Supported by CBAM.Clarion.Engineer
Steel producers across the Western Balkans are facing growing pressure to decarbonise their energy supply and meet EU customer requirements. However, renewable electricity procurement should not automatically be presented as a way to reduce current CBAM certificate costs for every steel product.
Current CBAM calculations focus on direct emissions
For iron-and-steel and aluminium goods currently listed in Annex II of the CBAM framework, the calculation focuses on direct emissions. Purchased-electricity emissions therefore do not automatically reduce the current certificate liability for these goods, even when renewable electricity delivers substantial operational and environmental benefits.
For covered steel products, the production route, fuels, process emissions and precursor chain remain central to determining CBAM liability. Electricity procurement can still support decarbonisation and commercial competitiveness, but its benefits must be distinguished from emissions categories that legally enter the current CBAM calculation.
Steel producers should begin by classifying the product, mapping its production route and identifying the relevant precursors. Only then should they assess which emissions categories apply and connect electricity procurement to a specific regulatory or customer benefit.
Renewable electricity retains commercial value
Green electricity can reduce operating emissions, support corporate procurement requirements, improve product-level information supplied to customers and strengthen the economics of electric arc furnace (EAF) production. A domestic renewable power purchase agreement (PPA) can also hedge wholesale electricity price exposure while providing long-term demand for renewable generation projects.
These benefits provide a commercial basis for renewable electricity procurement independently of any immediate reduction in CBAM certificate liability. Banks should therefore assess PPAs against demonstrable value, including electricity price stability, counterparty credit quality, renewable attributes, operating resilience and customer demand.
A premium supported only by unsubstantiated claims of current CBAM savings presents a weaker basis for financing.
Separate electricity procurement from CBAM emissions data
Steel companies can strengthen their procurement strategies by combining competitive renewable electricity pricing with Guarantees of Origin (GoOs) and metering records for customer reporting. In parallel, they can improve the data available on direct process emissions and precursor emissions for CBAM purposes.
Keeping these elements distinct allows companies to capture the benefits of renewable electricity without confusing environmental attributes or customer-facing claims with the emissions categories used in the current certificate calculation.
For steel buyers, the decision rule is to pay for renewable electricity against a defined energy, customer or decarbonisation benefit, rather than relying on a generic CBAM saving that the current product methodology does not establish.
Proposed reforms could change future electricity treatment
The separate legislative proposal COM(2025) 989 would materially revise electricity treatment, including the methodology for electricity default values and certain conditions governing actual values. It would also broaden the concept of physical PPAs to include intermediaries and change elements of the congestion and nomination framework.
The Council adopted its negotiating position on 12 June 2026, followed by the European Parliament’s position on 15 September 2026. The proposal remains under interinstitutional negotiation and must not be treated as enacted legislation.
The same legislative file proposes expanding CBAM downstream coverage from 2028 to selected steel- and aluminium-intensive goods. Both institutions support an expansion, but their proposed product lists differ and remain subject to negotiation. Until the final legislation is adopted, the existing scope remains the operating baseline.
The commercial opportunity for green electricity is strongest when its value is linked to benefits that producers, customers and lenders can substantiate, while current CBAM liabilities and potential future regulatory changes are assessed separately.
