With European Union’s Carbon Border Adjustment Mechanism (CBAM) transitioning from reporting-only to full implementation in January 2026, making adjustments for global trade, compliance obligations and corporate strategy have become important for relevant companies. Due to the complex mechanism, especially with the evolving legislative developments and lacking technical guidelines, majority of the businesses are struggling.
CBAM was established to place a carbon cost on imports of goods in carbon-intensive sectors, especially iron, steel, aluminum, cement, fertilisers, electrify and hydrogen. These sectors are categorised in Annex I of the CBAM Regulation using CN codes. The transitional phase, that lasts until December 2025, importers must only report embedded emissions in relevant products.
From January 2026, the CBAM obligations become more challenging. Importers will have to submit CBAM certificates corresponding to the embedded emissions in imported goods. This regulation marks a shift from informational compliance to reporting obligations with financial consequences. These new rules will result in the importers first purchasing the certificates and then handing them to the authorities as proof that they have already paid for their produced emissions.
However, a possible postponement for the certificate purchase timeline is proposed in the European Commission’s simplification proposal: Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards simplification and strengthening the carbon order adjustment mechanism, COM (2025) 87 final, dated 26 February 2025 (hereinafter, the “Simplification Proposal”).
Even with the simplification proposal, the necessity to submit CBAM certificates for imports from 2026 onward remains unchanged. Although, with the simplification proposal, the actual purchase of the certificates will be postponed until 2027. This means, importers can begin the purchase of the certificates for 2026 imports, starting from February 2027. This gives the importers additional time for assessment of the emissions exposure and allow them to plan their compliance budget.
The simplification proposal does not simplify the
emission calculation methods, which the importers demanded clarity, but rather concentrates
on selective exemptions.
The key feature is the introduction of a de minimis threshold: importers bringing in less than 50 tons/year of CBAM-covered goods may self-declare as “occasional importers” and be exempt from CBAM regulations. The Commission predicts that this will exclude 90% of importers while still capturing 99% of emissions from the targeted sectors. This aims to significantly reduce the compliance obligations of the small-volume importers. However, this is also not aligned with the goal of CBAM, which is addressing the bulk of emissions leakage from high-intensity goods, not regulating every economic actor.
As the technical legislation necessary to fully operationalise CBAM is still lacking, the European Commission is working on various technical (secondary) legislation.
The European Commission is also considering the possibility of extending CBAM to downstream goods, such as, finished products that contain CBAM-covered materials.
Source: https://www.reuters.com/legal/transactional/eus-carbon-cost-rules-are-changing-how-companies-can-prepare-cbam--pracin-2025-09-05/
