SEUTAME MAIMELE: Proposed EU CBAM amendments not very beneficial for SA firms

On February 26 the European Commission (EC) published an “Omnibus” package of proposed changes to key EU laws on sustainability reporting, diligence and trade. The Carbon Border Adjustment Mechanism (CBAM) is among the laws set for renovation, with the aim of cutting red tape and simplifying EU rules for citizens and business.

The commission’s proposed changes to the CBAM do not change the mechanism, but rather suggest processes to simplify administration and reporting. Exemptions are also made for SMEs from CBAM financial obligations, as long as their imports fall below an established volume in certain key affected sectors.

Although the European parliament expressed its support for the commission’s proposals on May 22, they have not yet come into effect. The proposals must still undergo the EU’s legislative process, which includes scrutiny and approval by the European Council. Even if the process is accelerated it could take several months, and the final outcome may differ significantly from the original proposals. There are several implications of these proposed changes on affected businesses in SA. 

Tabled changes

The following proposed changes to existing EU CBAM regulation are of particular interest:

• The purchasing of CBAM certificates (paying the carbon tax) has been proposed to commence from February 2027 (for 2026 emissions). Initially, this procedure was set to commence in January 2026. However, the reporting frequency remains the same — on a quarterly basis.
• The annual CBAM declaration deadline is set to be moved from May 31 to August 31. This will provide businesses some additional months to collect accurate emissions data, secure verification and purchase the necessary CBAM certificates.
• EU importers (or exporters from SA, or their agents) will be able to directly upload (and share) their data on a digital CBAM registry. This is set to make compliance more efficient and transparent.
• Only actual emissions data will require verification, with default values now exempt from this requirement. That means the complex reporting of embedded GHG emissions is set to be simplified. This removes redundant verification processes, allowing businesses to focus on accurate and meaningful reporting.
• Non-calcined kaolinic clay has been removed from the CBAM affected products, further reducing the compliance burden for industries dealing with this material. This is a step in the right direction because the material is not carbon intensive.
• Emissions reporting for precursors produced in the EU, or those with equivalent European Trading systems, will no longer be required.
• EU importers or the exporters from other regions will now be allowed to appoint third party agents such as environmental experts to submit CBAM declarations on their behalf. This alleviates operational complexity and provides flexibility in meeting regulatory obligations.
• The Omnibus package aims to reduce the required holding of CBAM certificates from 80% to 50% of total emissions at the end of each quarter in their CBAM account. Such certificates provide information on emissions and what firms need to pay. This lowers the upfront financial burden on businesses, improving cash flow management and reducing the strain of compliance.
• Stronger penalties have been proposed for noncompliance, meaning those obliged to report on CBAM will face steep financial penalties for noncompliance.
• The EU may introduce default carbon prices for third countries from 2027, based on the best available data. This means CBAM EU importers and non-EU manufacturers (including those in SA) should monitor default carbon price values and incorporate them into reporting, where primary data is unavailable.
• Value chain positioning has been accounted for, with manufacturers engaged only in finishing processes for steel and aluminium products no longer needing to report emissions from finishing processes, although they still have to report the emissions from their precursors. This includes non-EU manufacturers.
• The proposed regulations establish a de minimis threshold of 50 tonnes of net mass, cumulatively per calendar year, below which EU importers or exporters from other countries will be exempt from CBAM obligations such as authorisation, declarations and certificate purchases. The 50 tonnes net mass is equivalent to roughly, 80 tonnes of embedded emissions per consignment, per year. This replaces the previous threshold of €350 in annual consignment value. This proposal was made on the basis of EC investigations that found that about 90% of CBAM-impacted importers accounted for less than 1% of total imported emissions. In particular, this proposal is expected to benefit smaller importers, including SMEs, and reduce oversight costs for public authorities in member states. 

Overall implications for SA

The proposed amendments make some headway in reducing red tape and the delay in sales of CBAM certificates offers some reprieve. This reprieve will only postpone the cost of exporting to the EU for one year to allow for extended preparations. SA exporters have additional time to develop and institute measurement and reporting systems as well as financially prepare for the export costs into the EU in impacted sectors. 

Evidence suggests that establishing a robust greenhouse gas emissions system takes at least five years, meaning the limited extension does little to ease the burden during the transition period of the EU CBAM. That said, the proposals do provide some level of certainty, as firms that have already begun preparing infrastructure for emissions accounting can proceed without further delays. 

The proposal to exempt 50 tonnes of CBAM covered exports (per year) is unlikely to have a significant beneficial effect on SA. This is because most SA firms affected by the EU CBAM are large corporations in the aluminium and iron & steel industries, exporting well over 50 tonnes of products to the EU annually.

Similarly, in the fertiliser and cement industries, exports to the EU account for less than 1% of total SA exports to the EU. Financial and administrative burdens remain, on large firms in the iron & steel and aluminium sectors and in fertilisers and cement.

Overall, given the export basket from SA, the EU CBAM proposed amendments are not significantly beneficial for the affected SA firms. In this regard SA firms in aluminium, iron & steel, chemicals (fertilisers) and cement should continue preparing for the full implementation of the EU CBAM in 2027 (should the European Council agree to the proposed amendments).

This includes investing in human and technological capital to ensure accurate GHG emissions accounting and compliance with the regulation.

• Maimele is an economist at economic think-tank Trade & Industrial Policy Strategies.