EU CBAM amended to exclude 90% of importers but include 99% of emissions

On 20 October 2025, Regulation 2025/2083 (the ‘Regulation’), to simplify and strengthen the EU’s Carbon Border Adjustment Mechanism (CBAM), came into force. The European Commission has significantly recalibrated the CBAM following its data-gathering phase, ahead of its full implementation on 1 July 2026. The amendments introduce a de minimis threshold, among other simplifications, that will exempt approximately 90% of importers from the Regulation’s compliance obligations, whilst ensuring approximately 99% of embedded emissions in imported goods remain within scope. 

This article unpacks the aims behind CBAM and its intended function, before turning to the recent amendments and concluding with a look at the potential for an exemption for UK businesses importing relevant products into the EU.

The CBAM’s aims

The CBAM aims to prevent ‘carbon leakage’ by encouraging non-EU producers to decarbonise their production processes^[1]. To do this, it will require importers to pay for the embedded direct and indirect emissions generated during the production of certain goods brought into the EU. These include cement, electricity, fertilisers, iron and steel, hydrogen, and aluminium. Payment is made by purchasing carbon certificates equivalent to the carbon price that would have applied, had the goods been manufactured within the EU. Importers must also apply to become authorised CBAM declarants through the CBAM registry (the ‘Registry’) in order to be permitted to import in-scope goods into the EU, and make quarterly CBAM reports. 

By 31 May each year, importers must submit a CBAM declaration detailing the quantity of goods and their embedded emissions from the previous year. 

What’s changing 

In response to the data gathering phase that began on 1 October 2023 and requires importers within scope to submit quarterly CBAM reports but not to pay for certificates, the Commission is amending the CBAM ahead of the remaining compliance obligations coming into force on 1 July 2026. The amendments include:

1. Introducing a new ‘de minimis’ threshold

   1. A new cumulative annual threshold of 50 tonnes per importer: Known as the ‘de minimis’ mass threshold, this will exempt around 90% of importers, mainly SMEs and individuals, from the scope of the Regulation. This exemption only applies to all goods in the sectors of iron and steel, aluminium, fertilisers, and cement. Exempted importers must state the exemption in the customs declaration for the goods concerned. Notably, the customs declaration is not a separate CBAM filing.
       
   2. “All or nothing” approach: The CBAM threshold operates on an “all or nothing” basis. Once the cumulative 50-tonne limit is exceeded at any point during a calendar year, full CBAM obligations apply to all relevant imports from 1 January of that year - not just to volumes above the threshold. This mechanism creates a significant regulatory risk, particularly for businesses with fluctuating or unexpectedly increasing import volumes. Importers nearing the threshold should implement robust monitoring systems and assess whether voluntary early compliance may be a prudent strategy to mitigate the risk of exposure.
       

2. Simplifying compliance

   1. Streamlined compliance for in-scope companies: The Regulation simplifies the authorisation process for CBAM declarants and eases obligations related to emissions calculation and reporting. Importers expecting to exceed the single mass-based threshold are expected to apply for authorised CBAM declarant status before exceeding the limit. Authorised CBAM declarants may delegate the submission of CBAM declarations to third parties, although the CBAM declarant will remain responsible for compliance under the Regulation. The third party must hold an Economic Operations Registration and Identification, as well as being established in a Member State. Embedded emissions can be determined either using default values or actual values. Actual values should be verified, and default values should be calculated and made available to the Commission.
       
   2. Greater flexibility: To prevent disruption when CBAM first comes into full effect, imports will be permitted into the EU under specific conditions while importers await formal registration.
       
   3. Simplified procedures for all importers: Improvements include clearer authorisation steps, more efficient data collection, streamlined embedded emissions calculations, verification processes, and financial liability assessments for CBAM declarants.
       

3. Enhancing Verification and Enforcement Provisions

   1. Verification and accreditation: The Regulation outlines more detailed procedures for accreditation of verifiers and introduces a provision for the revocation or suspension of verifier accreditation in cases of non-compliance. A competent authority must now give the authorised CBAM declarant the possibility to be heard prior to a revocation, and they may consult with relevant authorities or the Commission through the Registry on the conditions for revocation.
       
   2. Carbon Certificates: From 1 February 2027, a centralised system is expected to be implemented to allow Member States to sell certificates to CBAM declarants within their country. This system will facilitate both the sale and repurchasing of certificates by Member States, with the objective of providing oversight and transparency in these transactions. It is anticipated that there will be strong information exchange between the Registry and the central purchasing mechanism. After submitting their annual declaration, declarants must surrender the corresponding number of carbon certificates by 30 September each year. By 31 May annually, authorised declarants are expected to use the Registry for certificate surrender, which from 2027 will require careful cash flow planning. Declarants may reduce the number of certificates to be surrendered to reflect any carbon price already paid in the country of origin for the declared embedded emissions. The Commission shall calculate the price of CBAM certificates as the average closing price of the EU Emissions Trading System (ETS) allowances on the platform. Importantly, carbon prices paid in a third country other than the country of origin, will also be eligible for deduction. The reduction will be assessed against yearly default carbon prices, and any rebate or compensation in the country of origin that lowers the effective carbon price should be considered. From 2027, the European Commission may determine and publish default carbon prices for third countries with carbon pricing mechanisms in place. These prices, along with the methodology used to calculate them, will be made available in the Registry. By 1 November each year, the Commission may cancel any CBAM certificates purchased in the previous calendar year, without compensation.
       
   3. Strengthening rules for avoiding circumvention: The Regulation has broadened the scope of circumvention to include artificially splitting imports, including non-genuine arrangements to avoid exceeding the single mass threshold.

An exemption for the UK is expected

At the time of publication, the UK and EU were in negotiations regarding a potential temporary exemption for UK businesses from the EU’s CBAM. UK Ministers are seeking a one-year exemption to avoid regulatory misalignment and potential market distortions, since a UK carbon border tax is not expected until 2027.  

In many respects, the UK CBAM closely resembles the Regulation but does contain some differences. For example, the EU’s CBAM includes electricity, whereas the UK’s proposal does not, and the EU requires importers to purchase and surrender CBAM certificates priced according to the EU ETS, whereas the UK’s current proposal introduces a levy-based system. Additionally, the UK’s proposal is expected to apply sector-specific rates, a feature which is not present in the Regulation. These structural differences have implications for compliance costs, hedging strategies, and broader market dynamics.

Businesses have raised concerns about the impact on UK consumers and the risk of surplus goods from the EU being redirected to the UK. While no formal deal has been reached yet, an announcement is anticipated following the UK-EU Summit in May 2025. Both the Prime Minister and the European Commission President indicated a desire to link the UK and EU emissions trading systems and deepen cooperation.