Simplification of CBAM for importers and operators of installations outside the EU: part two
The European Commission has adopted a new Omnibus package of simplification proposals in the areas of sustainable financial reporting, sustainable development due diligence, the EU taxonomy, the Carbon Border Adjustment Mechanism (CBAM) and European investment programmes.
Conservatively estimated, the adoption and implementation of these proposals would deliver:
- overall annual administrative cost savings of around €6.3 billion;
- mobilise an additional €50 billion in public and private investment to support the policy priorities of the European Green Deal.
The proposals will now be submitted to the European Parliament and the Council for consideration and adoption.
In the second part, we will look at the rest of the proposed changes to the CBAM and their impact on operators of installations outside the EU. The first part is already available on our website.
Measures to simplify CBAM reporting requirements
Change of the deadline to submit annual CBAM declarations
Moving the annual deadline for declarants to submit their declaration and surrender certificates to a later date each year would match the recent postponement of the EU ETS annual deadlines. It would in turn require changes to the two other CBAM annual deadlines which inherently follow the declaration and certificate surrender:
- certificate repurchase 1 month later than certificate surrender;
- certificate cancellation on the day after the last day of the repurchase period.
It is proposed to set the annual deadline for declaration submission and certificate surrender on 31 August, with the repurchase deadline moved to 30 September and the certificate cancellation precise date on 1 October.
CBAM Registry access for operators and verifiers
Two possible simplifications were identified. One relates to improving access for third-country operators to the CBAM Registry and the second one relates to creating an access to the CBAM Registry to accredited verifiers.
Measures to simplify the CBAM financial liability
CBAM certificate management
First, it is proposed to reduce from 80% to 50% the number of certificates that cover the embedded emissions of goods imported since the beginning of the year. The level of 50% was chosen to reduce the burden on declarants, while maintaining the effectiveness of the control measure and protection against compliance risks.
Second, the calculation base would be changed, and declarants would be given the choice between 2 options on which the calculation will be made:
- Use public default values with a deduction of the mark-up and of the corresponding free allocation.
- Use the number of CBAM certificates that they surrendered in the previous year for the same goods.
For both methods, the Commission will make all information and calculations available to declarants in the CBAM registry to facilitate both compliance by declarants and enforcement by NCAs. In practice, it means that declarants will access the registry and manage their financial liability directly in the registry, at least every quarter. They will also be made aware if they must purchase certificates.
Third, the one-third repurchase limit would:
- be replaced by the number of certificates that declarants will be required to buy as a result of the rule (i.e. all certificates which the Regulation forced a declarant to buy can be sold back);
- apply to the same year as the year of purchase (instead of the year before as currently provided for).
Certificate sales start date in 2027
It is proposed to provide for a specific treatment for the first year of the CBAM financial adjustment. Declarants will be able to purchase CBAM certificates from February 2027 to cover the emissions embedded in the CBAM goods they will have imported during 2026.
This will not affect the method of calculating certificate prices and certificates purchased in a given week in 2027 to cover 2026 emissions will reflect the applicable weekly ETS price calculated by the European Commission.
The sale start date should be postponed to February 1st (instead of January 1st) to give more time for declarants to collect data and customs systems to feed relevant data on latest imports in 2026 into the CBAM registry. While shortening the time declarants will have to buy certificates covering all their imports since 1 January 2026, they would still have two months to buy certificates before the first application of the “50% rule” (currently “80% rule”) on Q1 2027 e.g. from 1.1.2027 to 31.3.2027.
As CBAM declarants cannot acquire CBAM certificates in 2026, there is a need to determine the applicable EU ETS price for purchases of CBAM certificates in 2027 pertaining to emissions embedded in CBAM goods imported in 2026. For this purpose, the Commission will calculate the price of CBAM certificates based on the quarterly average of the closing prices of the EU ETS allowances of the quarter of importation of the CBAM goods to which those emissions correspond.
Default values for carbon prices paid in third countries
It is proposed that the European Commission may determine, where applicable, default carbon prices per country for the carbon price paid on average over a year (in EUR/tCO2e).
In such a case, any rebate or other form of compensation available in that country that would have resulted in a reduction of that default carbon price shall be taken into account. The possibility to claim a reduction based on certified evidence of an actual payment is maintained.
The default carbon prices would function similarly to default values for the calculation of embedded emissions. Thus, declarants would be given the possibility to choose either:
- to rely on the European Commission default carbon price;
- to claim the deduction of the carbon price effectively paid (where no changes are made compared to the current CBAM Regulation).
The ‘best available information’ would evolve over consecutive compliance periods, on the basis of cooperation with the third country. Therefore, the default values for carbon prices paid in third countries would be periodically revised. Where insufficient information is available in a specific country, the Commission would set more conservative default values to incentivise the provision of reliable data, while taking into account the need to reasonably reflect the carbon price paid.
This option provides additional flexibility for the producer and declarant, while ensuring that the European Commission can develop a workable approach to the carbon price deduction.
Information exchanges on CBAM certificate cancellation
Pursuant to Article 20(3) of the CBAM regulation, the information on the sale, repurchase and cancellation of CBAM certificates in the common central platform (CCP) should be transferred to the CBAM registry at the end of each working day. However, in practice, this non-reciprocal exchange of information from the CCP to the CBAM registry at the end of the day will not concern the cancellation of certificates. The cancellation of certificates is a task automatically performed by the European Commission in the CBAM registry, and certificates are cancelled without any compensation to the declarants.
It is proposed to remove the reference to certificates cancellation from the reference to information exchange from the CCP to the CBAM registry.
Key business implications
The proposed updates to the Carbon Border Adjustment Mechanism (CBAM) will impact businesses depending on their size and level of coverage.
In particular, smaller importers will benefit from a minimum mass threshold for CBAM products that will exempt them from CBAM reporting and paying. Other importers will still have to report quarterly emissions data and prepare for future CBAM costs, despite the financial obligations under CBAM only coming into force in 2027. Monitoring prices in the EU Emissions Trading System (EU ETS) and investing in advanced greenhouse gas accounting tools will help businesses anticipate their financial risks. Accurate emissions data is important, as using default values will lead to additional mark-ups and increased costs.
A key methodological change will affect downstream steel and aluminium producers, particularly those involved in recycling processes. Instead of calculating emissions from processes such as rolling, cutting or forging, companies must now focus on emissions from precursors, which requires adjustments to existing emission accounting practices.
A more detailed review of the CBAM is expected by the end of 2025, which could lead to a proposal to extend the scope of the mechanism to downstream products (subsequent processing stages), subject to approval by the European Parliament. In addition, details on the prices of CBAM certificates and the authorisation procedure will be announced in the coming months.
More details on the changes regarding CBAM in the Omnibus package of proposals can be found in the European Commission working document.
The publication was prepared within the framework of the project “Technical Assistance for CBAM good exports from UA to EU“, which is implemented with the support of the Ministry of Foreign Affairs of the Kingdom of the Netherlands and the Netherlands Enterprise Agency. Funding is provided by the Private Sector Development Program of the Netherlands Enterprise Agency/The Netherlands Enterprise Agency.
The project “Technical Assistance for CBAM good exports from UA to EU” began on November 25, 2024, and will last until February 28, 2026. This project is implemented with the support of the Ministry of Foreign Affairs of the Kingdom of the Netherlands and the Netherlands Enterprise Agency.
