EU poised to exempt 90% of importers from Carbon Border Adjustment Mechanism

The European Parliament today approved a proposal to exempt 90% of importers from having to pay a levy on imported emissions as part of the Carbon Border Adjustment Mechanism (CBAM).

The European Commission’s proposal to create a minimum threshold of 50 tonnes of emissions for inclusion in CBAM’s scope is part of its Omnibus package to simplify sustainability compliance for companies.

Today, Members of the European Parliament overwhelmingly voted in favour of the measure, based on estimates suggesting that 99% of CO2 emissions from iron, steel, aluminium and cement imports would still be covered.

“The CBAM is a crucial instrument to help the EU prevent carbon leakage and incentivise climate action outside the EU. I am therefore glad that Parliament decided not to reopen other provisions of the CBAM legislation. This approach enables us to simplify matters for companies without dismantling or weakening the CBAM. We will continue to work quickly to bring legal clarity and certainty to all CBAM stakeholders,” said rapporteur Antonio Decaro.

MEPs also adopted measures simplifying the authorisation process for companies importing CBAM-covered goods, as well the calculation of emissions and the management of CBAM financial liability, while strengthening anti-abuse provisions.

The proposal will now move to the European Council to finalise and adopt it as legislation.

CBAM impacts and data gaps

Seen as the first international levy on carbon emissions, the Carbon Border Adjustment Mechanism (CBAM) requires European importers to pay a tax on emissions derived from carbon-intensive products manufactured outside of the EU, as a way to level the playing field and incentivise climate action beyond the EU’s borders.

The law was adopted in 2023, and is expected to raise more than US$80 billion per year for the EU by 2040 – with the levy due to start being applied from January 2026.

Business groups and think tanks have been worried about the data gaps preventing its full application, but the exclusion of small importers from CBAM’s scope is likely to remove excessive burdens.

In 2024, the Asian Development Bank (ADB) compared the emissions reduction impact of CBAM with that of an emissions trading scheme (ETS) with a carbon price of €100 per tonne, with no border levy. 

It found that CBAM will reduce global emissions by just 0.2% more than an ETS only, while reducing global exports to the EU by 0.4%, and Asian exports to the EU by 1.1%.