The move, which the commission is due to propose this week as part of a package of measures to cut red tape for businesses, would drastically reduce the 200,000 importers currently covered by the European Union's world-first carbon border fee.

A draft of the Commission's proposal, seen by Reuters, outlined plans to change the carbon border levy (known as CBAM) so it only applies to companies importing goods with a mass-based threshold of 50 tonnes per year.

"A mass-based threshold reflecting the average emissions intensity of the volume of imported CBAM goods would better translate the climate objective of the CBAM. A threshold set at a level of 50 tonnes will exempt the vast majority of importers from obligations under this Regulation," it said.

The change would maintain more than 99% of the emissions covered by the carbon border levy, the draft said.

It would replace the existing CBAM rules, under which all individuals or companies importing CBAM-covered goods with a value of above 150 euros would have to pay the carbon border levy from next year.

From 2026, the policy will impose costs at the EU border on the CO2 emissions embedded in imported steel, aluminium, cement and other goods.

EU Climate Commissioner Wopke Hoekstra said earlier this month the Commission's analysis had found nearly all of the emissions covered by the carbon border tariff - 97% - are produced by just 20% of the companies under the scheme.

Most of the exempted importers are small and medium companies, or individual consumers, the draft document said.

"For those importers, the administrative burden resulting from compliance with CBAM obligations significantly outweigh the environmental and regulatory benefit," it said.

The draft proposal could still change before the Commission is due to publish it on Wednesday. Any changes to the EU policy would need to be approved by the European Parliament and EU member countries.