The European Commission has put forward changes to the EU’s Carbon Border Adjustment Mechanism (CBAM) electricity rules that would allow power purchase agreements involving intermediaries to qualify for actual-emissions treatment. The proposal, dated Brussels, October 27, 2026, responds to a limitation in the current framework. Under the existing approach for 2026 imports, a qualifying PPA must be concluded directly between an authorised CBAM declarant and a third-country electricity producer.
Commission proposal addresses direct-contract requirement
Electricity trading arrangements often include traders, aggregators and licensed suppliers between generators and final buyers. These intermediaries can provide market access, balancing services, collateral arrangements and cross-border scheduling. In some cases, these roles make direct contracting between independent power producers and EU importers commercially difficult.
The Commission’s proposal seeks to recognise intermediary-based contractual structures within the CBAM electricity framework. It would aim to accommodate physical PPA chains where the contractual relationships and the connection to the source installation can be demonstrated. The change is still a legislative proposal rather than an adopted rule.
For the framework applicable to 2026 imports, the qualifying PPA requirement would continue to require a direct conclusion between the authorised CBAM declarant and the producer. The Commission’s December 2025 proposal would broaden the framework to accommodate intermediaries, subject to final terms agreed by the Council and the European Parliament.
Compliance and documentation requirements remain central
The financial effects described in the proposal extend beyond the electricity purchase price. Trading margins can be narrow, and transactions that appear attractive based on energy costs and cross-border price spreads may become less profitable if actual-emissions treatment cannot be substantiated. In that case, a higher default emissions factor would apply.
Commercial planning is expected to model both a qualifying case and a fallback scenario. The approach is intended to identify which party would bear any resulting cost difference, particularly for long-term PPAs spanning multiple regulatory years. The proposal also states that allowing intermediaries would not remove documentation obligations.
Instead, it would increase emphasis on proving integrity across the contractual and physical chain. Agreements would need to establish links between the generating installation, intermediary and authorised declarant. They would also need to prevent the same generation from being allocated more than once and preserve access to hourly production and scheduling data.
Verification depends on controlled allocation across contracts
The records needed for a CBAM electricity claim are distributed among multiple participants in the supply chain. The generating plant holds production data, traders may control nominations, transmission system operators retain relevant capacity or flow records, and the EU importer remains responsible for its CBAM declaration. Contracts are expected to specify who retains each record.
The same contractual provisions should set out how long records must be kept and how quickly they must be provided to a verifier. Without enforceable access to evidence, electricity may fail to qualify for intended treatment even if its physical origin and generation can otherwise be traced. This is linked to how verification is performed under CBAM electricity rules.
If adopted, the reform could support a model where utilities and aggregators combine renewable generation from several third-country installations. Under this approach, delivery to EU importers could occur through a single trading platform. The proposal notes that such arrangements could reduce transaction costs while raising additional questions about allocating emissions performance, failed operating hours and verification expenses among participating parties.
Western Balkans relevance highlighted for intermediary trading
The Commission’s proposed flexibility could be relevant in the Western Balkans where independent producers often sell electricity through regional trading companies. Instead of maintaining direct access to EU import markets, these producers use intermediated routes for sales. The proposal links this structure to potential applicability of intermediary-compatible arrangements.
In Serbia and Montenegro, aggregators could potentially combine generation, market access and CBAM documentation while preserving the required connection to the source installation. The commercial benefit would depend on final legal requirements and on whether each participant can supply evidence needed for verification. The proposal also identifies multiple roles involved in such transactions across countries.
For independent power producers, aggregators, suppliers, traders, corporate buyers and EU importers, distinguishing the proposed framework from requirements governing 2026 imports is described as an immediate priority. The Commission proposal and positions taken by the Council and European Parliament are presented as inputs for scenario planning and contract negotiations. However, proposed provisions are not described as available compliance options until amending legislation enters into force.
Companies urged to plan under current 2026 rules
A two-scenario approach is described as a way for companies to prepare without relying prematurely on legislative change. One scenario reflects the direct-PPA requirement applicable to 2026 imports. A second scenario assesses potential effects under an intermediary-compatible framework.
Existing transactions for 2026 must comply with rules in force at present. New long-term agreements can include conditional clauses intended to permit intermediary arrangements if an amendment is adopted. This is framed as avoiding assumptions that proposed flexibility already creates a legal entitlement.
Implementation is also expected to connect compliance documentation with purchasing activities, production records, customs records and financial records. Using shared underlying information for verification and commercial management is described as helping assess how changes in suppliers, trading routes or prices affect outcomes under CBAM electricity rules.
Compliance file requires contract-to-record traceability
The proposal describes expectations for building a defensible compliance file before a transaction or reporting period is finalised. Companies should be able to connect contract terms with generating installation details, meter data, electricity schedules and cross-border records. Documentation should also identify who approves each assumption.
A fallback mechanism is described as necessary where preferred emissions treatment cannot be demonstrated. Although this fallback may be less commercially attractive, defining it in advance is described as supporting assessment of exposure before challenges by a verifier, customs authority or authorised declarant. It also supports management of price adjustments and changes in verification requirements.
The proposal further notes that as CBAM’s financial impact increases over coming years, preventable evidence gaps could become recurring costs for electricity suppliers and importers. It describes documented processes as a way to distinguish genuine emissions performance from claims that cannot be adequately substantiated through available evidence.
Until any amendment is adopted, the existing direct-PPA requirement remains described as the applicable legal test for CBAM electricity imports under current conditions.