In 2025, the European Commission will revise the carbon order adjustment mechanism (CBAM): it may be extended to other sectors and processed products, and procedures for small market players will be simplified.
These plans were outlined by the European Commissioners in the recently published EU Competitiveness Compass.
Rethinking the approach to decarbonization
Officials have promised that the upcoming revision of the CBAM will take into account the situation in energy-intensive industries included in the European Emissions Trading System (ETS) and the need to minimize circumvention and unintended consequences for value chains.
To enhance the effectiveness of this mechanism, the European Commission will analyze the possible expansion of its scope to other sectors and processed products, as well as additional measures to reduce the impact on exports of the relevant goods.
“This will contribute to achieving the goal of preventing carbon leakage and ensuring a greater impact in terms of promoting global carbon pricing and, as a result, creating a level playing field internationally,” the document says.
The EU is preparing a Clean Industrial Agreement to protect and promote clean technologies and decarbonized production. Its publication is scheduled for February 26. It is planned that it and its elements will mobilize various political levers – “from simplified permitting and authorization procedures to industrial policy incentives, from reformed public procurement rules to trade defence instruments, from targeted investments through the Global Portal and international partnerships to increased market access.”
The European Commission is also planning to revise the ETS Directive in 2026 and develop incentives for permanent carbon removal to compensate for residual emissions in sectors that are difficult to reduce.
Simplification for European companies
In the EU Competitiveness Compass, officials informed that they will soon propose a new definition of small companies with medium capitalization. It is expected that by creating this new category of companies that are larger than SMEs (small and medium-sized enterprises) but smaller than large companies, thousands of businesses in the EU will benefit from individualized regulatory simplification.
In an interview with the Financial Times, Commissioner for Climate, Net Zero and Clean Growth, Wopke Hoekstra, said that more than 80% of EU companies subject to the CBAM will be exempted from paying it as part of the reforms planned by the European Commission. He said that he wants to limit the carbon adjustment mechanism to the largest importers and exempt most companies from compliance costs and fees as part of the bloc's efforts to cut red tape and increase productivity.
“Less than 20% of the companies covered by the mechanism are responsible for more than 95% of the emissions in products,” he says.
This step will free up to 180,000 of the 200,000 companies covered by the mechanism from the need to comply with the requirements.
As a reminder, European companies complained about the complicated and expensive filling out of forms during the trial launch of CBAM. In a March report, it was recorded that only about 10% of companies in Germany and Sweden that had to report emissions did so.
Earlier, EcoPolitic reported that the most influential political group in the EU, the European People's Party, wants to freeze the CBAM and cancel the renewable energy targets.
