CBAM Electricity: The 5 Criteria for Using Actual Emissions Instead of Defaults

CBAM electricity operates under a fundamentally different default logic than any other covered sector: default values are the standard method, not the fallback, and actual emissions may only be used when five simultaneous criteria defined in Annex III, point 5 of Regulation (EU) 2023/956 are all met. Under the definitive phase that began January 1, 2026, electricity imported into the EU via physical interconnectors carries an embedded CO₂ obligation priced at the EU ETS rate, currently approximately €70 per tonne CO₂ as of late March 2026. The single CN code covered is 2716 00 00, and because electricity is listed in Annex II of the regulation, only direct generation emissions are priced. Understanding which imports qualify for actual values and which fall back to country-specific defaults is the central compliance question for every EU importer handling cross-border electricity flows.

Caption: Physical interconnectors are the only route through which CBAM electricity obligations arise, making grid topology central to compliance planning.

What Makes Electricity Unique Among the Six CBAM Sectors

Electricity is the only CBAM sector where actual emissions are the exception and country-level default values are the rule. Every other covered sector, including iron and steel, cement, aluminium, fertilizers, and hydrogen, treats actual verified emissions as the preferred path and reserves defaults for cases where measurement data is unavailable or unverified. Electricity reverses this structure entirely.

Three structural characteristics drive that reversal. First, electricity trade flows only through physical interconnectors, meaning imports originate from adjacent grid zones rather than any exporting country worldwide. Second, a grid's carbon intensity changes hourly as the generation mix shifts between coal, gas, nuclear, wind, and solar sources. Third, attributing specific emissions to a specific electron crossing a border requires knowing the marginal generator at the exact moment of import, which is technically complex under normal balancing conditions.

These three characteristics combine to make hourly-matched, generator-specific emissions verification the exception rather than the norm. The EU's full EU CBAM framework is built on this asymmetry: most importers will pay based on their country's average grid emission factor. Importers who want to pay based on verified lower-carbon generation must satisfy all five Annex III criteria without exception. For a complete explanation of how the broader EU CBAM mechanism assigns embedded emission obligations, the EU CBAM guide covers the certificate purchase process and overall compliance structure.

The 5 Criteria for Using Actual Emissions in CBAM Electricity

Five specific requirements must all be satisfied simultaneously for an electricity importer to use actual generation-level emissions instead of the country-specific default value. These requirements are set out in Annex III, point 5 of Regulation (EU) 2023/956. Failing any single criterion reverts the entire import back to the default.

The 5 criteria for actual emissions in CBAM electricity are listed below.

1. A power purchase agreement (PPA) must exist with a specific identified generator. The importer must hold a contractual relationship with the producing installation, not a general supply contract or a wholesale market purchase.
2. The installation must be directly connected to the EU transmission grid, or no network congestion may exist on the interconnector at the time of import. A congestion-free path ensures the nominated electricity physically reaches the EU border from the named generator.
3. The installation must emit no more than 550 g CO₂ per kWh. This threshold filters out coal and high-carbon gas generation entirely and limits actual-value eligibility to combined-cycle gas, nuclear, and renewable generation.
4. The electricity must have been firmly nominated to allocated interconnection capacity. Nomination confirms the importer reserved physical capacity on the interconnector for the specified import volume, establishing a traceable transmission path.
5. Nomination and actual production must match within one-hour periods. This hourly matching requirement is the most operationally demanding criterion. It means production at the named generator must correspond to the nominated import volume within the same clock hour, with no tolerance for rescheduling or aggregation across longer time windows.

In practice, the combination of hourly matching and the requirement for congestion-free interconnectors creates conditions that very few electricity imports can satisfy consistently. Most cross-border electricity flows under long-term commercial contracts do not include hourly production-nomination reconciliation. The result is that nearly all CBAM electricity obligations are calculated using default values.

How CBAM Electricity Default Values Are Calculated

CBAM electricity default values use country-specific average grid emission factors rather than a single universal benchmark. This approach reflects the reality that grid carbon intensity varies significantly across exporting countries, from near-zero in hydropower-dominant systems to above 600 g CO₂ per kWh in coal-heavy grids.

The calculation structure for embedded emissions in electricity follows a direct proportionality formula. Embedded emissions in tCO₂ equal the imported volume in MWh multiplied by the country's default emission factor in tCO₂ per MWh. The applicable implementing regulation for default values is Implementing Regulation (EU) 2025/2621. The default emission factor reflects the average generation mix across the exporting country's grid, weighted by annual generation volumes from each fuel type.

For importers using default values, the financial obligation is fully determined by two variables: the volume of electricity imported and the assigned default emission factor for the country of origin. Neither the importer nor the exporter has any direct ability to lower the default value through operational choices. The only path to a lower per-MWh obligation is satisfying all five actual-emission criteria, which qualifies the importer to use the verified emission factor of the specific contracted generator instead.

The mark-up schedule that applies to other sectors, including the +10% above benchmark in 2026 rising to +30% from 2028 onward under Implementing Regulation (EU) 2025/2621, does not apply to electricity in the same form. Electricity defaults are based on measured national grid averages rather than product benchmarks, so the punitive mark-up structure is structurally different from the approach used for steel, cement, aluminium, or hydrogen.

The mechanics of how embedded emissions translate into certificate obligations connects directly to how embedded emissions are calculated across all CBAM sectors, including the formula structure and the treatment of precursor inputs.

Which Countries Are Subject to CBAM Electricity Obligations

Not all electricity-exporting countries are subject to CBAM. Regulation (EU) 2023/956 Annex III lists the territories exempt from CBAM electricity obligations on the basis of EU ETS participation or equivalent carbon pricing linkage. Countries subject to CBAM obligations are those with physical interconnectors to the EU grid that are not on the exemption list.

The table below shows the key country categories and their CBAM electricity status under the definitive phase.

The UK situation deserves specific attention. The UK operates its own UK ETS, which covers power generation among other sectors. The UK ETS is not linked to the EU ETS and does not qualify as an equivalent carbon pricing scheme under Article 9 of Regulation (EU) 2023/956 as of April 2026. Whether the carbon costs already embedded in UK ETS-compliant generation qualify for an Article 9 deduction against CBAM certificates remains an unresolved regulatory question. Until formal equivalence is established, EU importers of UK electricity treat it as fully subject to CBAM default values.

A market coupling exemption pathway exists in Articles 2(7) through 2(12) of the regulation. This mechanism was designed for Energy Community countries, including Western Balkans members, Ukraine, Moldova, and Georgia. Full electricity market integration and an ETS commitment are the two qualifying conditions. As of April 2026, no country outside the EU or EEA meets both conditions simultaneously, so the market coupling exemption remains unused in the definitive phase.

Because electricity and hydrogen are the only two CBAM sectors with no de minimis threshold, there is no minimum annual import volume below which an electricity importer is exempt from compliance obligations. The CBAM de minimis threshold that applies to steel, cement, aluminium, and fertilizers at 50 tonnes annual mass does not extend to electricity.

Caption: Grid-average emission factors determine default CBAM electricity obligations, with variation from under 200 g CO₂ per kWh in low-carbon grids to above 500 g CO₂ per kWh in coal-heavy systems.

Active Interconnectors Subject to CBAM Obligations

CBAM electricity obligations arise only at physical interconnector crossing points. The list below covers the active interconnectors that carry CBAM-relevant electricity flows as of the definitive phase. Each interconnector name is followed by its rated capacity.

The active interconnectors subject to CBAM electricity compliance are as follows:

• IFA (UK to France): 2 GW rated capacity — the highest-capacity UK-EU link
• IFA2 (UK to France): 1 GW rated capacity — operates alongside IFA on the same corridor
• ElecLink (UK to France): 1 GW rated capacity — runs through the Channel Tunnel infrastructure
• BritNed (UK to Netherlands): 1 GW rated capacity
• Nemo Link (UK to Belgium): 1 GW rated capacity
• Viking Link (UK to Denmark): 1.4 GW rated capacity — became operational in 2024
• Turkey to Greece and Bulgaria: Multiple 400 kV lines with approximately 0.7 GW total interconnection capacity
• Ukraine to ENTSO-E: Emergency synchronization completed in March 2022; ongoing cross-border flows continue
• Morocco to Spain: Gibraltar AC link with approximately 0.7 GW capacity

The UK interconnectors collectively represent the largest single concentration of CBAM-affected electricity cross-border capacity in the system. At the combined 7.4 GW of UK-EU interconnector capacity across six links, the UK is by far the most commercially significant source of electricity subject to CBAM obligations under the definitive phase.

The Baltic states' disconnection from the Russian BRELL synchronous ring in February 2025 and synchronization with ENTSO-E removed Russia and Belarus as potential sources of CBAM-affected electricity flowing into the EU. Following synchronization, electricity flows between the Baltic states and the rest of the EU are internal market transactions and carry no CBAM obligation.

How CBAM Electricity Differs From Other Sectors

Is the Hourly Matching Requirement Achievable in Practice?

The hourly matching criterion is achievable in limited circumstances, primarily for direct industrial connections where a dedicated generation asset feeds a cross-border line with minimal intermediate dispatch. A large hydropower station with a dedicated high-voltage direct current (HVDC) link to an EU buyer, operating under a PPA with hourly scheduling, represents the type of configuration that can satisfy the requirement. Grid-integrated generation competing in day-ahead and intraday markets alongside other generators cannot practically achieve hour-by-hour production-nomination alignment because dispatch instructions from the transmission system operator override commercial nominations when system balance requires it.

Commercial electricity traders purchasing in wholesale markets and re-exporting across interconnectors cannot satisfy criterion 5 under normal operating conditions. The hourly matching rule effectively limits actual-emission eligibility to bespoke industrial supply arrangements, not commodity electricity trading.

What Happens When Only Four of the Five Criteria Are Met?

The five criteria operate as a conjunctive set: all five must be satisfied simultaneously, or the default applies. There is no partial actual-emission treatment, no weighted averaging between actual and default, and no transitional period during which partial compliance is accepted. An import that meets four criteria but fails the fifth criterion on hourly matching, for example, uses the full country-specific default value for that import volume. This binary structure reflects the EU's intent to prevent emissions laundering through selective attribution of low-carbon generation to specific commercial contracts while higher-carbon generation covers the residual supply.

Does CBAM Apply to Electricity in Transit Across the EU?

CBAM obligations apply at the point of import into the EU customs territory. Electricity that transits through an EU member state without being consumed in the EU does not trigger a CBAM obligation, because the good is not released for free circulation in the EU. The obligation arises when electricity is imported and consumed in the EU. Re-exports of the same electrical energy from one EU member state to a third country are internal market transactions on the export side and carry no additional CBAM dimension for the re-exporting importer.

Are Electricity Importers Subject to the Same Authorization Requirements?

Electricity importers face the same authorized declarant authorization requirement as importers of all other CBAM goods under the definitive phase. The application deadline for authorization was March 31, 2026, under Article 17(7a) inserted by Regulation (EU) 2025/2083. Importers who did not apply by that date may continue importing provisionally while awaiting a decision, but the first CBAM declaration covering calendar year 2026 remains due on September 30, 2027. The penalty for importing without authorization is €300 to €500 per tonne CO₂e, compared to €100 per tonne CO₂e for authorized declarants who fail to surrender sufficient certificates.

For importers handling electricity flows across multiple interconnectors or procuring from mixed-source suppliers, working through the full compliance process is described in detail at CBAM compliance for electricity importers.

How Do CBAM Electricity Default Values Differ From Those for Industrial Goods?

CBAM electricity default values reflect national grid average emission intensities rather than product-level production benchmarks. For industrial goods such as steel and cement, the default value represents the emission intensity of a typical production process in the exporting country, marked up by a penalty percentage (+10% in 2026, rising to +30% from 2028) to create a financial incentive for actual emissions measurement. For electricity, the default is the country's average grid emission factor, expressed in tCO₂ per MWh, and there is no analogous mark-up penalty because the default is already based on measured national averages rather than an idealized benchmark. The full set of country-specific electricity default values and how they compare across exporting nations is covered in the CBAM electricity default values reference page.

Can UK Electricity Exporters Claim an Article 9 Carbon Price Deduction?

Article 9 of Regulation (EU) 2023/956 allows a deduction from the CBAM certificate obligation for carbon prices already paid in the country of origin. The UK ETS does price electricity generation, and UK generators pay for their CO₂ emissions under UK ETS rules. Whether those UK ETS costs qualify for the Article 9 deduction against EU CBAM certificates is unresolved as of April 2026. The formal recognition process requires the European Commission to assess whether a third country's carbon pricing mechanism is equivalent in scope, coverage, and ambition. No such assessment has been published for the UK ETS. EU importers of UK electricity should not apply an Article 9 deduction without formal Commission recognition. The regulatory position on cross-border interconnectors and the Article 9 question is addressed further at CBAM electricity interconnectors.

What Is the CBAM Obligation for a 1 TWh UK Electricity Import?

A practical cost illustration helps quantify the obligation. Assume a UK grid average emission factor of 0.19 tCO₂ per MWh (based on the UK's 2024 grid average reported by National Grid ESO) and an EU ETS price of €70 per tonne CO₂. For a 1 TWh (1,000,000 MWh) import: embedded emissions equal 1,000,000 × 0.19 = 190,000 tCO₂. The gross CBAM certificate obligation equals 190,000 × €70 = €13,300,000. Under the 2026 CBAM factor of 2.5% (because 97.5% of free allocation remains in 2026 for EU ETS-covered sectors), the net obligation in 2026 is €13,300,000 × 2.5% = €332,500. That same 1 TWh import in 2030, when the CBAM factor rises to 48.5%, generates a net obligation of €13,300,000 × 48.5% = €6,450,500. The scaling from 2026 to 2030 represents a roughly 19-fold increase in net financial obligation for the same physical import volume. Importers planning long-term electricity sourcing contracts need to model these escalating costs across the full phase-out schedule. The CBAM cost calculator supports multi-year net obligation modeling for electricity and other sectors.

Where Can I Find the Country-Specific Default Values?

Country-specific default values for CBAM electricity obligations are published in Implementing Regulation (EU) 2025/2621 and the associated Commission annexes. The values reflect grid emission factors derived from Eurostat electricity generation data and member state reported statistics. Default values are country-specific, not regional or interconnector-specific. An electricity import attributed to the UK uses the UK national grid emission factor regardless of which of the six UK-EU interconnectors it transits. Similarly, Ukrainian electricity uses Ukraine's national grid average rather than a factor specific to the western Ukrainian grid zone synchronized with ENTSO-E. A full comparison of current default values by exporting country across all CBAM sectors is available at CBAM default values by country.