CBAM and Electricity Imports: Obligations for Cross-Border Power and Hydrogen Traders
Electricity and hydrogen were included in CBAM from the outset but operate under rules that differ from those applying to physical goods such as steel or cement. The traceability challenges inherent in electricity trading — once electricity enters a grid it cannot be traced to a specific generator — required the Commission to develop specific methodologies for these sectors.
When electricity imports are in scope
CBAM applies to electricity that is physically imported into the EU via interconnectors — the high-voltage transmission lines connecting EU and non-EU networks. For UK businesses, this is particularly relevant for power traded across 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.
CBAM does not apply to electricity consumed within the EU that happens to be generated from imported fuels. The obligation attaches to the physical cross-border flow of electricity itself.
How embedded emissions are calculated for electricity
Where an importer can demonstrate the specific source of the electricity — for example through a bilateral contract with a renewable generator, supported by certified guarantees of origin — the actual emissions factor of that source maybe used. Where this cannot be demonstrated, the Commission applies a default emissions factor based on the average grid carbon intensity of the exporting country.
The UK grid carbon intensity has fallen steadily as coal generation has been phased out and renewable capacity has grown. However, it remains above zero, and importers relying on default values will be assigned an emissions factor reflecting the average UK grid mix for the relevant period.
Who holds the CBAM obligation for electricity
Unlike goods importers, those importing electricity into the EU are subject to specific rules on who bears the declarant obligation. The importing electricity transmission system operator, or the market participant responsible for the import, may hold the obligation depending on the market structure applicable toa given interconnector. Legal advice is recommended for businesses with material electricity import volumes.
Hydrogen under CBAM
Hydrogen was added to the CBAM scope in Phase 1. The embedded emissions profile of hydrogen 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 and storage. Significantly lower than grey but not zero.
• Grey hydrogen: produced from natural gas via steam methane reforming without carbon capture. High embedded emissions — approximately 9–12 kg CO2 per kg of hydrogen.
Verification of the production pathway is therefore central to the CBAM certificate obligation for hydrogen importers. Guarantees of origin and third-party verification of the production process are required to use actual values rather than default benchmark figures.