Brussels is preparing to widen the scope of its carbon border levy as the European Union moves to shut loopholes that officials say allow polluting goods to slip through the net. The European Commission is drafting changes to the Carbon Border Adjustment Mechanism that would extend coverage beyond basic materials such as steel, aluminium and cement to include selected manufactured products that contain large amounts of those inputs. The move is driven by concern that companies can currently avoid the levy by relocating carbon intensive stages of production outside the bloc, while continuing to sell finished or semi finished goods into the EU. With the definitive phase of the mechanism set to start in 2026, pressure is mounting to ensure the system delivers on its promise to prevent carbon leakage as free allowances under the EU emissions trading system are gradually withdrawn. The planned expansion would pull more downstream products into the scheme, targeting goods where embedded emissions are significant but currently unpriced at the border. Officials and diplomats point to steel and aluminium intensive items such as machinery, construction components and certain automotive parts as prime candidates. The aim is to remove incentives for manufacturers to restructure supply chains purely to dodge the levy, a risk that has become more visible during the current transitional phase in which importers are only required to report emissions rather than pay. The Commission argues that without an expanded product list, Europe risks exporting emissions along with investment, undermining both its climate goals and its industrial base at a time when global competition for clean manufacturing is intensifying. Closing loopholes is also central to the reform. Commission documents highlight problems with under reporting, inconsistent data and the deliberate misclassification of goods to lower declared emissions. The proposed changes would strengthen the hand of customs authorities by allowing wider use of default emissions values when information is missing or unreliable, reducing the scope for manipulation. Officials are also reviewing how electricity imports are treated, after complaints that current rules fail to distinguish properly between cleaner and dirtier generation. The broader message is that the carbon border levy must be robust enough to withstand legal and commercial scrutiny, particularly as it begins to impose real costs on importers from 2026 onwards. Industry reaction has been mixed but engaged. Europe’s steel producers have long argued that the initial design of the carbon border levy left them exposed, warning that producers outside the EU could continue to access the single market without facing comparable carbon costs. Industry groups broadly support extending the mechanism to downstream sectors and tightening enforcement, seeing it as a necessary step to protect investment in low carbon production within Europe. At the same time, they continue to push for solutions on exports, arguing that EU producers selling abroad remain disadvantaged once free allowances are phased out. Environmental organisations counter that constant adjustments risk watering down the policy and diverting attention from faster emissions cuts at home. The legislative battle now shifts to the European Parliament and member states, where concerns over administrative burden, trade relations and industrial competitiveness will collide. Each expansion of the levy increases complexity for customs services and businesses, while also raising the risk of retaliation from trading partners who see the measure as protectionist. The Commission is framing the current proposal as a targeted fix rather than a wholesale redesign, with further reviews pencilled in later this decade. That gradual approach mirrors developments elsewhere, including the United Kingdom, which is planning its own carbon border measure from 2027, adding another layer to an already crowded climate and trade agenda....