The EU’s Carbon Border Adjustment Mechanism is scheduled to affect imports including electricity from 1 January 2026. In the Western Balkans, the mechanism is also emerging as a factor in electricity market outcomes. The Energy Community Secretariat reported early changes in cross-border power trading between the EU and the region.
Early signals in EU–Western Balkans power exchanges
In the first quarter of 2026, commercially scheduled electricity exchanges between the EU and the Western Balkans fell by 25% across borders with EU member states, according to the Energy Community Secretariat. The same report said day-ahead prices in the Contracting Parties were on average €30/MWh lower than in neighboring EU markets. The combination of lower prices alongside reduced exports points to disruptions beyond standard price-driven trading.
In a well-integrated market, lower prices on one side of a border would typically support exports toward higher-price neighboring areas. With exchanges declining while day-ahead prices remain lower in the Contracting Parties, CBAM has been identified as one of the main candidates for explaining the change. Reuters reported that CBAM applies to imports including electricity starting 1 January 2026, with coal-reliant Western Balkan supply expected to face higher costs for EU importers.
Carbon intensity as an export cost into the EU
CBAM alters how electricity exports are priced when carbon pricing is not equivalent in exporting countries. Electricity exported from coal-heavy systems into the EU becomes less competitive because importers must account for embedded emissions. For producers in Bosnia and Herzegovina, Serbia, Montenegro and North Macedonia, this can affect how attractive EU demand becomes under CBAM-linked costs.
For utilities, the shift changes the value of export markets even if generation remains technically available. A coal generator may still produce power, but access to EU demand can become less attractive when carbon costs reduce the netback price. For countries that have relied on exports during favorable conditions, reduced competitiveness can translate into lower revenue and liquidity.
Country exposure and implications for market integration
The impact is expected to vary across the region based on generation mix and trade patterns. Albania, with a hydro-dominated system, is described as less exposed to coal-related carbon costs but highly exposed to hydrology and import/export swings. Bosnia and Herzegovina, Serbia, Montenegro, North Macedonia and Kosovo are cited as facing larger coal-transition challenges.
EU neighbors connected to Western Balkan flows are also expected to experience trade effects. Croatia, Hungary, Romania, Bulgaria and Greece are named among countries likely to feel changes because of their interconnections with regional electricity movements. Beyond dispatch economics, CBAM raises requirements around tracking and documentation for cross-border electricity.
Certification, accounting and operational requirements
Renewable exporters face technical questions under a carbon-constrained trading environment. Clean power should benefit in principle from lower carbon intensity, but exporters need credible certification and guarantees of origin. Metering and carbon-intensity accounting are also required alongside market-coupling arrangements.
The region’s ability to meet these needs is described as a market-integration issue rather than solely a coal issue. The Western Balkans require better tracking of electricity origin, stronger regulatory alignment, more transparent exchanges and faster integration with EU electricity markets. Without these tools, lower export revenues, weaker investment signals and fragmented liquidity are identified as risks.
Domestic policy choices linked to CBAM-linked revenues
CBAM creates a policy choice for Western Balkan governments regarding how carbon-related costs are handled domestically. Governments can treat CBAM as an external penalty or use it as a catalyst for domestic carbon pricing, renewable investment and power-sector reform. The second approach is described as harder but potentially more productive within the domestic policy framework.
If carbon revenues are collected domestically rather than paid at the EU border, they can potentially be used for transition support measures. The listed uses include funding grid upgrades, social protection and coal-region diversification. Coal is still described as important for domestic security of supply in several Western Balkan systems.
CBAM is therefore characterized as changing economics around exports rather than closing plants immediately. It influences dispatch incentives, investment finance and long-term planning across the region while remaining a border mechanism with domestic impacts on power-sector decisions.
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