European Union policymakers are considering changes that could make it easier for renewable electricity from neighbouring countries to obtain actual-emissions treatment under CBAM. The reforms are linked to potential adjustments that could affect multi-trader export chains and the structure of multi-party contracts. As of October 2026, electricity producers and traders still face a timing issue because the proposed changes have not completed the legislative process, while electricity has been imported under the definitive regime since January.
European Commission proposal and electricity methodology changes
The European Commission’s COM(2025) 989, tabled in December 2025, covers downstream CBAM goods and anti-circumvention measures alongside electricity-specific methodology updates. For electricity, the proposal would make actual-emissions eligibility less restrictive. It also includes changes to contractual intermediaries and the network congestion requirement.
The Commission’s draft would revise the default emissions methodology for electricity to reflect the broader electricity generation mix. The proposal would move away from relying in the same way on fossil-only generation for default treatment. These elements are presented as proposals rather than automatic entitlements.
Default grid factor, PPA incentives and evidence requirements
The method under CBAM can affect economic outcomes for exporters. A country with significant hydro, wind or solar generation can appear relatively carbon-intensive under a fossil-generation-based default measure that does not reflect the overall output mix. A broader average grid factor could reduce the gap between system reality and default import treatment.
Changes to the methodology could also influence incentives for installation-specific PPAs. They may affect relative negotiating positions between traders and IPPs, depending on the final wording and official factors rather than a simple calculation based on national renewable shares.
Existing implementing rules recognise a direct PPA and a narrow single-contract tripartite structure. Broader recognition of verifiable contractual chains could allow standard power trading models to support actual-emissions claims without requiring every intermediary to fit one three-party instrument. Even with greater contractual flexibility, the importer would still need evidence that the claimed power was generated, nominated and imported as required by the final regulation.
Network congestion condition and documentation risk
The network congestion condition has been a focal point for market participants because route-wide physical evidence may be difficult to obtain for each import hour. The Commission proposed removing this condition as part of its reform package. If enacted, that change could reduce documentation risk for renewable generators and EU buyers.
Until an amendment is enacted and applies to the relevant import, producers cannot disregard current congestion evidence. The draft’s removal is therefore not available for imports covered by the existing rules before any effective date.
Legislative timeline, retroactive application and contract structuring
A timing feature is central to how the reforms could apply in practice. The Commission’s proposal envisages applying some electricity-methodology changes to imports from 1 January 2026, so that first annual declarations in September 2027 can use revised rules. If adopted in its final form, this would create a retroactive effect.
Businesses are expected to preserve evidence from 2026 even if they anticipate later simplification. The law as finally enacted may differ from the draft or include specific conditions for recalculation.
The European Parliament adopted amendments at first reading on 15 September 2026, after which the file entered interinstitutional negotiations. As of 17 October 2026, this leaves uncertainty over final text and timetable. Project contracts are expected to separate the regime already in force from anticipated rules and specify how prices, documentation and qualification claims would change if amendments become effective.
A forward-looking PPA could include an option to expand an eligible volume pool or allow additional contractual intermediaries once specific legal conditions are satisfied. It could also address how historic 2026 settlements would be reopened, whether buyers must file corrected data, and who receives any realised carbon saving. Without such provisions, disputes over the value of past imports could arise if reforms take effect.
Market implications before enforceable rules
For regional electricity market participants, policy direction remains important but not yet bankable. Market players are expected to preserve today’s evidence standards and negotiate contracts designed to accommodate future regulatory changes. They are also expected to avoid distributing hypothetical regulatory gains before an enforceable rule exists.