All information is accurate as of 27th February 2025
As part of yesterday’s Omnibus package, the European Commission has unveiled a new proposal designed to simplify the Carbon Border Adjustment Mechanism (CBAM).
The new proposal aims to reduce administrative burdens while maintaining CBAM’s core policy objectives in order to ensure a smooth roll-out of the Mechanism during the definitive period starting on 1st January 2026.
The proposal forms part of the European Commission’s broader effort to reduce regulatory complexity and enhance EU competitiveness, aligning with the Competitiveness Compass and the Budapest Declaration on the New European Competitiveness Deal. The Commission has set ambitious quantified targets for reducing administrative burden by at least 25% for all companies and 35% for SMEs.
Exemption for small importers
One of the most notable changes is the exemption of small importers. Under the proposal, importers with annual CBAM goods below 50 tonnes of net mass will be exempt from the CBAM requirements.
This revision will exempt 91% of importers, while ensuring that at least 99% of emissions remain within the scope of CBAM, preserving the environmental objectives of CBAM while significantly reducing administrative costs.
The Commission estimates that this measure will result in administrative cost savings of approximately €1.12 billion per year, with SMEs benefiting from at least €831 million of these savings.
Separation of reporting and compliance requirements
The proposal includes several measures to simplify reporting and compliance requirements for importers, with perhaps the most fundamental of these being the splitting of reporting duties from compliance obligations.
Under this proposal, while authorised CBAM declarants remain liable for all CBAM compliance obligations, their reporting duties could be assigned to a third-party CBAM representative. Representatives must meet specific eligibility criteria, including holding an EORI (Economic Operators Registration and Identification) number and being established within a Member State, but will not require separate authorisation.
Easing financial pressures on importers
The proposal also contains several revisions aimed at easing financial pressure of CBAM on importers, allowing them to manage their cashflows more effectively, including:
- The requirement for authorised CBAM declarants to hold CBAM certificates covering at least 80% of the emissions embedded in their imported goods by the end of each quarter will be reduced to 50%.
- The removal of the one-third cap on National Competent Authority’s (NCA) repurchases of excess CBAM certificates will enable importers to sell all surplus CBAM certificates before the compliance year ends.
Changes to key dates: CBAM certificates and declaration deadline
Under the proposal, the start of CBAM certificate sales would be delayed to 1st February 2027, allowing businesses an additional 13 months to adjust to the post-transition phase. However, importers will still need to buy certificates for the emissions embedded in goods imported in 2026.
While this change shifts the financial burden from 2026 to 2027, the price of the CBAM certificates required to cover 2026 embedded emissions would not be based on 2027 prices. Instead, they would be based on the quarterly average of the closing prices of the EU ETS allowances of the quarter of importation of the CBAM goods to which those emissions correspond.
The deadline for CBAM declarations and surrender of CBAM certificates would also be moved from 31st May to 31st August, with the repurchase deadline moved to 30th September and the certificate cancellation1 date would be 1st October.
This extension provides importers with additional time to gather and report the necessary data each year, reducing the risk of non-compliance due to tight deadlines, and brings cashflow implications for CBAM covered entities into line with domestic producers captured by the EU ETS.
Broader use of default values for third countries
The proposal also streamlines the compliance process with key changes to the management of unavailable third country data, including:
- EU-set default prices could be used if actual carbon prices in third countries are unavailable.
- The requirement for importers to justify their inability to determine actual emissions would be eliminated.
- Default emission intensity values would be based on the average emission intensity of the ten highest-emitting countries, rather than the worst-performing EU ETS installations.
Enforcement measures
To ensure compliance and enhance monitoring, the proposal includes several improved enforcement measures.
Most notably, national customs authorities would play a larger role in compliance and monitoring, through:
- Automated sharing of import data with the Commission and national regulators for risk monitoring to enable more effective oversight and identification of potential compliance issues.
- Cross-verifying CBAM registry data with customs records to ensure accuracy and compliance to help identify discrepancies and prevent fraud.
- Requirement to block further imports from entities that exceed the exemption threshold without authorisation.
The proposed enforcement revisions also include additional anti-abuse measures that target artificial splitting of imports across multiple EORI numbers to avoid CBAM obligations, and the introduction of biennial reviews to reassess the robustness of the exemption and enforcement mechanisms.
Adjustments to the coverage of goods and the calculation of emissions
For some aluminium and steel goods, the embedded emissions are mainly from input materials, with low emissions from the final production steps. In these instances, where the final production steps are done by separate installations not covered by the EU Emissions Trading System (ETS), emissions from the final production steps would be excluded from the CBAM emission calculations.
Non-calcined kaolinic clays will be removed from the CBAM scope altogether. This adjustment reflects the lower environmental impact of these materials and reduces the regulatory burden on importers of such goods. This decision also aligns with the EU ETS scope, ensuring that CBAM remains focused on high-emission sectors.
Additionally, EU-produced precursors and those from linked ETS countries will be exempted.
Crucially, the potential inclusion of indirect emissions across all CBAM sectors is under review for 2025, which could lead to expanded compliance requirements in future legislative proposals.
Navigating your CBAM risk exposure with Redshaw Advisors
The European Commission’s new proposal aims to simplify the complex and bureaucratic CBAM regulations while maintaining a proportionate approach to carbon pollution costs. Although these changes may ease immediate pressure on importers, the financial risk remains unchanged, merely delaying compliance requirements. No short-term impact on EUA prices is expected.
Perhaps more importantly, the proposed changes also serve as a foundational step toward a potential future expansion of CBAM to downstream products, reinforcing its effectiveness against carbon leakage, and putting industries not currently in scope of the CBAM on notice.
As the proposal must be reviewed and approved by the European Parliament and Council of the EU, this process is expected to take several months. Importers and stakeholders should monitor its progress and prepare for implementation to ensure compliance and minimise financial risks.
As businesses navigate the complexities of the evolving carbon economy, staying informed and proactive has never been more critical. The Carbon Support Programme (CSP) empowers your business to stay ahead.
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