CBAM and Electricity Imports: Obligations for Cross-Border Power and Hydrogen Traders
Electricityand hydrogen were included in CBAM from the outset but operate under rules thatdiffer from those applying to physical goods such as steel or cement. Thetraceability challenges inherent in electricity trading — once electricityenters a grid it cannot be traced to a specific generator — required theCommission to develop specific methodologies for these sectors.
When electricity imports are in scope
CBAMapplies to electricity that is physically imported into the EU viainterconnectors — the high-voltage transmission lines connecting EU and non-EUnetworks. For UK businesses, this is particularly relevant for power tradedacross the GB-EU interconnectors: IFA, IFA2, ElecLink, BritNed, and NSL.Electricity exported from Great Britain into continental European markets maybe subject to CBAM on the EU side of the transaction.
CBAMdoes not apply to electricity consumed within the EU that happens to begenerated from imported fuels. The obligation attaches to the physicalcross-border flow of electricity itself.
How embedded emissions are calculated for electricity
Wherean importer can demonstrate the specific source of the electricity — forexample through a bilateral contract with a renewable generator, supported bycertified guarantees of origin — the actual emissions factor of that source maybe used. Where this cannot be demonstrated, the Commission applies a defaultemissions factor based on the average grid carbon intensity of the exportingcountry.
TheUK grid carbon intensity has fallen steadily as coal generation has been phasedout and renewable capacity has grown. However, it remains above zero, andimporters relying on default values will be assigned an emissions factorreflecting the average UK grid mix for the relevant period.
Who holds the CBAM obligation for electricity
Unlikegoods importers, those importing electricity into the EU are subject tospecific rules on who bears the declarant obligation. The importing electricitytransmission system operator, or the market participant responsible for theimport, may hold the obligation depending on the market structure applicable toa given interconnector. Legal advice is recommended for businesses withmaterial electricity import volumes.
Hydrogen under CBAM
Hydrogenwas added to the CBAM scope in Phase 1. The embedded emissions profile ofhydrogen depends entirely on how it was produced:
• Green hydrogen: produced by electrolysis using renewable electricity.Near-zero embedded emissions.
• Blue hydrogen: produced from natural gas with carbon capture andstorage. Significantly lower than grey but not zero.
• Grey hydrogen: produced from natural gas via steam methane reformingwithout carbon capture. High embedded emissions — approximately 9–12 kg CO2 perkg of hydrogen.
Verificationof the production pathway is therefore central to the CBAM certificateobligation for hydrogen importers. Guarantees of origin and third-partyverification of the production process are required to use actual values ratherthan default benchmark figures.