EU Carbon Border Adjustment Mechanism (CBAM) reforms are moving through interinstitutional negotiations, affecting how market participants plan for electricity-related compliance and potential downstream coverage. The Council of the EU and the European Parliament have adopted negotiating positions that can influence future rules before any final act is in force. The legislative file remains subject to agreement and is not treated as enacted law.
The definitive CBAM regime has applied since 1 January 2026. Under the current framework, electricity falls under CN 2716 00 00. A mass-based de minimis exemption introduced through a 2025 simplification does not remove electricity imports from the mechanism.
Electricity provisions under COM(2025) 989
The reform proposal, COM(2025) 989, would change how electricity is handled within CBAM. The changes include the methodology for default emissions values. It also covers conditions related to using actual emissions values, recognition of physical power purchase agreements (PPAs) involving intermediaries, and the congestion and nomination framework.
The Council adopted its negotiating position on 12 June 2026. The European Parliament followed with its position on 15 September 2026. The file has entered interinstitutional negotiations, but the proposal must not be treated as already adopted or applicable.
Differences between the Council and Parliament positions are relevant for planning because final provisions will determine how far electricity trading arrangements could change. Those same provisions can also affect the potential reach of downstream CBAM coverage linked to the broader legislative package. Market participants therefore track negotiation outcomes alongside existing CBAM application.
Downstream expansion for steel and aluminium from 2028
The same legislative file includes a downstream expansion from 2028 for selected goods in steel and aluminium-intensive sectors. Both institutions support broader downstream coverage. Their proposed product lists differ and remain under negotiation.
A wider downstream scope could affect demand for lower-carbon industrial inputs. At the same time, revised electricity rules could influence commercial conditions for renewable electricity exports from the Western Balkans. Renewable energy projects, electricity traders, and steel and aluminium manufacturers are therefore exposed to related policy developments within the same process.
Valuation approach, financing assumptions, and compliance triggers
For renewable energy sources (RES) investors, developments under negotiation can be incorporated into valuation scenarios as potential upside. Expected regulatory benefits should not be recognised as established revenue before the relevant legal provisions are adopted and applicable. This distinction applies to both electricity-related changes and any downstream expansion outcomes.
Project valuations can reflect possible future regulatory changes without using them to support base financing cases. Lenders can evaluate potential upside through sensitivity analysis while keeping debt assumptions anchored in current law, existing customer demand, and demonstrable project economics. Contractual change-in-law clauses should specify precise triggers tied to adoption, publication, and application of relevant rules.
Political agreements, committee votes, and press releases should not automatically trigger repricing under change-in-law provisions. Historic imports should retain the legal basis applicable to their reporting period even when systems or contracts are updated. This approach is intended to keep financing models aligned with enforceable requirements rather than non-binding milestones.
Milestones for monitoring CBAM implementation
An event-based regulatory watchlist focuses on specific legal milestones relevant to electricity defaults and downstream product scope. These include adoption of the final regulation and official publication with dates of application. Investors also monitor changes to implementing rules and procedures.
The watchlist further includes publication or revision of applicable electricity default values. It also covers final decisions on the downstream product list for steel- and aluminium-intensive goods. Negotiating texts and public announcements can inform scenario planning, but they do not replace enacted legislation for compliance purposes.
For policy-sensitive renewable investments, the operational principle is to preserve flexibility for reform while maintaining current-law controls until an adopted rule changes them. Regulatory probability may be used in valuation work, but proposed law should not be treated as an operative compliance requirement or a guaranteed source of future revenue.