Energy Traders Europe’s latest feedback on the implementation of the Carbon Border Adjustment Mechanism for electricity imports is not a technical footnote. It is a warning from the market side that the EU’s carbon border regime, if applied to electricity without sharper operational rules, could turn a climate instrument into a source of trading uncertainty, balance-sheet risk and cross-border liquidity friction.
The position paper, dated 17 November 2025, supports CBAM’s broader objective of putting a fair carbon price on imports and limiting carbon leakage, but argues that electricity is being treated as if it were a conventional physical commodity. That is the core problem. Steel, cement or fertiliser can be attached to production batches, invoices, factories and customs records. Electricity moves through meshed grids, is nominated commercially, scheduled hourly or sub-hourly, and often crosses borders through trading arrangements that do not correspond neatly to physical flows. Energy Traders Europe says the current framework creates “significant regulatory and implementation risks” for electricity importers because of technical inapplicability, late secondary legislation and insufficient guidance before the definitive CBAM period begins.
The paper’s strongest message is that CBAM declarations for electricity should rely exclusively on scheduled commercial exchanges, not physical flows. This is not a narrow accounting preference. It is the only dataset that traders, TSOs, customs authorities and back offices can realistically reconcile. Market participants submit cross-border schedules, TSOs confirm them, and those schedules are already embedded in nomination, settlement and reconciliation systems. Physical flows, by contrast, may diverge from commercial transactions because electricity follows the laws of physics, not contract routes. For importers, using physical flow data would introduce a compliance exposure they cannot control.
That distinction matters directly for South East Europe. Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia and other non-EU markets are increasingly tied to EU power flows through interconnectors, day-ahead coupling trajectories, bilateral contracts, RES PPAs and industrial offtake structures. If CBAM is calculated on an unclear or non-tradable basis, electricity exports into the EU could face a risk premium before a single certificate is surrendered. Traders would price in uncertainty around carbon cost, documentation, transit identification and default emissions values. That would make cross-border electricity more expensive, less liquid and harder to finance.
Energy Traders Europe also calls for a clearer treatment of source and sink declarations so that transit flows can be identified and excluded where appropriate. This is particularly important in interconnected regions where electricity may commercially move from a non-EU country to the EU, from the EU through a non-EU country back into the EU, or from a non-EU country through the EU to another non-EU destination. Without a robust source-and-sink logic, CBAM could end up taxing movements that are transit rather than genuine EU imports. The paper argues that commercial origin and destination data, matched with TSO-confirmed hourly schedules, provides an auditable method for separating taxable imports from transit flows.
The second major issue is the carbon price already paid in third countries. Electricity is different from most CBAM goods because commercial decisions must be made before the import takes place. Traders buy capacity, nominate flows, hedge positions and price supply contracts ahead of delivery. If they do not know whether a third-country carbon price will be recognised, or how it will be deducted from CBAM liability, they cannot price imports reliably. The paper stresses that although CBAM costs will not be paid before 2027, the methodology must be known before 1 January 2026, because traders need it to decide whether imports are commercially viable in the definitive period.
This point is crucial for countries that may introduce or develop carbon pricing mechanisms while remaining outside the EU ETS. If a Western Balkan power market has a carbon charge, ETS-linked mechanism or other recognised compliance instrument, the market needs certainty that this price will reduce CBAM exposure. Otherwise, electricity could be double-priced for carbon: first through the domestic mechanism and then again at the EU border. For countries seeking to align with the EU acquis, that would weaken the incentive to introduce carbon pricing, because local generators and exporters might not receive credit for the cost already internalised.
The position paper is especially firm on exchange-traded electricity. Where power is traded through an exchange in a third country with a carbon pricing mechanism, the carbon cost may already be reflected in the market price, but the buyer cannot identify whether a specific MWh came from a carbon-paid fossil source or a fossil-free source. Anonymous exchange and wholesale OTC structures cannot provide buyer-level carbon-paid documentation. Energy Traders Europe therefore argues that CBAM discounts should apply at market level where carbon costs are embedded in the wholesale price. That approach would be administratively simpler and closer to how electricity trading actually works.
The default emissions value methodology is another flashpoint. Energy Traders Europe argues that default values should be based on the average emission factor of the full electricity mix, including low-carbon generation, rather than only fossil-fuel emission factors. The paper says the current approach risks overstating emissions from third countries and failing to recognise decarbonisation already taking place in their generation mix. For the Western Balkans, this is not a theoretical objection. A hydro-heavy hour in Montenegro, a high-wind delivery profile in Serbia or a solar-heavy export window from the region does not have the same carbon intensity as a coal-dominated residual mix. A fossil-only default could therefore penalise actual low-carbon production and reduce the value of renewables in cross-border trading.
The paper also asks for default values to match electricity trading timeframes, ideally hourly or 15-minute granularity. This is one of the most important practical recommendations. Electricity carbon intensity is volatile. It changes with wind output, solar production, hydrology, coal dispatch, gas-fired balancing, outages and imports. A fixed annual default value would be administratively easy but economically blunt. It would understate clean hours and overstate dirty hours, distorting market signals. Machine-readable, time-granular default values would allow traders, suppliers and CBAM declarants to automate compliance and embed carbon cost directly into dispatch, nomination and settlement systems.
The section on actual values is where the paper becomes especially relevant for renewable PPAs. Energy Traders Europe argues that CBAM rules should distinguish clearly between the importer and the authorised CBAM declarant, because these roles do not always sit with the same entity. In real electricity trading chains, a producer, intermediary, capacity holder, importer, supplier and CBAM declarant may all be different legal or commercial actors. If the regulation assumes a simplified bilateral structure, it could exclude normal market arrangements that are otherwise transparent and verifiable.
For CBAM-compliant PPAs, the paper argues against overly prescriptive contractual requirements. The key should not be whether the contract has a specific legal architecture, but whether verified data proves that the low-carbon generation volume equals or exceeds the scheduled commercial exchange in the same hour. In practical terms, a Serbian wind producer selling under a structured PPA to an EU-facing offtaker should be able to support actual emissions claims if smart metering data, generation records, nomination data and contractual continuity can be verified. The same logic applies to aggregated RES portfolios, provided the data chain is auditable.
This is where CBAM can become a bankability tool rather than only a compliance cost. If verified renewable electricity can reduce CBAM exposure for EU importers or CBAM-covered industrial buyers, then RES projects in Serbia and the wider region gain a new commercial value layer. A wind farm, solar plant or hybrid RES-plus-storage project would no longer sell only electrons and guarantees of origin. It could sell documented carbon compliance value: hourly metered generation, matched delivery schedules, contractual traceability and importer-ready emissions evidence. That could support stronger PPA pricing, longer tenor and better lender confidence, especially for exporters exposed to EU carbon rules.
However, the Energy Traders Europe paper makes clear that this opportunity depends on regulatory usability. If the rules force a narrow PPA format, require data that traders cannot obtain, or impose physical congestion tests that market participants cannot verify, the low-carbon premium may not materialise. The paper calls the “no physical congestion” criterion problematic because congestion cannot be predicted by CBAM declarants and may not be available to market participants. Instead, it proposes that matching producer metering data with scheduled commercial exchanges in the same hour and market area should be sufficient evidence.
The certificate issue turns CBAM from a compliance question into a treasury question. Energy Traders Europe argues that electricity importers need ex-ante certainty on CBAM certificate prices. If the first real CBAM certificate price for Q1 2026 is only available in April 2026, importers will be pricing electricity transactions without knowing the carbon charge that applies. For a commodity traded hourly, with thin spreads and high volatility, that is commercially dangerous. The paper suggests using the EU ETS weekly average from 2026 or, alternatively, a previous-quarter EU ETS average, although it notes that the latter may create a mismatch with third-country carbon prices.
For SEE power traders, this is a material risk. Cross-border margins between Serbia, Hungary, Romania, Croatia, Bulgaria and Greece can be shaped by relatively small price differentials, especially after capacity costs, balancing risk and nomination uncertainty. A poorly timed or unpredictable CBAM certificate price could wipe out trading margins or push importers to reduce activity. In that environment, CBAM becomes not only a carbon policy but a liquidity variable in regional power markets.
The paper also asks for broader delegation rights for CBAM service providers, including certificate purchasing, surrendering, repurchasing and reporting. This reflects how large energy groups actually manage compliance. Trading desks, customs representatives, centralised back offices and group-level compliance teams already handle complex reporting across jurisdictions. Allowing delegation would reduce operational burden and limit the risk of over- or under-purchasing certificates. Energy Traders Europe also proposes flexibility in certificate repurchasing and intra-group transfers of unused certificates, arguing that current rules could create unfair cost inefficiencies compared with EU ETS participants.
The final point concerns authorisation. The paper argues that CBAM declarant status should be recognised across all EU Member States for electricity imports. This is important because electricity traders may nominate explicit capacity and declare imports in multiple Member States. Without EU-wide recognition, the same importer could face fragmented registration and documentation requirements across borders. That would be particularly burdensome for companies operating across Hungary, Croatia, Romania, Bulgaria, Greece and Italy-linked routes, where SEE electricity enters or interacts with the EU market through several regulatory gateways.
For Serbia and the Western Balkans, the broader message is clear. CBAM electricity implementation will not be solved only by calculating a carbon factor. It requires a full market infrastructure: hourly metering, TSO-confirmed schedules, dispatch data, PPA traceability, source-and-sink reporting, recognised domestic carbon pricing, machine-readable default values, and a workable role for intermediaries. Countries that build these systems early will be better positioned to sell electricity and low-carbon attributes into the EU. Those that delay may see their exports discounted, their PPAs questioned and their generators treated under conservative default values.
The policy risk is that CBAM unintentionally penalises precisely the type of low-carbon trading it should encourage. A Serbian wind project, a Montenegrin hydro-backed supply structure or a regional RES portfolio can only support EU decarbonisation if its output can be verified in a way that markets can use. Energy Traders Europe’s paper is therefore less a lobbying document than a practical implementation map. It says the electricity market can live with CBAM, but only if CBAM is translated into electricity-market language: schedules, nominations, metering, balancing perimeters, PPAs, certificates, dispatch instructions and auditable hourly data.
For electricity.trade, the commercial conclusion is direct. CBAM is moving from regulation into price formation. The next competitive advantage in regional power trading will sit with companies that can connect carbon data to trading data, and with generators that can prove hourly low-carbon supply rather than merely claim renewable origin. In the SEE market, that turns SCADA, smart meters, PPA clauses, EMS/TSO schedules and customs declarations into one integrated commercial file. The winners will not simply be the cleanest producers, but the producers and traders able to document cleanliness in a format that EU importers, verifiers, customs authorities and financiers can accept.