Known as Carbon Border Adjustment Mechanism's (CBAM), the tax currently targets carbon-intensive goods such as aluminium, cement, electricity and steel from countries with lower environmental standards.
It aims to level the playing field for European industries subject to strict emissions rules.
But Brussels worries it could result in higher costs for EU manufacturers of goods made using the taxed products and cause some to move their factories elsewhere in countries with less stringent environmental requirements.
To tackle this the European Commission proposed extending the tax's scope to cover 180 steel and aluminium-intensive downstream products, like machinery and appliances.
"European industrial producers should be encouraged - and not deterred - in their decarbonisation efforts," said EU industry chief Stephane Sejourne.
Most of the concerned goods are industrial products such as metal mountings, wiring and cylinders, but the list also includes some household goods and appliances like washing machines.
CBAM is set to fully enter into force in January after a two-year transitional period. Its goal is to make foreign companies pay the same as EU producers are already doing under the 27-nation bloc's internal emissions trading system.
Importers -- often large trading firms -- must declare the CO2 emissions embedded in the production of goods abroad. If they exceed EU standards, firms are required to purchase emission certificates at the EU carbon price.
The levy is expected to generate 1.4 billion euros ($1.2 billion) annually for the EU.
The commission said Wednesday it wants to use 25 percent of the profits over the next two years to support EU makers of targeted goods through a dedicated fund.
The proposals need to be approved by the European parliament and member states.
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