For energy-intensive industries in Serbia, the traditional question of whether gas or electricity is cheaper is no longer the decisive one. The decisive variable over the next decade will be carbon. As the European Union’s Carbon Border Adjustment Mechanism enters its operational phase and the EU Emissions Trading System tightens toward 2030 and 2035, Serbian producers exporting steel, cement, chemicals and fertilizers into the EU market will increasingly discover that energy cost is only half of the equation. The other half is the carbon cost embedded in every exported tonne.
This shift fundamentally alters investment logic. What once looked like a rational choice—cheap gas-based heat and process energy—now carries a rising structural penalty. Conversely, electrification and renewable power, despite higher upfront capital requirements and grid constraints, begin to function not only as decarbonisation tools but as long-term cost-containment strategies. For Serbian industry, the coming decade will be defined by how early and how decisively this transition is understood.
Serbia’s industrial energy baseline
Serbia enters this transition with a mixed starting position. Industrial electricity prices are moderate by European standards but trending upward as tariff reform, grid investments and market alignment progress. Gas prices, while historically competitive, are structurally volatile and import-dependent. At the same time, Serbia’s power system remains dominated by lignite-based generation, meaning that grid electricity still carries a significant carbon footprint unless supplemented by renewable sourcing.
For domestic-only producers, these dynamics are uncomfortable but manageable. For exporters to the EU, they are existential. CBAM does not ask where emissions occur; it asks how much carbon is embedded in the product at the EU border. Whether a tonne of steel is produced in Smederevo or Duisburg is irrelevant once the carbon accounting begins.
Carbon pricing becomes the main cost driver
Between now and 2030, the EU carbon price is expected to rise materially as free allocations are phased out and the emissions cap tightens. Conservative scenarios keep prices near current levels, while more ambitious pathways foresee prices well above €120 per tonne of CO₂ by 2030, potentially approaching or exceeding €200 by 2035. For Serbian exporters, the practical implication is simple: carbon costs will rise faster than energy costs, and in many cases will exceed them.
This dynamic is most visible in primary steelmaking. Blast-furnace and basic oxygen furnace routes emit roughly two tonnes of COâ‚‚ per tonne of steel. Under modest carbon pricing, this adds a meaningful surcharge. Under aggressive pricing scenarios, carbon costs alone can exceed the entire pre-carbon energy bill. What was once an operational cost becomes a structural handicap.
Electric arc furnace steelmaking, by contrast, illustrates the asymmetry created by carbon pricing. With emissions per tonne often four to five times lower, the same carbon price translates into a fraction of the cost. Even if electricity prices rise moderately, electrified steel remains structurally advantaged in a carbon-constrained market. By 2030, the cost gap between fossil-based and electrified steel is not marginal; it is decisive.
Cement: trapped between chemistry and policy
Cement presents a more complex challenge. Unlike steel, where electrification can significantly reduce emissions, cement production is constrained by process chemistry. Roughly two-thirds of cement emissions come from limestone calcination, not from fuel combustion. This means that even aggressive electrification of auxiliary systems delivers only partial relief.
Under rising carbon prices, cement exporters face a dual squeeze. Energy costs rise gradually, but carbon costs rise sharply. By 2030, carbon charges may represent a majority share of total variable cost for EU-bound cement exports. By 2035, without carbon capture, alternative binders or radical process innovation, traditional cement production risks becoming economically marginal in cross-border trade.
For Serbian cement producers, the implication is not immediate shutdown but strategic repositioning. Domestic markets may remain viable, but EU exports increasingly require either low-carbon cement variants or embedded mitigation technologies. Capital expenditure decisions in the late 2020s will determine whether Serbian plants remain EU-competitive into the 2030s.
Chemicals and fertilizers: carbon eclipses energy
Nowhere is the dominance of carbon costs clearer than in ammonia and basic chemical production. These processes combine high energy intensity with high process emissions. Even at today’s carbon prices, emissions already rival energy as a cost driver. By 2030, under moderate carbon scenarios, carbon costs can exceed energy costs entirely. By 2035, they may double them.
For Serbian chemical producers exporting into the EU, this creates a stark choice. Either decarbonisation pathways are adopted, or export margins erode to the point of irrelevance. Electrification of auxiliary processes helps, but the real leverage lies in feedstock transformation: green hydrogen, low-carbon electricity, and redesigned process routes. These are capital-intensive shifts, but the alternative is structural exclusion from the EU market.
Electricity prices: important, but secondary
Electricity prices matter, particularly for electrified steel and chemical processes. However, their role should not be overstated. Even under scenarios where electricity prices rise moderately due to grid congestion and rising demand from electrification and hydrogen production, the impact on total cost is smaller than the impact of carbon pricing.
Conversely, renewable-driven electricity price moderation can significantly enhance the competitiveness of electrified pathways. On-site solar, long-term power purchase agreements and hybrid storage solutions allow industrial producers to partially decouple from volatile wholesale markets. While these solutions require upfront investment, they offer long-term predictability—something fossil fuel markets cannot guarantee.
Investment economics shift toward early action
The critical insight for Serbian exporters is that decarbonisation investments are not primarily about compliance. They are about cost control. A steel plant that converts to electric arc furnaces does not merely reduce emissions; it locks in a structurally lower carbon exposure for decades. A chemical plant that secures renewable electricity and begins hydrogen integration does not just signal sustainability; it protects future margins.
Capital costs for these transitions are substantial. Electric furnaces, grid upgrades, renewable installations and hydrogen systems require tens or hundreds of millions of euros at scale. But when viewed against cumulative carbon costs between 2030 and 2035, these investments increasingly look defensive rather than discretionary. Delaying them does not save money; it compounds future exposure.
Serbia’s strategic window
Serbia’s advantage lies in timing. As a non-EU country closely integrated with the EU market, it has a narrow but real window to position itself as a near-source, low-carbon industrial base. Electricity costs remain manageable. Renewable potential exists. Engineering capacity is strong. What is missing is strategic alignment between industrial policy, energy policy and export strategy.
By 2030, that window narrows. By 2035, it closes for high-emission pathways. Plants that remain fossil-locked will face cumulative carbon costs that no efficiency gain can offset. Plants that transition early will not only survive but gain competitive leverage against slower-moving peers elsewhere in Europe.
Sectoral outlook to 2035
In steel, the future belongs to electrification and scrap-based production, supplemented by low-carbon electricity. Primary steel routes without hydrogen or carbon capture face structural decline in EU-oriented trade.
In cement, survival depends on innovation. Electrification alone is insufficient; low-carbon binders, carbon capture and selective market positioning become essential.
In chemicals and fertilizers, green hydrogen and renewable electricity are no longer experimental concepts but prerequisites for long-term export viability.
Carbon defines Competitiveness
The next decade will not be defined by whether gas is cheaper than electricity in Serbia. It will be defined by whether Serbian industry internalises the reality that carbon pricing is no longer a future risk but a present cost. For EU-export-oriented producers, carbon exposure will increasingly determine who competes and who exits.
Those who treat decarbonisation as a cost will struggle. Those who treat it as a strategic investment will redefine Serbia’s industrial role in the European economy. The arithmetic is already visible. By 2030, carbon costs rival energy costs. By 2035, they dominate them. The only remaining question is how early Serbian industry chooses to respond.
Elevated by clarion.engineer
