The minute
- The European Parliament adopted its CBAM negotiating position by 464 votes to 50 (159 abstentions), extending the carbon levy to finished steel and aluminium products such as fasteners, wire, springs and household articles.
- MEPs rejected a Commission proposal that could temporarily remove goods from CBAM during price shocks, opting instead for a mechanism to redirect CBAM revenues toward affected sectors.
- A Temporary Decarbonisation Fund, approved separately by 433 votes to 97 (146 abstentions), would run from 2027 through 2029 and cover fertiliser producers and downstream users exposed to carbon-related input costs.
Why it matters: By pushing carbon pricing from basic materials into finished products, the EU is signalling that emissions costs will follow goods through entire supply chains, not just at the commodity stage. For any company exporting steel or aluminium products to Europe, the compliance burden now extends to product-level emissions data, supplier transparency and proof of origin. The vote is a negotiating position, not final law, but it sets the direction for talks with EU member states.
What changes for Brazilian exporters
Brazil is a significant exporter of semi-finished steel to the EU. Under the original CBAM scope, basic steel products such as slabs and billets were already covered. Parliament’s expanded position now pulls in downstream goods, including fasteners, wire and springs. Brazilian steelmakers and manufacturers that convert raw steel into finished goods for the European market face a new layer of carbon cost exposure. Each product entering the EU would need verified emissions data tied to its actual production process, not just the raw material stage.
The anti-circumvention provisions add another dimension. Parliament lowered the threshold for what qualifies as circumvention, meaning minor product modifications to reclassify goods outside CBAM’s scope would be harder to sustain. At the same time, the text narrows the rule to target arrangements established specifically to avoid CBAM obligations, protecting legitimate commercial decisions. For Brazilian exporters, this means restructuring supply chains purely to dodge the carbon levy carries legal risk, but genuine cost-reduction measures remain permissible.
The inclusion of fertiliser products in the Decarbonisation Fund (urea, ammonium nitrate, ammonium sulphate) matters for the competitive landscape. EU fertiliser producers receiving financial support from the fund could narrow the cost gap with Brazilian competitors who currently benefit from lower energy and carbon costs. The fund runs only from 2027 to 2029, but it signals the EU’s willingness to subsidise its own producers during the transition.
Brazil has no equivalent carbon border mechanism
Brazil operates a regulated carbon market under the law signed in December 2024, but this market focuses on domestic emissions trading. There is no Brazilian equivalent to CBAM, meaning Brazilian imports do not face a carbon border charge. The asymmetry creates a specific dynamic: Brazilian exporters must account for EU carbon costs when selling to Europe, but face no reciprocal obligation domestically. The Brazilian carbon market, still in its implementation phase, does not yet generate carbon prices that could be credited against CBAM obligations.
Parliament’s decision to remove the option for Paris Agreement Article 6 carbon credits to offset CBAM obligations is relevant here. Brazil has been active in negotiating Article 6 frameworks. Had the EU allowed those credits to count against CBAM charges, Brazilian exporters could potentially have used domestically generated credits to reduce their EU carbon border costs. That pathway is now closed in Parliament’s position, though the issue may resurface during the EU Emissions Trading System revision.
What remains undecided
The Parliament vote establishes a negotiating mandate, not final law. EU member states must now agree on their own position before trilogue negotiations can produce binding legislation. Several points remain open. The exact product list covered by the expanded CBAM could shift during negotiations. The Decarbonisation Fund’s duration (Parliament wants 2027-2029, starting a year earlier than the Commission proposed) and eligibility criteria are subject to change. The treatment of international carbon credits, removed by Parliament, could return to the table as part of the broader ETS revision. How remaining CBAM revenues are allocated (Parliament wants surplus directed to international climate finance under the Paris Agreement rather than returned to member states) is another point of contention. For companies planning compliance strategies, the legislative uncertainty means final obligations could differ from what Parliament has proposed.
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