Renewable electricity producers outside the European Union must align their power purchase agreements (PPAs) with CBAM requirements if they want imported electricity to qualify for actual-emissions treatment. The contractual relationship between the generating installation, any intermediary and the authorised EU importing declarant is central to establishing the origin of electricity and substantiating the evidence required for cross-border delivery.
Direct PPAs and single tripartite agreements
A direct physical PPA between a renewable electricity producer and an authorised EU CBAM declarant provides a straightforward contractual structure. The agreement identifies the generating installation, contracted volumes, delivery periods, pricing, the buyer and the allocation of responsibility for obtaining records used in the EU import declaration. Separate traders or balancing service providers can support scheduling and market access, provided their involvement does not conflict with the supply relationship used to claim actual emissions.
An alternative is a single tripartite PPA involving the producer, an intermediary and the EU declarant. Commission Implementing Regulation (EU) 2025/2547 specifies that, where a PPA is concluded through an intermediary, the contractual evidence must demonstrate that only one contract was concluded between all three parties.
This requirement distinguishes a qualifying tripartite arrangement from a conventional wholesale trading chain in which an independent power producer sells electricity to one trader under one agreement and that trader resells it to an EU importer under another. Although such successive transactions may be valid wholesale trades, they cannot simply be classified as a qualifying tripartite PPA.
Physical delivery and emissions eligibility requirements
Both contractual models must satisfy the wider conditions established in Annex IV(5) of Regulation (EU) 2023/956, which governs the EU Carbon Border Adjustment Mechanism.
The generating installation must be directly linked to the EU transmission system, or the claimant must demonstrate that there was no physical network congestion along the relevant route at the time of export. The installation must also remain below the threshold of 550 grams of fossil-origin CO₂ per kWh.
Electricity must be firmly nominated against allocated interconnection capacity by the responsible transmission system operators. The nomination and actual electricity production must correspond to the same period, which cannot exceed one hour. An accredited verifier must certify compliance with the conditions and receive interim evidence at least monthly.
These requirements mean that a signed PPA alone cannot establish eligibility. The contractual structure must be supported by evidence of generation, nominations, transmission arrangements and verification.
Allocating trading and balancing responsibilities
Under a direct PPA, the practical challenge may arise from the arrangements required to deliver electricity across borders. A wind project selling to an EU trader, for example, may need a separate entity to act as the local balancing-responsible party, manage grid deviations and secure cross-border transmission rights.
The relevant agreements should identify the entity responsible for submitting nominations, the allocation of imbalance charges and the operational instructions that the importing buyer may issue. Where a trader acquires full title to the electricity under a separate resale arrangement, the parties must reassess whether the direct PPA still reflects the transaction relied upon for actual-emissions treatment.
A tripartite agreement can accommodate an intermediary with more extensive contractual responsibilities, but its provisions need to distinguish the qualifying physical supply relationship from the supporting commercial services. The main agreement should establish the single qualifying PPA and specify each party’s commitments.
Separate schedules can address pricing and invoicing, dispatch instructions, cross-border capacity, balancing settlements, meter access, document retention and the transfer of data to the EU declarant. Unclear contractual relationships can jeopardise the anticipated treatment of electricity under the actual-emissions rules.
Hourly reconciliation and carbon-cost allocation
Annual invoices are insufficient to establish the eligible quantity of electricity. Contracting parties should reconcile, for each hour, the PPA-covered volume, metered eligible generation, accepted firm nominations and the volume recorded in customs-import documentation.
As an operational control, the eligible quantity can be limited to the smallest hourly volume supported by the available evidence, provided all other regulatory conditions are met. This approach is a practical reconciliation safeguard rather than a substitute for the statutory eligibility tests.
Pricing provisions must also distinguish payment for electricity delivered from any premium conditional on successful emissions qualification. A producer may receive payment for all delivered megawatt-hours while receiving an additional qualification premium only for volumes supported by a satisfactory verifier’s conclusion.
Contracts should specify how the financial difference is allocated when eligibility is lost because of inaccurate metering, late nominations, network congestion, curtailed generation or an error attributable to the importer. They should also establish whether an adverse verification result leads to repricing, indemnification, alternative delivery arrangements or the application of the default emissions factor.
Proposed EU changes remain subject to legislation
The European Commission’s December 2025 proposal, COM(2025) 989, would introduce greater flexibility into aspects of the actual-emissions test, including the treatment of intermediary arrangements and physical-network conditions.
As of 17 October 2026, the proposed changes remained subject to the EU legislative process. Contracting parties can include provisions for adapting their agreements if the rules change, but the proposed regime should not be treated as legislation already in force. Any attempt to qualify earlier imports retrospectively must await the enacted legal text and relevant implementation provisions.
Implications for renewable project financing
Lenders assessing direct and tripartite PPAs face different contractual and operational considerations. A direct agreement generally provides a more straightforward legal chain to trace, although additional arrangements may be required for balancing, scheduling and cross-border services.
A tripartite structure can allow the importing buyer to benefit from a trading intermediary’s infrastructure, but it also brings contractual, operational and evidentiary responsibilities together in a multi-party instrument.
For both structures, the relevant test is whether each claimed electricity import can be traced from the generating installation through the contractual and physical delivery arrangements to the EU import declaration, with the required evidence available for independent verification.
