EU wants to amend carbon border rules. Third countries could thus export electricity to the EU more easily

The European Commission is apparently preparing to amend its carbon border adjustment mechanism (CBAM), which should resolve uncertainties and ambiguities surrounding electricity imports from third countries. The EU’s carbon border adjustment mechanism has been in its transitional phase for several years and is due to become fully operational next year. The planned changes could address concerns among potential electricity exporters to the EU about how the carbon intensity of imported electricity is determined.

The EU’s carbon border adjustment mechanism has raised concerns about its impact for several years, particularly in the case of electricity imports. Under the current rules, the carbon footprint of electricity imported from third countries is to be calculated on the basis of the average power generation mix in those countries. However, these rules have prompted concerns that imports of coal-fired electricity could paradoxically be cheaper than those from renewable sources (RES).

Producers will be able to deduct from the charges any fees paid under local emissions pricing systems. In this case, however, renewable electricity producers will not be able to deduct any payments, since they pay no emissions charges. As a result, coal-fired electricity could become cheaper to export to the EU after being charged under domestic systems.

However, this paradox could be resolved by a planned amendment which, according to leaked documents seen by Argus, would allow exporters to report the actual emissions associated with the generation of exported electricity. The Commission was prompted to prepare the CBAM amendment by feedback from stakeholders, who say the rules are too rigid and fail to reflect third countries’ efforts to decarbonise their energy mixes. According to Argus, the amendment is based on a public consultation held this summer.

Rules are also set to be eased for PPAs

According to the outlet, the amendment also covers physical and indirect power purchase agreements, known as PPAs. The current rules reportedly require that there be no capacity constraints on the grid. An exemption could allow cross-border purchases of renewable electricity through PPAs without carbon border charges being applied to imports into the EU. This is set to change.

If actual data on emissions associated with imported electricity are not available, the average value for the national mix will still apply. Changes are also expected in this case: the average value will reflect the current generation mix rather than a five-year average based on data from the International Energy Agency. The amendment should therefore better reflect the progress made in decarbonisation in recent years.