Proposed changes to the EU Carbon Border Adjustment Mechanism (CBAM) would adjust how electricity importers substantiate embedded emissions for wind, solar and hydropower exports from the Western Balkans. The revisions are aimed at addressing rules that currently make it difficult for projects to demonstrate that imported electricity carries low or zero emissions. The changes focus on the evidentiary chain linking a specific generator to electricity entering the EU through interconnected trading and physical mixing across bidding zones.
Evidentiary chain problem in interconnected EU power trading
Under the existing framework, importers generally rely on national default emission factors unless they meet cumulative conditions to use actual emissions. Those conditions are intended to connect production and import credibly, but they do not align well with how European electricity trading is structured. Electricity can be traded, resold and physically mixed across several bidding zones before it is imported into the EU.
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 flows can cross multiple bidding-zone borders, while transmission capacity may be allocated through market coupling instead of separately nominated cross-border contracts. Physical flows follow network conditions rather than the contractual path agreed between buyer and seller.
The approach can cause renewable electricity to inherit the default emissions of the exporting country’s wider power system, with particular impact in coal-dependent markets. Serbia’s default factor of 1.041 tonnes of CO₂ per MWh implies an indicative CBAM liability of about €78.37/MWh at the Q2 2026 certificate price of €75.28/tCO₂. Bosnia and Herzegovina’s default factor of 1.148 tonnes corresponds to a charge of roughly €86.42/MWh.
Default factors can apply despite renewable-linked contracts
Even when electricity is contractually associated with a renewable plant, costs can still apply unless the importer meets requirements for reporting actual emissions. This creates uncertainty for developers about whether an EU-facing power-purchase agreement can deliver an expected price premium. The evidentiary requirements are designed around linking generation to imports within a market context where trades may be intermediated and physically mixed.
The proposed revision would recognise physical PPAs involving intermediaries if a verifiable contractual chain connects the generator, intermediary and EU importer. The change is relevant because regional utilities and independent renewable producers often depend on licensed traders for balancing, scheduling and market access. The reform would not treat financial or virtual PPAs as proof that physical electricity delivered under the agreement entered the EU.
The contract would still need to be tied to actual generation and cross-border supply during the relevant period. Hourly metering, nomination records, production data and contractual allocation would remain central to demonstrating that covered electricity was generated and delivered in that timeframe. Guarantees of origin may support documentation, but they are not automatically a substitute for completing the full CBAM evidence chain.
Revisions on congestion tests and capacity nominations
The proposal would remove requirements to prove either direct grid connection to the EU or absence of physical congestion along the entire transmission route. The congestion condition has been problematic because renewable generators cannot control operational states of multiple interconnectors at delivery time. Another amendment would limit firm capacity-nomination requirements to borders where capacity is allocated explicitly.
Where market coupling allocates both electricity and transmission capacity together, traders would not be expected to provide separate nominations that reflect a market design feature rather than an independently nominated cross-border contract. Taken together, these changes are intended to make actual emissions technically usable rather than only available in principle under CBAM rules.
Implications for project finance and PPA structuring
The distinction between a coal-fired export and electricity supplied under a traceable renewable contract is described as important for project finance. Western Balkan renewable developments increasingly use long-term PPAs designed to stabilise revenue and support debt repayment when buyers are inside the EU. Uncertainty over CBAM treatment can reduce bankable offtake prices, shorten contract tenors or require wider risk premiums.
A 100 MW wind farm operating at a 35% capacity factor would produce around 307 GWh annually. A CBAM-risk discount of €10/MWh would reduce potential annual revenue by approximately €3.1 million. For projects exposed to a default cost exceeding €70/MWh, nominal liability could exceed operating margin and debt-service capacity.
Technology-specific considerations: wind, solar and hydropower
Wind projects require specific treatment because their output profile, capacity factor and system value differ from solar generation. Wind output is more likely during evening, winter and lower-solar periods when EU prices can be stronger. Solar projects face midday price cannibalisation and increasingly rely on storage, aggregation or shaped PPAs to preserve value.
The traceability approach needs to operate at an hourly level without removing commercial differences between technologies used in PPAs. Hydropower has distinct characteristics including reservoir plants that can shift generation into higher-priced periods and provide balancing services. Run-of-river output remains linked to hydrological conditions.
Verification obligations for declarants and importers
An analysis by Virtu.Energy described cross-border trading and renewable exports as continuing operationally while each transaction requires a credible CBAM evidence package. That package must cover generation source, hourly production, contractual allocation, metering and delivery for each commercial transaction involving imports into the EU. The authorised CBAM declarant or EU importer remains legally responsible for declaration and eventual surrender of certificates.
The importer would still need to share substantial data and documentation obligations with exporters, traders and electricity producers in practice. A declarant cannot independently create plant-level evidence that was never collected or preserved by the generator. Supporting records must be reviewable by an EU-accredited verification body.
Pre-verification timing for new PPAs and contract amendments
Virtu.Energy analysts said integrating pre-verification procedures into PPAs, trading arrangements and plant data systems is no longer limited to tasks carried out at the end of the reporting cycle. The process needs to start before incomplete contracts or missing hourly records make actual emissions unusable under CBAM evidence requirements. For new PPAs, CBAM provisions should define 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 because many were signed before definitive CBAM documentation requirements were established. The proposed whole-generation-mix methodology would lower fallback exposure even where a generator cannot satisfy the full actual-emissions test. Its effect would vary by country, hydrological year and quality of national generation data.
No automatic zero-CBAM access for Western Balkan renewables
The revision would not automatically guarantee zero-CBAM access for Western Balkan renewable electricity exports into the EU market. It would replace several practically unworkable tests with rules closer to how cross-border power markets operate under interconnected trading arrangements. Developers integrating pre-verification early would be better positioned to protect EU offtake revenues while distinguishing wind, solar and hydropower output from carbon intensity levels associated with wider national systems.
