The European Council has announced plans to simplify its carbon border adjustment mechanism (CBAM), as it looks to “reduce the regulatory and administrative burden” of the policy by exempting many importers from compliance requirements.
Namechecking SMEs in particular, the council said in its announcement that it is seeking to cut costs for EU firms as part of its new negotiating position with the European Parliament on the legislation.
The EU CBAM – a carbon border tax, introduced 1 October 2023 – is designed to prevent ‘carbon leakage’, the practice of offshoring production processes in cheaper, higher-polluting countries.
The new approach will provide “simplification and cost-efficient compliance improvements” that do not undermine CBAM’s environmental objectives, the council said.
‘De minimis’
Adam Szłapka, Poland’s minister for EU affairs, argued that the new position would “boost EU competitiveness”, sending a “clear signal” that the council is “determined to advance on this path as soon as possible”.
The “main simplification” is the proposal for a ‘de minimis’ exemption from obligations under CBAM.
This exemption will cover importers “which do not exceed a single mass-based threshold set at a level of 50 tonnes of imported goods per importer per year”, the council said.
Joe Goldsworthy, Chartered Institute of Export & International Trade customs export, said:
"Many businesses based in both the UK and Europe will be relieved to hear that the Council has adopted most of the measures proposed in the Omnibus package to revise the CBAM. Crucially, the 'De Minimis' ruling which will revise the limit to 50 tonnes of CBAM goods has been agreed, meaning that many companies will no longer need to file CBAM declarations as they are under the threshold.
"Whilst the statement will be welcomed with open arms by companies, it is not time for businesses to rest on their laurels.
"Manufacturers and importers will be keeping a keen eye on developments over the coming months to see what is eventually confirmed as legislation to replace the current CBAM framework."
Changes for importers
There are also simplifications for those who import CBAM goods above this threshold. The council said these include changes to:
· The authorisation procedure under CBAM
· Data collection processes
· Calculation of embedded emissions
· Emission verification rules
· The calculation of the authorised CBAM declarants’ financial liability during the year of imports into the EU
· The claim by authorised CBAM declarants for carbon prices paid in third countries
Parliament
The announcement includes a note that the council “also supports the new de minimis mass threshold of 50 tonnes of imported goods, as proposed by the [European] Commission”.
The European Parliament has already voted to “simplify” the EU CBAM in a vote last week, endorsing the commission’s proposals with a 564-20 vote.
The parliament’s press office said the move “would exempt the vast majority (90%) of importers − mainly small and medium-sized enterprises and individuals − who import only small quantities of CBAM goods.”
Both parliament and council start negotiations to reconcile the different versions of the policy.
Context
The suggestion for changes come after high-profile calls for increased EU competitiveness, particularly in Mario Draghi’s major report on the subject.
The news also follows the announcement as part of the UK-EU ‘reset’ deal agreed last week that the country and the bloc would “work towards” linking their emission trading schemes.
The UK’s own version of CBAM is still being developed.
