The European Commission has tabled a proposal (the “Proposal”) to amend the CBAM Regulation (EU 2023/956), and it is now moving through the European Parliament, with a plenary vote expected in September 2026.
Most of the headline attention has gone to the Proposal’s extension of CBAM to downstream steel and aluminium goods and its new anti-circumvention safeguards. But buried in the detail are changes to how electricity is treated – and for producers and traders across the Western Balkans, these could matter more than anything else in the package.
Why did electricity become CBAM’s sore point?
Almost as soon as the CBAM Regulation took effect, electricity turned into its most contentious corner. The default-value methodology failed to capture the true carbon intensity of power exported from markets with a heavy renewables mix, while the alternative – declaring actual embedded emissions – came wrapped in cumulative conditions so strict that few exporters could ever meet them in practice. The result: persistent uncertainty over what it actually costs to sell electricity into the EU.
The Proposal now takes aim at both problems.
A new approach to default values
The core complaint from the electricity sector has been that default values are pegged to the emission factor of fossil-fuel generation alone, ignoring the exporting country’s actual generation mix.
The Proposal changes that: emission factors would now be calculated from electricity produced from all sources, fossil and non-fossil alike. On that basis, the Commission would set revised default values that more accurately reflect each exporting country’s real power mix.
It also opens a specific escape route – if a third country can show, with reliable data, that its average electricity-mix emission factor (or the emission factor of its price-setting generation sources) is lower than the applicable default, that lower figure could be used instead.
Easier rules for declaring actual emissions
The Proposal also loosens the conditions for using actual, rather than default, embedded emissions – aiming to make the alternative genuinely usable while still rewarding decarbonisation, and without piling new complexity onto importers. The bar remains cumulative and evidence-heavy, but three specific obstacles are cleared:
- Power purchase agreements.
Today’s rules effectively require “plant-level attribution” via a PPA signed directly between the producer and the EU importer – a structure that ignores how electricity is actually traded, through intermediaries. The Proposal would recognise PPAs involving intermediaries, provided a verifiable contractual chain links the producer, the intermediary and the importer to the specific electricity in question. The relief is real, but it applies only to physical PPAs.
- Congestion and direct-connection tests.
Exporters currently have to prove either a direct grid connection to the EU transmission system or the absence of physical network congestion along the entire route at the time of export. The Proposal scraps both requirements outright.
- Implicit capacity allocation.
Under the existing rules, electricity must be firmly nominated – hour by hour – to allocated interconnection capacity across every relevant TSO. That’s workable for explicit capacity allocation, but nearly impossible where capacity is allocated implicitly through market coupling, since power and cross-border capacity are awarded together with no separate nomination step. The Proposal confines the firm-nomination requirement to explicit allocation only, freeing market-coupled trades from a test they were never built to pass.
What’s next
The European Parliament is due to hold a joint debate on the Proposal on 14 September 2026, at which it is expected to settle its own position. The Council already adopted its position back in June 2026. From there, the file moves into trilogue – Parliament, Council and Commission negotiating toward a single agreed text, which both co-legislators must then formally approve.
The institutions are currently aiming to land a final text by the end of 2026, though that timeline depends entirely on how smoothly the trilogue runs.
For now, the Proposal is a starting point, not a settled outcome. But if it survives negotiations broadly intact, it should mark a meaningful recalibration of CBAM’s electricity rules – and a more workable, more accurate framework for the region’s electricity exporters.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.
