EU proposes to simplify CBAM: key takeaways for Balkan companies

Although the primary target audience of the CBAM are EU companies, the regulation impacts non-EU entities ("third-country operators") as well. This is often referred to as the Brussels effect, describing the EU's power to shape the international business environment by introducing regulations with extraterritorial effects.

The CBAM is initially designed to cover all importers of specific products by imposing a price on the greenhouse gas emissions embedded in those products. Non-EU producers of carbon-intensive goods would thus be financially impacted by the carbon tax that their EU partners must now account for. As a result, these producers can either commit to lowering emissions by investing in cleaner technologies or pay the EU carbon tax. 

The new changes to the CBAM will reportedly not impact the essence of the mechanism but will cut red tape to make the CBAM more flexible and effective in the long run.

The most significant change is introduction of a de minimis threshold exemption of 50 tonnes mass for imports of iron and steel, cement, aluminium and fertilisers. According to the Commission's calculations, the threshold will keep 99 % of emissions within scope of the CBAM, while exempting around 90 % of importers. Importers who fall under the threshold would only have to declare themselves as occasional CBAM importers when submitting customs declarations. This change would provide relief to many Balkan businesses, as they will be free from the new and often confusing reporting and compliance requirements under the original CBAM regime.

For those who remain within the scope of the CBAM, the Commission has proposed simplifying compliance with CBAM obligations in several areas:

• Authorisation of declarants
  The process of authorisation will be simplified by making the consultation procedure optional, as well as introducing CBAM representatives to assist in the process.
  
  

• Multiple measures in terms of emission calculation
  • Exclusion of non-calcined clay from the scope of the CBAM.
  • Allowing declarants to choose between actual embedded emissions and default values with a mark-up.
  • Exclusion of emissions from downstream processing steps for certain aluminium and steel goods.
  • Exemption of precursors produced in the EU.
  • Removal of verification of embedded emissions based on default values, which allows third-country operators to rely on default values.
  • Exclusion of indirect emissions of electricity.
• Reporting requirements
  • The annual deadline for submitting declarations and surrendering certificates has been extended to 31 August.
  • The repurchase deadline is moved to 30 September, while the precise date of certificate cancellation is set for 1 October.
  • Changes to the CBAM registry will improve access for third-country operators and create access for accredited verifiers.
• Financial liability
  Requiring importers to hold certificates for 50 % of their emissions, as opposed to the previous 80 % rule. Importers can choose to calculate based on either default values or the number of certificates surrendered in the previous year.
  
  
• CBAM certificate sale start date
  The start date for CBAM certificate sales has been moved to February 2027, providing more time for declarants to collect data.
  
  
• Default values for carbon prices paid in third countries
  Generally, if a carbon price is paid in a third country, declarants can claim a reduction in CBAM certificates to avoid double charging. However, if information on the price paid is unavailable, the European Commission may determine default carbon prices per country based on the average carbon price paid throughout the year.
  
  
• Anti-abuse provisions
  The proposal strengthens anti-abuse provisions and aims to develop a joint anti-circumvention strategy in collaboration with national authorities.

These changes are not final yet. The Omnibus is a set of proposals put forward by the Commission, which is now subject to further consideration and adoption by the EU Council and the EU Parliament. In any case, there is still more to come, as the Commission has announced a review of the CBAM's functioning during the transitional phase which will be concluded before the definitive regime starts. 

Authors: Nina Rašljanin, Srdjana Petronijević