Proposed changes to the EU Carbon Border Adjustment Mechanism (CBAM) aim to create a more practical route for Western Balkan wind, solar and hydropower exports into European markets. The revisions focus on how exporters and importers demonstrate low or zero embedded emissions when electricity is traded across interconnected systems. The main issue highlighted is the evidence chain linking a specific generator to electricity imported into the EU.
Under the current CBAM framework, importers generally rely on national default emission factors unless they meet cumulative requirements for reporting actual emissions. The conditions are intended to establish a credible link between generation and imports, but they can be difficult to apply in modern European power markets. This challenge is tied to how electricity is traded, resold and physically mixed across multiple bidding zones.
Electricity from a wind farm in Serbia, a solar plant in North Macedonia or hydropower in Montenegro may be sold through an intermediary rather than directly to an EU importer. Power flows can cross several bidding-zone borders, while transmission capacity may be allocated via market coupling instead of a separately nominated cross-border contract. Network conditions also influence physical flows, which do not necessarily match the contractual route agreed between buyer and seller.
As a result, renewable electricity can be assigned the default emissions factor of the exporting country’s wider power system. The text cites Serbia’s default factor of 1.041 tonnes of CO₂/MWh, linked to an indicative CBAM liability of around €78.37/MWh at a Q2 2026 certificate price of €75.28/tCO₂. It also cites Bosnia and Herzegovina’s default factor of 1.148 tonnes, resulting in an indicative charge of approximately €86.42/MWh.
The costs can apply even when electricity is contractually linked to a renewable generator if the importer cannot meet requirements for reporting actual emissions. For renewable developers, this can create uncertainty about whether a power purchase agreement with an EU buyer delivers the expected commercial value. The proposed revision would address this by changing how certain contract structures are treated for evidence purposes.
Physical PPAs, metering data and contractual allocation under revised CBAM
The proposed revision would recognise physical PPAs involving intermediaries if there is a verifiable contractual chain connecting the generator, intermediary and EU importer. The text highlights that this could be significant in the Western Balkans where utilities and independent renewable producers often use licensed traders for balancing, scheduling and access to European markets. It also specifies that financial or virtual PPAs would not be treated as proof of physical electricity delivery.
Contracts would still need to be linked to actual generation and cross-border supply. Hourly metering, nomination records, production data and contractual allocation are described as remaining important for showing that electricity covered by an agreement was generated and delivered during the relevant period. Guarantees of origin could be part of supporting documentation but would not automatically replace the broader CBAM evidence chain.
The proposal also addresses additional documentation expectations by requiring that producers and traders connect the commercial agreement with measurable generation, the relevant delivery period and the electricity presented for import into the EU. It further notes that the authorised CBAM declarant or EU importer remains legally responsible for declaration and eventual surrender of certificates. In practice, data and documentation responsibilities would need to be shared with exporters, traders and electricity producers.
An importer cannot independently produce plant-level evidence that was never collected or preserved by the generator. Supporting records must be robust enough for review by an EU-accredited verification body. Virtu.Energy analysts recommend integrating pre-verification into PPAs, trading arrangements and plant data systems rather than treating verification as something completed at the end of the reporting cycle.
Changes affecting grid connection tests and capacity nominations
The text describes another proposed change as removing the requirement to demonstrate either direct grid connection with the EU or the absence of physical congestion across the entire transmission route. It states that this requirement has been challenging for renewable generators because they cannot control operational conditions across multiple interconnectors at delivery time. The proposal would also limit firm capacity-nomination requirements to borders where transmission capacity is explicitly allocated.
Where market coupling allocates electricity together with transmission capacity, traders would no longer need to provide separate nominations that the market design itself does not generate. Taken together, these amendments are described as making actual-emissions reporting more practical in real-world electricity markets rather than only available in principle. They are also described as strengthening differentiation between fossil-based generation and power supplied under traceable renewable contracts.
Implications cited for project finance and technology-specific profiles
The text links revised CBAM treatment uncertainty to renewable project finance structures using long-term PPAs intended to provide predictable revenues and support debt repayment in Western Balkan developments. It states that when final buyers are located in the EU, uncertainty over CBAM treatment can reduce bankable off-take prices, shorten contract duration or increase risk premiums demanded by investors and lenders. It provides quantitative examples tied to wind project economics.
A 100 MW wind farm operating at a 35% capacity factor would generate approximately 307 GWh per year. A CBAM-related risk discount of €10/MWh would reduce potential annual revenue by around €3.1 million. If renewable electricity were instead exposed to a default CBAM cost exceeding €70/MWh, liability could exceed operating margin and affect debt-service capacity.
The text says wind projects require particular consideration because their generation profile differs from solar plants in timing relative to European price patterns. It states wind generation is more likely during evening, winter and lower-solar periods when European electricity prices can be stronger. For solar projects, it cites midday price cannibalisation and increasing reliance on storage, aggregation or shaped PPAs.
The discussion adds that CBAM traceability needs to function at an hourly level while reflecting technology-specific commercial characteristics. Hydropower is described as having different operating profiles: reservoir-based plants can shift generation toward higher-priced periods and provide balancing services, while run-of-river facilities depend more on hydrological conditions. Albania is cited as benefiting from a zero national default factor.
The text says renewable producers in Montenegro, Bosnia and Herzegovina and Serbia operate within mixed generation systems and need access to actual-emissions reporting so output is not treated according to carbon intensity of wider national systems. It adds that cross-border trading and renewable exports remain operationally possible but each EU-bound transaction increasingly needs a credible CBAM evidence package covering generation source, hourly production, contractual allocation, metering and delivery.
Responsibilities for new contracts versus existing agreements
The authorised CBAM declarant or EU importer remains responsible for declaration and certificate surrender under the described framework. For new PPAs, CBAM provisions should clearly establish responsibility for data preparation, access to metering records, verification costs, correction of inconsistencies and liability if an evidence package is rejected. Existing contracts may require amendments where they were signed before definitive CBAM documentation requirements were established.
The text also references a proposed whole-generation-mix methodology that could reduce fallback exposure even when a generator cannot satisfy all requirements for actual-emissions reporting. It says impacts would vary between countries depending on generation mix, hydrological conditions and availability and quality of national electricity data. It also states that proposed changes would not automatically provide zero-CBAM treatment for Western Balkan renewable electricity.
For renewable developers, traders and EU buyers, establishing a reliable evidence chain from generation through delivery into import is presented as central under the revised approach described in the text. Projects building data collection and pre-verification into PPAs and trading arrangements from the outset are described as better positioned to demonstrate actual emissions while protecting commercial value for renewable electricity sold into the EU.