European lawmakers approve carbon border tax reform on overwhelming majority
The European Parliament voted with a decisive majority to endorse a proposal to streamline the EU’s carbon border adjustment mechanism, or CBAM, by moving to a mass-based threshold and tweaking the timeline for the sale of carbon pricing certificates.
The simplification measures, part of the European Commission’s Omnibus package presented in February 2025, passed with 564 votes in favor, 20 against and 12 abstentions, clearing the way for negotiations with the European Council on the final shape of the legislation.
“The CBAM is a crucial instrument to help the EU prevent carbon leakage and incentivize climate action outside the EU. I am therefore glad that Parliament decided not to reopen other provisions of the CBAM legislation,” Antonio Decaro, a member of the European Parliament, who is the chair of the Committee on the Environment, Climate Change and Food Safety, said.
“This approach enables us to simplify matters for companies without dismantling or weakening the CBAM,” he said. “We will continue to work quickly to bring legal clarity and certainty to all CBAM stakeholders.”
CBAM tweaks
Under the changes, importers will be able to purchase CBAM certificates starting in February 2027 rather than from Jan. 1, 2026, to cover the emissions embedded in their imports for 2026, giving businesses more time to adapt to the new carbon pricing mechanism.
The proposal also includes a 50 mt de minimis threshold that would exempt 90% of importers while still covering 99% of CO2 emissions from key industrial imports.
Efforts to simplify the EU’s CBAM reflect a broader struggle within the bloc to balance environmental goals with economic realities, particularly as European industries face competitive pressures from regions with less stringent climate policies.
The European Commission had said the changes to CBAM were being made to enhance the competitiveness of the bloc’s industry by exempting small importers and reducing the administrative burden for many companies.
In early 2026, the Commission will assess whether to extend the scope of the CBAM to other ETS sectors at risk of carbon leakage.
“The bigger CBAM issues like export rebates and expansion to downstream products are still unresolved,” Ingvild Sorhus, manager of EU carbon analysis at Veyt, said. “The upcoming report on CBAM scheduled for the [Q3 2025] will be forward-looking and policy-design oriented. The report is expected to lead to a legislative proposal in Q4 2025, with exports, circumvention protection, and downstream products likely on the docket.”
CBAM essentially imposes a carbon tariff on emissions-intensive commodities imported by the EU, including aluminum, cement, electricity, fertilizers, hydrogen, and iron and steel. The aim is to level the playing field for EU companies, as most exporting countries do not have a carbon price as high as the EU Emissions Trading System or lack a price on emissions altogether.
Carbon prices vary significantly globally. Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2025 at Eur72.69/mtCO2e ($82.24/mtCO2e) May 21.
This compares with China’s compliance emission allowance, which was valued at Yuan 70.42/mtCO2e ($9.79/mtCO2e) May 16, according to the Shanghai Environment and Energy Exchange.
EUROMETAL participates in EC Expert Group Meeting on CBAM
EUROMETAL took part in the 3rd Meeting of the Informal Expert Group on the Carbon Border Adjustment Mechanism (CBAM), held on 15 May 2025, and was represented by its President, Alexander Julius.
The Expert Group, convened by the European Commission’s DG TAXUD, plays an important advisory role in shaping the development and implementation of CBAM. Its core mission is to support the Commission in preparing both legislative and non-legislative measures and to facilitate an effective exchange of knowledge, best practices, and technical insights among stakeholders and Member States.
The group contributes by assisting in the implementation of existing EU legislation, programmes, and policies; supporting the preparation of delegated and implementing acts; providing input on legislative proposals and policy initiatives; coordinating with national authorities and fostering dialogue across the EU and supplying expertise to the Commission ahead of comitology procedures.
During the session, EUROMETAL President Alexander Julius raised a strong concern regarding the lack of clarity around the average ETS (Emissions Trading System) price for 2026 and how this uncertainty — combined with the yet undefined benchmark factor — could pose a significant and unpredictable cost burden for the European manufacturing and processing industry.
EUROMETAL called for the prompt establishment of a modest and realistic benchmark factor, which would offer greater predictability and reduce the risk of overburdening the steel value chain during the critical early phases of CBAM implementation.
As a representative voice of Europe’s steel distribution, service, and trading sectors, EUROMETAL continues to actively engage in CBAM policy discussions to ensure that the framework is fair, effective, and supportive of both industrial competitiveness and environmental objectives.
Assofermet: steel demand-boosting measures needed in EU amid declining demand
Italian distributor and service center association Assofermet called May 13 for action to stimulate steel consumption across the European Union, as demand declines due to intense global competition and the urgent need for the industry to transition towards decarbonization.
“The EU steel Industry … is certainly experiencing one of the most significant historical moments due to the continuous growth of new generation sites in third countries capable of producing steel at lower cost … and is facing epochal challenges of transformation towards decarbonization that, not only should be recognized, but should be supported and backed by the European Commission with effective, rapid and concrete measures,” Assofermet said in a statement.
European manufacturers are finding it increasingly difficult to maintain their market position and produce steel at competitive prices, in particular with new generation steel production sites emerging in third countries. The decline not only threatens the steel industry itself but also jeopardizes the entire supply chain, including key sectors such as automotive, construction and infrastructure.
While the organization welcomed the EC’s Steel and Metals Action Plan as a necessary and important document signaling that Europe is ready to act to protect strategically important industries, it proposed several targeted measures aimed at boosting demand, including tax credits, non-repayable loans, and reduced VAT rates for steel products.
Echoing steel producers Assofermet advocated for the extension of the Carbon Border Adjustment Mechanism to cover certain steel-intensive finished products, which would help level the playing field for EU manufacturers against cheaper imports as well as introducing an obligation to favor the use of machinery, vehicles and products with high steel content produced in the EU in the bloc’s public procurement tenders.
Assofermet underlined the crucial role of end-users, as stimulating demand in sectors that rely heavily on steel would not only support Europe’s manufacturing base but also foster its economic growth.
In its proposal, the trade body outlined the need for a robust domestic supply chain, especially highlighted during crises like the COVID-19 pandemic, when the EU relied on imports to meet demand.
Platts assessed the southern European domestic hot-rolled coil price at Eur620/mt ($690/mt) EXW Italy on May 12, stable over the day.
EU steel consumption was expected to decline by 2.3% year on year in 2024 to 127 million mt due to the recession in the two major steel-consuming sectors, namely construction and automotive, European steel association Eurofer said in its latest report published in February.
EU HRC prices face downward pressure as market sentiment remains cautious
European domestic hot-rolled coil prices remained largely stable May 8, with sources citing a modest erosion of EUR10-20 across various regions.
“Prices have been pretty stable overall, but we expect a small dip in the short term, with HRC ex-Ruhr at EUR630-640 and ex-Italy at EUR620,” a mill source said. “We’re not seeing a lot of action in the market right now, and the outlook remains fairly weak.”
Despite this, there is optimism for the second half of the year, with expectations for a potential improvement as market conditions stabilize. However, concerns about the gap between domestic and import prices, combined with regulatory uncertainty, remain.
“Import activity is quieter, and there’s little insight on where it will go,” the source added, noting that a lack of clarity on the Carbon Border Adjustment Mechanism (CBAM) was exacerbating market hesitancy. “People are starting to calculate what it really means, but there are still many gaps to be filled by the commission.”
Platts assessed HRC ex-works Italy at EUR620/mt and HRC CIF Southern Europe at EUR530/mt, both stable day over day. Platts assessed HRC in Northwest Europe at EUR640/mt EXW Ruhr, down Eur5 day over day, and HRC CIF Antwerp at Eur540/mt, stable day over day.
CBAM extras must be discussed in supply chain to prevent major disruption of steel trade in 2026
The CBAM for imported products was proposed by the EU to prevent carbon leakage within the EU Emissions Trading System (ETS), and was expected to be implemented from January 1, 2026.
Despite the short time-frame, European steel market participants were still digesting important details on how the mechanism will be administered.
Effectively, CBAM will come into force on January 1, but the fiscal implications will only become effective in May 2027.
“The EU delayed the operational handing of CBAM until May 2027 because the [electronic] platform for handing the certificates is not ready for trading,” Alexander Julius, president of European steel distributors’ association EUROMETAL, said during his presentation in Milan.
The price of CBAM certificates will be linked to ETS prices. For example, EU carbon emissions allowance prices hovered around €71.52 ($80.49) per tCO2e in January this year, peaked at more than €81 per tCO2e in mid-February, and then dropped below €60 per tCO2e in early April.
Under CBAM, those involved will need to buy certificates on the EU platform and can also resell those which are not used, Fastmarkets understands.
There are actual values of CO2 in imported goods, and the European Commission has also introduced default values that can be accepted in the future and will be set in the system. But the default values will be higher than the actual values, Fastmarkets understands.
To import steel when CBAM is in effect, customs-authorized companies need to be registered with the platform to be able to pay for CBAM certificates.
Initially, CBAM declarations will need to be done for Scope 1-2 emissions, but eventually also for Scope 3.
Declarants will be held liable for declaring incorrect emissions values.
Therefore, to provide more transparency, non-EU suppliers can register their installations on the EU platform to declare their Scope 1-2 emissions. But this will have to be checked by EU verifiers and certification companies.
“This is a good plan because not every declarant can risk registering [CO2 emissions] independently,” Julius said.
There will be around 100,000 companies that will be authorised on the EU platform to buy CBAM certificates, he estimated.
Dangerous misunderstanding
But while some buyers felt that the delay of CBAM certificates purchases may relieve some immediate financial pressure, that impression was faulty because the exposure to financial risk remained the same.
“The problem with this [delay of certificates sales] is that we don’t know what will be the exact CO2 values under ETS,” Julius said.
“It’s a cashflow issue,” he added, “because in 2027 the declarant will have to buy all the certificates for the goods that have been fiscally cleared in 2026. And the declarant has to build [financial] reserves. And CBAM certificate prices must be displayed in the final pricing.”
In the first year of CBAM – 2026 – Importers will have to pay for only 2.5% of embedded emissions, but this rate will gradually increase to 100% of grey emissions by 2034.
Therefore, the costs of handling imports will dramatically change next year, and buyers should start to prepare now.
“Everything that has been ordered from non-EU countries for the second half of 2025 will be fiscally treated on January 1, 2026, will be subject to CBAM and CBAM extras,” Julius said.
High extras for carbon emissions-intense steel
The complexity of CBAM might become a significant burden for smaller business, with intermediary companies simply unable to digest the costs.
“In the future, we will need much more stronger cooperation in the supply chain between importing companies, processing companies [and] up to the end-user company,” Julius said.
“We made calculation based on our imports volumes in 2024,” a buyer in Northern Europe said, “and CBAM handing costs are estimated to be €6.5 million [$7.3 million]. This is totally unmanageable.”
A buying company will need to be familiar with the system to be able to take the cost factor into consideration. Extras will have to be paid for imported steel with higher emissions, bringing additional costs of round €56 per tonne, Julius said.
One way to address the issue could be the introduction of “emissions surcharges” – adapting contracts to include advance emissions-tracking coordination between mills, customers and logistics partners, and to consider the use of digital systems for emissions reporting and certificate management.
“Nobody is willing to pay [emissions] extras, but under CBAM steel prices will increase dramatically,” Julius said. “These extras need to be discussed in the supply chain.”
What’s next?
In the fourth quarter of 2025, the European Commission will introduce CBAM amendments, including a potential extension of its scope downstream and additional anti-circumvention measures.
The proposed amendments will be in three areas – to address the problem of carbon leakage for CBAM goods exported from the EU to third countries; to introduce a CBAM scope extension to certain steel downstream products, to address the risk of carbon leakage being pushed further down the value chain; and to propose anti-circumvention measures, including those against resource shuffling.
While steel imported into the EU to produce finished goods will be subject to CBAM regulations, some steel derivatives – products made from steel, such as auto parts, cookware, nails or furniture. – can be imported directly without falling under the scope of CBAM. But this carbon leakage might do further damage to the already-suffering manufacturing industry in the EU, trade sources said.
“Instead of bringing the steel coil, beam, section or whatever from Asia and processing it in the EU,” a mill source said, “we buy the ready-made steel structure without quota, without anti-dumping duty and CBAM. That’s killing our downstream industry.”
EU launches steel carbon label consultations
The European Commission has initiated a public consultation as part of its impact assessment on different policy options related to the Clean Industrial Deal, which include a voluntary label specifying the carbon intensity of steel products, Kallanish notes.
The Industrial Decarbonisation Accelerator Act, a key part of the Clean Industrial Deal, aims to increase sustainable and resilient industrial production in energy-intensive industrial sectors (EIIs) in the EU by supporting decarbonisation investments.
Its three objectives are to speed up permitting procedures for industrial decarbonisation; Identify and promote priority industrial decarbonisation projects and clusters; and create and protect European lead markets for European low-carbon products.
The last of these will consider introducing sustainability and
Also assessed will be promoting industrial products with a low carbon intensity, including options for an EU label. This will develop a voluntary label for steel based on EU Emissions Trading System data and building on the EU’s Carbon Border Adjustment Mechanism (CBAM) methodology, the Commission says.
The impact assessment will also consider incentives for uptake of clean carbon feedstock, including carbon capture and u
In a continuation of its recent language that has been strongly supportive of industry, the Commission says: “The absence of additional EU action would maintain the status quo, increasing the risk of losing European strategic industries and becoming excessively dependent on non-EU countries for the EU’s green, digital, defence and economic security objectives.”
It admits problems can only partially be addressed by member states due to the integrated nature of the market for energy-intensive industrial products and that of energy markets.
EIIs are “of strategic importance to the EU’s resilience, security and economic prosperity. They are the key starting point for many value chains, providing raw, processed and intermediate materials to downstream sectors,” the Commission adds.
They therefore need “urgent support to decarbonise, electrify as well as tackle high energy costs, unfair global competition and complex regulations that jeopardise their business case, harm their competitiveness and weaken European resilience,” it notes.
The consultation is open for feedback for 12 weeks from 2 May and is open to all citizens and stakeholders.
Adam Smith Poland
UK publishes draft CBAM primary legislation for technical consultation
The draft outlines the legislative framework for the CBAM tax on certain imported goods into the UK, which will become effective from January 1, 2027.
The tax will apply to direct and indirect emissions embodied in the imported CBAM good.
“This represents continued momentum for the adoption of CBAM mechanisms globally, as countries follow in the EU’s footsteps to use trade as a tool for climate policy. It also helps better align policies in the UK and the EU, smoothing the way to progress linking of the UK and EU emissions trading systems, which will be a topic for discussion at the UK-EU Summit in May,” Stuart Evans, Fastmarkets’ chief economist and head of environmental markets, said.
As it stands, goods imported to the UK are not subject to the UK’s Emissions Trading System (ETS).
The ETS operates through a “cap and trade principle,” whereby the cap is set by the ETS and participants can trade emission allowances as needed.
CBAM aims to prevent carbon leakage in the UK, since imported goods not subject to the UK ETS have also not been subject to a similar carbon price from the jurisdiction they were produced in.
A “CBAM” good is defined in Schedule 1 of the draft primary legislation as:
- Aluminium
- Cement
- Fertilizers
- Hydrogen
- Iron and steel goods
Specific CBAM goods will be subsequently identified by commodity codes.
The CBAM tax rate will be charged “at an amount equal to the sectoral domestic price” of the good and multiplied by the number of tonnes of CO2 embodied in the good.
The “sectoral domestic price” will be calculated by the Treasury for each CBAM sector every quarter.
This would involve using the previous quarter’s average UK ETS auction price.
The importer will be liable to the CBAM cost, but exemptions are available if the good has originated in the UK, it has been returned or the good has been imported outside the course of business.
Registration with His Majesty’s Revenue and Customs (HMRC) will be required if CBAM goods with an aggregate value of £50,000 ($67,033) or more have been imported into the UK over 12 months, or it is expected that this quantity will be met before the end of a 30-day period.
According to the draft legislation, registration must occur within 30 days of triggering the above threshold.
The first accounting period for the CBAM tax will run from January 1, 2027, to December 31, 2027; returns and payments will be due five months after the end of the first accounting period (May 31, 2028) to provide businesses and HMRC sufficient time to adjust to the new system.
From January 1, 2028, CBAM costs are required every quarter and are due two months after the accounting period ends.
Initially the consultation proposal outlined quarterly accounting periods from 2028 with a one-month return and payment window. But after concerns around data availability were raised, this has been amended to two months, to bring greater alignment between CBAM and other UK tax models and provide businesses more time to gather the data required to submit their return.
As part of the submission, the government will allow the use of the most recently verified emissions data, and the most recently verified information to determine the “deductible carbon price.” According to the draft legislation, independently verified data or default values can be used by the importer.
From 2027, the government will proceed with a single default value per good, and the methodology for its calculation and publication will be confirmed prior to the beginning of CBAM in 2027.
The government noted that it is considering moving to an alternative approach from 2028 onward.
Importers can reduce their CBAM liability through a carbon price relief if the embodied emissions of the goods they have imported have previously been subject to a “deductible carbon price.”
This could be either through another country’s ETS or taxation.
In a previous consultation, the government confirmed that only explicit carbon prices that place a price per tCO2e can be used as part of this relief. Other policies, such as fuel duties or carbon regulations, are not allowed to form part of any deductions.
The UK government also proposed an exemption for goods that originated in a jurisdiction with a linked carbon pricing scheme, since carbon leakage risk would be minimal because the ETS prices would converge.
The consultation will end on July 3, and feedback is encouraged from all affected stakeholders.
UK-EU carbon markets relationship
The EU’s equivalent CBAM policy will come into effect on January 1, 2026, which has prompted other countries to look at setting up similar measures and their own ETS.
But the European Commission is planning to review legislative proposals amending CBAM in the fourth quarter this year, Fastmarkets recently reported.
The proposed amendments will be in three directions — to address the problem of carbon leakage for CBAM goods exported from the EU to third countries; to introduce CBAM scope extension to certain steel downstream products, to address the risk of carbon leakage being pushed further down the value chain; and to propose anti-circumvention measures, including those against resource shuffling.
Harmonizing CBAM policies between the UK and EU would provide domestic producers a way to offset associated CBAM costs when exporting to the UK through domestic pricing schemes.
The UK is at risk to lose £3.5 billion-8 billion in revenue from 2025 to 2030 if it remains outside the EU carbon market, since UK ETS allowance prices are lower than those in the EU, a UK Energy report from October 2024 shows.
“The UK Emissions Trading Scheme (ETS) is 10 times smaller, more volatile and, since mid-2022, has been priced lower than the EU ETS… A lower UK carbon price leads to reduced revenues for Treasury and lessens the incentive to decarbonize,” the report reads.
“Analysis by Frontier Economics projects shows that the introduction of the EU CBAM will lead to £800 million being paid to EU member states on export across all impacted sectors between 2026 and 2030,” it continued.
For example, in January 2025, UK ETS allowance prices were just around £32.57 per tCO2e. In contrast, EU carbon emissions allowance prices hovered around €71.52 ($74.06) per tCO2e in Janaury 2025, peaked at over €81 per tCO2e in mid-February, and then dropped below €60 per tCO2e in early April.
The projected average price for the year is around €75 per tCO2e, which is 15% higher than in 2024, according to the outlook for European Union Allowance, the financial instruments within the EU Emissions Trading System.
Jamie Mcleod at IREPAS: EU is taking steps to simplify CBAM but not weakening it
Speaking at the SteelOrbis Spring 2025 Conference & 92nd IREPAS Meeting taking place in Athens on April 27-29, Jamie Mcleod, director at consulting firm Crowe U.K. LLP, talked about the EU’s Carbon Border Adjustment Mechanism (CBAM) which is in its transition period right now, stating that in January 2026 the definitive period starts, imposing a levy on carbon-intensive goods imported into the EU, with steel being the most affected good.
Mr. Mcleod said that the transitional period is only the reporting phase and the 5th quarterly report is due to be submitted in April, marking the third report requiring actual emissions data, as default values are no longer permissible for the rest of the transition period.
He underlined that obtaining reliable and complete actual emissions data remains a significant challenge. If actual data is unavailable, CBAM declarants must demonstrate that they have made all possible efforts to obtain it.
Regarding the CBAM, Mr. Mcleod stated that, apart from the obvious results, another practical result of the mechanism is that it will generate billions of revenues for the EU.
The EU is taking steps to simplify the CBAM but is not weakening it. He went on to say that the EU is proposing a mass-based threshold of 50 mt per importer per calendar year, meaning that, if an importer imports 50 mt for the whole year, they will be exempt from CBAM obligations. However, he noted, most steel importers will be over that threshold.
He warned that, from 1 January 2026, only authorised CBAM declarants can import CBAM goods into the EU.
If you are supplying to EU, you need to be authorized and applicants must have a strong compliance history, no customs debts, sufficient financial standing to meet their CBAM obligations, and suitable internal processes to demonstrate adequate CBAM management.
While EU importers are directly responsible for CBAM reporting and charges, the CBAM impacts the whole supply chain, the Crowe U.K. official pointed out.
Touching upon the UK’s CBAM, Mcleod indicated that it will come into effect in 2027 and that there will not be a transition period, adding that alignment between the UK and the EU could mitigate trade impacts for trade of CBAM goods between the parties.
Italy, France, Slovakia seek to further simplify CBAM
Italy, France and Slovakia are urging the European Commission to simplify the Carbon Border Adjustment Measure (CBAM) and resolve the administrative challenges that come with its implementation.
The complex structure of this system could cause delays and increases in management and operational costs for European businesses.
“A simplification of the regulatory framework is needed to provide operators with clearly defined and simplified technical rules. Basing the CBAM on pre-defined emission values for upstream and downstream sectors could significantly simplify reporting requirements,” says the AoB document requested by France, Italy and Slovakia and obtained by Kallanish.
The paper suggests an exemption for small importers and a thorough review of downstream carbon leakage as well as carbon leakage in exports. The CBAM regulation now applies to the six pilot sectors and 20 neighbouring downstream products. However more sectors and downstream products may be at risk of carbon leakage due to the phase-out of free EU ETS allowances.
CBAM should cover downstream sectors and goods at risk of carbon leakage by the end of the transition period. At present, it does not include any measures to avoid carbon leakage from exports.
The EC is to consider the extension of CBAM to indirect emissions under the condition that it does not compromise decarbonisation efforts and to consider the impact of the mechanism on the competitiveness of the EU industry.
“The Commission is required to submit a report by 2028 on the impact of the CBAM, notably on carbon leakage to exports, resource shuffling, and an evaluation of the overall application of the regulation. Such a report should be anticipated to the end of the transition period. It should propose, if necessary, appropriate and proportionate measures to prevent carbon leakages in support of exporting industries, by maintaining, among other measures, targeted free ETS allowances for exportations to ensure a level playing field,” the paper concludes.
Earlier this month the Commission published its Steel and Metals Action Plan confirming it would issue a legislative proposal for CBAM adjustments by year-end.
Natalia Capra France
Redirection of Asian steel trade worries EU
Spain’s Celsa Group has joined the European steel sector in warning that the main impact of US tariffs will not be on European exports but rather on the influx of material from countries such as China, Indonesia and North Africa. These imports are expected to be redirected to Europe following the closure of the US market, Kallanish understands.
Celsa’s president, Rafael Villaseca, calls for stronger EU protection against potential trade diversions during the visit of European Commission vice president Stépahne Séjourné to the group’s plant in Castellbisbal. Like other European executives, Villaseca expresses concerns that Chinese steel is already being imported with state subsidies and does not meet Europe’s environmental standards.
“At a time of declining domestic consumption in China, rather than reducing production, they are shifting supply to other markets that lack protectionist measures, such as Europe,” he warns.
“Deindustrialisation is already a reality, with a loss of 29 million tonnes of annual production over the past decade. Strong political action is essential to defend European interests. We must curb unfair imports, ensure competitive energy costs, strengthen protection against carbon leakage, and guarantee that scrap generated within the EU is recycled within the continent,” he emphasises.
During the meeting with Séjourné, key measures were proposed for inclusion in the Steel and Metals Action Plan (see separate story). These included reviewing and strengthening EU safeguard measures to reflect current market conditions and prevent unfair competition. Another priority discussed was the need to secure access to affordable energy to maintain industry competitiveness and ensure the effective implementation of the Carbon Border Adjustment Mechanism (CBAM), reinforcing circular economy objectives.
Celsa accounts for 0.65 percentage points of the 3.3% of Spanish steel exports to the US.
Todor Kirkov Bulgaria