Policy & Compliance
With the largest importers being responsible for the bulk of emissions, the EU is considering sparing smaller companies the cost of complying with CBAM Proposed revision of the EU CBAM
T he UK fi nancial press has Commissioner for Climate, Net Zero, and Clean Growth, regarding the future of the EU’s Carbon Border Adjustment Mechanism (EU CBAM). Hoekstra has suggested that the EU CBAM should be restricted to the biggest importers, stating: “Less than 20% of the companies in scope [of CBAM] are responsible for more than 95% of the emissions in the products.” The rationale given for this proposal was to spare smaller businesses the costs of complying with the reporting requirements and reported on comments made by Wopke Hoekstra, European the additional charges incurred, thereby reducing red tape and boosting business productivity in the region. The proposed changes would reduce the number of businesses currently in scope of the CBAM by 80% from 200,000 to 20,000. Green deal policy The EU CBAM was implemented in October 2023 as a key policy of the EU’s Green New Deal, which aims to ensure that the EU is carbon neutral by 2050. The purpose of the EU CBAM is to prevent carbon leakage when industries transfer polluting production to countries with less stringent climate polices, or when EU products get replaced by more carbon-intensive imports. It is currently limited to high emitting products: iron/steel, cement, fertilisers, aluminium, hydrogen and electricity. A transitional phase ran from 1 October 2023 to 31 December 2024. During this period, EU importers of goods within the scope of CBAM were required to report their greenhouse gas emissions under the EU methodology, using default
“ By limiting the scope of CBAM to the largest importers, most imports would still be covered, but it reduces the adminis - trative and fi nancial burden on many businesses in the region
values or by an alternative equivalent method. Since 1 January 2025, companies can only report using the EU methodology. During the transitional phase, European countries have reported that many companies have not been, or only partially been, able to report their emissions data. This has led to concerns in the business community that the challenges of CBAM are hurting their competitiveness. Pragmatic approach In light of this, the comments made by Hoekstra indicate that the EU is likely to take a pragmatic approach. By limiting the scope of CBAM to the largest importers, most imports would still be covered, but it reduces the administrative and financial burden on many
businesses in the region. It must be stressed that the comments made by Hoekstra do not mean that the legislation regarding the CBAM has been changed, although it implies that the EU Commission is likely to propose an amendment to existing legislation in due course. Any amendment to the CBAM would need to go through the Ordinary Legislative Procedure – in other words be approved by the EU council and parliament. The UK is currently planning to implement its own CBAM in 2027. We hope that the UK CBAM will take a similarly pragmatic approach, focusing on the large sustainability gains whilst ensuring that UK businesses remain competitive. BIFA will continue to monitor any updates to CBAM and advise Members as this story develops.
14 | April 2025
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