The European Commission has recently announced that it is working on a proposal to significantly raise the threshold for the Carbon Border Adjustment Mechanism (CBAM). This proposal comes in response to concerns raised by importers, and the Dutch Emission Authority (NEa) has repeatedly advocated for a change to the threshold to reduce administrative burdens, particularly for smaller importers.
What is CBAM?
CBAM is an EU regulation that ensures companies importing products from outside the EU pay for the CO2 emissions associated with the production of these goods. This applies to products such as cement, steel, aluminum, fertilizers, and hydrogen. The goal is to maintain a level playing field while supporting the EU’s climate goals by imposing costs on carbon-intensive production outside the EU.
Why is the increase in the threshold important?
The current threshold for CBAM is set at €150 per shipment. This means that importers of goods under this value are still subject to CBAM and must comply with its administrative requirements. For small importers, this is often impractical, particularly when the CO2 emissions from these small quantities are relatively low.
The NEa has previously pointed out that the administrative burden on these importers is disproportionately high. By raising the threshold, a larger number of small companies would be exempt from CBAM obligations, without undermining the effectiveness of the system. The new threshold would ensure that only importers with significant CO2 emissions would fall under CBAM’s scope.
The solution: A threshold based on weight
The NEa has proposed changing the threshold from being based on the value of goods to being based on the weight of imported CBAM goods. An analysis shows that more than half of the importers currently falling under the €150 threshold report very little CO2 emissions. Often, these amounts are less than 10 tons of CO2 per year per importer, or even zero.
A weight-based threshold would not only be clearer and easier to verify but would also ensure that only importers who are actually reporting a substantial amount of CO2 emissions would fall under CBAM. This would significantly reduce the administrative burden on small importers, while still maintaining the goals of the system.
Balancing feasibility and effectiveness
The exact value of the new threshold still needs to be further developed. A balance must be found between making the system more manageable for businesses and reducing administrative burdens, while maintaining the effectiveness of CBAM. Additionally, care must be taken to prevent misuse, such as splitting shipments to avoid the threshold.
The NEa welcomes the proposal to raise the threshold, but emphasizes that it is important for the proposal to be carefully implemented. Only then can the system remain both feasible and effective, with less administrative pressure on companies importing small quantities.
