Supported by CBAM.Clarion.Engineer
Broader recognition of indirect physical power purchase agreements (PPAs) could become one of the most commercially significant changes in the pending EU Carbon Border Adjustment Mechanism (CBAM) electricity reform. The proposed approach would better reflect the role of intermediaries in cross-border electricity markets while retaining the need for verifiable supply arrangements.
Reform could open new routes for industrial buyers
Utilities and electricity traders commonly structure power supply, manage balancing and intermediate credit between renewable generators and industrial consumers. Under the current framework, establishing eligibility for actual electricity emissions values can be restrictive when the required physical PPA relationship depends on a direct connection between the generating installation and the authorised CBAM declarant.
The proposed reform could allow more flexible contractual chains involving intermediaries, provided the applicable requirements for demonstrating electricity supply and emissions are met. This could give industrial steel and aluminium buyers more options to procure electricity through licensed suppliers rather than contracting directly with generators.
It could also improve opportunities to aggregate smaller renewable projects into portfolios that better match industrial demand and support project financing.
Traceability remains essential
A more flexible PPA framework would remove a potential legal bottleneck, not eliminate the need to demonstrate electricity quantities, maintain source traceability or manage counterparty risk.
Lenders should continue to require clear data-access rights, documented allocation arrangements and transparent responsibility for losses. Traders would need to show how electricity moves through the contractual chain and ensure that intermediated supply does not compromise the evidence required under the applicable CBAM rules.
Contracts should also address the financial consequences of regulatory change. If requirements are simplified, agreements need to establish who benefits from resulting cost savings and who bears reasonable transition costs when systems, reporting processes or contractual arrangements must be revised.
CBAM cash-flow planning remains important
The compliance timetable creates a separate treasury consideration for importers. For 2026 imports, CBAM certificate sales are scheduled to begin on 1 February 2027, while the first annual declaration and certificate-surrender deadline is 30 September 2027.
From 2027, the general certificate-pricing mechanism moves to weekly averaging of auction prices, while quarterly holding requirements become part of the treasury cycle. These obligations mean that the financial effects of CBAM cannot be assessed solely through the headline cost of electricity or the expected benefits of a renewable PPA.
Downstream expansion adds another investment scenario
The same legislative file proposes extending CBAM from 2028 to selected steel- and aluminium-intensive downstream goods. Both the Council of the EU and the European Parliament support expansion, although their proposed product lists differ and remain subject to negotiation.
Manufacturers planning capital expenditure for 2027–2028 can use the proposed lists as scenarios when designing data systems and electricity procurement strategies. However, investments should retain flexibility because the final scope has not been adopted and the existing scope remains the operating baseline.
COM(2025) 989 is not yet enacted law
The reform proposal, COM(2025) 989, would change electricity default-value methodology, aspects of the conditions for using actual emissions values, the recognition of physical PPAs involving intermediaries, and the congestion and nomination framework.
The Council adopted its negotiating position on 12 June 2026, and the European Parliament adopted its position on 15 September 2026. The proposal remains under interinstitutional negotiation and should not be treated as enacted legislation.
For policy-sensitive investments, the appropriate approach is to preserve flexibility for reform while maintaining current-law controls until an adopted rule changes them. The likely beneficiary is not the trader that obscures the source of electricity, but the trader that can intermediate supply while preserving traceability, reliable data and clear contractual accountability.
