EU Commission plans major CBAM exemptions
The European Commission is moving toward exempting 80% of European companies from the Carbon Border Adjustment Mechanism (CBAM), as part of a broader effort to ease regulatory burdens on businesses. This significant adjustment is expected to be included in the Omnibus package, set for release on February 26.
CBAM, introduced in 2021 under the Fit for 55 legislative package, is the EU’s mechanism for applying a carbon price to imported goods from countries with lower environmental standards. It aims to prevent carbon leakage—the relocation of European industries to nations with weaker climate policies—and to encourage global adoption of more ambitious climate measures.
The CBAM regulation took effect on October 1, 2023. Between 2023 and 2025, importing companies must report the carbon emissions embedded in their products, though they are not yet required to pay fees. This is a transition period. Starting in 2026, companies will have to purchase CBAM certificates, linked to the EU Emissions Trading System (ETS) prices, to cover imported carbon emissions. The mechanism applies to high-carbon industries, including iron, steel, cement, aluminum, fertilizers, and electricity.
CBAM reform: what is the EU Commission proposing?
The planned revisions to the CBAM regulation, included in the Omnibus package, were revealed by EU Climate Commissioner Wopke Hoekstra.
In an interview with the Financial Times, Hoekstra explained that around 180,000 of the 200,000 companies affected by CBAM would be exempt, as less than 20% of firms account for more than 95% of emissions.
The goal is to reduce administrative burdens and compliance costs, addressing widespread concerns from European businesses about the complexity of green transition regulations, ESG reporting, and due diligence requirements.
“This would not weaken climate objectives in any way but would make life easier for a broad range of businesses,” said Hoekstra.
With all the measures in the Omnibus package, the Commission aims to cut administrative burdens by 25% overall—and by 35% for small businesses.
Industry resistance to CBAM grows
Many EU companies have expressed concerns that CBAM compliance is too costly, with low adherence rates in the preliminary phase. For instance, only 10% of German and Swedish companies have fulfilled their emissions reporting obligations so far.
Meanwhile, the Italian government is also pushing for CBAM reform. Alongside Poland, Austria, and Bulgaria, Italy has launched a joint European initiative to revise the carbon border tax.