Embedded Carbon for Electricity: CBAM Guide
Unlike physical commodities, electricity cannot be tracked physically across borders. CBAM applies a unique methodology for imported electricity, focusing heavily on power purchase agreements and interconnector capacity.
CBAM Scope for Electricity
Electricity falls under CN code 2716 00 00. Because electrons on a grid are indistinguishable, the embedded carbon calculation for imported electricity relies on tracing the contractual path of the power or applying regional default values.
The primary exporters of electricity to the EU are neighbouring countries with grid interconnectors: the Western Balkans (Serbia, Bosnia and Herzegovina, North Macedonia), Ukraine, Moldova, and the UK. Note that countries fully integrated into the EU ETS or linked systems (like Norway and Switzerland) are exempt from CBAM.
Calculation Methodology (Annex IV)
CBAM Regulation 2023/956 Annex IV provides two distinct approaches for calculating the embedded carbon of imported electricity:
1. Default Values (The Standard Approach)
If actual emissions cannot be reliably demonstrated, the embedded carbon is calculated using default values based on the specific CO2 emission factor of the exporting country's grid. If reliable data for the exporting country is unavailable, the default value defaults to the CO2 emission factor of the EU grid.
2. Actual Emissions (The Direct Link Approach)
Importers can declare actual embedded emissions if they can prove a direct link between the imported electricity and a specific power generation installation. This requires meeting strict criteria:
- A Power Purchase Agreement (PPA) must exist between the importer and the specific installation.
- The installation must be directly connected to the EU grid, or it must be demonstrated that the electricity was physically transmitted to the EU (via nominated interconnector capacity).
- The electricity must not have been sold to any other party.
The Western Balkans Exemption Pathway
The CBAM Regulation includes a specific provision (Article 2) allowing for the exemption of electricity imported from countries whose electricity markets are integrated with the EU market (via the Energy Community Treaty). To qualify for this exemption by 2030, these countries must implement a carbon pricing mechanism equivalent to the EU ETS and commit to climate neutrality by 2050.
Until this exemption is formally granted, electricity imports from these regions remain fully subject to CBAM financial obligations starting January 2026.