EU Reveals Plan to Simplify Carbon Border Tax System

(MENAFN) European Union institutions reached a landmark agreement on Wednesday to streamline the carbon border tax system, significantly easing compliance for the vast majority of importers.

The European Council confirmed a deal on proposed changes to the Carbon Border Adjustment Mechanism (CBAM), following negotiations between EU member states and the European Parliament.

The revised legislation introduces a key exemption: companies that import less than 50 tons per year of CBAM-covered goods will no longer be subject to the carbon border requirements.

"The proposal seeks to provide simplification and cost-efficient compliance improvements to the CBAM regulation, without compromising its climate goals, as about 99% of embedded emissions in the imported CBAM goods would remain covered," the Council said in a statement.

This move is expected to ease the burden on small- and medium-sized enterprises (SMEs), which make up the majority of affected businesses. According to the EU, around 90% of importing firms — primarily SMEs — will be exempt from paying the border carbon tax under the new rules.

The regulation still needs formal endorsement from both the EU Council and the European Parliament before it becomes law.

CBAM is part of the EU's broader climate strategy and applies to imports from high-emission industries such as cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.
Currently, importers must report both the volume of products they bring into the EU and the greenhouse gas emissions tied to their production.

The bloc is preparing for CBAM’s full implementation phase, set to begin on January 1, 2026. From that point, importers will be obligated to purchase CBAM certificates equal to the carbon footprint of their imported goods.

Countries with a domestic carbon pricing system equivalent to the EU’s will be allowed to export to the bloc without paying the difference in emissions costs.

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