A position paper dated 17 November 2025 backs the Carbon Border Adjustment Mechanism’s goal of applying a fair carbon price to imports and limiting carbon leakage. It argues, however, that electricity is being handled as though it were a conventional physical commodity. Energy Traders Europe says the current framework creates “significant regulatory and implementation risks” for electricity importers due to technical inapplicability, late secondary legislation and insufficient guidance before the definitive CBAM period begins.
The paper contrasts electricity with goods such as steel, cement or fertiliser, which can be linked to production batches, invoices, factories and customs records. Electricity instead moves through meshed grids and is nominated commercially, with schedules set hourly or sub-hourly. It also often crosses borders using trading arrangements that do not align neatly with physical flows.
Scheduled commercial exchanges versus physical flow data
Energy Traders Europe says CBAM declarations for electricity should rely exclusively on scheduled commercial exchanges, not physical flows. The paper describes this as the only dataset traders, transmission system operators, customs authorities and back offices can reconcile in practice. It states that cross-border schedules are submitted by market participants, confirmed by TSOs and embedded in nomination, settlement and reconciliation systems.
According to the paper, physical flows may diverge from commercial transactions because electricity follows physical laws rather than contract routes. For importers, it says using physical flow data would create compliance exposure they cannot control. The argument is framed as a trading-risk issue rather than an accounting preference.
The paper links the approach to Southeast Europe’s growing integration with EU power movements. It names Serbia, Montenegro, Bosnia and Herzegovina and North Macedonia, alongside other non-EU markets tied to EU flows through interconnectors, day-ahead coupling trajectories, bilateral contracts, RES PPAs and industrial offtake structures.
If CBAM is calculated on an unclear or non-tradable basis, the paper says electricity exports into the EU could face a risk premium before any certificate is surrendered. It adds that traders would price uncertainty around carbon cost recognition, documentation requirements, transit identification and default emissions values. The expected outcome described is higher cross-border electricity costs, reduced liquidity and difficulty financing trades.
Source-and-sink treatment for transit across interconnected systems
Energy Traders Europe also calls for clearer rules on source and sink declarations to identify and exclude transit flows where appropriate. The paper 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 warns that without robust source-and-sink logic, CBAM could tax movements that are transit rather than genuine EU imports. The paper argues that commercial origin and destination data matched with TSO-confirmed hourly schedules can provide an auditable method for separating taxable imports from transit flows.
Carbon prices already paid outside the EU ETS
A second major issue raised is how CBAM interacts with carbon costs already paid in third countries. The paper says electricity differs from many CBAM-covered goods because commercial decisions must be made before import takes place. It describes how traders buy capacity, nominate flows, hedge positions and price supply contracts ahead of delivery.
The paper states that if traders cannot determine whether a third-country carbon price will be recognised or how it will be deducted from CBAM liability, they cannot price imports reliably. It adds that while CBAM costs are not paid before 2027, the methodology must be known before 1 January 2026 because traders need it for commercial viability during the definitive period.
This point is presented as important for markets outside the EU ETS that may still introduce or develop carbon pricing mechanisms. The paper says if a Western Balkan power market applies a carbon charge or an ETS-linked mechanism or other recognised compliance instrument, market participants need certainty that such pricing will reduce CBAM exposure.
It warns of potential double pricing for carbon if domestic mechanisms apply first and then again at the EU border. It also says credits at the EU level could affect incentives for countries aligning with the EU acquis if local generators and exporters do not receive credit for costs already internalised.
Exchange-traded electricity and buyer-level documentation limits
The position paper is described as especially firm on exchange-traded electricity under third-country carbon pricing regimes. Where power is traded through an exchange in such jurisdictions, it says carbon costs may already be reflected in wholesale prices. However, it states buyers cannot identify whether specific MWh originated from carbon-paid fossil generation or fossil-free generation.
The paper argues that anonymous exchange trading and wholesale OTC structures cannot provide buyer-level documentation showing carbon-paid sources. Energy Traders Europe therefore proposes that CBAM discounts apply at market level when carbon costs are embedded in wholesale prices. It frames this as administratively simpler and aligned with how electricity trading operates.
Default emissions values: mix-based factors and time granularity
The default emissions value methodology is identified 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 the current approach risks overstating emissions from third countries and failing to reflect decarbonisation already present in their generation mix.
For Western Balkans conditions cited in the paper, it points to examples such as a hydro-heavy hour in Montenegro, a high-wind delivery profile in Serbia and a solar-heavy export window from the region having different carbon intensity than a coal-dominated residual mix. It says a fossil-only default could penalise actual low-carbon production and reduce renewables’ value in cross-border trading.
The paper also asks for default values matching trading timeframes, ideally hourly or 15-minute granularity. It describes electricity carbon intensity as volatile due to changes in wind output, solar production, hydrology, coal dispatch, gas-fired balancing, outages and imports. It argues fixed annual defaults would be administratively easy but economically blunt by understating clean hours and overstating dirty hours.
Energy Traders Europe further calls for machine-readable time-granular defaults so traders, suppliers and CBAM declarants can automate compliance within dispatch, nomination and settlement systems. This is presented as enabling embedding of carbon cost directly into operational processes rather than relying on static annual assumptions.
Actual values for renewable PPAs: roles, verification and congestion criteria
The section on actual values focuses on renewable PPAs under CBAM rules. Energy Traders Europe argues rules should distinguish between the importer and the authorised CBAM declarant because these roles may not belong to the same entity. It states real trading chains can involve different legal or commercial actors including producers, intermediaries, capacity holders, importers, suppliers and CBAM declarants.
The paper says overly prescriptive contractual requirements should be avoided for CBAM-compliant PPAs. Instead of contract architecture requirements, it proposes that verified data must show low-carbon generation volume equals or exceeds scheduled commercial exchange volumes in the same hour. It cites practical verification elements including smart metering data, generation records, nomination data and contractual continuity for a Serbian wind producer selling under a structured PPA to an EU-facing offtaker.
The same logic is extended in the paper to aggregated RES portfolios provided data chains are auditable. It also describes how verified renewable electricity could reduce CBAM exposure for EU importers or CBAM-covered industrial buyers by creating documented value linked to hourly metered generation matched with delivery schedules and contractual traceability.
The paper links this opportunity to regulatory usability constraints. It says if rules force narrow PPA formats, require data traders cannot obtain or impose physical congestion tests market participants cannot verify, low-carbon premiums may not materialise . It calls “no physical congestion” problematic because congestion cannot be predicted by CBAM declarants and may not be available to market participants.
CERTIFICATE PRICING TIMING AND DELEGATION FOR ELECTRICITY IMPORTERS
The certificate issue is described as shifting CBAM into treasury planning for electricity importers. Energy Traders Europe argues importers need ex-ante certainty on certificate prices because hourly traded commodities have thin spreads and high volatility . It states that if the first real CBAM certificate price for Q1 2026 becomes available only in April 2026, importers would be pricing transactions without knowing applicable charges.
The paper suggests using the EU ETS weekly average from 2026 or alternatively a previous-quarter EU ETS average while noting potential mismatch with third-country carbon prices . For Southeast Europe power traders named in the paper—Serbia alongside Hungary, Romania, Croatia, Bulgaria and Greece—it describes margin sensitivity to relatively small price differentials after capacity costs, balancing risk and nomination uncertainty.
A poorly timed or unpredictable certificate price is described as potentially wiping out trading margins or reducing activity . In this framing it becomes not only a carbon policy variable but also a liquidity factor affecting regional power markets.
Delegation rights across jurisdictions and authorisation recognition across Member States
The position paper requests broader delegation rights for CBAM service providers covering certificate purchasing, surrendering, repurchasing and reporting . It describes existing compliance handling by trading desks, customs representatives, centralised back offices and group-level compliance teams managing complex reporting across jurisdictions . Allowing delegation is presented as reducing operational burden while limiting risks of over- or under-purchasing certificates.
The paper also proposes flexibility in certificate repurchasing and intra-group transfers of unused certificates due to potential cost inefficiencies compared with EU ETS participants . Its final authorisation point argues that CBAM declarant status should be recognised across all EU Member States for electricity imports .
This recognition is described as necessary because electricity traders may nominate explicit capacity and declare imports in multiple Member States during cross-border operations . Without EU-wide recognition it says registration and documentation requirements could fragment across borders for companies operating along routes involving Hungary-linked entry points through Croatia-, Romania-, Bulgaria-, Greece- and Italy-linked gateways .
Operational infrastructure requirements cited for Serbia and Western Balkans exporters
The paper’s broader message for Serbia and Western Balkans markets is that implementing CBAM for electricity requires more than calculating a carbon factor. It lists elements including hourly metering; TSO-confirmed schedules; dispatch data; PPA traceability; source-and-sink reporting; recognised domestic carbon pricing; machine-readable default values; and workable roles for intermediaries . Countries building these systems early are described as better positioned to sell electricity and low-carbon attributes into the EU .
It also states that delays could lead to discounted exports into the EU alongside questioned PPAs and conservative treatment of generators under default values . The policy risk described is that CBAM could unintentionally penalise low-carbon trading if output verification cannot be used by markets .
The document concludes its operational framing by stating that translating CBAM into electricity-market language requires schedules; nominations; metering; balancing perimeters; PPAs; certificates; dispatch instructions; and auditable hourly data . For electricity.trade it describes CBAM moving into price formation where competitive advantage depends on connecting carbon data to trading data . In Southeast Europe it links this integration to SCADA inputs alongside smart meters; PPA clauses; EMS/TSO schedules; and customs declarations compiled into one integrated commercial file .
