The implementation of the Carbon Border Adjustment Mechanism (CBAM) has introduced significant complexities to the electricity markets of Southeast Europe, particularly regarding the alignment of commercial schedules with actual electricity flows. This divergence poses critical challenges for market stability, operational efficiency, and long-term regulatory frameworks. The observed discrepancies between what traders nominate and what the grid delivers have far-reaching implications that extend beyond mere pricing and trading volumes.
In a well-functioning integrated electricity market, commercial schedules typically align closely with physical electricity flows. Market participants base their cross-border trade nominations on price signals, which generally correlate with the actual movement of electricity across interconnectors. This alignment is crucial for transmission system operators (TSOs) to effectively manage congestion, maintain system balance, and ensure a stable supply. However, this equilibrium began to falter in the first quarter of 2026.
Data indicates a notable decline in commercially scheduled exchanges between the Western Balkans and the European Union, while physical flows remained relatively stable or even increased along certain corridors. For instance, at the Hungary–Romania interface, scheduled flows plummeted by approximately 14,000 MWh per day, yet physical flows only decreased by about 4,100 MWh per day. Similarly, on the Romania–Bulgaria border, commercial exchanges fell by 8,800 MWh per day, while actual flows dropped by just 2,900 MWh per day. These figures illustrate that electricity continues to traverse these routes despite reduced trading activity.
This phenomenon is not merely an anomaly; it reflects fundamental shifts in the drivers behind electricity movement. The introduction of CBAM has altered economic incentives for traders, prompting them to adjust their nominations to minimize exposure to carbon costs. Consequently, scheduled exchanges—particularly those involving coal-heavy systems from the Western Balkans—have declined. Nevertheless, physical flow dynamics remain dictated by established generation patterns and network configurations.
A critical case study is the south–north corridor running from Greece through Albania and Montenegro to Bosnia and Herzegovina. Increased hydro generation in these regions during Q1 2026 resulted in heightened physical flows along this route. However, due to CBAM-related adjustments in commercial trading patterns, there was a mismatch between scheduled exports and actual movements. For example, electricity generated in Albania was often slated for export to Greece but physically flowed through neighboring countries towards other EU markets.
This divergence has significant operational consequences for TSOs. Predictability in electricity flows is vital for maintaining system stability; when commercial schedules do not match physical movements, TSOs face challenges in anticipating congestion points and managing resources effectively. The breakdown of this alignment can lead to unscheduled or “loop” flows that place unexpected stress on segments of the grid, increasing risks of congestion or outages.
The Southeast European grid has previously experienced stress events that underscore its vulnerability. For instance, a blackout in June 2024 was triggered by simultaneous outages of key transmission lines in Montenegro and Albania. Although this incident was not directly linked to CBAM impacts, it highlights how divergences between commercial and physical flows could exacerbate operational risks if left unaddressed.
Inefficiencies arising from this divergence are likely to translate into higher operational costs for TSOs as they must implement additional balancing measures and invest in monitoring systems to manage unexpected flows. Over time, these costs may be passed on to consumers through increased network tariffs. Thus, the misalignment between commercial schedules and physical flows represents both a technical challenge and an economic burden impacting all stakeholders within the system.
Market participants also face heightened risks as they rely on predictable relationships between scheduled trades and actual flows for portfolio management. When these relationships fail to hold true due to divergences caused by CBAM or other factors, traders may experience unexpected costs or penalties that disrupt their strategic positioning.
The complications extend further into congestion management mechanisms within integrated markets where price signals traditionally guide capacity allocation based on resource scarcity. Divergences can render these mechanisms ineffective as prices may not accurately reflect congestion levels or actual system constraints—ultimately distorting market efficiency.
From a regulatory standpoint, reconciling CBAM objectives with operational realities presents a considerable challenge. While CBAM aims to standardize carbon costs across borders and prevent carbon leakage, it does not fully account for the complexities inherent in electricity flow dynamics. The divergence noted in early 2026 indicates a need for enhanced coordination between market design principles and system operations to avoid compromising stability.
Potential solutions include improving cross-border coordination among TSOs through better data sharing and joint capacity calculations that could alleviate some impacts of unscheduled flows. Additionally, clarifying CBAM implementation—especially regarding transit flow treatment—could help mitigate adverse effects on trading schedules.
As Southeast Europe’s energy landscape evolves under CBAM’s influence, addressing these divergences will be crucial for ensuring efficient market operations while maintaining system security amidst new regulatory frameworks. The current state underscores an urgent need for proactive measures that align policy objectives with market realities as stakeholders navigate this transitional phase.
