Revised EU Carbon Border Adjustment Mechanism (CBAM) rules are expected to affect how wind, solar and hydropower projects in the Western Balkans demonstrate low or zero embedded emissions when exporting electricity to the EU. The central issue highlighted in the proposal is not emissions from renewable generation itself, but the evidence chain linking a specific generator to electricity imported through interconnected markets. The changes focus on practical requirements for physical delivery, contractual allocation and data used for actual-emissions reporting.
Under the current CBAM framework, importers generally rely on national default emission factors unless they meet cumulative conditions for reporting actual emissions. While those conditions are designed to connect generation with imports, they can be difficult to apply within the structure of European electricity trading. Electricity can be traded, resold and physically mixed across multiple bidding zones, complicating the mapping between contracts and physical flows.
In practice, a wind farm in Serbia, a solar plant in North Macedonia or a hydropower facility in Montenegro may sell electricity through an intermediary rather than directly to an EU importer. Power can cross several bidding-zone borders, while transmission capacity may be allocated through market coupling instead of a separately nominated cross-border contract. Physical flows are also shaped by network conditions and do not necessarily follow the contractual path between buyer and seller.
As a result, renewable electricity may be assigned the default emissions factor of the exporting country’s wider power system. This is described as particularly significant in coal-dependent markets. Serbia’s current default factor of 1.041 tonnes of CO2/MWh is cited as producing an indicative CBAM liability of about €78.37/MWh at a Q2 2026 certificate price of €75.28/tCO2. Bosnia and Herzegovina’s default factor of 1.148 tonnes of CO2/MWh is cited as resulting in a charge of around €86.42/MWh.
Evidence chain requirements for physical PPAs
The costs described above can arise even when electricity is contractually linked to a renewable generator, unless the importer satisfies conditions for reporting actual emissions. For project developers, this can create uncertainty around whether a power purchase agreement with an EU buyer delivers the expected price and revenue premium. The proposed revision would address this by recognising physical PPAs that involve intermediaries.
Recognition would apply where a verifiable contractual chain connects the generator, intermediary and EU importer. The change is presented as relevant to the Western Balkans, where utilities and independent renewable producers often use licensed traders for balancing, scheduling and access to regional and European markets. The reform would not treat financial or virtual PPAs as proof that physical electricity was delivered.
Contracts would still need to be connected to actual generation and cross-border supply. Hourly metering, nomination records, production data and contractual allocation are identified as central elements for demonstrating that electricity covered by an agreement was generated and delivered during the relevant period. Guarantees of origin could support documentation but would not automatically replace the full CBAM evidence chain.
The proposal also keeps the authorised CBAM declarant or EU importer as legally responsible for declaration and eventual surrender of certificates. It also notes that substantial data and documentation responsibilities would need to be shared with exporters, traders and electricity producers. An importer cannot independently create plant-level evidence that was never collected or preserved by the generator.
Changes affecting congestion tests and capacity nominations
The proposed amendments would remove the requirement to prove either direct grid connection to the EU or the absence of physical congestion along the entire transmission route. This condition is described as difficult for renewable generators because they cannot control operational status across multiple interconnectors at delivery time. Another amendment would limit firm capacity-nomination requirements to borders where capacity is explicitly allocated.
Where market coupling allocates electricity together with transmission capacity, traders would no longer be required to provide a separate nomination that is not generated by market design. Taken together, these changes are described as making actual-emissions reporting more practical for cross-border electricity transactions within interconnected markets.
Implications for project finance by technology and contract design
The discussion links traceability under CBAM with renewable project finance structures based on long-term power purchase agreements intended to stabilise revenues and support debt repayment. When final buyers are located in the EU, uncertainty over CBAM treatment is cited as potentially reducing bankable offtake prices, shortening contract tenors or increasing risk premiums demanded by investors and lenders.
A 100 MW wind farm operating at a 35% capacity factor is cited as generating approximately 307 GWh per year. A CBAM-related risk discount of €10/MWh is cited as reducing potential annual revenue by roughly €3.1 million. If default CBAM costs exceed €70/MWh, liability could be greater than operating margin and affect debt-service capacity.
Wind projects are highlighted separately due to differences in generation profiles compared with solar plants. Wind output is described as more likely during evening and winter periods and during lower-solar times when European electricity prices can be stronger. Solar projects are described as facing midday price cannibalisation and increasingly relying on storage, aggregation or shaped PPAs to preserve output value.
The text states that CBAM traceability needs to function at an hourly level while reflecting technology-specific commercial characteristics for wind and solar. Hydropower is described with different operating patterns: reservoir plants can shift generation towards higher-priced periods and provide balancing services, while run-of-river facilities remain more dependent on hydrological conditions.
Albania is cited as benefiting from a zero national default factor, while producers in Montenegro, Bosnia and Herzegovina and Serbia operate within mixed generation systems. Those producers are said to need access to actual-emissions reporting so their renewable output is not treated according to carbon intensity of wider national systems.
Verification approach for EU-bound transactions
Analysts at Virtu.Energy, described as a CBAM-focused engineering platform specialising in electricity, say cross-border trading and renewable exports remain operationally possible. They add that each EU-bound transaction increasingly needs a credible CBAM evidence package covering generation source, hourly production, contractual allocation, metering and delivery.
The supporting records must be sufficiently robust for review by an EU-accredited verification body. Virtu.Energy analysts recommend integrating pre-verification procedures into PPAs, trading arrangements and plant data systems rather than treating verification as something completed at the end of the reporting cycle.
For new PPAs, CBAM provisions should establish responsibility for data preparation, access to metering records, verification costs, correction of inconsistencies and liability where an evidence package is rejected. Existing contracts may require amendments where they were signed before definitive CBAM documentation requirements were established.
The proposed whole-generation-mix methodology is described as potentially reducing fallback exposure when a generator cannot satisfy all requirements for actual-emissions reporting. Its impact is stated as varying between countries depending on generation mix, hydrological conditions and availability and quality of national electricity data.
The revision is also described as not automatically guaranteeing zero-CBAM treatment for Western Balkan renewable electricity. It could replace several difficult-to-apply requirements with rules more closely aligned with how cross-border electricity markets operate.
For renewable developers, traders and EU buyers, establishing a reliable evidence chain from generation through delivery into import is identified as a key priority. Projects integrating data collection and pre-verification into PPAs and trading arrangements from the outset are described as better positioned to demonstrate actual emissions while preserving commercial value for wind, solar and hydropower exports to the EU.