AEGIS Europe’s Position on the European Commission’s 17 December 2025 CBAM Package
/AEGIS Europe’s Position on the European Commission’s 17 December 2025 CBAM Package
On 17 December 2025, the European Commission published a legislative package on CBAM, composed of:
1. a Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 to strengthen CBAM’s effectiveness (COM(2025) 989) and;
2. a Proposal for a Regulation establishing the Temporary Decarbonization Fund (COM(2025) 990).
The Commission proposed measures aim at closing loopholes to prevent circumvention and strengthen the efficacy of EU's Carbon Border Adjustment Mechanism's (CBAM) for the CBAM definitive phase, which started on 1 January 2026.
Temporary Decarbonisation Fund (TDF) – an imperfect and insufficient interim solution for exports pending structural responses in EU ETS Review
The risk of carbon leakage related to export and the free allocation phase-out - which heightens exposure for export-oriented sectors - are acknowledged. The exposure for export-oriented sectors increases pressure as free allocation declines and CBAM costs materialise. The TDF is supposed to address the competitiveness loss in third-country markets where EU goods might be supplanted by cheaper, more emission-intensive alternatives, potentially increasing global emissions. The TDF should ensure a level playing field for EU exporters affected by CBAM.
The TDF introduces an indirect and time-limited support measure without providing any direct solution to address carbon leakage related to exports, particularly for some goods at high risk of carbon leakage and not covered by ETS. There is, however, no certainty that the Fund will provide sufficient support to address carbon leakage related to exports.
AEGIS Europe therefore recommends:
The Fund should primarily compensate EU exporters of CBAM‑covered goods in order to mitigate the risk of product reshuffling. In a second step, it should support EU downstream exporters using CBAM‑covered inputs that face a significant cost increase due to higher carbon prices of imported precursors. Compensation will have to be brought forward to 2027 and earmarking a clearly defined financial allocation for the most exposed sectors.
The TDF cannot substitute a long-term structural solution for EU export sectors impacted by CBAM. The European Commission should therefore earmark dedicated financial support within the forthcoming EU Multiannual Financial Framework, providing long‑term certainty for EU producers.
This long-term solution needs to be proposed urgently and compensate EU exporters for the increased ETS costs. The raw material cost increase CBAM will generate for importers of CBAM covered goods should also be acknowledged and compensated. Export adjustments must be part of the CBAM design to ensure that European exports do not become uncompetitive on foreign markets. This long-term solution should reflect the free allocation phase out trajectory, maintain decarbonization incentives, and be explicitly linked to export exposure. It should be included in the ETS review proposal which is expected mid-2026. AEGIS Europe proposed a WTO-compatible solution.
A close monitoring of European industry’s performance in EU and third-country markets by the European Commission is necessary to assess, over time, carbon leakage risks, including those related to exports.
Extension to downstream products
The European Commission should consider extending CBAM in a targeted manner to certain downstream sectors to ensure level playing field, as CBAM may shift competitive pressure further down the value chain.
The European Commission should complete the vertical extension to downstream products where this is justified by a high carbon leakage and circumvention profile and supported by a demonstrated technical and economic feasibility, including the availability of a robust methodology for calculating emissions in complex goods.
Extensions should be supported by clear principles and criteria, robust impact assessments across the value chain (upstream and downstream products) and thorough consultations with both directly and indirectly impacted sectors. The scope of the extension must also consider potential distortions and unintended consequences for market dynamics.
Additional anti-circumvention measures
European Commission’s proposals to address circumvention are welcome as a first step but need to be further strengthened to secure CBAM delivers on expectations.
The anti-circumvention measures largely consist of empowering the European Commission and competent authorities to act if circumvention risks are identified. Instead, a clearer political mandate from co-legislators is necessary, with more visibility on the countermeasures, notably via the application of default values.
The European Commission’s definition of “abusive practices” seems too narrow, and the risk of resource shuffling needs to be effectively addressed. The effectiveness of its proposals needs clarification in the CBAM regulation, before it is implemented in secondary legislation.
Both the European Commission and competent authorities must have sufficient resources and capacities to identify circumvention and address it through controls and concrete measures to combat circumvention of these rules are necessary.
Given that CBAM has just entered its definitive period, potential abusive practices remain open-ended and should be regularly assessed by the Commission.
In addition to circumvention practices, CBAM-related cost absorption should also be considered.
We welcome that the CBAM Registry High Level architecture is offering a portal to the user communities including OLAF. However, we are of the opinion that the European Anti-Fraud Office (OLAF) should be more assertive by strengthening its investigative mandate, improving access to real-time data, and empowering it to directly intervene in cross-border fraud cases. As the CBAM has entered its definitive phase, OLAF’s role is critical in detecting circumvention, such as misreporting origin or misclassifying goods to evade carbon costs. In a future revision of CBAM the Regulation should explicitly grant OLAF the power to launch investigations into suspected circumvention on its own initiative, reducing reliance on national authorities to initiate cases.
Transparency of the CBAM registry
Transparency is essential for ensuring market integrity, stakeholder trust, and effective enforcement. The ETS Registry has demonstrated that clear, accessible, and timely information enhances accountability, reduces the risk of fraud and market manipulation, and supports informed decision-making by industry and policymakers. Given that CBAM will play a critical role in preventing carbon leakage, similar transparency standards are necessary to reinforce the credibility of the EU’s climate policy framework and ensure that CBAM operates as a robust and trusted instrument in the transition to a low-carbon economy.
AEGIS Europe’s key messages on CBAM
· AEGIS Europe supports a CBAM that is efficient in addressing carbon leakage risks while ensuring a level playing field on both European and foreign markets
· Simplification attempts are welcome, but not at the expense of effectiveness in preventing carbon leakage. Simplification should not facilitate or lead to circumvention
· CBAM needs a WTO-compatible export solution for producers of CBAM goods to avoid carbon leakage and the replacement of EU low-carbon products with high-carbon alternatives on global markets
· Anti-circumvention rules must be strengthened to ensure the effectiveness of the measure and avoid practices such as resource shuffling or cost absorption
· CBAM alone cannot solve the carbon leakage issue for all sectors, especially ETS sectors it covers with very specific value chains, products, and global trade flows. For these sectors, a stronger carbon leakage protection and additional measures are needed
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AEGIS Europe is an industry alliance that brings together more than 30 European manufacturing associations representative of the whole value chain, from commodities down to consumer end products. Our members account for more than €500 billion in annual turnover, as well as for millions of jobs across the EU.