Scope: Which Products Are Covered

Scope: Which Products Are Covered

The Six Initial Sectors

Article 2 of the CBAM Regulation establishes that the mechanism applies to goods listed in Annex I - currently covering six sectors. These were selected because they combine high carbon intensity of production with high risk of carbon leakage as assessed under the EU ETS Directive framework. The sectors are: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen.

The selection was not arbitrary. Each sector had already been on the EU ETS carbon leakage list, meaning it was known to face significant competitive exposure to imports from non-EU producers without equivalent carbon costs. The initial scope is deliberately limited to allow regulators, businesses, and verification bodies to build operational experience before any future scope expansion.

The Combined Nomenclature Code System

Whether a specific good is in scope is determined by its Combined Nomenclature (CN) code - the EU's 8-digit product classification system based on the international Harmonized System (HS). The CN code of an imported good determines its customs tariff treatment, and for CBAM purposes, determines whether it triggers reporting and certificate obligations.

Importers must know the CN codes of their goods before they can assess their CBAM obligations. Annex I of the CBAM Regulation provides the definitive list. A product that shares a general category with a CBAM-covered product is not necessarily itself covered - the determination must be made at the CN code level.

What Is Not Covered: Important Exclusions

Several important exclusions and limitations apply to the scope of CBAM:

• Goods originating from EEA countries and Switzerland: These are exempt because their producers already operate under carbon pricing systems equivalent to or linked with the EU ETS.
• Goods below the de minimis threshold: Imports below a single consignment mass of 50 kg (in the transitional period) or a cumulative annual mass of 50 tonnes (in the definitive period) may be exempt from reporting and certificate requirements - though specific threshold rules are set in the implementing regulations.
• Military goods: Imports for official use by military entities of EU Member States are excluded.
• Downstream products: A car made of CBAM-covered steel is not itself a CBAM good. CBAM applies to the listed goods - the steel - not to finished products incorporating those goods. This is a deliberate simplification that limits CBAM's scope to relatively basic materials.

The Concept of "Precursor" Goods

Annex I of the CBAM Regulation distinguishes between finished CBAM goods and precursor goods - materials that are themselves CBAM-covered and used as inputs in the production of other CBAM-covered goods. This distinction matters for embedded emissions calculations: when a CBAM good is produced using another CBAM-covered material as an input, the emissions embedded in that precursor material must be tracked and incorporated into the total embedded emissions figure.

For example, if a steel producer uses iron ore pellets (a CBAM precursor) in the blast furnace, the emissions from producing those pellets are part of the embedded emissions of the final steel product. Similarly, ammonia (a CBAM good in its own right) is a key precursor for fertilisers - the emissions from ammonia production flow through into the fertiliser's embedded emissions calculation.

Future Scope: Article 30 Review

CBAM is explicitly designed as an evolving instrument. Article 30 of the CBAM Regulation requires the European Commission to submit a review report by 31 December 2025, assessing whether the scope should be extended to additional sectors and goods. The review must consider the risk of carbon leakage for goods not yet covered, the administrative feasibility of expansion, and the interaction with the phase-out of free allocation in the EU ETS.

Sectors widely discussed as candidates for future inclusion include: chemicals, polymers and plastics, glass, ceramics, paper and pulp, and downstream goods with high CBAM-material content (such as certain machinery or vehicles). The ultimate ambition of the regulation is that CBAM eventually captures the majority of carbon leakage risk across EU trade, though the pace of scope expansion will depend on implementation experience and political process.