EU Parliament Backs CBAM Reforms To Ease SME Burden

The European Parliament's Environment Committee has endorsed major changes to the European Union's Carbon Border Adjustment Mechanism (CBAM), in a bid to ease administrative burdens on small importers while safeguarding the environmental integrity of the scheme. The move, within a larger effort at legislative simplification nicked "Omnibus I," is a significant step forward towards tweaking one of the EU's most ambitious climate instruments.

CBAM is the EU's flagship carbon pricing tool aimed to combat "carbon leakage" by charging levies on imports of high-carbon products like steel, aluminium, cement, iron, and fertilisers. The tool prevents businesses operating in the EU Emissions Trading System (ETS) from being undercut by lower-cost, high-carbon products from low-regulating countries. But its reporting requirement and enforcement processes have raised eyebrows among small and medium-sized enterprises (SMEs) that are short of resources to contend with the intricacies of the system.

To mitigate such concerns, the Environment Committee welcomed a new threshold below which importers dealing with less than 50 tonnes of covered products per year would be exempt from CBAM reporting. This exemption will cover around 90% of importers, who are primarily SMEs and sporadic importers, and hence lighten the administrative burden on these stakeholders appreciably. Notwithstanding the wide reach of this exemption, the environmental goal of CBAM is not undermined because 99% of CO₂ emissions related to the concerned imports will continue to be within the scope of the mechanism.

The European Commission first proposed revising CBAM in February 2025 as part of its series of measures to simplify the EU legislation for businesses. This reform fits well with the strategy developed by the Commission: to make climate policy effective and not burdensome. Such a strong consensus was shown by the lawmakers since there were 85 votes in favor, just one against, and one abstention when adopting this committee decision.

Italian Member of Parliament Antonio Decaro, the rapporteur on the CBAM file, urged caution to remain balanced. "A majority within the committee supported restricting amendments to the Commission's specific proposals and not reopening other provisions of the CBAM bill, which is so important in order to avert carbon leakage," he said. This strategy allows us to streamline things for businesses without dismantling or undermining the CBAM. We will continue to act as quickly as we can to introduce legal certainty and clarity to all CBAM stakeholders.

Apart from the threshold of exemption, the amendments bring in a number of technical enhancements that seek to simplify compliance. These include simplifications within the authorisation process for CBAM declarants, more precise guidance on emissions calculation methods, and stronger safeguards against abuse of the system. Such adjustments are intended to simplify compliance and safety, especially for small players who have hitherto had great difficulty interpreting and fulfilling CBAM requirements.

The Environment Committee vote is not the last step in the legislative process. A plenary vote in the European Parliament is set for 22 May 2025, and then trilogue negotiations with the European Council will begin to conclude the legislative text. The agreed final version is set to clarify the rules for companies and give a stable environment as the CBAM phases in gradually over its transition period.

The CBAM is regarded as a key complement to the EU ETS, which sets emissions limits for firms operating in the EU. By applying the same carbon cost to imported products, the mechanism puts European manufacturers on an equal footing while encouraging cleaner behavior elsewhere in the world. The European Commission has also indicated that it will consider widening the scope of the CBAM by early 2026 to include other sectors that are exposed to carbon leakage.

As climate action continues to be an EU priority, the CBAM is key to driving more profound decarbonisation in and outside the EU. The recent reforms represent a balanced effort to uphold high environmental standards while acknowledging the business realities of small economic players. If supported in the next plenary session, the adjustments would further fortify the efficiency and equity of the CBAM, further cementing the EU as a climate governing leader in the international arena.