A position paper dated 17 November 2025 backs the Carbon Border Adjustment Mechanism’s aim of applying a fair carbon price to imports and limiting carbon leakage. It argues that electricity is being handled as if it were a conventional physical commodity. The paper says this approach conflicts with how power is traded and scheduled across interconnected grids.
Energy Traders Europe says the current framework creates “significant regulatory and implementation risks” for electricity importers. It cites technical inapplicability, late secondary legislation and insufficient guidance ahead of the definitive CBAM period. The market feedback frames the issue as operational rather than purely policy design.
Electricity flows versus scheduled commercial exchanges
The paper distinguishes between goods that can be tied to production batches and customs records, such as steel, cement or fertiliser, and electricity. It says electricity moves through meshed grids and is nominated commercially. It is scheduled on an hourly or sub-hourly basis, including cross-border movements.
Energy Traders Europe argues that CBAM declarations for electricity should rely exclusively on scheduled commercial exchanges rather than physical flows. The paper says this is because traders, transmission system operators (TSOs), customs authorities and back offices can reconcile schedules in nomination, settlement and reconciliation systems. It adds that physical flows may diverge from commercial transactions because electricity follows physical laws rather than contract routes.
The distinction is presented as a compliance exposure issue for importers. The paper states that using physical flow data would expose importers to compliance they cannot control. It links this concern to trading arrangements used across borders.
Source-and-sink treatment for transit in Southeast Europe
The paper says the implications are direct for South East Europe, where Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia and other non-EU markets are increasingly connected to EU power flows. It cites interconnectors, day-ahead coupling trajectories, bilateral contracts, renewable PPAs and industrial offtake structures as part of cross-border trading links.
Energy Traders Europe warns that if CBAM is calculated on an unclear or non-tradable basis, electricity exports into the EU could face a risk premium before any certificates are surrendered. It says traders would price uncertainty around carbon cost recognition, documentation requirements, transit identification and default emissions values. The paper connects this to potential impacts on liquidity and financing for cross-border electricity.
The position paper also calls for clearer source-and-sink declarations to identify and exclude transit flows where appropriate. It highlights scenarios where electricity may move commercially from a non-EU country to the EU, from the EU through a non-EU country back into the EU, or from a non-EU country through the EU to another non-EU destination.
It argues that without robust source-and-sink logic, CBAM could end up taxing transit rather than genuine EU imports. The paper says commercial origin and destination data matched with TSO-confirmed hourly schedules provide an auditable method to separate taxable imports from transit flows.
Carbon prices already paid outside the EU ETS
The paper identifies carbon pricing already applied in third countries as a second major issue. It says electricity differs from many CBAM goods because commercial decisions must be made before import takes place. Traders buy capacity, nominate flows, hedge positions and price supply contracts ahead of delivery.
Energy Traders Europe states that if traders do not know whether a third-country carbon price will be recognised or deducted from CBAM liability, they cannot price imports reliably. It notes that while CBAM costs will not be paid before 2027, the methodology must be known before 1 January 2026. The paper ties this timing to traders’ ability to assess commercial viability in the definitive period.
The position paper links this requirement to countries outside the EU ETS that introduce or develop domestic carbon pricing mechanisms. It says Western Balkan markets with carbon charges or ETS-linked mechanisms need certainty that those prices reduce CBAM exposure at the border.
It warns of potential double pricing for carbon if a domestic mechanism applies first and then CBAM applies again at the EU border. The paper also says crediting issues could weaken incentives to introduce carbon pricing aligned with the EU acquis because local generators and exporters might not receive recognition for costs already internalised.
Exchange-traded electricity and market-level discounting
The position paper addresses exchange-traded electricity in particular. Where power is traded through an exchange in a third country with a carbon pricing mechanism, it says carbon costs may already be reflected in market prices. However, it argues buyers cannot identify whether specific MWh came from carbon-paid fossil generation or fossil-free generation.
Energy Traders Europe says anonymous exchange trading and wholesale OTC structures cannot provide buyer-level documentation showing carbon-paid sources. It therefore argues that CBAM discounts should apply at market level where carbon costs are embedded in wholesale prices. The paper describes this approach as administratively simpler and aligned with how electricity trading operates.
Default emissions values by hour or 15-minute intervals
The paper highlights default emissions value methodology as another flashpoint. Energy Traders Europe argues default values should be based on the average emission factor of the full electricity mix, including low-carbon generation, rather than only fossil-fuel emission factors. It says current approaches risk overstating emissions from third countries by not recognising decarbonisation in their generation mix.
It gives examples relevant to the Western Balkans: it cites hydro-heavy hours in Montenegro, high-wind delivery profiles in Serbia and solar-heavy export windows from the region as having different carbon intensity than coal-dominated residual mixes. The paper argues that a fossil-only default could penalise low-carbon production and reduce the value of renewables in cross-border trading.
The position paper also asks default values to match electricity trading timeframes, ideally hourly or 15-minute granularity. It states electricity carbon intensity changes with wind output, solar production, hydrology, coal dispatch, gas-fired balancing, outages and imports. It contrasts fixed annual defaults as administratively easy but economically blunt.
Energy Traders Europe calls for machine-readable time-granular defaults so traders, suppliers and CBAM declarants can automate compliance. The paper says this would support embedding carbon cost into dispatch, nomination and settlement systems using auditable time-based data.
Actual values for renewable PPAs and role separation
The section on actual values focuses on renewable PPAs. Energy Traders Europe argues CBAM rules should distinguish between the importer and the authorised CBAM declarant because these roles do not always belong to the same entity. It says real trading chains can involve producers, intermediaries, capacity holders, importers, suppliers and declarants operating as different legal or commercial actors.
The paper argues against regulation that assumes a simplified bilateral structure if it would exclude normal market arrangements that are transparent and verifiable. For CBAM-compliant PPAs, it says contract architecture should not be the deciding factor; instead verified data should show low-carbon generation volume equals or exceeds scheduled commercial exchange volumes in the same hour.
It states that a Serbian wind producer selling under a structured PPA to an EU-facing offtaker should be able to support actual emissions claims if smart metering data, generation records, nomination data and contractual continuity can be verified. The same logic is described for aggregated RES portfolios where the data chain remains auditable.
No physical congestion tests for PPA evidence
The position paper links its PPA approach to usability of regulation for market participants. It argues that overly prescriptive contractual requirements could prevent low-carbon premiums from materialising if they demand data traders cannot obtain or impose tests not available to market participants.
Energy Traders Europe calls a “no physical congestion” criterion problematic because congestion cannot be predicted by CBAM declarants and may not be available to market participants. Instead it proposes matching producer metering data with scheduled commercial exchanges in the same hour and market area as sufficient evidence.
CBAM certificate pricing timing for Q1 2026
The certificate issue is presented as shifting CBAM from compliance into treasury planning for importers. Energy Traders Europe argues importers need ex-ante certainty on certificate prices before transactions occur. It states that if the first real certificate price for Q1 2026 is only available in April 2026, importers would have to price without knowing the applicable carbon charge.
The paper describes this timing problem as commercially dangerous for hourly trading with thin spreads and high volatility. It suggests using the EU ETS weekly average from 2026, or alternatively a previous-quarter EU ETS average while noting possible mismatches with third-country carbon prices.
Delegation rights and EU-wide authorisation for declarants
The position paper also requests broader delegation rights for CBAM service providers covering certificate purchasing, surrendering, repurchasing and reporting. It cites how large energy groups manage compliance through trading desks, customs representatives, centralised back offices and group-level compliance teams handling reporting across jurisdictions.
Energy Traders Europe says allowing delegation would reduce operational burden and limit risks of over- or under-purchasing certificates. It also proposes flexibility in certificate repurchasing and intra-group transfers of unused certificates due to potential cost inefficiencies compared with EU ETS participants.
The final point concerns authorisation across Member States for electricity imports. Energy Traders Europe argues CBAM declarant status should be recognised across all EU Member States because traders may nominate explicit capacity and declare imports in multiple jurisdictions.
The paper says lack of EU-wide recognition could fragment registration and documentation requirements across borders. It highlights companies operating across Hungary, Croatia, Romania, Bulgaria, Greece and Italy-linked routes where SEE electricity enters or interacts with EU markets through several regulatory gateways.