The European Parliament has approved changes that would exempt most importers from compliance with the European Union’s carbon border adjustment mechanism. The changes must next be endorsed by the European Council.
CBAM requires importers of covered products (currently iron and steel, cement, aluminum, fertilizers, electricity, and hydrogen) into the EU to pay the difference between the carbon price paid in the country of production and the price of carbon allowances under the EU’s Emissions Trading System. CBAM rules were applied from Oct. 1, 2023, but with a three-year transition period where importer obligations are initially limited to reporting. CBAM levies are expected to be phased in between 2026 and 2034 in conjunction with the phasing out of free allowances under the ETS.
According to a Parliament press release, the amendments set a new threshold whereby imports up to 50 tons per importer per year will not be subject to CBAM rules. This threshold would exempt from compliance 90 percent of importers − mainly small and medium-sized enterprises and individuals – that import only small quantities of CBAM goods.
The press release notes that the amendments also simplify the rules on imports still covered by the CBAM with respect to the authorization process, the calculation of emissions, verification rules, and the financial liability of authorized CBAM declarants.
The EU has previously signaled an intent to conduct a more comprehensive review of CBAM later this year, accompanied by a legislative proposal to extend CBAM to downstream products and introduce additional anti-circumvention measures.
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