The European Union’s Carbon Border Adjustment Mechanism (CBAM) has entered a decisive phase as of January 1, 2026, marking the first fully operational carbon border pricing regime aimed at imported goods’ embedded emissions. While the initial scope of CBAM targets traditional carbon-intensive sectors like steel, cement, aluminium, and fertiliser, a lively debate is underway over whether downstream renewable energy products—most notably solar photovoltaic modules and associated equipment—should also be included. This discussion is gaining traction among solar manufacturers, environmental advocates, and energy transition stakeholders because it touches on fairness, climate ambition, and global competitiveness.
What Is CBAM and Why It Matters
CBAM is a climate policy tool designed to prevent carbon leakage, the phenomenon where production shifts to countries with weaker climate regulations, undermining global emissions reductions. Under the EU’s Emissions Trading System (ETS), domestic producers pay for carbon emissions. CBAM ensures that imports face a comparable carbon cost by requiring importers to buy CBAM certificates reflecting the emissions embedded in goods, aligned with the EU ETS carbon price. The mechanism begins in 2026 with financial liability for covered imports, based on emissions reported in 2026. SAP
The mechanism’s current product coverage, defined in EU Regulation 2023/956 and its implementing rules, includes six primary sectors:
- Cement
- Iron and steel
- Aluminium
- Fertilisers
- Electricity
- Hydrogen. Taxation and Customs Union
These sectors were selected for high carbon intensity, significant EU import volumes, and vulnerability to carbon leakage. The phased approach allows future expansion. European regulators and industry voices alike acknowledge that CBAM’s long-term trajectory will see additional goods and sectors brought into the system. S-GE
Why Solar Products Are in the News
As CBAM now enters its definitive phase, solar products have emerged as a focal point for debate. Industry groups, especially the European Solar Manufacturing Council (ESMC), are actively advocating for expanding CBAM’s scope to include solar modules, mounting structures, and solar trackers that are currently exempt. Imported finished solar products from major non-EU producers—particularly China, which accounts for a large share of solar module exports to Europe—do not currently bear CBAM costs, even though they rely on carbon-intensive inputs like aluminium and glass that are already under CBAM coverage for raw material imports. SteelOrbis+1
Proponents argue that this creates an uneven playing field where EU manufacturers face carbon costs for inputs, while foreign finished products bypass these fees, undermining both climate goals and local industry competitiveness. Extending CBAM to finished solar products would mean that importers must cover the full embedded emissions of these goods, aligning costs more closely with EU producers and reinforcing the mechanism’s environmental integrity. APVIA
The Environmental and Policy Rationale
From an environmental perspective, including solar products in CBAM aligns with two core objectives:
- Closing Carbon Pricing Loopholes
Finished solar modules can contain significant embodied emissions from materials like aluminium frames and glass, yet they currently escape CBAM’s levy. This inconsistency can undercut the mechanism’s core purpose of incentivising emissions reductions throughout global supply chains. SteelOrbis - Supporting Clean Energy Transitions
Solar power is pivotal to Europe’s decarbonisation goals. Ensuring that imported solar equipment reflects its true carbon footprint encourages manufacturing practices that integrate renewable energy and low-carbon processes. It also supports EU policies like the Net-Zero Industry Act and the European Solar Initiative, which aim to bolster domestic clean tech capacity and resilience. ESMC Solar
For environmental advocates, expanding CBAM to encompass solar products would mean aligning trade policy more closely with climate action goals, rather than allowing carbon-intensive production to be externalised to exporting countries.
Economic and Competitive Implications
Including solar products in CBAM has substantial economic implications:
- For EU Manufacturers
European solar producers could receive a competitive boost if imports face carbon adjustment costs equivalent to those borne domestically. This could support regional supply chains, job creation, and investment in low-carbon manufacturing technologies. ГМК - For Importers and Exporters
Non-EU manufacturers that currently supply the EU market—especially those in China—could face increased costs if solar products are added to CBAM. This might encourage cleaner production practices abroad but could also raise prices for EU solar installers and consumers if costs are passed on. APVIA - For Global Trade Dynamics
Expansion of CBAM’s scope raises potential friction in trade relations. Some countries may view such measures as protectionist unless accompanied by transparent emissions accounting and cooperation mechanisms. There is also the risk of retaliatory trade measures if partners perceive CBAM as overreaching. SAP
Canadian Angle
Canada, as a trade partner with the EU and a major exporter of clean energy technologies, has a stake in CBAM’s evolution. Canadian solar manufacturers and exporters already face strict domestic carbon policies including provincial pricing systems and federal clean fuel standards. If CBAM expands to cover finished solar products, Canadian firms may need to enhance emissions reporting and verification systems to ensure competitiveness in the EU market—particularly for products containing materials like aluminium. While this could level the playing field for Canadian goods with lower carbon footprints, it also introduces new compliance requirements for smaller exporters. Tetra Tech Sustainable Markets
What Comes Next
There is no definitive timeline yet for whether and when solar products will be formally added to CBAM’s scope. The European Commission is expected to review submissions from industry groups and stakeholders, including the ESMC, and may propose formal regulatory adjustments in the months or years ahead. The mechanism’s future expansions may be decided in consultation with EU member states and could be phased in gradually to allow markets to adapt. S-GE
For stakeholders—manufacturers, importers, environmental advocates—the focus now is on ensuring that CBAM evolves in a way that strengthens climate policy while minimizing unintended trade disruption and supporting the global clean energy transition.
Practical Takeaways
- CBAM begins definitive implementation in 2026, applying first to six carbon-intensive sectors with potential for future inclusion of others. Taxation and Customs Union
- Solar modules and related finished products are currently exempt, but advocacy is strong for their inclusion to avoid carbon pricing loopholes. SteelOrbis
- Extending CBAM to solar products would align trade policy with climate goals, support European clean tech manufacturing, and push imported goods to disclose and reduce embedded emissions. ESMC Solar
- Canadian and other non-EU exporters should monitor developments to adapt compliance systems and ensure market access. Tetra Tech Sustainable Markets
As energy transitions accelerate and climate policy intersects with global trade, the CBAM debate illustrates the evolving landscape of international environmental governance. Solar products sit at the intersection of trade, climate ambition, and industrial strategy, making their potential inclusion in CBAM a subject of ongoing importance through 2026 and beyond.