Supported by CBAM.Clarion.Engineer
A proposed revision of the EU Carbon Border Adjustment Mechanism (CBAM) could broaden the contractual arrangements available for cross-border electricity trading by recognising physical power purchase agreements (PPAs) involving intermediaries. For traders, renewable electricity producers and industrial buyers, the potential change could affect procurement structures and project financing, but the proposal does not yet provide an alternative to the rules currently in force.
The reform remains under legislative negotiation. Electricity imports during 2026 must therefore be assessed against the legal requirements applicable to the relevant period, rather than a future framework that has not been adopted.
Current rules retain specific contractual requirements
Commission Implementing Regulation (EU) 2025/2547 sets out the contractual evidence requirements for physical electricity PPAs used to support installation-specific actual emissions under CBAM. A qualifying agreement can be concluded directly between the electricity producer and the relevant authorised CBAM declarant. Where an intermediary is involved, the arrangement must be supported by one coherent three-party contract covering the relevant physical supply.
A chain of successive bilateral resales does not, on its own, establish the same evidentiary relationship. This distinction remains relevant to electricity trading desks that use traders and utilities to aggregate renewable generation and supply EU importers.
The separate reform proposal, COM(2025) 989, would broaden the concept of qualifying physical PPAs to include arrangements involving intermediaries. It would also change the methodology for electricity default values and parts of the conditions governing the use of actual emissions values, alongside revisions to the congestion and nomination framework.
Legislative negotiations have not produced enacted rules
The Council adopted its negotiating position on 12 June 2026, followed by the European Parliament’s position on 15 September 2026. Interinstitutional negotiations remain outstanding, meaning the proposed changes cannot yet be treated as binding requirements or operating permissions.
Trading desks can model the potential effects of indirect PPA structures under a future reform, but those scenarios must remain separate from assessments of current imports. The applicable requirements continue to depend on the legislation in force for the relevant import period.
The European Commission also published definitive-period sector guidance on 14 August 2026, covering electricity, iron and steel, and aluminium, among other materials. Its general CBAM questions and answers were updated on 15 October 2026. These documents provide implementation guidance but do not replace binding regulations or implementing acts.
Contract design must reconcile ownership, payments and evidence
Companies evaluating indirect PPAs should map the flow of contractual title, payments and emissions evidence separately before checking whether all three are consistent. A structure may appear coherent in its legal documentation but fail in practice if the electricity scheduler, importer or data custodian is a different entity from the one assumed in the PPA.
For arrangements covering multiple generating installations, each plant should have a separately controlled schedule and defined allocation limits. Portfolio flexibility can support electricity procurement, but any substitution should trigger a formal review. Replacement electricity should not be attributed to the original generating installation without the necessary supporting evidence.
Contract managers should release a structure only when the parties, title transfers, cash flows, data rights and fallback settlement formula can be reconciled without relying on informal assumptions.
Industrial procurement and renewable project finance
For steel and aluminium buyers, a broader definition of physical PPAs could make it easier to procure renewable electricity through utilities and traders while maintaining a clearer connection to identified generating installations. Such a change could affect industrial electricity procurement and renewable energy offtake markets.
However, the potential reform of electricity-import treatment would not automatically change the separate CBAM obligations applicable to manufactured steel and aluminium products. Electricity procurement arrangements and the CBAM treatment of the resulting industrial goods must therefore be assessed under their respective rules.
Project finance models should distinguish between base-case revenue under current law and additional revenue that depends on the proposed reform. Lenders should not increase base-case debt capacity solely because a future rule might make an intermediary-based PPA eligible under revised conditions.
The commercial value of COM(2025) 989 at this stage lies in the possibility of additional contractual flexibility. Until the legislative process is completed and the relevant measures enter into force, that possibility remains a conditional scenario rather than established revenue.
