The European Commission recently proposed a series of updates to the Carbon Border Adjustment Mechanism (CBAM), aimed at reducing the regulatory burden on businesses and ensuring a smoother path to full implementation in 2026. The proposal, part of the EU’s Omnibus Simplification Package, introduces meaningful changes. While the European Parliament and Council still need to review and approve the proposal before it becomes law, adoption is anticipated by mid-2025.
Here’s what businesses exporting CBAM-covered goods into the EU need to know.
CBAM in Brief
What is CBAM? CBAM is the EU’s tool for addressing carbon leakage by putting a carbon price on imported goods from sectors covered by the EU Emissions Trading System (ETS). It applies to imports of iron, steel, aluminum, cement, electricity, fertilizers, and hydrogen. The mechanism is designed to ensure that imported goods are subject to the same carbon costs as those produced within the EU.
Since October 2023, businesses have been required to report embedded emissions quarterly under a transitional phase that runs through the end of 2025. Starting in 2026, companies must begin purchasing CBAM certificates to cover the reported emissions—unless the proposed changes shift that burden further out.
What’s Changing?
The Commission’s February 2025 proposal doesn’t alter CBAM’s overall structure or timeline, but it introduces several important proposed adjustments:
- De Minimis Threshold Introduced
Importers bringing in less than 50 tonnes of CBAM-covered goods annually would be exempt from the mechanism. While this threshold excludes many smaller importers, the vast majority of emissions—and high-volume trade—remain covered. - Deferral of Certificate Purchases
Although the definitive phase still begins on January 1, 2026, the deadline to purchase CBAM certificates would be pushed to February 2027 under the proposal. This would give companies more time to build systems for tracking, verifying, and pricing embedded carbon emissions in their supply chains. - Simplified Reporting for SMEs
The proposal includes streamlined templates and tools to support small and medium-sized enterprises (SMEs), aiming to reduce complexity without weakening the mechanism’s environmental goals.
Timeline Still Holds—With One Proposed Delay
The EU has not delayed CBAM’s entry into force. Companies must continue quarterly emissions reporting throughout 2025. However, when the Omnibus package is formally adopted, the financial obligation—purchasing CBAM certificates—would shift to 2027 for 2026 emissions.
This means, assuming the changes are approved:
- 2025 = Continued reporting (no payments)
- 2026 = First year requiring CBAM certificates (purchased in early 2027)
Until then, companies should operate under the current framework.
Business Implications
For companies importing covered goods into the EU, CBAM compliance remains a near-term priority. Even with the proposed easing of timelines, the scope and expectations are still significant:
- Importers must still report in 2025, regardless of size.
- Companies with high-volume or carbon-intensive trade should prepare for future costs based on emissions intensity.
- Suppliers and intermediaries may face new demands for emissions data from EU-based partners.
- Investments in emissions tracking and supplier engagement will support compliance and customer trust ahead of full implementation.
What’s Next?
The European Parliament and Council are currently reviewing the proposal. If adopted, the changes would take effect later in 2025. In the meantime, CBAM quarterly reporting requirements remain in force, and the Commission continues to publish additional guidance for affected sectors.
The EU’s direction is clear: embedded carbon data is becoming an essential part of doing business in Europe. Companies that prepare early will be better positioned to comply, manage cost exposure, and maintain market access.
Tetra Tech combines deep regulatory insight with technical expertise to help businesses build practical, audit-ready CBAM compliance strategies. From emissions data management to supplier engagement, our team supports every step of the process.
Need support? Contact Tetra Tech’s CBAM compliance experts at [email protected].
