Bosnia and Herzegovina is entering a major electricity-market restructuring as the European Union’s Carbon Border Adjustment Mechanism (CBAM) begins affecting regional power trade economics. A presentation by Prof. Dr. Admir Softić, Assistant Minister for Energy at Bosnia and Herzegovina’s Ministry of Foreign Trade and Economic Relations, links electricity market integration, carbon pricing reform and exchange-based trading to economic survival under CBAM. Sarajevo’s position is that these steps are not only regulatory updates but also conditions for maintaining competitiveness in the CBAM era.
The analysis presented during a Sarajevo roundtable on forming an electricity exchange in Bosnia and Herzegovina points to rising pressure across Western Balkan power systems as CBAM shifts from transitional reporting into financial implementation. Bosnia and Herzegovina is described as the only European country without an organized electricity exchange. The presentation says this gap increasingly threatens export revenues and long-term integration with the European Union.
Regulator, transmission and market law tied to EU coupling and CBAM exemptions
The proposed Law on the Regulator, Transmission and Electricity Market in Bosnia and Herzegovina is framed as more than sectoral legislation. Authorities are positioning it as a pathway toward eventual coupling with the EU electricity market through SDAC and SIDC platforms. At the same time, the law is intended to create legal conditions that could support potential CBAM exemptions in electricity trade.
The presentation states that without organized trading, market coupling, and a domestic emissions pricing framework compatible with EU ETS rules, Bosnian exports into the European Union could lose commercial viability. It adds that rapid implementation of the electricity market law is considered critical for reducing CBAM-related risks. The discussion also places emphasis on how quickly institutional arrangements must align with EU requirements.
CBAM electricity provisions start full impact from 2026
The situation is described as sensitive because CBAM’s electricity provisions are materially harsher than those applied to most industrial sectors. The presentation says Bosnia and Herzegovina’s power sector will face the full CBAM burden from 2026 onward. It also notes that several other covered sectors receive a gradual phase-in between 2026 and 2034.
The analysis connects this timing to Western Balkans export dependence on cross-border revenues from electricity. Bosnia and Herzegovina, Serbia and Montenegro are described as relying heavily on thermal generation fleets dominated by coal and lignite, while benefiting from relatively lower generation costs compared with many EU markets. The presentation says CBAM changes that cost advantage.
Default CBAM costs vary across Western Balkans exporters
The presentation provides estimated default CBAM costs for electricity exports across economies analyzed. Bosnia and Herzegovina is placed at €86.5/MWh, followed by Serbia at €78.5/MWh, Montenegro at €73.8/MWh, Kosovo at €74.2/MWh, and North Macedonia at €66.8/MWh. Albania is described as effectively at €0/MWh due to its hydro-dominated generation mix.
It reports that Q1 2026 assessments show price spreads between WB6 and EU electricity markets widened to more than €30/MWh. This is characterized as roughly two to three times wider than during the same period in 2025. Commercial electricity trade flows from the Western Balkans into the EU reportedly declined by between 25% and 70% on certain corridors.
Physical flows stable while commercial schedules weaken
The presentation highlights divergence between physical power flows and commercial schedules. It says physical flows have remained relatively stable due to system balancing and network realities. In contrast, commercial trading volumes weakened sharply where CBAM exposure became material.
This shift is described as relevant for transmission system operators, traders and regional policymakers because it indicates CBAM is already affecting dispatch economics and arbitrage opportunities. The analysis frames these changes as cross-border trading behavior adjustments rather than only a future compliance issue .
Electricity share of CBAM burden and export price vs carbon-adjusted cost
For Bosnia and Herzegovina, the presentation cites an EU4Energy analysis referenced in its materials regarding the scale of CBAM exposure in Q1 2026 . It says electricity represents 80.3% of Bosnia and Herzegovina’s total estimated CBAM burden during Q1 2026.
The presentation also compares estimated CBAM cost against export prices for the same period. It states Bosnia and Herzegovina’s estimated CBAM cost of €86.5/MWh was calculated using a default emissions factor of 1.148 tCO₂/MWh alongside a Q1 2026 EU ETS reference price of €75.36/tCO₂eq. It adds that this exceeded the country’s average electricity export price of approximately €83.5/MWh during Q1 2026.
Export declines coincide with market reform timelines
The consequences are reported through macroeconomic indicators for Bosnia and Herzegovina. The presentation says there was a 4.9% decline in electricity export volumes, a 16% decline in export value, and a 6.6% reduction in sector gross value added . It links these figures to ongoing discussions about building an electricity exchange and market coupling.
The proposed reforms aim to establish a Day-Ahead Market (DAM), Intraday Market (IDM), a designated NEMO operator, and eventual integration with EU trading platforms . The roadmap presented suggests full integration could take roughly three to four years after the law enters into force . Implementation milestones cited include creating an organized market operator within 90 days, adopting CACM-related rules within 120 days, NEMO licensing within 450 days, and regional market integration within approximately 1,260 days.
MRV, emissions trading pathways and carbon pricing compatibility
The presentation emphasizes that institutional work extends beyond market design alone. It says Bosnia and Herzegovina must build a Monitoring, Reporting, Verification and Accreditation framework while establishing pathways toward an emissions trading system and accelerating decarbonization investments . It also highlights the need for alignment with EU energy governance rules alongside these steps.
It describes an EU regulatory sequence for potential exemptions under Article 2(7) of Regulation 2023/956 for electricity-related CBAM claims . According to the interpretation presented, countries must not only integrate electricity markets with the EU but also introduce carbon pricing equivalent to the EU ETS by 2030 . The presentation notes this creates tension for coal-heavy economies seeking internal carbon-pricing reforms while managing external competitiveness under CBAM.
Emissions factors dispute: default vs verified actuals
A separate issue raised concerns emissions accounting methodology used for CBAM calculations. The presentation says Bosnia and Herzegovina argues current default emission factors overstate actual emissions intensity . It cites a default fossil-fuel emissions factor of 1.148 tCO₂/MWh, while estimating a real factor closer to 1.1145 tCO₂/MWh.
It adds that production-mix factors imply actual grid intensity around 0.72 tCO₂/MWh, compared with a default assumption near 0.74 tCO₂/MWh. The financial implications are described as significant at scale: using verified actual emissions instead of default factors could reduce annual CBAM-related costs by approximately 12 million KM. Production-mix methodologies could create differences approaching 27 million KM annually .
Prospective methodology refinements discussed for electricity CBAM
The presentation also reflects expectations that Brussels may refine electricity-related CBAM methodologies over time . Proposed reforms discussed suggest future default values could shift from fossil-generation-only assumptions toward full grid-intensity calculations incorporating renewable generation . It states such changes would benefit countries with growing renewable shares including hydro generation or expanding wind and solar capacity.
The materials describe broader direction as continuing toward institutional compatibility with EU carbon-regulated market frameworks rather than temporary regulatory adjustment . They say Western Balkans competitiveness increasingly depends on elements including organized trading platforms, emissions accounting approaches, guarantees of origin, carbon pricing measures, and EU market integration . For Bosnia and Herzegovina specifically, it notes delays relative to Serbia, Montenegro and North Macedonia that already operate exchanges or have advanced further in regional integration mechanisms.
Authorities’ parallel priorities across market reform, climate planning and MRV readiness
The concluding priorities cited in the presentation describe simultaneous pursuit of electricity-market legislation alongside NECP adoption and long-term climate strategy development . It also lists MRV implementation, ETS preparation, and broader alignment with EU energy governance rules . The materials frame these items as part of comprehensive transition requirements linked to evolving carbon-policy constraints affecting regional power trade.
