Three developments are beginning to reshape Southeast Europe’s electricity market: the introduction of carbon costs at the EU border, the potential recognition of Western Balkan renewable certificates in the EU and the emergence of new cross-border trading routes.
The EU’s definitive Carbon Border Adjustment Mechanism entered into force on January 1, creating a carbon liability for electricity imported from non-EU markets. For Western Balkan countries relying on national default emissions factors, the financial impact can be substantial.
At the second-quarter CBAM certificate price of €75.28/tCO₂, the indicative cost reached €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia and €73.70/MWh for Montenegro. Albania, whose applicable default factor is zero, faced no comparable cost.
The result is an increasingly differentiated regional market in which electricity with similar physical characteristics can carry very different carbon costs depending on its declared origin.
Early 2026 trading data suggest that market participants are already adapting. Gross commercial electricity exchange between the Western Balkans and neighbouring EU markets declined by approximately 19% year on year in the first half, even as trading activity on regional power exchanges increased.
During the first quarter, exceptionally strong hydropower generation widened price differences between the Western Balkans and EU markets. However, cheaper regional electricity was not fully exported because CBAM costs in some cases exceeded the available arbitrage margin.
The second quarter brought lower EU prices and a return of the Western Balkans towards net-import status. Price correlations strengthened again, but cross-border commercial trading did not fully return to its previous pattern.
Instead, new corridors gained importance. Scheduled electricity exports from Serbia to Hungary increased by 111%, while Romania-Hungary trade rose by 156%, with Ukrainian electricity demand contributing to the growing importance of Hungary as a regional hub. Greece also maintained its role as a southern supply centre, supporting flows towards Bulgaria, North Macedonia and Albania.
At the same time, commercial schedules are increasingly diverging from physical electricity flows. This is particularly visible along the south-to-north corridor linking Albania, Montenegro, Bosnia and Herzegovina, Serbia and EU markets.
That divergence creates a structural challenge for CBAM. Commercial contracts assign electricity to a declared origin and importer, while the interconnected grid moves electricity according to physical network conditions.
The European Commission’s electricity guidance seeks to address this problem through a detailed evidence chain. Renewable generators seeking actual-emissions treatment must demonstrate a physical PPA, hourly production, firmly nominated cross-border capacity, documentation covering transit countries and an accredited verification conclusion.
Guarantees of Origin cannot replace that evidence. However, the Commission’s proposed mutual recognition of EU and Energy Community renewable certificates could make GoOs issued in Serbia, Montenegro and other qualifying markets commercially usable within the EU.
The certificate reform could strengthen corporate PPA economics and provide renewable projects with an additional revenue stream. At the same time, proposed CBAM amendments could lower national default factors by taking the full electricity mix into account and remove the difficult requirement to demonstrate that there was no physical congestion between a generating installation and the EU.
Taken together, these reforms could create a more workable route for Southeast European renewable producers into the EU market. But the commercial model will increasingly depend on three separate and carefully controlled products: the electricity, its renewable certificate and the verified evidence supporting its CBAM emissions claim.
Large utilities and independent traders will face different challenges. State-owned generators such as EPS, EPCG, ERS and EPBiH control broad generation portfolios and established trading operations, but will need robust systems to ensure renewable electricity is not mixed, double-allocated or inconsistently attributed across different customers and transactions.
Independent suppliers may have greater flexibility to develop installation-specific electricity packages for EU CBAM declarants or industrial exporters in Serbia. Their challenge will be securing reliable access to named generating installations, cross-border capacity and the operational data required for independent verification.
Renewable producers will also have to choose between different export strategies. They can sell electricity directly into the EU and assume the full scheduling, contractual and CBAM evidence burden, or supply Serbian and Montenegrin industrial consumers seeking credible low-carbon electricity for products ultimately exported to European markets.
The second option may be operationally simpler in some cases, but it supports a different emissions claim. Electricity consumed by a Serbian industrial facility forms part of the manufacturer’s emissions and sustainability evidence; it is not treated as electricity physically imported into the EU.
The emerging market will therefore reward companies capable of keeping different carbon and renewable claims clearly separated and fully traceable.
Southeast Europe still possesses the renewable resources, interconnections and price differentials needed to support significant electricity trade with the EU. What has changed is the burden of proof. From 2026 onwards, the most valuable megawatt-hour will not necessarily be the cheapest or even the greenest, but the one whose commercial origin, renewable attributes and carbon identity can be independently demonstrated from the generating installation to the final declarant.
