European Parliament tightens carbon border adjustment mechanism rules

The European Parliament's Environment Committee set the price of Carbon Border Adjustment Mechanism (CBAM) certificates for the second quarter of 2026 at €75.28, a slight decline from the previous quarter. MEPs approved extending CBAM coverage to roughly 180 downstream steel‑ and aluminium‑intensive products from 2028 and introduced a temporary decarbonisation fund (TDF) that will operate from 2027 to 2029 to support European producers in export markets. The committee removed the Commission’s proposed “emergency brake” that would have allowed goods to be excluded during price shocks, added a mechanism to redirect CBAM revenues to affected sectors, and eliminated the option to use international carbon credits for compliance. The vote also broadened the scope to include a wide range of steel and aluminium end‑products, set an exemption for non‑EU electricity used by grid operators, and tightened anti‑avoidance rules to target only schemes designed to evade CBAM. The TDF will also cover strategic fertilizer inputs such as urea and ammonium nitrate, with any surplus funds earmarked for international climate finance under the Paris Agreement.