Executive summary

On 22 May 2025, the European Parliament expressed its approval of the European Union (EU) Omnibus I Carbon Border Adjustment Mechanism (CBAM) simplification package.

Detailed discussion

Background

On 26 February 2025, the EU Commission proposed simplifications to the CBAM regulation to reduce administrative burdens for businesses, while maintaining the functionality of the CBAM measure. The key aspect of the proposal is a new exemptions threshold of 50 tons for certain CBAM goods per year per importer. This new threshold would exempt 90% of current importers from the CBAM declarant application process. Despite this reduction in the threshold value, 99% of the emissions from CBAM-covered goods would remain in the scope of regulation. (For details, see EY Global Tax Alert, European Commission releases Omnibus Package I proposal to simplify EU Carbon Border Adjustment Mechanism regulation, dated 3 March 2025.)

After the vote, rapporteur Antonio Decaro (S&D, IT) said: "The CBAM is a crucial instrument to help the EU prevent carbon leakage and incentivise climate action outside the EU. I am therefore glad that Parliament decided not to reopen other provisions of the CBAM legislation. This approach enables us to simplify matters for companies without dismantling or weakening the CBAM. We will continue to work quickly to bring legal clarity and certainty to all CBAM stakeholders."

Next steps

Next, the European Parliament will negotiate the final form of the legislation with the European Council. Subsequently, the publication of the final regulation can be expected in the Official Journal of the European Union.

Implications

The regulation provides clarity for EU operators subject to the CBAM regulation. In particular, all the importers of CBAM goods (except electricity, hydrogen) that do not exceed the 50-ton exemption threshold will be relieved of CBAM obligations (except indirect representatives declaring CBAM goods). This change will alleviate significant administrative burdens for qualifying EU operators. Further, the proposed procedural simplifications will relax the process for declaring CBAM. Nonetheless, it remains to be seen whether representatives of the EU Member States (EU Council) will negotiate amendments.

In any case, this year (2025) multiple additional legal acts are expected to provide details on the CBAM regulation. For example, a legal act that would expand the goods subject to CBAM is expected at the end of 2025. As soon as the range of goods is expanded, a large number of businesses can be expected to return to the CBAM scheme.

The CBAM should become a top priority, even for businesses that are not yet affected or anticipate qualifying under the CBAM exemption rules if they import goods that typically are produced in an emissions-heavy environment. Businesses will need to focus on CBAM education, build capacity to manage CBAM processes and plan for CBAM from a business-strategy perspective, CBAM's expansion and increased cost could have a significant effect on competitiveness. Planning and optimization opportunities include using special customs procedures or strategic procurement of low(er) carbon goods.