The EU is considering changes to the electricity rules under the Carbon Border Adjustment Mechanism (CBAM), including how electricity supply arrangements are recognised for emissions reporting. A reform proposal would address the treatment of physical power purchase agreements (PPAs) where intermediaries are involved. The changes are linked to the electricity default-value methodology and related conditions for using actual emissions values.
Utilities and electricity traders typically structure power supply, manage balancing, and intermediate credit between renewable generators and industrial consumers. Under the current framework, eligibility for actual electricity emissions values can be constrained when the required physical PPA relationship depends on a direct connection between the generating installation and the authorised CBAM declarant. This can affect how cross-border electricity transactions are documented for CBAM purposes.
More flexible contractual chains for indirect physical PPAs
The proposed reform would allow more flexible contractual chains involving intermediaries, as long as requirements for demonstrating electricity supply and emissions are met. The approach is intended to reflect the role of intermediaries in cross-border electricity markets while keeping supply arrangements verifiable. It would also relate to congestion and nomination framework elements described in the proposal.
For industrial buyers, the changes could increase options to procure electricity through licensed suppliers rather than contracting directly with generators. The proposal also points to potential benefits for aggregating smaller renewable projects into portfolios that align with industrial demand. Such portfolio aggregation is described as relevant to project financing considerations.
A more flexible PPA framework would not remove obligations to demonstrate electricity quantities, maintain source traceability, or manage counterparty risk. Evidence requirements under applicable CBAM rules would still need to be satisfied when intermediated supply is used. Lenders are expected to continue requiring data-access rights, documented allocation arrangements, and clear responsibility for losses.
Contract terms and CBAM-related cash-flow timing
Traders would need to show how electricity moves through a contractual chain and ensure that intermediated supply does not undermine CBAM evidence. Contracts are also expected to address financial consequences if regulatory requirements change. Where requirements are simplified, agreements would need to specify who benefits from cost savings and who bears reasonable transition costs tied to system, reporting, or contractual updates.
The CBAM compliance timetable creates a separate treasury consideration for importers. For 2026 imports, certificate sales are scheduled to begin on 1 February 2027. The first annual declaration and certificate surrender deadline is set for 30 September 2027.
From 2027, the general certificate-pricing mechanism would shift to weekly averaging of auction prices. Quarterly holding requirements would become part of the treasury cycle. These elements mean that CBAM financial effects cannot be assessed only by reference to headline electricity costs or expected benefits from a renewable PPA.
Planned extension of CBAM scope from 2028
The same legislative file proposes extending CBAM from 2028 to selected steel- and aluminium-intensive downstream goods. Support for expansion is indicated from both the Council of the EU and the European Parliament, although their proposed product lists differ. The lists remain subject to negotiation.
Manufacturers planning capital expenditure for 2027–2028 can use the proposed product lists as scenarios when designing data systems and electricity procurement strategies. Investments should retain flexibility because final scope has not been adopted and existing scope remains the operating baseline. This affects planning assumptions tied to downstream coverage under CBAM.
Status of COM(2025) 989 in EU negotiations
The reform proposal is identified as COM(2025) 989, covering changes to electricity default-value methodology, aspects of conditions for using actual emissions values, recognition of physical PPAs involving intermediaries, and congestion and nomination framework elements. It is not yet enacted law. The Council adopted its negotiating position on 12 June 2026.
The European Parliament adopted its position on 15 September 2026. The proposal remains under interinstitutional negotiation and should not be treated as enacted legislation. For policy-sensitive investments, maintaining flexibility while preserving current-law controls until an adopted rule changes them is described as an approach within the proposal context.