The European Commission plans to cut the red tape companies face by introducing an extensive omnibus initiative to simplify sustainable finance reporting, taxonomy and sustainability due diligence. The far-reaching proposals also aim to simplify the Carbon Border Adjustment Mechanism (CBAM), primarily via the introduction of a de minimis rule which will exempt a large number of companies from the scope of the CBAM Regulation. A variety of legal issues remain unresolved, however.
I. Background
Following an announcement by Commission President Ursula von der Leyen in November 2024, the European Commission presented its omnibus initiative containing extensive measures to reduce the administrative burden on companies on 26 February 2025. Sustainable finance reporting, taxonomy and sustainability due diligence are to be simplified, creating greater legal certainty, cutting red tape and making it easier to invest in the EU. According to the Commission, this will bring total savings in annual administrative costs of around EUR 6.3 billion and mobilise additional public and private investment capacity of EUR 50 billion.
The omnibus initiative not only amends the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D), but also aims to simplify and rationalise the obligations under Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism (hereinafter: “CBAM Regulation”) (Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism, 2025/0039 (COD)). This would entail extensive changes to the CBAM Regulation.
II. How the CBAM works
The Carbon Border Adjustment Mechanism (CBAM) is the EU’s tool for putting a fair price on the carbon emitted during the production of carbon-intensive goods imported into the EU. It aims to encourage cleaner industrial production in non-EU countries and ensure that the carbon price of imports is equivalent to the carbon price of domestic production, thereby preventing carbon-intensive production from being moved abroad to countries where less stringent policies apply (carbon leakage). The definitive regime of the CBAM will apply from 2026 onwards, with the current transitional period running from 2023 to 2025.
From 2026, EU importers of goods covered by the CBAM will be required to register with national authorities, where they will also be able to buy CBAM certificates for the greenhouse gases released during the production of the goods. The price of the certificates will be calculated based on the weekly average price of the certificates of the European Union Emissions Trading System (EU ETS). Importers must declare the emissions embedded in their imports and surrender the corresponding number of certificates each year. If importers can prove that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted.
III. What are the planned changes to the CBAM Regulation?
The amendments to the CBAM Regulation introduced by the omnibus initiative focus on the following key points intended to reduce the burden on affected companies:
1. Exemption of small importers from CBAM obligations
The Commission’s omnibus initiative provides for a de minimis threshold for importing CBAM goods, easing the burden on importers of small quantities of these goods. Currently, the CBAM Regulation applies to all imports of emission-intensive goods listed in Annex I to the CBAM Regulation with a value in excess of EUR 150. According to the Commission, however, only a small number of importers account for a significant share of the embedded emissions entering the EU. The retention of small and medium-sized importers within the Regulation’s scope places a disproportionate burden on these companies, the Commission argues, as they collectively account for less than 1% of the recorded emissions. Under the new initiative, only importers who bring more than 50 tonnes of CBAM goods into the EU per year will therefore remain in the scope of the Regulation, although the Commission will be able to recalculate this threshold based on significant changes in emission intensities or trade patterns. The omnibus initiative also aims to improve compliance with and enforcement of the envisaged thresholds.
2. Option to delegate reporting requirements to third parties
The omnibus initiative provides for the introduction of a CBAM representative through Article 5(7a) CBAM Regulation, which means that CBAM declarants will be able to delegate the submission of the CBAM declaration to these representatives. The CBAM representative will have to be established in a Member State and fulfil certain technical requirements, such as registration with an Economic Operators Registration and Identification (EORI) number. However, even where the reporting requirements have been delegated to a representative, the CBAM declarant will remain liable for all CBAM obligations. Ultimately, the explicit option of engaging experienced service providers will mean significantly simplified operationalisation for companies.
3. Sale of CBAM certificates postponed to February 2027
A core element of the CBAM is the introduction of CBAM certificates based on emission certificate trading in the ETS. However, unlike emission certificates, there will be no fixed upper limit to the total number of CBAM certificates to be issued and the issued certificates will not be tradable between companies so as not to disrupt existing trade flows from third countries into the EU (no cap-and-trade system). Following a transitional period, the sale of these CBAM certificates was to start on 1 January 2026. The Commission now intends to postpone this to 1 February 2027 to address uncertainties related to implementation during 2026 – planned as the first year of the post-transitional period – and to streamline information exchanges between the CBAM registry and the common central platform. Member States will be able to sell CBAM certificates to authorised CBAM declarants via the common central platform. The data on the declarants’ CBAM certificates will be stored in a standardised electronic database, the CBAM registry, and will therefore be automatically available to the competent authorities in real time.
CBAM declarants will only be obliged to acquire CBAM certificates for emissions resulting from goods imported into the EU in 2026 from 2027 onwards to give them sufficient time to adjust to the changes to the Regulation. The price of CBAM certificates purchased in 2027 to cover emissions from goods imported in 2026 will reflect the price of EU ETS certificates in 2026.
4. Simplified calculation of embedded emissions for certain goods
Embedded emissions within the meaning of the CBAM are greenhouse gases directly released during the manufacture of goods as well as greenhouse gases indirectly released because the electricity used in manufacturing may not have been zero-emission. Calculation of the required CBAM certificates depends on these embedded emissions, but it is often hard to determine them. Where actual emissions cannot be determined, CBAM declarants may resort to default values when working out their emissions.
The omnibus initiative aims to simplify CBAM declarants’ calculations where they are based on default values. To this end, the default values for exporting countries unable to provide reliable data for a type of goods will be based on the highest emission intensity for that type of goods from all exporting countries for which reliable data is available.
For aluminium and iron products, emissions generated from input products will, as a rule, still be taken into account in future, but not emissions generated in the finishing of aluminium and iron products, as has been the case to date.
It can be assumed that the envisaged changes will make it easier for CBAM declarants to determine embedded emissions in future. But businesses will still need to develop an understanding, at an early stage, of how the processes for determining emissions work in order to gather the relevant data within the company as efficiently as possible.
5. Greater scope for CBAM declarants to claim deductions for carbon prices paid in a third country
Under Article 9(1) CBAM Regulation, CBAM declarants can claim in their CBAM declaration a reduction in the number of CBAM certificates to be surrendered in order to take into account any carbon price paid for the emissions declared in the country of origin and avoid being double charged.
The information gathered over the transitional period shows that in some cases it is hard to obtain the requisite information on the carbon price actually paid in a third country. The new omnibus initiative therefore provides for standard carbon prices, based on the default value system (see above). In a change to existing rules, CBAM declarants will be able to invoke standard annual carbon prices when claiming certificate reductions in their CBAM declarations if the carbon price paid in a third country can no longer be established. From 2027, the Commission is to publish standard carbon prices for each third country based on the best available data from reliable, publicly available information and information provided by third countries.
However, the Commission’s omnibus initiative does not address the costs that businesses incur because they bought certificates on the voluntary certificates market. So even if the omnibus initiative is implemented in its current form, the legal uncertainty in this area will not be eliminated.
Irrespective of this legal uncertainty, implementing the omnibus initiative will at least make it easier for businesses to claim deductions for expenses incurred in connection with greenhouse gas emissions in third countries. But to do so, businesses must have an overview of the extent to which their imported goods have already been subject to greenhouse gas emission pricing. One particular aspect to have in mind here is whether the electricity used in production contains surcharges that reflect the greenhouse gas emissions resulting from the generation of that electricity. This aspect requires that companies have an in-depth understanding of their own supply chain.
IV. Conclusion and outlook
The amendments to the CBAM proposed in the omnibus initiative may ease the burden on affected businesses. This applies in particular to importers that fall below the threshold, i.e. small and medium-sized enterprises (SME).
The planned simplification measures must first pass through the ordinary legislative procedure on the European level before they become law. It remains to be seen whether the political majorities required will be forthcoming in the European Parliament and in the Council. Before the end of 2025, moreover, the Commission is planning to review the CBAM Regulation in its entirety and its impact on other industries and downstream goods subject to the EU ETS. Its scope may therefore be expanded to include the sectors covered by the EU ETS.
Following the review of the CBAM Regulation, a legislative proposal can be expected for early 2026. In any case, affected companies should keep a close eye on developments and be ready to respond to the changing legal landscape.
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