Explanatory Memorandum to COM(2025)87 - Amendment of Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism

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dossier COM(2025)87 - Amendment of Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism.
source COM(2025)87 EN
date 26-02-2025


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

In his report on ‘The Future of European Competitiveness’, Mario Draghi emphasised the need for Europe to create a regulatory landscape which facilitates competitiveness and resilience 1 . In the Budapest Declaration on the New European Competitiveness Deal, EU Heads of State and Government called for ‘a simplification revolution, ensuring a clear, simple and smart regulatory framework for businesses and drastically reducing administrative, regulatory and reporting burdens, in particular for SMEs’ 2 . Multiple companies and stakeholders have voiced their concerns about the administrative burden resulting from a number of EU acts, including Regulation (EU) 2023/956 establishing a Carbon Border Adjustment Mechanism (‘CBAM Regulation’) 3 .

In its Communication on the Competitive Compass for the EU, the Commission confirmed that it would deliver an unprecedented simplification effort to achieve the agreed policy objectives in the simplest, most targeted, most effective and least burdensome way. In its Communication entitled ‘A simpler and faster Europe: Communication on implementation and simplification’, the Commission set out an implementation and simplification agenda that delivers fast and visible improvements for people and business on the ground, requiring more than an incremental approach and underlining the need for bold action to streamline and simplify EU, national and regional rules 4 .

Administrative requirements, including reporting requirements, play a key role in ensuring correct enforcement and proper monitoring of legislation. Generally, their costs are largely offset by the benefits they bring. However, reporting requirements can also impose disproportionate burdens on stakeholders, particularly affecting small and medium-sized enterprises and micro-companies.

This proposal will deliver simplifications and cost-efficient improvements to the CBAM Regulation without affecting the achievement of objectives in this policy area. The proposed measures will not undermine the environmental objective of CBAM, rather the measures will enable a more efficient CBAM while the key design principles of the mechanism will remain unchanged.

The proposal will make it easier for importers of goods into the Union to comply with CBAM reporting obligations by simplifying some of those CBAM reporting requirements which rely on complex calculations and data collection processes which would hamper the CBAM’s effective implementation.

In addition, the proposal will strengthen the monitoring and supervision of CBAM. It will increase the ability of the Commission to process data and exchange relevant information with national authorities to ensure that the utility of the information reported by stakeholders is maximised. It will also enable the Commission to better detect risks and the national competent authorities to be better equipped to take appropriate actions where needed

Finally, simplifying the mechanism will also be a key enabler for a potential future scope extension. In the second half of 2025, the Commission will present a comprehensive CBAM review report as provided in Article 30 of the CBAM regulation, which will pave the way for a potential extension of the CBAM scope.

• Consistency with existing policy provisions in the policy area

This proposal is part of a package of measures aiming at simplifying reporting requirements, by looking comprehensively at existing requirements, with a view to assess their continued relevance and to make them more efficient. It builds on existing rules from the CBAM Regulation, Commission Implementing Regulation (EU) 2023/1773 of 17 August 2023 laying down the reporting obligations for the transitional period 5 and Commission Implementing Regulation (EU) 2024/3210 of 18 December 2024 laying down rules for the CBAM registry 6 .

• Consistency with other Union policies

The proposal is consistent with the objectives of the better regulation agenda, as it will strengthen the Commission’s ability to carry out its general supervision of CBAM, while avoiding the costs (both for the Commission and the entities providing the information) that would otherwise be incurred in collecting the information through other means.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

The proposal amends an existing regulation. Therefore, the legal basis for the proposal is the same as the legal basis of the amended Regulation, namely Article 192(1) of the Treaty on the Functioning of the European Union (‘TFEU’) in the area of environment protection.

In accordance with Articles 191 and 192(1) of TFEU, the Union shall contribute to the pursuit, inter alia, of the following objectives: preserving, protecting and improving the quality of the environment, promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.

• Subsidiarity (for non-exclusive competence)

The CBAM Regulation created a common uniform framework ensuring an equivalence between the carbon pricing policy applied in the EU’s internal market and the carbon pricing policy applied on imports.

The simplifications to that regulation envisaged by this proposal will further enhance legal certainty and rationalise the reporting requirements.

• Proportionality

The simplification of administrative requirements, including reporting requirements, simplifies the legal framework by introducing changes to existing requirements that do not affect the substance of the policy objectives. The proposal is therefore limited to those changes that are necessary to decrease the compliance burden and to ensure compliance in a more efficient manner without changing the substance of the legislation concerned.

The proposal is consistent with the principle of proportionality as it does not go beyond what is necessary to meet the objectives of the Treaties. The proportionality of the proposal has a number of important aspects.

Firstly, it is recognised that it is challenging for importers to deal with the CBAM reporting requirements while at the same time Member States’ competent authorities must carry out important supervision tasks. This will be mitigated by introducing a threshold to exempt from CBAM obligations certain importers.

Secondly, for importers within the CBAM scope, the proposal contains changes to the reporting requirements, targeting those which are necessary to decrease the compliance burden and ensure compliance in a more efficient manner.

• Choice of the instrument

The proposal requires amending the CBAM Regulation. It lays down the specific rules necessary for the simplified application of certain provisions of the CBAM Regulation, where the goals pursued cannot be reached through the adoption of implementing measures as they require amending basic provisions of the CBAM Regulation. This concerns the de minimis derogation, the reporting obligations, the calculation of embedded emissions and the calculation of the financial adjustment.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

The proposal relies on the experience gained in implementing the CBAM Regulation since the mechanism started to apply in its transitional phase on 1 October 2023.

• Stakeholder consultations

Since the CBAM started to apply in its transitional phase on 1 October 2023, the Commission Services have continuously been consulting stakeholders in the Union and in third countries relevant for CBAM via multiple communication channels. In 2023, the Commission Services renewed the mandate of the expert group on CBAM 7 whose mission is to assist the Commission services in the development and implementation of the CBAM, harness technical expertise and bring exchanges of experience and good practices in CBAM implementation.

In 2023, the Commission Services also launched a broad communication campaign to raise awareness about CBAM including in third countries, explain the rules and provide useful advice in how CBAM could be implemented by the relevant stakeholders (such as importers, third country producers, national authorities). This communication campaign relied on publicly available live webinars in several EU languages. Useful materials have been provided on the CBAM-dedicated webpage 8 : targeted e-learning materials, Q&A, guidance (also translated to non-EU official languages).

The Commission was also in regular contact with national competent authorities for CBAM, to discuss various issues concerning implementation of CBAM, with a view to improve its functioning and effectiveness.

On 6 February 2025, the Commission hosted a high-level consultation day with key stakeholders to test the main ideas of the legislative package on simplification on targeted policies, including the CBAM, and to collect input and feedback ahead of its adoption on 26 February 2025.

Based on these actions and repeated public meetings with relevant business representatives from the Union and third countries, the Commission Services have collected sufficient feedback from stakeholders to adopt the best measures to achieve the objective of the proposal: simplify the complex reporting rules to reduce the compliance burden and ensure CBAM is efficiently rolled out while preserving its environmental objective and climate objective.

• Collection and use of expertise

The proposal has been elaborated following a process of internal scrutiny of existing reporting obligations and is based on experience in implementing the related legislation, including the data collected through the quarterly CBAM report submitted by declarants. Since this is a step in the process of continuous assessment of reporting requirements in Union legislations, the scrutiny of such burdens and of their impact on stakeholders will continue in the future.

• Impact assessment

The proposal concerns targeted changes of the CBAM Regulation to simplify some of its requirements, including reporting. The main measures are based on experience in implementing this Regulation and abovementioned related implementing acts. The proposed targeted changes ensure a more efficient and effective implementation of the existing mechanism.

This proposal is accompanied by an analytical document, the Commission Staff Working Document (SWD) “Towards a simpler and more effective Carbon Border Adjustment Mechanism” 9 . The analytical document builds on and further complements the analysis carried out in the original impact assessment conducted in 2021.

• Regulatory fitness and simplification

In the 2021 impact assessment accompanying the CBAM legislative proposal 10 , the Commission concluded that, since CBAM is initially applied to imports of selected basic materials and their products, large businesses would be the primary ones affected, but that in practice the CBAM would result in relatively higher compliance costs for small and medium-sized enterprises (SMEs) compared to large enterprises in scope of CBAM, e.g. those importing CBAM goods above the derogation.

Based on the experience in implementing CBAM in its transitional phase, and on the assessment of stakeholders’ feedback since 1 October 2023, it has become clear that CBAM requires two types of main simplifications: a broader derogation from CBAM requirements of importers of very small quantities of CBAM goods, and a set of simplifications for the rest of the importers of CBAM goods to facilitate their compliance with the administrative requirements.

The proposed simplification is expected to exempt around 90% of importers from CBAM obligations, while maintaining more than 99% of embedded emissions in scope of CBAM, thereby safeguarding the environmental nature of the mechanism.

• Fundamental rights

The proposal respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the Union. In particular, it contributes to the objective of a high level of environmental protection in accordance with the principle of sustainable development as laid down in Article 37 of the Charter.

4. BUDGETARY IMPLICATIONS

This proposal will have implications for the EU budget. Its impact is assessed in the legislative financial and digital statement accompanying this proposal.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

As the proposal amends the CBAM Regulation, it does not have additional implementation plans and monitoring, evaluation and reporting arrangements beyond the existing ones under the said Regulation.

It is however important to recall that the Commission will continue ensuring that arrangements are in place to monitor and evaluate the functioning of the CBAM, including its enforcement against circumvention practices, and evaluate it against the main policy objectives. Given that the CBAM is one of the policy proposals under the ‘Fit for 55 Package’ adopted by the Commission in July 2021 11 , monitoring and evaluation will be carried out in alignment with the other policies of the package.

The Commission will monitor how CBAM is implemented to feed into its analysis and will regularly report to the European Parliament and to the Council on the application of the CBAM Regulation. As part of that reporting, the Commission will propose possible changes to improve its functioning, collect the necessary information for a potential further extension of the scope of CBAM, including on other goods that could be at risk of carbon leakage, such as downstream products. Those reports should also contain an assessment of the impact of the CBAM on carbon leakage, including in relation to exports, and its economic, environmental, social and territorial impact throughout the Union.

• Detailed explanation of the specific provisions of the proposal

The proposal contains two types of simplifications.

First, importers of small quantities of CBAM goods, which represent very small quantities of embedded emissions imported into the Union and in most cases correspond to SMEs and individuals, will be exempt from CBAM obligations. For those importers, the administrative burden resulting from compliance with CBAM obligations significantly outweighs the environmental and regulatory benefit. This is due to the combination of (i) the insignificant share of embedded emissions in all their CBAM goods imported into the Union and (ii) the inability of national authorities to enforce the rules due to the large numbers of importers of small quantities of CBAM goods.

Second, the proposal contains a set of simplifications for importers of CBAM goods above the threshold to facilitate their compliance with the reporting requirements. In particular, the proposal simplifies and streamlines the authorisation procedure for national competent authorities and the Commission, the data collection processes from third country producers to authorised CBAM declarants, the calculation of embedded emissions for certain goods, the emission verification rules, the calculation of the authorised CBAM declarants’ financial liability during the year of imports into the EU and the claim by authorised CBAM declarants for carbon prices paid in third countries where goods are produced.

Article 1(1) amends the derogation from the CBAM obligations by introducing a new mass threshold as laid out in a new Annex VII to the CBAM Regulation, to exclude importers of very small quantities of goods.

Article 1(2) amends the definitions of importer and operator to facilitate reporting requirements.

Articles 1(3) and 1 i, point (b), draw the consequences of the new threshold on the rules related to the authorisation that importers must be granted to import goods above that threshold, and provide for the possibility for authorised CBAM declarants, which remain legally responsible of their CBAM obligations, to technically delegate in the CBAM Registry the reporting requirements to third parties to facilitate compliance.

Articles 1(4)(a) changes the annual deadline for submitting the annual CBAM declaration.

Article 1(4)(c) introduces the possibility for authorised CBAM declarants to claim a carbon price paid in a third country other than the country of origin.

Articles 1 i, point (d), and 1(6) amend the rules on emission verification so that the obligation to verify embedded emissions only applies to actual values.

Article 1(5) amends the calculation of embedded emissions in the case of relevant input materials (precursors).

Article 1(7) introduces the possibility for authorised CBAM declarants to use default carbon prices calculated and made available by the Commission and claim carbon prices paid in third countries other than the country of origin of the goods.

Article 1(8) facilitates reporting obligations by introducing several changes to the portal established pursuant to Article 10 to register operators and installations in third countries.

Article 1(9) creates the registration of accredited verifiers so they can access the CBAM registry and carry out certain relevant tasks to facilitate reporting obligations.

Article 1(10) strengthens the empowerment Member States give to their national competent authority to carry out the CBAM-related duties and responsibilities.

Articles 1(11) and 1(13) draw the consequences of the changes introduced by this proposal on the requirements applying on the CBAM registry, risk analysis and monitoring.

Article 1(12) streamlines the consultation of other competent authorities and the Commission to reduce excessive administrative burden.

Article 1(14) sets the start date of the sales of CBAM certificates to February 2027 to address significant uncertainties related to the year 2026, which is the first year of the post-transitional period, and streamlines the information exchanges between the CBAM registry and the common central platform.

Articles 1(15) and 1(18) draw the consequences of the move of certificate sales to 2027 on the determination of the financial adjustment for the year 2026.

Article 1(16) simplifies the calculation as from 2027 by authorised CBAM declarants of their expected financial liability during the year of imports.

Article 1(17) modifies the repurchase limit to facilitate the way authorised CBAM declarant may manage their CBAM financial liability and draws the consequence of the change of the CBAM declaration submission annual deadline.

Articles 1(19) modifies the scope of information exchanged with customs authorities, the competent authorities and the Commission to reflect the introduction of the derogation.

Articles 1(20) and 1(22) introduce the rules and information exchanges on the monitoring of the derogation.

Article 1(21) introduces the possibility for competent authorities to modulate the penalty based on relevant facts and circumstances and draws the consequences of the new derogation.

Article 1(23) amends the empowerments given to the Commission by the co-legislators to adopt delegated acts in light of the simplifications made by this proposal.

Article 1(24) complements the reporting by the Commission to the co-legislators with the application of the derogation as amended by this proposal.

Article 1(25) amends the list of CBAM goods to exclude non-calcined kaolinic clays.

Article 1(26) adds electricity to the list of CBAM goods for which only direct emissions are to be taken into account in the calculation of the embedded emissions.

Article 1(27) amends Annex IV to Regulation (EU) 2023/956 to exclude input materials which have been subject to the EU ETS or to a carbon pricing system that is fully linked with the EU ETS.

Article 1(28) introduces a new Annex VII to set the threshold referred to in Article 1(1) point (b).

Finally, the Annexes contain several simplifications of embedded emission calculation to facilitate reporting obligations, for instance in the case of default values or precursors produced in the EU.