CBAM simplification proposal

The European Commission has adopted a new package of proposals to simplify EU rules, boost competitiveness, and unlock additional investment capacity. This initiative is a major step forward in creating a more favorable business environment to help EU companies grow, innovate, and create quality jobs.

In particular, on February 26, 2025, the European Commission published a proposal to simplify the Omnibus I and Omnibus II regulations that includes a review of Regulation (EU) 2023/956 of the European Parliament and of the Council of May 10, 2023, establishing a Carbon Border Adjustment Mechanism. You can consult the other steps in our Post | Toward simplification of sustainability and investment.

We have previously analyzed the governing regulations of the Carbon Border Adjustment Mechanism (“CBAM”) in these posts: Post | The new Carbon Border Adjustment Mechanism (CBAM) and Post | Carbon Border Adjustment Mechanism. In brief, the CBAM deals with the greenhouse gas emissions embedded in certain goods—whose production is carbon intensive, such as cement, iron, aluminum, fertilizers, electricity and hydrogen—that are imported into the European Union customs territory, aimed at avoiding the risk of carbon leakage and reducing global carbon emissions.

Currently, we are in the transitional implementation phase of the CBAM —launched on October 1, 2023, and ending December 31, 2025—in which there are mandatory quarterly reports for the importers of products affected by the Mechanism. This period is organized as a pilot and learning period to determine the emissions in the definitive period (planned to start on January 1, 2026). Once the definitive period starts, importers must submit a certain number of CBAM certificates, previously acquired, depending on the embedded emissions in their annual reports.

The objective of the European Commission’s proposal to simplify the CBAM Regulation (Regulation 2023/956) is to reduce the administrative burden that the CBAM implies for companies, in a manner that ensures that the regulation is effective in reducing emissions, without creating unnecessary barriers for small importers, particularly, the SMEs. These importers move small quantities of goods that represent particularly small additional emissions entering the EU from other countries. Up until now, despite their low impact, these imports have also been included in the CBAM. To avoid that, a new annual minimum threshold of 50 tonnes per importer will be introduced. This eliminates CBAM obligations for over 180,000 importers—90% of the total—while it will keep covering over 99% of total emissions made by the remaining 10% of importers.

For the companies that remain in the CBAM scope for exceeding that threshold, the proposed changes will simplify both the authorization of declarants (converting the consultation with authorities of other Member States as optional) and the rules related to CBAM obligations, including the calculation of embedded emissions and reporting requirements. The Proposal includes the following modifications:

• Simplifying the calculations of emissions in complex aluminum and steel products, enabling the use of default values and excluding the mandatory verification of embedded emissions when the default values are used.
• Including electricity in Annex II, clarifying that only direct embedded emissions will be taken into account.
• Permitting the deduction of not only the price paid for the carbon in the country of origin of the goods but also in any third state.
• Extending the time limit to submit the declaration, so that it is postponed until the following August in the calendar year, and canceling the corresponding certificates the following October 1, granting a longer period for compliance with both obligations.
• Clarifying the sanctioning regime, allowing reductions based on cooperation, past performance and unintentional errors; and clarifying that the payment of sanctions discharges the obligations of certificate repayments.

With these modifications, the aim is to make the CBAM more efficient in the long term, strengthening the regulations to avoid abuse and circumvention, and enabling the CBAM to be applied to other sectors in the future. To this end, in the second half of 2025, the Commission will present a comprehensive review of the CBAM, which may lead to a new legislative proposal on extending its scope of application.

This proposal will now be presented to the European Parliament and the Council, to be considered, and where possible, implemented.