The CBAM after Omnibus I: simpler, but also stronger?
The simplification of the carbon border adjustment mechanism keeps almost all emissions covered, but opens two avoidance channels the EU is already trying to close.
Based on the policy brief “The CBAM after Omnibus I” (College of Europe / IEE-ULB, July 2026), co-authored with Alice Fleury-Isambert, Justine Fourré, Mustafa Gülderen and Andrea Valera Córdoba.
The Carbon Border Adjustment Mechanism (CBAM) is the EU’s main tool against carbon leakage. The Omnibus I package has simplified it considerably. The relevant question is not whether it is now easier to comply with, which it is, but whether it still does what it is meant to do.
KEY MESSAGES
- The simplification preserves the mechanism's arithmetic: 10% of importers still cover around 99% of embedded emissions.
- The Commission itself has identified two avoidance risks: consignment splitting and shifting production towards downstream goods.
- A legislative response is already under way. The environmental outcome will depend on how fast it is adopted and how rigorously it is enforced.
What has changed
The CBAM, established by Regulation (EU) 2023/956, puts a carbon price on imports of iron and steel, aluminium, cement, fertilisers, electricity and hydrogen, equivalent to what EU producers pay under the EU Emissions Trading System (EU ETS).
Regulation (EU) 2025/2083, adopted on 8 October 2025, replaces the old EUR 150 per-consignment exemption with a single threshold of 50 tonnes of CBAM goods per importer per year. Around 182,000 importers, mostly SMEs, fall out of scope, while roughly 99% of emissions stay in (European Commission, DG TAXUD).
| Before | After Omnibus I | |
|---|---|---|
| Exemption | EUR 150 per consignment | 50 t per importer per year (not for electricity or hydrogen) |
| Annual declaration | 31 May | 30 September |
| Certificate sales | From January 2026 | From February 2027, with retroactive obligation |
| Quarterly holding | 80% of emissions | 50% (from 2027) |
The case for, and the case that does not convince
The argument for the reform is one of proportionality. The 90% of importers now exempted account for around 1% of emissions. Freeing them from disproportionate reporting duties lets enforcement focus where the carbon actually is. Seen this way, simplification is a precondition for the mechanism to be administrable and defensible towards third countries.
The criticism is both substantive and symbolic. More than 360 civil society organisations called the Omnibus “disastrous” (joint statement, March 2025). The problem lies less in the CBAM changes, which are defensible on their own, than in the package they belong to, which also waters down the CSRD, the CSDDD and the Taxonomy. The Commission’s own yardstick is useful: simplification yes, deregulation no. On paper, the CBAM passes that test. In practice, it depends on what happens with the avoidance channels.
Two avoidance channels
Splitting imports. A corporate group can spread its purchases across several subsidiaries so that each stays below 50 tonnes. The group thereby avoids authorised declarant status and the purchase of certificates, even if its aggregate emissions are substantial. The Commission has explicitly described this as a “circumvention strategy”.
Processing abroad and exporting the finished product. The CBAM only covers raw and semi-finished materials. If steel is turned into a component before crossing the border, it enters free of any obligation. This creates an incentive to move the manufacturing of finished goods outside the EU, towards countries with weaker climate policies. The result is not lower emissions, but displaced ones.
The response has been swift. In December 2025 the Commission proposed anti-avoidance rules and an extension to around 180 downstream product categories by 2028. The Council adopted its general approach on 12 June 2026, with a refined product list and pre-consumer scrap added as a precursor.
Environmental assessment
My reading is that the net effect is neutral to slightly positive, provided both channels are closed. Emissions coverage is maintained. Calculation and verification are aligned with the EU ETS. Default values are deliberately conservative, pushing exporters to provide actual data or to decarbonise. The delay in certificate sales is mostly a timing effect: the 2026 obligation remains and is priced on 2026 levels.
WHAT TO WATCH
- The passage of the downstream extension through the European Parliament.
- Updates to default values and benchmarks in 2026 and 2027.
- The publication, from 2027, of default carbon prices for third countries.
- Leakage indicators in trade data as the CBAM registry matures.
Four recommendations
- Accelerate the downstream extension, to shorten the period during which the asymmetry remains open.
- Assess the 50 t threshold at corporate-group level. This neutralises splitting by design, instead of relying only on ex-post enforcement.
- Resource enforcement and the registry. Conservative defaults only work if there is verification capacity, data cross-checks with customs and effective penalties.
- Use recognition of foreign carbon prices as climate diplomacy, with transparent methodologies and support for partner countries.
Whether a simpler CBAM is also a stronger one will not be decided by the simplification itself, but by how quickly these measures are adopted and how rigorously they are applied.
Main sources. Regulation (EU) 2025/2083; European Commission, DG TAXUD (20.10.2025) and press release IP/25/3088 (17.12.2025); Council of the EU (12.06.2026); World Bank, State and Trends of Carbon Pricing 2025; Merler, Bruegel (2025). Full text and bibliography in the policy brief.
