emissions data, EU authorities would calculate the levy using benchmark emissions values for the exporter's country and sector.
Known as default values, these benchmarks are set to change when CBAM enters its full payment phase in 2026, with the European Commission planning to shift the methodology from a global average to a country-specific average combined with a punitive premium.
ZHOU Xibang, chief researcher on EU carbon tariffs at Beijing Kunlun Green Technology Development, said this adjustment could be more damaging than the product expansion itself. Many Chinese exporters, he noted, still lack the technical capacity to calculate actual emissions and have relied on default values to simplify compliance during the transition period.
Under the revised methodology, default values assigned to China would rank among the highest globally, reflecting structural factors such as a coal-heavy power mix and the dominance of blast-furnace steelmaking rather than explicit discrimination.
Zhou estimated that reliance on the new default values alone could add about €100 per tonne of steel in carbon costs compared with the transition phase, enough to wipe out margins in the low-profit steel trade and leave Chinese suppliers at a disadvantage against competitors with lower benchmark intensities.
MO Zhengchun, a director at the Institute for Global Decarbonization Progress, said earlier studies by Chinese and international research bodies suggest CBAM is unlikely to have a significant short-term impact on China's exports to the EU, but warned that the latest expansion could carry far greater long-term implications that still need to be assessed.
With CBAM's payment phase set to begin on Jan 1, 2026, exporters are reassessing their exposure, mapping affected product lines, prioritizing emissions accounting for core products and coordinating more closely with EU customers on data standards and reporting requirements. Some are also seeking to include carbon-cost adjustment clauses in medium-term contracts to share future compliance risks.
According to commission estimates, the newly covered downstream products account for only about 15% of import volumes currently under CBAM, but more than 50% of import value. By 2030, they are expected to generate 20%–25% of total CBAM revenue.
The proposal remains subject to negotiations between the European Commission, the European Parliament and the EU Council, and revisions remain possible. For exporters, the EU's carbon border levy is pushing carbon costs beyond raw materials into finished goods, with default emissions values emerging as a key source of competitive pressure.
