Proposed changes to the European Union’s Carbon Border Adjustment Mechanism could significantly lower the default emissions assigned to electricity from Serbia, Montenegro and Bosnia and Herzegovina, potentially improving the economics of verified renewable power exports into the EU.
Under the current methodology, national default emissions factors are largely influenced by fossil-fuel generation. This results in factors of 1.148 tCO₂/MWh for Bosnia and Herzegovina, 1.041 tCO₂/MWh for Serbia and 0.979 tCO₂/MWh for Montenegro.
Using the second-quarter CBAM certificate price of €75.28 per tonne, those factors translate into indicative import costs of around €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia and €73.70/MWh for Montenegro.
The European Commission’s proposed reform would change the way these default values are calculated by taking into account the country’s entire electricity generation mix, rather than focusing primarily on fossil-fuel generation. As a result, hydro, wind and solar generation could lower the average emissions factor applied to electricity exports.
The change could have a particularly significant impact in markets such as Montenegro, where substantial hydropower generation operates alongside the Pljevlja lignite-fired power plant. Under the current methodology, the national default factor can impose a CBAM cost that is higher than the average commercial price spread available across Montenegro’s undersea electricity interconnection with Italy.
The proposed reform would also remove one of the most difficult conditions currently facing renewable electricity exporters seeking treatment based on actual emissions. Exporters would no longer have to demonstrate that there was no physical congestion between the generating installation and the EU during the specific hour of export.
For renewable producers, this could be an important simplification. Generators have limited control over congestion occurring across several interconnected transmission systems, meaning that proving the absence of physical congestion can be particularly difficult even when the electricity itself comes from a low-carbon installation.
Other evidence requirements would remain in place. Producers and authorised declarants would still need to demonstrate a qualifying power purchase agreement, hourly generation data, firm cross-border nominations, imported quantities and independent accredited verification.
The legislative process is already advancing. The Council adopted its negotiating position in June, while the European Parliament’s environment committee approved its report in July. A political agreement on the wider reform is expected towards the end of 2026.
If adopted in its current form, the electricity-related changes could apply retroactively from January 1, 2026. The prospect of such a change is already becoming relevant for market participants, particularly on trading corridors where the existing default factors can make electricity exports commercially unattractive.
The proposed reform would not remove CBAM from electricity imports from the Western Balkans. Instead, it could move the system towards a methodology that more accurately reflects the actual carbon intensity of national electricity systems and makes it easier for low-carbon generators to demonstrate the characteristics of individual deliveries.
For developers planning new wind, solar and hydropower projects with EU electricity exports as part of their business model, that distinction could be critical. Lower default exposure and a more workable verification system could determine whether access to the European market becomes a bankable source of project revenue rather than a theoretical export opportunity.
