The Carbon Border Adjustment Mechanism (CBAM) was introduced with a clear objective: to prevent European companies from being placed at a competitive disadvantage compared to imported products manufactured in countries with less stringent climate regulations.

Put simply, if a European manufacturer must bear a cost for its CO₂ emissions, the EU wants certain imported products to face an equivalent carbon cost. This is intended to prevent so-called carbon leakage — the relocation of production to countries with lower environmental standards in order to reduce costs.

On 12 June 2026, the ECOFIN Council adopted its negotiating position on a new CBAM reform (document 10423/26). While this does not represent the final approval of the proposed changes, it marks the beginning of negotiations with the European Parliament to agree on the final legislative text.

Why is CBAM being reformed?

Following several years of implementation and a transitional phase focused primarily on reporting obligations, the European Commission identified that many small importers were facing a significant administrative burden despite accounting for only a very small share of the emissions covered by the mechanism.

The reform seeks to balance two objectives:

  • Reducing administrative requirements and compliance costs.
  • Preserving the environmental effectiveness of the system while expanding its scope.

The Most Important Change: A New Exemption for Small Importers

The key innovation is the introduction of a single threshold based on the weight of imported goods.

Under the new framework, importers bringing less than 50 tonnes per year of CBAM-covered goods into the EU will be exempt from most CBAM obligations.

According to European Commission estimates, this measure would exclude approximately 90% of currently affected importers while still covering around 99% of the emissions associated with CBAM goods.

Expanded Scope

The most significant changes include:

1. The CBAM Scope Will Expand Significantly from 2028

The agreement extends CBAM to downstream products with significant steel and aluminium content.

The scope will include, among others:

  • Metal structures, pipes, fasteners and tanks under Chapter 73.
  • Lifting machinery and industrial refrigeration equipment under Chapter 84.
  • Electric motors, generators and transformers under Chapter 85.
  • Freight transport vehicles under Chapter 87.

Industries that previously had no CBAM obligations will become subject to the mechanism from that date onwards.

2. New Formal Concept: Harmful Resource Shuffling

The agreement introduces and defines the concept of “harmful resource shuffling”.

This refers to situations where operators in third countries control multiple production facilities with different emission intensities and selectively export their lowest-emission products to the EU without implementing genuine decarbonisation strategies across their broader operations.

For certain product-origin combinations considered high risk, the European Commission will adopt implementing acts requiring authorised CBAM declarants to provide evidence demonstrating that such practices have not occurred.

Where sufficient evidence is not available, embedded emissions will be calculated using higher default values.

3. Pre-Consumer Scrap: New Emissions Accounting Requirement

Until now, steel and aluminium scrap generated during the manufacturing process (pre-consumer scrap) was treated as having zero emissions.

Under the new agreement, emissions associated with this material must be accounted for when it is used as an input (precursor) for goods covered by Annex I.

Any claim that scrap is post-consumer scrap must be supported by robust and verifiable evidence. In the absence of such proof, it will be treated as pre-consumer scrap.

4. New Requirements to Demonstrate Actual Embedded Emissions

For certain products with highly variable emission intensities, declarants will be required to provide evidence identifying the specific production facility where the material was manufactured.

Examples include:

  • Mill certificates.
  • Product passports.

The Commission will determine through implementing acts which products are affected and the required evidence format.

5. Electricity: Methodological Change with Retroactive Effect from 1 January 2026

The methodology used to calculate emission factors for imported electricity will be revised to include all generation sources, including non-fossil sources.

In addition, the conditions for using actual emissions data will be relaxed:

  • Power Purchase Agreements (PPAs) involving intermediaries will be accepted.
  • The requirement to demonstrate the absence of physical grid congestion will be removed.

These changes will apply retroactively to electricity imports from 1 January 2026 onwards.

6. Guarantees and Certificate Management from 2027

From 2027, authorised declarants exceeding the de minimis threshold will be required to hold, at the end of each quarter, CBAM certificates corresponding to 50% of the embedded emissions associated with their cumulative imports since the beginning of the year.

Competent authorities may also require additional financial guarantees to ensure compliance.

7. Temporary Exemptions for Outermost Regions

The agreement introduces a temporary exemption mechanism, subject to strict conditions, for imports of cement and heavy construction materials destined for the EU’s outermost regions, such as Mayotte and Réunion, when facing exceptional circumstances such as natural disasters.

The European Commission will assess each request individually and may reject applications where there is a risk of circumvention.

Reduced Administrative Burden

The reform does not only benefit exempted importers.

Companies that remain within the CBAM framework will also benefit from several simplification measures.

1. Simpler Authorisation Procedures. The process for obtaining Authorised CBAM Declarant status, a requirement for importing CBAM goods, will be streamlined.

2. Less Complexity in Emissions Calculations. The proposal introduces improvements to emissions calculation methodologies and data collection requirements, reducing documentation burdens for importers and foreign producers.

3. Clearer Verification Rules. Verification requirements will be revised to facilitate compliance and reduce uncertainty.

4. Financial Simplification. The mechanisms governing the purchase and management of CBAM certificates will be adjusted to make compliance more straightforward and predictable.

Stronger Measures Against Fraud and Circumvention

The reduction in administrative burden is accompanied by stronger anti-fraud and anti-circumvention measures. The EU aims to prevent situations in which economic operators artificially split imports or modify supply chains solely to avoid CBAM obligations.

At Erhardt Ertransit, we closely monitor the evolution of CBAM and all regulatory developments affecting international trade. If you would like to understand how these changes may impact your imports or supply chain, our specialists are available to analyse your specific situation and help you make informed decisions with confidence and foresight.