EU carbon border tax simplification moves forward with committee approval

A key committee in the European Parliament endorsed the European Commission's proposal to simplify the EU's carbon border adjustment mechanism (CBAM) by introducing a 50 mt threshold that would exempt 90% of importers.

The European Parliament's Committee on the Environment, Climate Change and Food Safety (ENVI) adopted the CBAM simplification text on May 13, with 85 votes, one against, and one abstention, according to a statement.

"A majority in the committee agreed to limit amendments to the specific proposals by the Commission and not reopen other provisions of the CBAM legislation, which is so crucial to prevent carbon leakage," said Antonio Decaro, a member of the European Parliament, who is the chair of the ENVI committee.

"This approach enables us to simplify matters for companies without dismantling or weakening the CBAM. We will continue to work as fast as possible to bring legal clarity and certainty to all CBAM stakeholders."

The full EU Parliament vote to approve the revamped CBAM is set for May 22 to set its "mandate for negotiations with the European Council on the final shape of the legislation."

Under the EU's CBAM, importers of selected energy-intensive products (iron, steel, aluminum, fertilizers, cement, electricity, and hydrogen) will need to purchase carbon certificates corresponding to the emissions associated with the production of the imported goods.

This mechanism is intended to level the playing field for EU producers who are subject to stricter carbon regulations compared to their competitors from outside the bloc.

Streamlining CBAM

The European Commission recently proposed to move to a mass-based threshold to make the tax more streamlined and effective.

Importers below a 50 mt threshold will be exempt from the CBAM authorization and declaration obligations, as well as from the requirement to purchase CBAM certificates.

This change would eliminate CBAM obligations for approximately 182,000 importers, or 90% of total importers, while still covering over 99% of emissions in scope, according to the Commission.

The primary reason for raising the exemption threshold is to reduce the impact of CBAM on small importers, simplify the carbon tax, and maintain its environmental effectiveness.

In early 2026, the Commission will assess whether to extend the scope of the CBAM to other ETS sectors at risk of carbon leakage.

CBAM is currently operational in the EU in a "transitional phase," where importers must report emissions embedded in relevant products they bring into the bloc.

However, from Jan. 1, 2026, under its "definitive phase," importers will be obliged to purchase CBAM certificates. This proposal means these certificates will now need to be purchased until 2027.

Carbon pricing

The EC has also proposed tweaking the timeline for the sale of carbon pricing certificates.

Importers will be able to purchase CBAM certificates starting in February 2027 rather than from Jan. 1, 2026, to cover the emissions embedded in their imports for 2026.

The changes may relieve some immediate pressure, but the financial risk exposure stays the same, according to industry analysts, with companies still liable for 2026 emissions.

The price of CBAM certificates is based on the weekly average auction price of EU ETS allowances.

Platts, part of Commodity Insights, assessed EU Allowances for December 2025 at Eur73.25/mtCO2e ($81.79/mtCO2e) on May 12, the highest price since March 19.