In May 2021, European Commission presented its proposal for a Regulation establishing a Carbon Border Adjustment Mechanism (CBAM) aiming to put a fair price on the carbon emitted during the production of carbon intensive goods originating in a third country that are entering the customs territory of the Union, and to encourage cleaner industrial production in non-EU countries.

ENTSO-E supports the general principles and objectives of the CBAM. There are however still many questions and concerns that would jeopardize the current reporting obligations of the transitional period as well as the full implementation of the CBAM regulation as of 1 January 2026 for electricity. This position paper highlights those concerns and provides ENTSO-E recommendations on how to move forward, in view of the upcoming revision of the CBAM regulation.

The following concerns affecting ENTSO-E members have been identified:

• Measures put in place may in some specific cases create unnecessary administrative burdens for TSOs compared with the actual risk of carbon leakage. The current CBAM Regulation does not provide a sufficiently clear method for reporting import and computing the embedded CO2 intensity, leading to legal uncertainty and potential noncompliance risks. A further harmonisation of the EU standards would therefore be needed.
• The current formulation of CBAM overlooks exchanges that EU TSOs might have with third countries TSOs to keep the stability of the European electricity system. These exchanges are reserve sharing agreements to keep the grid balanced and Cross-border redispatch and Countertrading in order to solve internal congestions. ENTSO-E calls European Commission to consider that TSOs are not energy traders on the market like any other market participant. Imposing CBAM requirements for regulated TSO activities would therefore not be proportionate to the risk of carbon leakage.

In order to address those concerns, ENTSO-E recommends:

• Exempting TSOs activities from the CBAM scope.
• Conducting an additional impact assessment prior to the definitive period of implementation of CBAM for electricity.
• European Commission to assess more in depth the list of third countries eligible for exemption.

In order to allow the successful implementation of CBAM, ENTSO-E calls on the European Commission to consider those concerns and to adjust the mechanism based on those recommendations as soon as possible. ENTSO-E remains of course available and is keen to enter into a structural dialogue with the European Commission and electricity stakeholders, to provide expert input where needed to enable qualitative legislation to be put into place.

Read the detailed position paper here