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The European Commission is considering major changes to the bloc’s Carbon Border Adjustment Mechanism (CBAM), including postponing the purchase of certificates and raising the exemption threshold, according to a draft proposal seen by GTR.

CBAM is an import duty on high-pollution goods produced in countries without inbuilt carbon pricing.

It is currently in a transitional phase, where importers within the duty’s scope are required to report embedded emissions for their goods, but not yet mandating official registration  as an “authorised CBAM declarant” with their national government or the purchase and surrender certificates. Under the current timeline, the policy is due to take full effect from January 2026.

CBAM aims to avoid carbon leakage, where EU companies either move manufacturing to regions with weaker environmental regulation or face unfair competition from producers in those regions.

However, the policy has proved controversial, hampering the bloc’s attempts to negotiate a trade deal with India and drawing criticism from think tanks that have argued it may penalise developing countries.

The draft document proposes simplifying the legal framework for paying the duty, which it acknowledges is “challenging for importers to deal with”.

The most significant change is the introduction of a mass-based threshold of 50 tonnes, meaning importers will only have to buy or surrender CBAM certificates once they have imported a cumulative 50 tonnes of in-scope product in a given year.

Beyond this threshold, importers will be required to surrender certificates – each representing one tonne of CO2 – equivalent to the embedded emissions of their imported goods. The price of these certificates will be set weekly, based on the average auction price of the EU’s internal Emissions Trading System allowances, creating carbon cost parity between goods produced inside and outside the EU.

The draft says this amendment would exempt around 90% of importers while still covering 99% of the embedded emissions CBAM currently targets.

“This was an easy win in terms of policy changes,” Stuart Evans, chief economist and head of environmental markets at commodity intelligence company Fastmarkets, tells GTR.

“It is consistent with the general approach that the European Commission has taken within the EU Emissions Trading System, which is limiting compliance burden by only covering the largest emitters.

“They’re not covering your local shop that has a gas burner, and this is the equivalent of that. [The European Commission is saying] if you’re an importer that has a small emissions footprint, it doesn’t make sense for you to have these significant reporting requirements when the actual incentive that it provides from the policy is minor.”

The document notes this simplification would also benefit national authorities, which have struggled to enforce the rules during the transition phase due to “the large number of importers and small quantities of CBAM goods”.

A working document released by the European Commission on February 26 estimates that it will reduce the total compliance cost for importers by €831mn and for states by €87mn.

 

Delayed certificate purchases

Another major change proposed in the document is delaying the purchase of CBAM certificates until February 2027.

Since sales are set up months in advance, this delay heightens risk for importers as they must account for a cost that remains uncertain until after the deal is finalised. This is likely to drive up costs, says Dan Maleski, lead CBAM advisor at environment markets consultancy Redshaw Advisors.

“Let’s imagine I am a steel trader selling to a construction company, and I have a contract that I signed on February 26, 2025,” he says

“I’m going to go to that company and say, ‘I can sell you steel that will be delivered in the EU in August, but because it’s a contract, they’re going to get everything locked in now’.

“That steel trader is going to buy their coke and iron, they’re going to buy and hedge their freight and FX and everything else to ensure a profitable margin. What they can’t buy is CBAM certificates, so incorporating those costs becomes very difficult.”

The draft also introduces several recommendations aimed at simplifying the reporting requirements for importers still subject to CBAM payments.

These include industry-specific changes, like the removal of non-calcined kaolinic clays from the goods list, and broader adjustments such as allowing importers to delegate their CBAM responsibilities to a third party – though they would remain legally liable for compliance.

Another key recommendation is the calculation and publication of “default values” of embedded emissions for goods subject to the duty, as well as for carbon pricing in different regions. This would remove the need for importers to individually calculate the emissions produced – and paid for – by each of the products they bring into the bloc.

While the proposed changes may ease compliance and reporting requirements, they do not signify a shift in the EU’s broader CBAM policy, says Maleski.

“The EU is still set on moving forward with CBAM and the reason behind the CBAM, which is to further its common ambition by preventing carbon leakage,” he says.

“They are looking to ease the administrative burden and simplify some of the reporting requirements and measuring methodologies, and they are looking to have a smooth start to the procurement of CBAM certificates. However, CBAM in itself doesn’t change significantly, as importers will still face a cost for 2026 emissions.”

Evans suggests that for this reason, the Commission’s revisions are unlikely to solve the main problems raised by industry groups and foreign nations.

“It doesn’t tackle the more fundamental economic problems that CBAM may encounter, which is specifically things like export leakage, so the reduction in competitiveness of exporters from the EU is still not addressed,” says Evans.

“It’s still going to be a politically contentious issue. Similarly, the risk of resource shuffling is not solved. You have lower emissions imports coming into the EU, which is a good thing, but that could be still very detrimental to the competitiveness of European industry as free allocations are withdrawn.”

He adds: “To me, they are the two big political pain points and are still going to be a subject for discussion between industry and the Commission, I imagine, on a frequent and ongoing basis.”