Europe’s carbon-border policy faces potential expansion into copper, nickel, lithium, cobalt, graphite and rare earths, materials essential to electricity grids, batteries, wind turbines, electronics and defence. Most remain outside the current Carbon Border Adjustment Mechanism (CBAM), despite the electricity and fuel requirements associated with some refining operations.
An extension would aim to address differences between European refineries operating under the EU Emissions Trading System (EU ETS) and imported materials produced under less stringent carbon constraints. A targeted approach could also recognise foreign producers able to demonstrate lower emissions.
Carbon Costs and Critical Mineral Supply Security
Extending CBAM could reduce the risk of European refining operations losing competitiveness against imports. Critical-mineral markets are concentrated, volatile and often lack diversified supply, creating risks for European battery, cable, defence and clean-technology manufacturers if additional border charges raise input costs before domestic processing capacity is available.
Broader coverage could also complicate partnerships with resource-rich countries that the EU is pursuing through its raw-material diplomacy.
Different Processing Routes Complicate Emissions Accounting
Establishing reliable emissions methodologies would be a central challenge. Copper cathode can be produced from ore, scrap or mixed feed, while nickel moves through laterite, sulphide, matte, ferronickel and refined-metal routes. Lithium comes from brines or hard-rock concentrates, and graphite can be natural or synthetic.
These production pathways have different energy requirements and emissions profiles. Any extension would need robust installation-level accounting without imposing excessive supply-chain traceability requirements.
Downstream CBAM Expansion Shows Scope Disputes
The Commission has proposed adding 180 steel- and aluminium-intensive products to CBAM, while the Council’s position covers roughly 200 goods and Parliament’s position extends to 457 products. The proposals concern a potential expansion of the mechanism and demonstrate the difficulties of defining coverage even within established industrial sectors.
Selective Coverage Could Target High-Emission Refining
A potential extension to critical minerals could initially focus on materials with clear EU ETS comparators, high carbon intensity and demonstrable carbon-leakage risks.
The central criterion would be whether carbon costs materially distort competition, rather than whether a material is considered strategically important. Under that approach, selected critical-mineral refining operations could become candidates for inclusion in Europe’s carbon-border framework.
