The European Union is expanding its Carbon Border Adjustment Mechanism (CBAM) to cover manufactured products with high steel and aluminum content, such as heavy machinery and car parts. This move targets circumvention where exporters previously shipped semi-finished goods like window frames to avoid the carbon tariff. New Zealand exporters of these products will now face reporting and payment requirements under the updated rules. The extension, tabled in 2025, tightens anti-circumvention measures and refines rules on electricity imports. While small manufacturers are exempt, exporters with products containing nearly 80% steel or aluminum content will be affected. The EU says this step aims to prevent carbon leakage and accelerate decarbonisation investment, though some groups raise concerns about administrative costs for downstream products. New Zealand's aluminium exports to the EU have risen significantly, making this a critical issue for local exporters. Similar CBAM-type measures are being considered in the UK, Australia, and the US. Exporters should prepare for these requirements as carbon border adjustments become standard in major markets.
