Electricity traders are expected to run two regulatory scenarios in parallel: the definitive EU Carbon Border Adjustment Mechanism (CBAM) rules for imports and the proposed changes set out in COM(2025) 989. Maintaining separate models is intended to support contract pricing, regulatory exposure management, and continuity for existing transactions.
Definitive CBAM electricity coverage from 1 January 2026
The definitive CBAM regime has applied since 1 January 2026. Electricity falls under CN 2716 00 00, and the mass-based de minimis exemption introduced through the 2025 simplification does not exempt electricity imports from the mechanism.
For current legislation, using actual electricity emissions requires meeting cumulative conditions. These include a narrowly defined physical power purchase agreement (PPA) structure and applicable network, congestion, and nomination tests.
Traders are required to evaluate those conditions against the rules currently in force. The approach is described as necessary rather than assuming that alternative contractual arrangements will qualify under a future framework.
COM(2025) 989 proposes changes affecting electricity treatment
The reform proposal would materially change how electricity is treated under CBAM. The proposed updates include a methodology for electricity default values, elements of the conditions for using actual emissions values, and a broader concept of physical PPAs involving intermediaries.
The proposal also includes changes to the congestion and nomination framework. The Council of the EU adopted its negotiating position on 12 June 2026, followed by the European Parliament on 15 September 2026.
As of the latest described status, COM(2025) 989 remains under interinstitutional negotiation and has not become enacted law. Traders, independent power producers (IPPs), and lenders are therefore directed to keep current-law and reform scenarios separate in financial models and contracts.
Contract change-in-law triggers tied to legal adoption and application
Change-in-law clauses are described as needing precise triggers for changes in pricing or obligations. The trigger should refer to adoption, publication, and application of the relevant legal rule where appropriate.
The trigger is not intended to rely on political agreements, committee votes, or press releases. Historic imports should retain the legal basis applicable during the period when they occurred, even after reporting systems and commercial models are updated.
Contractual mechanisms should allow future transactions to be adjusted when relevant rules change without retrospectively rewriting treatment for earlier imports. The same discipline is described as applying to steel and aluminium businesses.
Regulatory monitoring milestones for electricity default values and procedures
An effective regulatory watchlist is described as tracking specific legal milestones. These include adoption of the final regulation, official publication of adopted legislation, entry into force, dates of application, changes to implementing rules and procedures, and updates to electricity default values and related acts.
Negotiating texts and press reports are characterized as useful indicators of possible future changes. They should not automatically trigger repricing of historic trades or be treated as regulatory approval.
For policy-sensitive investments, the stated principle is to preserve flexibility for reform while maintaining current-law controls until an adopted and applicable rule changes them. Markets may price the option value of future regulatory changes, but legislative expectations are described as needing separation from rules that currently apply.