The European Commission plans to exempt 80% of companies from its Carbon Border Adjustment Mechanism (CBAM). EU Climate Commissioner Wopke Hoekstra aims to simplify compliance and reduce red tape while maintaining climate goals.
CBAM, launching its full implementation in 2026, will impose fees on CO2 emissions in imported goods like iron and steel, aluminum, fertilizers, electricity, hydrogen, and cement. The new proposal limits compliance to the top 20% of importers, basically responsible for 97% of targeted emissions. Indeed, businesses across Europe have raised concerns about CBAM’s complexity and high administrative costs. A trial run showed that only 10% of expected reporters in Germany and Sweden submitted data, highlighting bureaucratic inefficiencies.
Hoekstra insists the reform simplifies processes without weakening climate commitments. “If a company isn’t in scope, there’s no reason for unnecessary paperwork,” he said. The EU plans to cut red tape by 25%—and 35% for small businesses—to boost growth and productivity. The proposal will be part of an upcoming “omnibus” simplification act and requires approval from EU member states and the European Parliament.
Key trading partners like the U.S., India, China, South Africa, and Brazil oppose CBAM. They argue the levy hurts developing economies by making their industries less competitive in the EU. EU officials defend the tax as necessary to prevent carbon leakage, where companies shift production to countries with weaker regulations.
European industries seek further adjustments. For instance, the steel sector wants exemptions for products exported outside the EU, processed abroad, and re-imported. It also requests exemptions for items like girders and aircraft components.
Despite proposed simplifications, challenges persist. Many European firms struggle to obtain emissions data from international suppliers, complicating CBAM’s implementation. Brussels should consider balancing climate ambition with economic competitiveness as it finalizes reforms.
The EU’s approach to CBAM could shape global carbon pricing policies. Success may encourage other economies to adopt similar measures. However, European policymakers must ensure fair implementation while sustaining economic growth.
As discussed before, CBAM will significantly affect exporters from the Western Balkans. They are particularly exposed when it comes to steel, electricity, and other raw material exports to the EU. While a simplified CBAM could reduce compliance costs, it is still important to work on lowering carbon emissions to avoid the long-term burden of this levy. To remain competitive in EU markets, Western Balkan businesses ultimately must monitor their carbon footprints and invest in greener production methods. There are also no special exemptions for EU’s neighbouring countries, and exports from the region will have to bear the financial consequences of CBAM starting 2026. In other words, although some red tape may be avoided with the proposed measures, the burden is still there.
