A proposed revision of the EU Carbon Border Adjustment Mechanism (CBAM) could expand contractual options for cross-border electricity trading by recognising physical power purchase agreements (PPAs) that involve intermediaries. The change, if adopted, could affect how traders, renewable electricity producers and industrial buyers structure procurement and project financing. The proposal does not replace the rules currently applicable under CBAM.
Legislative negotiations are ongoing, so electricity imports during 2026 must be assessed under the legal requirements in force for that period. This assessment should not rely on a future framework that has not been adopted. Current obligations therefore remain tied to existing legislation for the relevant import window.
Contractual evidence requirements under current CBAM rules
Commission Implementing Regulation (EU) 2025/2547 sets out contractual evidence requirements for physical electricity PPAs used to support installation-specific actual emissions under CBAM. Under the current approach, 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.
The rules also distinguish between qualifying arrangements and trading structures based on successive bilateral resales. A chain of bilateral resales does not, by itself, establish the same evidentiary relationship required for installation-specific actual emissions claims. The distinction remains relevant for electricity trading desks that use traders and utilities to aggregate renewable generation and supply EU importers.
COM(2025) 989 would broaden qualifying physical PPAs
The separate reform proposal COM(2025) 989 would broaden the concept of qualifying physical PPAs to include arrangements involving intermediaries. It would also change elements of how electricity default values are handled and modify parts of the conditions governing the use of actual emissions values. The proposal further includes revisions to congestion and nomination framework elements.
Because negotiations have not produced enacted rules, any potential operational impact from COM(2025) 989 is not yet a binding requirement for importers. Trading desks may model how indirect PPA structures could work under a future framework, but those scenarios must be kept separate from assessments of current imports. Applicable requirements continue to depend on the legislation in force for each import period.
Status of negotiations and Commission guidance
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 proposed changes cannot yet be treated as binding requirements or operating permissions. As a result, companies cannot assume that intermediary-based PPA recognition will apply during ongoing compliance cycles.
The European Commission published definitive-period sector guidance on 14 August 2026, covering electricity as well as 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.
Designing indirect PPA contracts around title, payments and evidence
Companies assessing indirect PPAs are expected to map flows of contractual title, payments and emissions evidence separately before checking whether those elements align. A structure may appear coherent in legal documentation but fail in practice if key roles differ from those assumed in the PPA. This includes situations where the electricity scheduler, importer or data custodian is not the entity reflected in the agreement.
For arrangements covering multiple generating installations, each plant should have a separately controlled schedule and defined allocation limits. Portfolio flexibility can support procurement, but any substitution should trigger a formal review process. Replacement electricity should not be attributed to an original generating installation without the necessary supporting evidence.
Contract managers are expected to release a structure only when parties, title transfers, cash flows, data rights and fallback settlement formulas can be reconciled without relying on informal assumptions. This requirement applies when evaluating whether contractual documentation can support installation-specific claims under CBAM evidence standards. It also affects how intermediaries are incorporated into contract design.
Implications for industrial buyers and renewable project finance
A broader definition of physical PPAs could affect how steel and aluminium buyers procure renewable electricity through utilities and traders while maintaining a clearer connection to identified generating installations. Such changes could influence industrial electricity procurement approaches and renewable energy offtake markets. The potential effect is linked to how electricity procurement arrangements are structured.
The reform of electricity-import treatment would not automatically change separate CBAM obligations applicable to manufactured steel and aluminium products. Electricity procurement arrangements and the CBAM treatment of resulting industrial goods must be assessed under their respective rules. This separation means that changes in PPA eligibility would not directly alter product-level compliance requirements.
Project finance models should distinguish between base-case revenue under current law and additional revenue dependent on COM(2025) 989 outcomes. Lenders should not increase base-case debt capacity solely because a future rule might make an intermediary-based PPA eligible under revised conditions. At this stage, COM(2025) 989’s commercial value lies in possible additional contractual flexibility rather than established revenue.