Carbon border tax simplification advances with European Council approval

The proposal to reform the EU's Carbon Border Adjustment Mechanism cleared another hurdle after the European Council backed the simplification of this climate policy May 27.

"Simplification and reduction of the administrative burden for our companies to boost EU competitiveness remain among the priorities of the Polish presidency," Adam Szłapka, Poland's minister for the EU, said in a statement.

"Today's agreement sends a clear signal that the Council is determined to advance on this path as fast as possible."

The European Commission had been under pressure from various sectors to tweak CBAM so as to enhance the competitiveness of the bloc's industry by exempting small importers and reducing the administrative burden for many companies.

Under the changes, 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, giving businesses more time to adapt to the new carbon pricing mechanism.

The proposal also includes a 50 mt de minimis threshold that would exempt 90% of importers while still covering 99% of CO2 emissions from key industrial imports.

"Following today's adoption of the Council's position, the presidency will start negotiations with the European Parliament on this file," the European Council statement added.

This comes almost a week after the European Parliament voted with an overwhelming majority to streamline the EU's CBAM.

CBAM essentially imposes a carbon tariff on emissions-intensive commodities imported by the EU, including aluminum, cement, electricity, fertilizers, hydrogen, and iron and steel. The aim is to level the playing field for EU companies, as most exporting countries do not have a carbon price as high as the EU Emissions Trading System or lack a price on emissions altogether.

Carbon prices vary greatly geographically. Platts, part of S&P Global Energy, assessed EU allowances for December 2025 at Eur71.71/mtCO2e ($81.38/mtCO2e) May 23. This compares with China's compliance emission allowance, which was valued at Yuan 69.41/mtCO2e ($9.65/mtCO2e) on May 23, according to the Shanghai Environment and Energy Exchange.

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.