The implementation of the European Union’s Carbon Border Adjustment Mechanism (CBAM) is poised to significantly impact the electricity trade dynamics in Serbia and the broader South-East Europe (SEE) region. Starting on January 1, 2026, CBAM will require importers of electricity from non-EU countries to monitor, declare, and settle greenhouse gas emissions associated with their imports. This regulatory shift aims to align the carbon costs between EU domestic producers and imports, creating new administrative and financial obligations for countries like Serbia, Bosnia and Herzegovina, Montenegro, and North Macedonia that are closely integrated into the EU’s electricity market.
Serbia’s electricity sector, characterized by a total installed capacity of approximately 8,981 MW and an annual gross generation of around 34,706 GWh, is particularly vulnerable to these changes. The country’s reliance on coal and lignite-fired plants—accounting for roughly 60–65% of total generation—results in a carbon intensity of about 556 gCO2e per kWh, significantly exceeding the EU average. This high carbon footprint raises concerns about Serbia’s export competitiveness under potential CBAM charges that could reach up to €60 per MWh for coal-based power.
In recent years, Serbia has experienced a resurgence in net electricity exports, often sending 2–4 TWh annually beyond domestic consumption levels. The SEEPEX exchange has reported monthly traded volumes exceeding 420–450 GWh, indicating a robust cross-border electricity market. However, the introduction of CBAM adds a layer of complexity to this trade by imposing costs linked to carbon emissions embedded in exported electricity.
The pressing questions for stakeholders in Serbia revolve around two key areas: how carbon emissions will be accurately measured and verified for imported electricity and how green energy can be certified to minimize CBAM-related charges. Current procedures require importers to declare carbon dioxide equivalent emissions associated with their imports and surrender corresponding CBAM certificates tied to EU ETS allowance prices.
The complexity arises from the nature of electricity itself; power flows do not correspond directly to specific generation units, leading to variability in carbon content based on grid conditions and supply dynamics. To address this issue, the EU is proposing a new verification methodology that would allow importers to report actual emissions values rather than default grid averages. This approach aims to accommodate non-EU producers actively working towards decarbonization.
This verification process necessitates detailed installation-level reporting audited by accredited verifiers. For renewable sources such as solar and wind, verified hourly or daily generation records will need to be maintained alongside emissions declarations compliant with recognized standards. For hydropower—a significant part of SEE’s renewables mix—the focus will be on accurate generation metering and reservoir management records.
The investment landscape in SEE is heavily influenced by these regulatory developments. Renewable energy projects in Serbia are accelerating; wind generation has increased by over 17% annually. Yet until CBAM-compatible verification systems are fully operational, investors may encounter heightened policy risk premiums affecting both capital expenditures (CAPEX) for renewable projects and operational expenditures (OPEX) related to carbon accounting.
Serbia’s national climate plan aims for a renewable energy share of 40.7% by 2030, which necessitates significant scaling of solar and wind technologies alongside energy storage solutions. Scenario modeling indicates potential reductions in CO2 emissions from power generation by 35–59% by 2030, contingent upon rapid deployment of renewables.
The CBAM framework allows for exemptions or postponements if third countries meet specific conditions such as coupling their markets with the EU’s day-ahead market and establishing domestic carbon pricing aligned with EU ETS levels by set deadlines. Serbia plans to couple its electricity market with the EU by the fourth quarter of 2026, which could qualify it for temporary exemptions until 2030 provided other criteria are satisfied.
The economic implications are substantial; independent studies suggest that without adjustments, annual revenues from CBAM levies on Western Balkan electricity exports could amount to hundreds of millions of euros—Serbia alone potentially contributing over €300 million annually. If these exports face punitive charges without accurate carbon accounting reflecting their true low-carbon status, it could jeopardize revenue streams and deter investment in regional renewable projects.
This situation underscores the necessity for a delay in full CBAM implementation concerning electricity imports until robust verification systems are established alongside harmonized market coupling frameworks. Such a postponement would facilitate smoother integration into an interconnected European electricity market while ensuring compliance with evolving regulatory expectations without compromising economic viability.
