CBAM power transformers compliance is about to fork into two paths. A 250-tonne, 400 kV / 500 MVA single-phase autotransformer leaves a port in Ningbo bound for Rotterdam. By the time it crosses into the Customs Union, the unit has accumulated regulatory exposure under three distinct EU regimes. The finished transformer itself, classified under CN 8504 23, sits outside the Carbon Border Adjustment Mechanism today, and will remain outside it after the Commission’s proposed scope extension takes effect on 1 January 2028. A 400 kVA dry-type distribution transformer destined for a Lombardy industrial estate, classified under CN 8504 33 00, sits outside CBAM today, but is set to move inside scope on the same date. Two transformers, two CN codes, two different futures. This piece is about the line between them.
The European grid is in the early stage of a renewal cycle that has no real precedent. Demand for power transformers is not the binding constraint of this market; if anything, it is the strongest tailwind any industrial sector enjoys in 2026. The numbers tell a coherent story.
| Indicator | Value | Source |
|---|---|---|
| EU electricity grid investment, 2024–2040 | €1.2 trillion (€730 bn distribution + €477 bn transmission) | European Commission, European Grids Package, 10 December 2025 |
| EU distribution grids over 40 years old | ~40 % | European Commission, Action Plan for Grids |
| China transformer exports to Europe, 2025 | +138 % YoY | China customs data, via industry press |
| China total transformer exports, 2025 | RMB 64.6 billion (+36 % YoY) | China customs data |
| EU imports from China, HS 8504 (broad), 2024 | USD 12.2 billion | UN COMTRADE |
| Korean Big Four order backlog, end Q3 2025 | KRW 33.04 trillion (≈ 5–6 years of work) | Company quarterly reports, November 2025 |
| Lead times for large power transformers | Up to 5–6 years; some books reaching 2031 | Industry sources, late 2025 |
The market will absorb whatever supply can be delivered. The binding constraint is regulatory access, and the geometry of that constraint differs substantially between the distribution and transmission segments.
What CBAM covers today: power transformers in scope and out
The Carbon Border Adjustment Mechanism, established by Regulation (EU) 2023/956 and refined through Regulation (EU) 2023/1773, the Omnibus simplification under Regulation (EU) 2025/2083, and the eight implementing acts adopted on 17 December 2025, applies in its definitive phase from 1 January 2026 to six sectors: iron and steel, cement, aluminium, fertilisers, electricity and hydrogen. The list of in-scope goods, fixed in Annex I, is defined by Combined Nomenclature codes. CN 8504, which covers electrical transformers, static converters and inductors, does not appear in that Annex I. Neither does the assembled motor, the assembled switchgear, the assembled inverter.
This is deliberate. CBAM was built to mirror the EU Emissions Trading System, and the ETS prices carbon at the point of industrial production, not at the point of final assembly. A power transformer is built largely from goods that are themselves CBAM-regulated. The principal metallic content breaks down roughly as follows: copper for windings and conductors (typically 15–25 % of unit weight in a large oil-immersed transformer); grain-oriented electrical steel (GOES) for the core (15–25 %); structural carbon steel for the tank and enclosure (20–30 %); aluminium for radiators and selected structural elements (5–10 %); transformer mineral oil (15–25 %); cellulose, kraft paper and porcelain bushings for the insulation system (5–10 %).
Of that breakdown, only the steel components and the aluminium are in CBAM scope under the current Annex I. Copper is not in CBAM scope. Mineral oil, kraft paper, porcelain and cellulose are not in CBAM scope. By weight, the materials directly subject to CBAM typically account for 35–45 % of a finished oil-immersed power transformer; by value, the share is generally lower because GOES, the silicon steel that defines the core’s magnetic performance, contributes less to bill-of-material cost than copper while remaining in CBAM scope. This asymmetry produces a counter-intuitive result in the current regime. A Chinese manufacturer who ships a fully assembled 400 kV power transformer to a German utility crosses the border with a CBAM exposure of zero on CN 8504. The same manufacturer shipping spare parts, replacement components or knocked-down assemblies for final EU integration crosses with a non-trivial CBAM bill, because each major component then declares separately under its own CN code: tank under CN 7308, radiators under CN 7616, fasteners under CN 7318. A core finished as laminated and wound assembly travels under CN 8504 90 13. That code, while not in CBAM scope, is now under safeguard investigation, which we examine below.
That is the regime today. For a defined sub-segment of CN 8504, it is not the regime envisaged for 2028.
On 17 December 2025, the European Commission adopted proposal COM(2025) 989 final (legislative procedure 2025/0419(COD), published on EUR-Lex as CELEX:52025PC0989), formally amending Regulation (EU) 2023/956 to extend CBAM scope to approximately 180 downstream steel- and aluminium-intensive product categories, with application proposed for 1 January 2028. The verifiable annex to the proposal lists, for chapter 8504, the following codes and only the following codes:
- CN 8504 31 80 — Other transformers having a power handling capacity not exceeding 1 kVA (precursor: carbon dioxide and perfluorocarbons, reflecting embedded steel and aluminium emissions)
- CN 8504 33 00 — Other transformers having a power handling capacity exceeding 16 kVA but not exceeding 500 kVA (same precursor logic)
- ex CN 8504 50 00 — Inductors, containing steel or aluminium (same precursor logic)
The codes that are not in the proposal annex are equally informative. Liquid-dielectric transformers fall under CN 8504 21 (up to 650 kVA), CN 8504 22 (650 kVA to 10,000 kVA) and CN 8504 23 (above 10,000 kVA). Other transformers fall under CN 8504 32 (1–16 kVA) and CN 8504 34 (above 500 kVA). None of these subheadings appears in the proposal annex. The Commission’s proposed scope extension therefore captures small transformers (sub-1 kVA, typically electronics-grade) and medium-sized “other transformers” up to 500 kVA, but does not capture the entire liquid-dielectric subfamily and does not capture transformers above 500 kVA in any subfamily.
Mapped onto the EU’s own regulatory taxonomy, the picture is clean. Commission Regulation (EU) No 548/2014, which sets the eco-design framework for power transformers, defines three categories: small power transformers (windings rated ≤ 16 kVA), medium power transformers (windings ≤ 3,150 kVA and maximum output voltage between 1.1 kV and 36 kV), and large power transformers (at least one winding > 3,150 kVA or output voltage > 36 kV). The CBAM scope extension as proposed maps onto all small power transformers and a portion of medium power transformers, while leaving all large power transformers entirely outside scope. Since transmission-grade autotransformers and HV substation transformers, the units that move the European Grids Package volume, sit firmly in the “large” category by both winding rating and voltage, the proposal as drafted does not capture them.
This is consistent with the Commission’s stated methodology. The impact assessment accompanying COM(2025) 989 explains that the selection of downstream goods to include in CBAM was driven by three indicators: trade intensity (proxy for tradability and therefore leakage risk), cost-push (how much the CBAM cost on precursors drives the downstream good’s overall costs), and a minimum embedded-emissions floor at sectoral level. Large power transformers score poorly on all three. They are bespoke, not commodity, so trade intensity is structurally low. The dominant cost driver in their bill of materials is copper, which is not in CBAM scope, so the cost-push indicator on CBAM precursors is muted. Their absolute volumes, by tonnes-imported across the EU, are small relative to commodity steel categories. The selection criteria of the Commission’s option 2 (“balanced extension focussed on at-risk downstream goods with high emission intensity”) therefore filtered them out by design, not by oversight.
Commercially, this means a hard segmentation of the Chinese exporter universe. Tier-1 producers focused on transmission-grade large power transformers, including TBEA, Baoding Tianwei, XD Group, Sieyuan Electric for HVDC, and parts of Pearl Electric’s high-voltage line, face a regulatory environment in 2028 that is structurally identical to 2026 on the finished unit. The CBAM bill on what they ship is, and remains, zero on CN 8504 22, 8504 23, 8504 34. The pressure on them is indirect, through the embedded steel and aluminium in their supply chain, the same as today. Producers focused on the distribution segment, including Eaglerise, parts of JSHP and Pearl, and the broad tier-2 universe whose product lines cluster in the 16–500 kVA range covered by CN 8504 33, will see the finished unit move into CBAM scope on 1 January 2028 if the proposal is adopted on schedule.
As of late April 2026, the proposal is in active legislative negotiation. The European Parliament’s ENVI committee appointed MEP Mohammed Chahim (S&D, Netherlands) as rapporteur on 23 February 2026, and on 15 April 2026 he submitted a draft report that maintains the downstream extension as targeted, predictable and grounded in objective criteria, while removing the emergency-exemption clauses that the Commission had proposed. The ITRE committee published a supportive draft opinion on 19 April 2026. The Council’s Ad Hoc Working Party on CBAM met on 22 April 2026. Adoption through ordinary legislative procedure typically takes 12–24 months after Commission proposal, so a final regulation in late 2026 or first half of 2027 is the realistic window. The product list could be widened or narrowed during trilogue, but no current signal suggests that large power transformers will be added: European Aluminium’s February 2026 position paper requesting broader coverage focuses on chapter 76 aluminium codes, not on extending chapter 8504 upward.
The default-value trap and the verifier bottleneck
Where CBAM bites, the question becomes how it bites. Regulation (EU) 2023/956 lets importers declare actual embedded emissions when verified producer data is available, and forces them onto default values when it is not. Under Implementing Regulation (EU) 2025/2621 of 16 December 2025, default values are country- and product-specific, calculated on the average emission intensity of each exporting country, or on the average of the ten exporting countries with the highest emission intensities for that product where reliable country data are not available. To incentivise the use of actual data, defaults carry a mark-up that increases over time: 10 % in 2026, 20 % in 2027, and 30 % from 2028 onward, applied to most CBAM products including iron and steel and aluminium. Fertilisers carry only a 1 % annual mark-up. No mark-up applies to imported electricity or precursors.
The transitional flexibility that allowed declarants to use default values for up to 20 % of total embedded emissions of a complex good has expired. From 1 January 2026, that escape valve is gone. For a power transformer, which involves a GOES mill, two or three structural-steel mills, several metalworking sub-suppliers and two or three aluminium mills, the disappearance of the 20 % rule changes the operational arithmetic. Either each major upstream supplier provides verified data, or the entire embedded-emissions calculation falls back on country defaults plus mark-up. This applies whether the transformer is 100 MVA HVDC converter transformer (CN 8504 23, finished unit out of scope, components in scope) or a 250 kVA distribution unit (CN 8504 33, finished unit in scope from 2028, components already in scope today).
For Chinese-origin steel and aluminium, the indirect-emissions component is calculated against China’s national grid factor of 0.5810 tCO₂e/MWh, set in the CBAM transitional registry on five-year IEA averages. The EU grid average in 2024 was approximately 0.213 tCO₂/kWh (Ember, Global Electricity Review 2025). The Chinese grid factor is roughly 2.7 times the EU average, primarily because China’s power mix remained 60 %+ fossil-driven in 2024 with continued reliance on coal. For an importer who cannot obtain installation-specific data from a Chinese mill, the combination of country-default emission intensity, the indirect-emissions factor for Chinese electricity, and the rising mark-up produces a measurable cost differential against suppliers who do provide verified data.
A second operational constraint, less discussed than it should be, is verifier capacity. From 1 January 2026, all reported emissions must be independently verified by a CBAM-accredited third-party verifier, under rules established by Commission Delegated Regulation (EU) 2025/2551 of 20 November 2025 and Commission Implementing Regulation (EU) 2025/2546 of 10 December 2025. In the first year of verification, verifiers are required to conduct an on-site inspection of the installation where the relevant goods are produced. Industry sources tracked through late 2025 (McCloskey, S&P Global Platts, Redshaw Advisors) report that national accreditation bodies are operating at high capacity and that verifier availability for non-EU installations, particularly in China, will be tight through 2026 and into 2027. The first surrender deadline, 30 September 2027 for emissions on 2026 imports, falls into this constrained window. A Chinese transformer manufacturer who completes data collection for its mills but cannot secure a verifier slot in time will, in practice, be pushed back onto default values regardless of internal effort.
| Year | CBAM rate (share of carbon cost applied) | Default-value mark-up (steel & aluminium) | What it means in practice |
|---|---|---|---|
| 2026 | 2.5 % | 10 % | Symbolic on rate; first certificate surrender deferred to 30 September 2027 (Reg. 2025/2083). Sales of CBAM certificates begin 1 February 2027. |
| 2027 | 5 % | 20 % | First financial impact. Verified data starts paying off. |
| 2028 | 10 % | 30 % | Cost differential becomes material in tender comparisons. Proposed scope extension to CN 8504 31 80 and 8504 33 00 (small and medium transformers up to 500 kVA) takes effect, if adopted. CN 8504 22, 8504 23, 8504 34 (large power transformers and units above 500 kVA) remain outside scope. |
| 2029 | 22.5 % | 30 % | Quadrupling of effective rate. Supplier-data quality becomes commercially decisive. |
| 2030 | 48.5 % | 30 % | Nearly half of full ETS price applied to embedded carbon. |
| 2034 | 100 % | (under review) | Full CBAM, free ETS allowances to EU producers fully phased out. |
The phase-in does not defer the cost. The discounted portions are permanently waived, not delayed. A producer who reports verified data in 2026 locks in low-rate years against actual numbers; a producer who reports nothing locks in default values plus mark-up against the same low-rate years and arrives at 2030 with no historical data and no negotiating room.
There is one mitigation built into the regulation that Chinese exporters should understand. Article 9 of Regulation (EU) 2023/956 allows a deduction for carbon prices effectively paid in the country of production, up to the level of the CBAM certificate price. China’s national ETS, expanded in 2025 to cover steel, cement and aluminium production in addition to the power sector, traded at an average of approximately CNY 84/tonne (~USD 11.8/tonne) in the first half of 2025. The EU ETS in the same period averaged around EUR 70–80/tonne. The deductible amount is therefore meaningful but limited: at current prices, the Chinese ETS carbon price offsets roughly 13–15 % of the equivalent CBAM cost. For a Chinese mill that pays the domestic ETS on its precursor production, documenting that payment is a non-trivial reduction of the bill its EU customer ultimately faces. The Commission’s implementing act on Article 9 methodology, expected in early 2026, will clarify the documentation standard. Carbon prices paid in a third country other than the country of origin of the imported goods are also eligible for deduction, if corresponding evidence can be provided.
Trade defense, the second tightening
CBAM is not the only force narrowing the field, and unlike CBAM, the trade-defense regime applies symmetrically across the entire transformer family from sub-distribution to HVDC. Anti-dumping duties on grain-oriented electrical steel from China, Japan, Korea, Russia and the United States, extended by Commission Implementing Regulation (EU) 2022/58, remain in force under a minimum-import-price mechanism, with maximum duties of 21.5–39 % of import price when prices fall below the MIP. They have been in force long enough that Chinese exporters have adapted, partly by routing volumes through laminated semi-finished forms that the original duties did not cleanly capture. According to the Chinese Society for Metals, China produced 2.95 million tonnes of GOES in 2024 and 3.37 million tonnes in 2025, with exports of 642 000 and 757 000 tonnes respectively (Chinese customs data via Fastmarkets). On the EU side, industry analyses indicate that Chinese GOES had become the leading import source despite the tariff regime by 2024.
That workaround is now under direct review. On 27 March 2026 the European Commission opened a safeguard investigation into GOES imports, notified to the WTO Committee on Safeguards on the same day under reference G/SG/N/6/EU/3. The scope explicitly includes steel laminations and cores, whether or not stacked or wound, for transformers and inductors, falling under CN code 8504 90 13, alongside the GOES codes 7225 11 00 and 7226 11 00. The Commission has nine months from initiation to determine whether safeguard measures are justified, with a statutory deadline of 27 December 2026, extendable by two months to 27 February 2027. Provisional measures may be proposed earlier, typically four to five months after initiation.
If the investigation concludes affirmatively, Chinese-origin laminated cores will face additional tariffs on top of any residual GOES duties. The structural significance is greater than the immediate tariff impact. The pre-cut, pre-laminated core has been the principal mechanism through which Chinese GOES bypassed the existing anti-dumping regime: a transformer manufacturer in the EU who buys finished cores from a Chinese supplier escapes the duty that would have applied to the equivalent volume of unprocessed GOES sheet. Closing that channel realigns the cost calculus for European OEMs (Siemens Energy, Hitachi Energy, GE Vernova, SGB-SMIT, Wilson Power Solutions and the smaller specialty manufacturers) and changes the procurement decision for utilities that have been using Chinese-built transformers as the marginal supply, regardless of whether those units are large transmission transformers (CBAM-out under the proposed extension) or medium distribution transformers (CBAM-in from 2028).
For utilities planning long-lead procurement, the practical effect is that sourcing decisions taken in 2026 for delivery in 2028 will land into a regime that did not exist when the tender was drafted. For Chinese manufacturers, the practical effect is that the period of maximum competitive advantage on the EU market is now, and that the calculation begins to change in 2027, earlier and more sharply for the distribution segment than for the transmission segment.
What this means at the asset level
The question that matters for an asset manager at a European utility is not whether to buy Chinese transformers, since there is no realistic way to fill the demand at current prices and lead times without them, but how to manage the embedded regulatory exposure across a 40–50-year asset life. A power transformer ordered in 2026 will routinely operate into the 2070s under standard asset-management practice, with only major refurbishment cycles every 25–30 years. Its carbon story does not end at commissioning. CSRD reporting, Scope 3 disclosures, and the disclosure regimes that lenders and rating agencies are beginning to apply to grid assets will all want to know what went into the unit, where, and at what carbon intensity. A unit with no traceable embedded-emissions data is not a compliance failure today, but it is an information liability that compounds across decades, and the asset-life carbon disclosure regimes will not distinguish between a transformer that was inside CBAM scope when imported and one that was outside. They will ask the same questions of both.
The same logic runs in reverse for the Chinese manufacturer, with the segmentation now sharpened by the December 2025 proposal. For tier-1 producers selling primarily into the transmission market (TBEA, Baoding Tianwei, XD Group, China XD), the strategic incentive to instrument verified embedded-emissions data is driven by buyer disclosure pressure rather than by direct CBAM liability on the finished unit. The unit ships at zero CBAM exposure on CN 8504 22, 8504 23 or 8504 34, but the utility buyer will increasingly demand verified component-level data for its own CSRD and Scope 3 reporting. This is a softer pressure than direct CBAM, but it is not weaker: tender scoring incorporates it, and over a four-year procurement cycle it differentiates suppliers as effectively as a tariff line would.
For producers selling primarily into distribution (Eaglerise, the dry-type lines from JSHP and Pearl, much of the tier-2 universe whose product mix sits in CN 8504 33), the incentive is direct and dated: from 1 January 2028, the finished unit pays CBAM on its precursor steel and aluminium content if the proposal is adopted on schedule. The data infrastructure must be in place before that date, not in response to it.
The realistic implementation path for a Chinese tier-1 manufacturer is not to attempt verified data for every single component. It is to build a tier-1-priority approach: verified data for the GOES mill (one or two suppliers, typically Baosteel and one second source), verified data for the structural steel mills supplying the main tank and major plates, and acceptance of country-default values plus mark-up for smaller bolt-on parts and minor sub-components. This is the same operational logic that EU producers are already applying to their own supply chains. The 80/20 of CBAM cost concentrates on a small number of upstream suppliers for the largest weight items; that is where verification effort produces the largest financial return.
Who actually pays: the importer-manufacturer split
A point worth making explicit because it is routinely glossed over in CBAM commentary. The legal obligation under Regulation (EU) 2023/956 falls on the authorised CBAM declarant established in the Union, not on the producer in the third country. It is the EU importer who must register with the competent national authority before importing CBAM goods, who submits the annual CBAM declaration by 30 September of the year following import, who purchases and surrenders CBAM certificates against the embedded emissions of the imports, and who faces the penalty regime (€10–50 per tonne of undeclared CO₂, depending on Member State enforcement and on whether the breach is treated as a misdeclaration or as evasion). The Chinese manufacturer provides data. The EU importer pays and bears liability.
That formal allocation matters, but it conceals the economic reality. The CBAM cost flows through the supply chain by the same mechanism every regulatory cost has flowed through supply chains since regulations existed: through price. An EU importer who faces a default-value calculation with the 30 % mark-up applied from 2028 on Chinese-origin steel content, and who cannot reduce that calculation because the manufacturer did not provide verified data, prices the resulting CBAM bill into the next purchase order. The manufacturer who provided no data sees a discount on next year’s contract. The manufacturer who provided verified data does not. Within twelve to eighteen months, the cost has been pushed back upstream into the manufacturer’s pricing, regardless of who legally writes the cheque to the EU competent authority.
This produces a coordination problem with two solutions of unequal quality. The bad solution is for each importer and each manufacturer to negotiate data flows bilaterally on a case-by-case basis, with the importer demanding embedded-emissions evidence at order time and the manufacturer scrambling to obtain it from upstream mills under the pressure of a deal already half-closed. This is what most of the market is doing in 2026, and it produces low-quality data, audit risk on both sides, and lost time. The good solution is for the manufacturer to instrument its supply chain in advance with structured, verifier-ready data flows that any potential EU importer can plug into without renegotiation. The marginal cost of the second solution, once the first has been done, is essentially zero. The marginal benefit is that the manufacturer becomes the supplier of choice for any importer who wants to keep their own CBAM bill low.
Two implications follow for the buyer of advisory services in this space. For European importers (utilities running direct procurement, system integrators incorporating Chinese transformers into broader projects, electrical wholesalers and distributors carrying Chinese product lines), the immediate priority is supplier-data due diligence: which Chinese sources can provide verifier-ready embedded-emissions data today, which need help to build that capability, and which should be replaced. For Chinese manufacturers, the immediate priority is to engineer a data infrastructure that makes them the supplier the EU importer prefers, before competitors do the same. The two priorities are mirror images of each other, and the consultancy that can mediate the coordination, translating between the EU regulatory language the importer needs and the operational data flow the manufacturer can actually provide, is positioned exactly between two markets that need each other.
The 2030 picture for CBAM power transformers
Four convergent trajectories define the next four years. Demand stays structurally strong, driven by grid renewal, renewables connection and data-centre electrification. Trade defense tightens, with the GOES safeguard investigation, if concluded affirmatively, closing the laminations loophole that has absorbed Chinese export pressure for the past several years. CBAM scales from symbolic to material on its current scope, with the rate rising from 2.5 % in 2026 to 48.5 % in 2030 and the default-value mark-up settling at 30 % from 2028 for steel and aluminium. And, on a defined sub-segment of CN 8504, the scope of CBAM itself widens to cover small and medium transformers up to 500 kVA from 1 January 2028, leaving large power transformers for transmission entirely outside scope.
| Period | Distribution segment (CN 8504 31, 8504 33) | Transmission segment (CN 8504 22, 8504 23, 8504 34) |
|---|---|---|
| 2026 | Finished unit out of CBAM. Components in scope. Verifier capacity tight. GOES safeguard investigation ongoing. | Finished unit out of CBAM. Components in scope. Same verifier and GOES dynamics. Window of maximum opportunity for tier-1 Chinese transmission exporters. |
| 2027 | Finished unit out of CBAM. CBAM at 5 %, mark-up at 20 %. Possible safeguard provisional measures on cores. Scope-extension regulation likely adopted in this window. | Finished unit out of CBAM. Same financial parameters on components. Confirmation that transmission segment escapes scope extension. |
| 2028 | Finished unit moves into CBAM scope, if proposal adopted on schedule. CBAM at 10 %, mark-up at 30 %. Safeguard, if adopted, fully effective. | Finished unit remains out of CBAM. CBAM still applies to precursor components only. Pressure shifts from regulatory to procurement disclosure. |
| 2029 | CBAM at 22.5 %. EU free-allowance phase-out accelerating. Tier-2 distribution suppliers without verified data systematically lose tenders. | CBAM at 22.5 % on components. Tier-1 transmission suppliers with verified data hold ground; verified data becomes tender-scoring decisive even without finished-unit CBAM. |
| 2030 | CBAM at 48.5 % on a wider product base. Distribution segment fully repriced. | CBAM at 48.5 % on components only. Asset-level carbon disclosure widely required by lenders and rating agencies, applied identically to both segments. |
The naive reading of this trajectory is that Chinese transformers face a wall. The accurate reading is that they face two different filters. The distribution segment faces a regulatory step-change in 2028, with the finished unit moving into CBAM scope and the cost of unverified data rising sharply through 2030. The transmission segment faces no such step-change on the finished unit, but faces a softer, slower, more decisive pressure through procurement scoring, asset disclosure regimes, and the steady tightening of component-level CBAM that already applies today.
For Seetalabs’s clients on the transmission side , the operational priority is to industrialise verified embedded-emissions data on the GOES and structural-steel supply chains before tender scoring renders it mandatory de facto, even though the finished unit will remain de jure outside CBAM scope. For clients on the distribution side, the priority is the same in substance but more urgent in timing: the data infrastructure must be in place by Q4 2027 to be operational for the first 2028 imports under the new scope.
The transformer market through 2030 will not be undifferentiated. The Commission’s December 2025 proposal has drawn a line between the two halves of CN 8504, and that line will be the most consequential commercial fact for Chinese exporters between now and the end of the decade. Producers who recognise which side of the line their product falls on, and instrument accordingly, will keep their access to a market that is structurally short of capacity. Producers who treat “transformers” as a single regulatory category will miss the distinction that defines competitive position from 2028 onward.
The transmission box stays outside the box CBAM cares about. The distribution box does not. The supply chains behind both are inside, and have been for some time. By 2030 the producers who used these eighteen to thirty months to instrument their data flow will be selling into a market that the producers who waited will no longer recognise.
Frequently asked questions
Does CBAM apply to power transformers in 2026?
No on the finished unit. CN 8504 sits outside Annex I of Regulation (EU) 2023/956, so the assembled transformer crosses the EU border without a CBAM bill in 2026. Yes on the steel and aluminium components in the supply chain: the GOES core, the structural steel tank, the aluminium radiators all carry CBAM exposure under their own CN codes from 1 January 2026.
Will the scope extension proposed in December 2025 cover all power transformers?
No. The annex to proposal COM(2025) 989 final, verified directly on EUR-Lex (CELEX:52025PC0989), lists only three subheadings of chapter 8504: CN 8504 31 80 (other transformers up to 1 kVA), CN 8504 33 00 (other transformers between 16 and 500 kVA), and ex CN 8504 50 00 (inductors containing steel or aluminium). Liquid-dielectric transformers under CN 8504 21, 8504 22, 8504 23 and other transformers above 500 kVA under CN 8504 34 are not included. Large power transformers for utility transmission therefore remain outside CBAM scope on the finished unit even if the proposal is adopted.
When would the scope extension take effect?
1 January 2028, on the Commission’s proposed timeline. The proposal is currently going through ordinary legislative procedure: ENVI rapporteur Mohammed Chahim submitted a draft report on 15 April 2026, ITRE committee published a supportive opinion on 19 April 2026, and the Council’s Ad Hoc Working Party met on 22 April 2026. A final regulation is expected in late 2026 or first half of 2027, leaving roughly twelve months between adoption and entry into force.
What is the difference between distribution and transmission transformers under CBAM?
Distribution transformers up to 500 kVA (CN 8504 33 00) enter CBAM scope on the finished unit from 1 January 2028 if the proposal is adopted. Transmission transformers, which are typically liquid-dielectric large power transformers above 650 kVA (CN 8504 22, CN 8504 23) and dry-type units above 500 kVA (CN 8504 34), remain outside CBAM scope on the finished unit. Both segments face CBAM on their precursor steel and aluminium components from 2026. The asymmetry reflects the Commission’s selection methodology in the impact assessment, which excluded large power transformers because copper rather than CBAM-regulated metals drives their cost structure.
Can Chinese manufacturers deduct China ETS carbon prices already paid?
Yes, under Article 9 of Regulation (EU) 2023/956. The deduction is available up to the level of the CBAM certificate price. The Chinese national ETS, expanded in 2025 to cover steel and aluminium production in addition to the power sector, traded at approximately CNY 84/tonne (USD 11.8) in the first half of 2025, against an EU ETS average of EUR 70–80/tonne. At current prices the Chinese ETS deduction offsets roughly 13–15 % of the equivalent CBAM cost. The Commission’s implementing act on Article 9 methodology, expected in early 2026, will clarify the documentation standard required.
What happens if a supplier cannot provide verified embedded-emissions data?
Country-default values plus a mark-up apply: 10 % in 2026, 20 % in 2027, 30 % from 2028 onward for steel and aluminium. The mark-up is not a temporary penalty; it is a permanent surcharge on emissions calculated against defaults rather than against verified data. Combined with the 2.7-fold ratio between the Chinese national grid factor (0.5810 tCO₂e/MWh) and the EU 2024 grid average (0.213 tCO₂/kWh), the cumulative effect of relying on defaults rather than verified data becomes commercially material from 2027 onward and tender-decisive from 2029.
