The European Parliament and Council reached a provisional agreement (i.e., a post-consultation, non-binding political deal in relation to the final text of a legislative proposal) to streamline the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) on June 18, 2025. This is a key instrument to prevent carbon leakage and align trade policy with the EU’s climate goals. The changes are part of the EU’s broader sustainability legislative simplification package announced earlier this year. This proposal is intended to ease compliance burdens while maintaining the environmental integrity of the CBAM framework.
Central to the provisional agreement is the introduction of a de minimis threshold: importers of less than 50 tons of covered goods per year would be exempt from CBAM requirements. This threshold is expected to eliminate compliance obligations for approximately 90% of importers—primarily small and medium-sized enterprises (SMEs)—without materially impacting the policy’s climate objectives. According to the EU’s announcement, nearly 99% of emissions associated with CBAM-covered imports are generated by larger, higher-volume entities that will remain subject to the regime.
For importers above the threshold, the provisional agreement simplifies several core aspects of compliance, including streamlining the authorization processes, emissions data collection, verification procedures and financial liability accounting. The update would also standardize procedures for deducting carbon prices paid in third countries, modifies penalties for non-compliance and clarifies the role of customs representatives.
Importantly, the agreement includes transitional measures that allow unregistered importers to continue operating into early 2026, reducing the risk of supply chain disruptions during the registration and compliance onboarding period. The simplified regulation is expected to be formally endorsed by the European Parliament and Council by September 2025 and would enter into force shortly after its publication in the Official Journal of the European Union.
Key Implications for Clients:
- SMEs and low-volume importers may fall outside the scope of CBAM and avoid costs and complex reporting obligations.
- Covered or scoped-in importers should prepare for the updated compliance framework and begin assessing the impact of the simplifications on internal carbon accounting and risk management.
- Exporters, of any size, supplying in-scope goods (iron and steel, cement, aluminum, fertilizers, electricity and hydrogen) to the EU should discuss total annual import volumes with their EU importing business partners. Coordinated discussions are critical to compliance and cost management considerations.
