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The EU’s landmark Carbon Border Adjustment Mechanism (CBAM) entered into force on 1 January despite fierce opposition from trading partners and warnings from European industry that it will increase costs and red tape, as reported notable by the Financial Times.
CBAM, which covers six sectors including steel, cement, aluminium and electricity, is intended to prevent EU companies that have to pay for their emissions being undercut by cheaper, more heavily polluting competition. EU importers or their indirect customs representatives importing more than the single mass-based threshold of 50 tonnes of CBAM goods into the EU will have to apply for the status of authorised CBAM declarants. They will buy CBAM certificates from the national authorities in their country of establishment. The price of the certificates will be calculated based on auction price of EU European Trading System (ETS) allowances expressed in EUR/tonne of CO2 emitted, as a quarterly average in 2026 and as a weekly average from 2027 onwards.
EU importers must declare the emissions embedded in their imports and surrender the corresponding number of certificates each year. If importers can prove that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted.
The European Commission (EC) published on 17 December several amendments to the CBAM. They aim to close loopholes, prevent circumvention, and strengthen CBAM’s overall efficiency. From 1 January 2028, CBAM’s scope will expand to specific steel and aluminium-intensive downstream products. The EC also proposes a temporary support scheme to protect EU producers vulnerable to carbon leakage.
The changes also introduce the concept of equivalence in carbon tax and price deduction, and includes a new clause allowing for negotiated trade facilitation measures, e.g. mutual recognition of trustworthy accreditation bodies, and new facilities on equivalence of carbon price deduction.
The package also includes legislative texts relating to CBAM verification:
On 16 and 17 March 2025, the European Parliament (EP) and the EC will co-host the fourth edition of the annual EU Tax Symposium in Park Cinquantennaire and at the EP’s Hemicycle in Brussels, with the participation of National Parliaments.
This year, the event will take place under the theme: The future of taxation: Inequality and growth in the global economy. Speakers will include Nobel Prize winners in Economics Prof. Joseph Stiglitz and Prof. Philippe Aghion among many others.
Registrations to attend the Symposium have opened.
The EC has launched its expected public consultation to evaluate the functioning of the EU’s Directive on Administrative Cooperation in the field of taxation (DAC).
This consultation will feed directly into the EC’s legislative proposal later this year (second quarter of 2026) to streamline and reform the DACs, with the view of reducing administrative burdens for companies.
The deadline for stakeholder feedback is 10 February.
According to DG TAXUD’s Director for direct taxation, Mr. Benjamin Angel, the EU Tax Observatory is being revamped and will soon comprise two complementary pillars: one focusing on tax competitiveness, and the other on identifying and tackling tax gaps.
A Bruegel-led consortium, known as EU TAX COMPASS, has been awarded the grant for the “EU Tax Observatory Competitiveness and Advanced Sustainability in Systems of EU Taxation”. In addition to Bruegel, the consortium comprises 7 partners: the Vienna University of Economics and Business, the Institut des Politiques Publiques (PSE), Erasmus University Rotterdam, the University of Amsterdam, Fedea (Fundación de Estudios de Economía Aplicada) and Copenhagen Business School.
In parallel, the Paris School of Economics, under Gabriel Zucman’s leadership, has been awarded the other grant titled “EU Observatory Tax Gap”.
The EP’s FISC Committee will convene for the first time this year on 27 January for a busy and topical set of hearings.
First on the day, FISC will hold a hearing tackling tax obstacles in the Single Market. This will be followed immediately after by a hearing titled “The future of EU tax policy harmonisation – Cost of non-Europe report”, to discuss a study with the same title commissioned by the Committee.
After both hearings, FISC will host Commissioner Wopke Hoekstra for an exchange of views on the EU’s tax priorities, according to the Committee Coordinators’ December decision.
On 1 January Cyprus took over from Denmark the 6-month rotating Council Presidency. As it is the practice, Cyprus has published a Presidency programme indicating what topics it intends to advance during its term that will end in June 2026.
The programme contains several tax related priorities, such as:
Ireland will take over the rotating Presidency from Cyprus on 1 July 2026.
The 147 countries and jurisdictions working together within the OECD/G20 Inclusive Framework on BEPS agreed on 5 January on key elements of a package that charts a course forward for the co-ordinated operation of global minimum tax arrangements.
Following months of intense negotiations, the comprehensive package for a “side by side” arrangement represents a significant political and technical agreement which will set the foundation for stability and certainty in the international tax system. OECD argues that it will preserve the gains achieved so far in the global minimum tax framework and protects the ability for all jurisdictions to have first taxing rights over income generated in their jurisdictions.
This agreement is the result of US President Donald Trump’s January 2025 executive order rejecting the application of the global minimum tax rules in the US. Bruegel’s Senior Fellow Pascal Saint-Amans published an analysis assessing the relative wins and losses of this agreement, nothing that whilst the global minimum tax architecture is preserved, the agreement may have granted the US a competitive advantage that must be monitored.
In the meanwhile, the EC published on 12 January in the EU Official Journal a Commission notice that confirms the application of the OECD agreement in the context of the EU’s Pillar 2 Directive. This means that no re-opening of the EU Directive should be expected in the foreseeable future at least.
