Simplifying CBAM to Ease Administrative Burdens

The European Parliament has formally endorsed a set of amendments to the Carbon Border Adjustment Mechanism as part of the broader Omnibus simplification package initiated by the European Commission in February. A prominent change involves the lowering of the threshold from 150 metric tons to 50 metric tons per year. This aims to ease compliance burdens for smaller importers, effectively excluding around 90% of them from the CBAM carbon levy. The measure is primarily administrative, meant to streamline the bureaucratic weight on micro and small enterprises without altering the regulation’s climate goals.

Major Steel Players Still Within Scope

While the change offers relief to small businesses, the majority of Europe’s steel manufacturers remain within the remit of CBAM. Due to their large volumes of imports, these companies will still be required to account for the embedded CO₂ emissions in the goods they bring into the EU. The CBAM continues to target sectors such as steel, aluminium, fertilisers, hydrogen, electricity and cement, those considered most at risk of carbon leakage. The mechanism intends to level the playing field between domestic industries and foreign producers who may operate under laxer environmental regulations.

Next Steps with the European Council

Following the EP’s approval, the amendments now proceed to the European Council for final legislative deliberations and ratification. This inter-institutional negotiation phase, known as the trilogue, will determine the exact legal framework of the revised CBAM. Implementation of these updates is expected to align with the existing transitional phase of CBAM, which runs through 2025. During this phase, importers report emissions data without paying a carbon fee, giving them time to adapt to the system before financial obligations begin in 2026.

Sandbag Urges CBAM Expansion

Brussels-based climate think tank Sandbag released a detailed position paper calling for a broader application of CBAM. The organisation advocates for horizontal and vertical expansions, urging inclusion of additional products and key precursors such as coke, lime and ferro-silicon. It also recommends that emissions from international transport and embedded scrap materials be integrated into CBAM's scope. Sandbag argues that these additions are essential to closing the “emissions gap” that persists under the current model and to effectively phase out free carbon allowances granted under the EU Emissions Trading System.

Eurofer Flags Persistent Loopholes

The European Steel Association has echoed concerns about the regulation’s efficacy in its current form. It warns that the CBAM, despite its revised threshold, still contains loopholes that undermine the decarbonisation pathway of EU industry. For instance, the regulation does not account for carbon leakage through exports, a major oversight considering that 70% of EU steel exports go to countries without any carbon pricing mechanisms. Eurofer’s proposed solution is the continuation of free allocations for exported goods to preserve competitiveness and avoid production shifts abroad.

Calls to Include Downstream Steel Products

Another loophole Eurofer identifies is the exclusion of steel-intensive downstream products such as automobile components, machinery and household appliances. These goods can currently enter the EU without being subject to any carbon tax, thereby putting EU-based manufacturers at a competitive disadvantage. Eurofer has proposed a simplified emissions calculation system for these complex goods to extend CBAM coverage and reinforce the mechanism’s intent.

Clarifying Product Origin Criteria

Eurofer has also pointed to the importance of defining the origin of CBAM-covered goods based on where steel is melted and poured, not merely where the final product is assembled. This detail is crucial in preventing circumvention by rerouting materials through countries with lower environmental standards. The association has developed a “toolbox” to help policymakers amend these gaps, ensuring that the CBAM aligns with broader EU goals on industrial resilience and climate action.

Industry Caught Between Reform & Compliance

The ongoing discourse underscores the delicate balance the EU must strike between regulatory simplification and environmental integrity. While the CBAM revisions remove burdens for smaller companies, they also expose latent inefficiencies that could hinder the EU’s decarbonisation journey. The calls from Sandbag and Eurofer highlight that fine-tuning the system is crucial—not only to uphold climate goals but to ensure European industry remains globally competitive in a rapidly greening economy.

Key Takeaways:

• The European Parliament has approved lowering CBAM’s threshold to 50 metric tons, exempting 90% of smaller importers.

• Sandbag urges the inclusion of more products and transport emissions in CBAM to close existing emissions gaps.

• Eurofer warns of loopholes allowing steel-intensive goods to bypass CBAM, risking competitiveness & investment in decarbonisation.