Position paper on CBAM extension to finished goods

APPLiA Europe urges co-legislators to extend the extension of the CBAM scope to downstream goods to include currently missing home appliance categories which face the same carbon-related challenges as those already in scope.

Why is the downstream CBAM extension needed?

EU carbon pricing relies on two linked systems: the Emissions Trading System (ETS) for domestic industries and the new Carbon Border Adjustment Mechanism (CBAM) for imported raw materials like steel, aluminum, and cement. Historically, the ETS provided free allowances to prevent carbon leakage. As the definitive CBAM regime takes effect on January 1, 2026, these free allowances will gradually phase out by 2034. 

In its initial design, CBAM excluded finished goods. This meant that an EU manufacturer had to pay carbon costs for the raw materials in their products (e.g., the ~70% steel and cement in a washing machine), while imported finished goods bypassed these costs entirely. Fixing this 'downstream carbon leakage' is essential, as the resulting competitive imbalance directly threatens European growth, investments, and jobs.

Defining the Scope for Downstream Goods

The European Commission’s proposal for extending CBAM to downstream goods is based on three carbon leakage risk indicators: trade intensity, a cost-push factor, and a minimum emission floor. The home appliance sector meets the primary criteria: Eurostat data shows our trade intensity is 38%, and APPLiA estimates that the cost-push factor—the impact of input carbon costs on ex-factory production costs—exceeds the Commission's 5% threshold. 

While these first two indicators alone would have justified extending CBAM to 230–250 product categories, the Commission applied an additional, "emission floor" filter. This final criterion reduced the scope to just 180 categories, excluding 50–70 product groups that are otherwise highly vulnerable to carbon leakage.

What’s at stake?

The European home appliance sector supports one million jobs, contributes €79 billion to EU GDP (2024), and drives massive household energy savings. It is also highly reliant on CBAM-covered materials like steel and aluminum, which comprise 57% of our annual material consumption. Excluding the remaining large household appliances from CBAM exposes this critical sector to severe competitive disadvantages as free ETS allowances phase out. Extending CBAM to these products is the only way to ensure a level playing field between EU and non-EU manufacturers. 

Ultimately, an incomplete CBAM threatens more than one industry—it undermines the EU’s broader climate goals and industrial competitiveness. Addressing downstream carbon leakage is essential for cross-policy coherence and Europe's economic resilience.