EU: EU to simplify carbon tax at borders for most companies

EU institutions agreed Wednesday on a legislative simplification plan that will remove the majority of companies from the scope of the carbon tax at the border.

The European Council announced that an agreement has been reached on legislation to simplify the carbon border adjustment mechanism (CBAM) negotiated between member state representatives and the European Parliament (EP).

A statement noted that with the amendment to the rules, companies importing less than 50 tons per year for products covered by the border carbon tax will be exempted from CBAM requirements.

“The proposal seeks to provide simplification and cost-efficient compliance improvements to the CBAM regulation, without compromising its climate goals, as about 99% of embedded emissions in the imported CBAM goods would remain covered,” it said.

The aim is to reduce the regulatory and administrative burden, as well as compliance costs for EU companies, especially small- and medium-sized enterprises (SME).

As a result of the simplification of the rules, 90% of importing companies, mostly small- and medium-sized, are expected to avoid paying carbon tax at the border.

The regulation will take effect once it is officially approved by the EU Council and the EP.

Under the CBAM, which will apply to imports from carbon-intensive sectors such as cement, iron and steel, aluminum, fertilizer, electricity and hydrogen, EU importers are now required to report the volume of products and the amount of greenhouse gas emissions generated during production.

The EU continues to work toward the final phase of the CBAM, which is scheduled to start next year.

From Jan. 1, 2026, importers will need to purchase and deliver the number of CBAM certificates corresponding to the greenhouse gases of their products.

If the EU has an equivalent carbon price mechanism, exports to the EU can be made without paying the difference.