The EU's Carbon Border Adjustment Mechanism (CBAM) – Part II – Simplification Proposals

Recently, there have been various documents published by the European Commission ("the Commission") seeking to simplify CBAM, namely:

1. The EU's Omnibus Package published on 26 February 2025;
2. The Clean Industrial Deal published on 26 February 2025; and
3. III. The European Steel and Metals Action Plan published on 19 March 2025.

Despite these efforts to simplify implementation of CBAM, the proliferation of documents has increased the challenge for businesses and stakeholders to keep track of the proposed changes in an already complex system. While the Commission intends to simplify CBAM, its proposals would be more effective if consolidated into a single reference point for clarity and accountability.

I. Simplifying CBAM through the EU's Omnibus Proposal

The Omnibus Proposal amending Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism ("the Omnibus Proposal") followed the EU's Competitiveness Compass, which we covered in Part I of this series here.

The Omnibus Proposal still needs to pass through the EU's legislative process. Whilst we expect the legislative process to proceed at pace, the final amendments may differ from the proposed changes included in the Omnibus Proposal. Please note that the current CBAM legislation already in force continues to apply in the meantime.

We examine the key proposed changes of the Omnibus Proposal in the following sections: 1. Reduction in scope; 2. Delayed deadlines; and 3. Simplification of calculating emissions.

1. Reduction in scope

A significant change proposed by the Omnibus Proposal is the adjustment to the de minimis compliance threshold, currently set at 150 EUR per consignment of CBAM goods. Instead of the above, a new tonnage threshold will be introduced that would exclude smaller companies only importing up to 50 tonnes of CBAM goods on cumulative mass per calendar year in the iron and steel, aluminium, fertilisers, and cement sectors. In practical terms, this change in threshold is also designed to eliminate the risk of circumvention through the artificial splitting of consignments by a single importer.

Fundamentally, the modified de minimis threshold is expected to exempt around 90% of importers from CBAM obligations, while maintaining more than 99% of embedded emissions in scope of CBAM. This ensures that the CBAM legislation remains effective without administratively overburdening occasional importers.

The Omnibus Proposal also makes a slight reduction in the product scope of CBAM goods outlined at Annex 1 of the CBAM Regulation. It replaces the CN code 2507 00 80 (other kaolinic clays) with CN code 2507 00 80, thereby excluding non-calcined kaolinic clays from the product scope.

Overall, these proposed amendments reflect the Commission's response to concerns about CBAM's administrative demands while ensuring alignment with the objectives of the European Green Deal.

2. Delayed deadlines

The Omnibus Proposal intends to make changes to the annual deadline for submitting the annual CBAM declaration. With the Definitive Phase still due to commence on 1 January 2026 as originally planned, the deadline for surrendering CBAM certificates is to be modified to 31 August instead of 31 May going forward.

This later date is proposed to correspond with the ETS annual deadlines moving from 30 April to 30 September, allowing authorised CBAM declarants to surrender and buy their corresponding certificates in a one-month period. It also provides non-EU installation operators with more time to verify their carbon emissions.

As a general reminder – the first CBAM declaration is currently due in 2027 for the year 2026.

3. Simplification of calculating emissions

To facilitate compliance for importers above the CBAM threshold, the rules for calculating embedded emissions are being simplified. More specifically, emissions of certain input materials (precursors) which are already subject to the EU ETS or a fully linked carbon pricing system of a third country, will no longer be counted in the calculation of total embedded emissions for complex goods. This prevents double counting and reduces businesses' reporting burdens.

Moreover, the Omnibus Proposal introduces default values for carbon price paid in third countries, allowing importers to opt for default carbon prices or claim deductions based on actual carbon price effectively paid. These proposed changes aim to ease the administrative load on non-EU installation operators.

II. Clean Industrial Deal ("CID")

The CBAM references included in the Clean Industrial Deal Communication ("CID Communication") form part of the EU's joint roadmap for competitiveness and decarbonisation. Recognizing the need for global cooperation, the CID Communication reiterates need to improve the effectiveness of CBAM by reducing the administrative burden on industries and their supply chains, while continuing to incentivise global carbon pricing.

Although the CID Communication provides less details on the proposed changes to CBAM than the Omnibus Proposal, it indicates the Commission's intention to present a comprehensive CBAM review in the second half of 2025. This review will explore the opportunity to extend the scope of CBAM to additional EU ETS sectors and downstream products.

A separate legislative proposal on the extension of CBAM is anticipated in the first half of 2026.

III. The EU Steel and Metals Action Plan

The Commission published its communication on the European Steel and Metals Action Plan ("the Action Plan") on 19 March 2025, at a time when the steel industry is facing unprecedented challenges.

Acknowledging the proposed changes from earlier documents, the Action Plan promises accelerated efforts to expand CBAM and prevent carbon leakage. The Commission will introduce an anti-circumvention strategy, with legislative proposals expected by Q4 2025 to strengthen CBAM and prevent market distortions.

IV. Conclusions

The proposed changes aim to simplify the CBAM framework, which will particularly benefit smaller companies by reducing complexity and administrative burdens. Exemption provisions, along with streamlined reporting requirements, are expected to enhance operational efficiency and effectiveness within impacted businesses. As the legislative process unfolds, companies subject to CBAM should proactively monitor developments and assess their supply chain strategies to adapt to potential regulatory updates.