30/07/2025
Briefing

Simplification of the CBAM

We looked at the European Commission’s proposal for an amending Regulation to simplify the CBAM Regulation in our insights blog post: Omnibus Package: Revision of the Carbon Border Adjustment Mechanism.

The EU co-legislators have now reached provisional agreement on the text of the amending Regulation. It is expected to be endorsed in September 2025, following which it will be published in the Official Journal of the EU and enter into force 20 days later.

While comprehensive review of the amended rules is recommended, key changes are outlined below.

  • De minimis exemption: Where net mass of imported goods does not exceed a specified single mass-based threshold per importer per calendar year, the importer will be exempted from obligations around CBAM authorisation, declarations, and purchase of CBAM certificates. The threshold is to be set at 50 tonnes and will be assessed each year. Importers will need to declare the exemption in their customs declaration. An importer must apply to become an authorised CBAM declarant before exceeding the threshold, or risk penalty. There is a sell-back mechanism for importers who purchase CBAM certificates but whose imports then do not exceed the threshold. Where an importer is not established in an EU Member State, the indirect customs representative must obtain the status of authorised CBAM declarant, irrespective of whether the importer is eligible for the exemption. The exemption does not apply to imports of electricity and hydrogen.
  • Grace period: We previously outlined the requirement to be registered as an authorised CBAM declarant from 1 January 2026. It is intended to introduce a grace period where an application has been made in accordance with the CBAM Regulation before 31 March 2026. If the application is refused, the importer / indirect customs representative faces penalties for emissions embedded in goods already imported.
  • First sale of CBAM certificates: Member States will begin selling CBAM certificates on 1 February 2027 for goods imported in 2026.
  • New annual deadline: CBAM declarations and surrendering of CBAM certificates is required by 30 September. The first deadline will be 30 September 2027 for goods imported in 2026. 
  • Ongoing obligation to hold CBAM certificates: At the end of each quarter, declarants were required to have enough CBAM certificates on account to correspond to at least 80% of their embedded emissions since the start of the year. This now is reduced to 50% and account is taken of the free allocation of EU ETS allowances.
  • Delegation: Declarants will be able to delegate access to the CBAM registry and the right to submit a CBAM declaration to a third party (such as a consultant).
  • Double-counting: The amending Regulation clarifies that, where input materials (precursors) have already been subject to the EU ETS or to a carbon pricing system fully linked with the EU ETS, the embedded emissions of those precursors should not be accounted for in the calculation of the embedded emissions of complex goods.
  • Default values for emissions: Declarants will have a choice of determining embedded emissions in goods (other than electricity) based on actual emissions or on default values (and only declared emissions based on actual emissions will now need to be verified by an accredited verifier). The Commission will set default values at the average emission intensity of each exporting country, for each CBAM good (other than electricity), increased by a proportionately designed mark-up. Where there is insufficient data to do this, an alternative methodology is provided.
  • Netting-off: Authorised CBAM declarants can claim a deduction in CBAM certificates to be surrendered based on any carbon price paid outside the EU. It will now be possible to use default carbon prices. Where embedded emissions are determined based on default values, default carbon prices must be used to claim a deduction. It will be possible to claim for carbon prices paid in third countries other than the country of origin of the goods.
  • Electricity: Electricity is to be added to the list of goods for which only direct emissions are relevant to the calculation of embedded emissions.
  • Cement: Non-calcined kaolinic clays is to be removed from the list of cement goods.
  • Penalties: Indirect customs representatives acting as authorised CBAM declarants can be subject to penalties. There is also provision to take account of circumstances where failure by authorised CBAM declarants to surrender the correct number of CBAM certificates was caused by incorrect information from a third party.

Potential Expansion of the CBAM

The European Commission is consulting until 26 August 2025 on extension of the CBAM to goods downstream of current CBAM goods. A legislative proposal is expected by the end of 2025.

The Commission indicates that the selection of downstream products will be based on analogous criteria to those guiding the initial CBAM scope: risk of carbon leakage, relevance of embedded emissions, and technical feasibility. Additional reporting requirements on production technology and composition of the goods will be considered.

The Commission is also considering the rules on electricity. Options include changing the default value from the use of the CO2-only based emission factor, clarifying the applicability of different types of PPAs, simplifying the requirements for physical network congestion, and clarifying application of the criterion of capacity nomination for the use of actual values.

Support for EU Exporters

The European Commission plans to propose measures by the end of 2025 to mitigate carbon leakage risk for exporters in respect of EU-produced goods. It is reported that CBAM revenues will be used to support EU exporters competing with competitors in non-EU markets who do not have to pay a similar cost of carbon.

The authors wish to thank James Deasy for his contribution to this briefing.