AUTHOR: Pierre Leturcq (IEEP) in partnership with the Center on Global Energy Policy at the University of Columbia – SIPA
Adopted as part of the European Union’s Fit-for-55 package, the Carbon Border AdjustmentMechanism (CBAM) was conceived as a climate instrument designed to address carbon leakage while reinforcing the EU’s domestic decarbonisation trajectory. In contrast, on the international stage, CBAM is increasingly depicted less as a climate policy instrument and more as a protectionist mechanism, aimed at shielding European industry and generating additional revenues for the EU budget. This blog assesses whether the revision package presented on 17 December 2025 remains aligned with the EU’s climate objectives. It underscores the importance of upholding a number of core principles and highlights the risks of future dilution arising from evolving political dynamics in the European Parliament, notably the growing convergence between the moderate right and the far right on environmental policy issues.
Adopted in December 2022 as part of the Fit-for-55 legislative package aiming to put the European Union on track to achieve 55% emissions by 2030, the Carbon Border Adjustment Mechanism (CBAM) has rapidly emerged as one of the most visible and contested instruments of the European Green Deal. Flagship initiative or tip of the iceberg – the EU CBAM constitutes first and foremost the logical corollary of the domestic EU Emissions Trading System (ETS) which is the cornerstone of the EU’s industrial decarbonisation strategy. The latest revision of the ETS adopted in April 2023 further increased in ambition as it effectively doubled the annual linear reduction factor of the emissions cap—from 2.1% in the 2021–2023 period to 4.3% for 2024–2027 and 4.4% for 2028–2030. Initially conceived as a measure to address carbon leakage by aligning the carbon costs borne by imports with those faced by EU producers under the more ambitious EU ETS, CBAM has progressively acquired a broader political and geopolitical salience. It became the initial spark that triggered not only a global surge in the adoption of carbon pricing schemes, but also a range of efforts to structure and institutionalise the trade–climate policy nexus at the international level.
As part of the Omnibus I legislative package adopted in 2025, the EU amended the CBAM Regulation (EU) 2023/956 to introduce a significant revision of the mechanism’s scope through a ‘de minimis’ mass-based threshold, replacing the previous value-based exemption. Under the original design, imports of covered goods were exempt from CBAM obligations only if individual consignments were of negligible value (below €150 per consignment). The revised framework replaced this with a single annual mass threshold of 50 tonnes of CBAM goods per importer per calendar year, such that importers whose total annual imports of CBAM-covered goods fall below this threshold are exempted entirely from CBAM compliance requirements—including reporting, declaration, and certificate surrender obligations. The revision substantially reduced the number of economic operators subject to CBAM, primarily excluding small and medium-sized enterprises (SMEs) and occasional importers that trade relatively small quantities of covered products. Estimates presented by the European Commission alongside the amending legislation suggest the threshold could exclude around 90 % of importers, while still covering approximately 99 % of embedded emissions from CBAM-covered goods entering the EU.These figures were calculated upon initial default values applied to exporting countries, and will have to be revised based on actual data.
On 1 January 2026, CBAM fully entered into force, two weeks after the Commission published a last-minute revision consisting of a series of legislative acts amending the conditions for the application of the mechanism or clarifying its functioning and methodology.
What are the main elements of this reform? More importantly, what do they reveal about the European Commission’s vision and intentions regarding the use and future of the mechanism? While the shift from a climate to a competitiveness rationale is clear, questions remain as to whether CBAM may gradually evolve into an instrument serving objectives beyond climate policy, notably commercial and fiscal ones.
