The European Commission is expanding the carbon tax system on imports of steel and aluminum, among other products. This will soon include finished products, such as car parts and washing machines. This will make the border tax somewhat more watertight.

The so-called ‘Carbon Border Adjustment Mechanism’ (CBAM) or border tax requires companies outside the EU to pay for their CO2 emissions, just as European companies do. However, because the measure did not apply to finished products, there was still a way to avoid the tax.

Products containing steel and aluminum

By extending the tax to about 180 finished products containing significant amounts of steel and aluminum, the loopholes in the law will be closed from the beginning of next year. These products include automotive parts, industrial machinery, steel wire, and industrial radiators, as well as some household appliances, such as washing machines.

The measure, which will take effect from 1 January 2026, addresses concerns that exporters from countries such as China or India might avoid European import duties on polluting steel and aluminum, for example, by shipping more finished products to Europe. It should also prevent manufacturers from relocating abroad to circumvent Europe’s strict climate regulations.

The Commission also wants to tackle other forms of abuse, such as countries understating their emissions to avoid the levy. The Commission also provides for a relaxation for the import of electricity from, for example, the UK or Ukraine.