The European Parliament has backed changes to the European Union’s Carbon Border Adjustment Mechanism (CBAM) that could reduce some of its most disruptive effects on electricity trade with the Western Balkans, as growing evidence suggests the levy is weakening commercial exchanges and contributing to greater fragmentation of the regional power market.
Lawmakers adopted their negotiating position on 15 September 2026, with 464 votes in favour, 50 against and 159 abstentions, paving the way for negotiations with EU member states on the final legislation. While much of the proposed package focuses on steel, aluminium and manufactured goods, several electricity-related provisions could have significant implications for utilities, traders and renewable-energy developers in Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, Albania and Kosovo.
One of Parliament’s proposals would exempt certain electricity flows used by transmission system operators to maintain network stability. The measure is designed to prevent emergency balancing, redispatch and other security-related electricity exchanges from generating CBAM liabilities where the flows are required for the safe operation of interconnected grids rather than for commercial purposes.
The proposed exemption would still have to be agreed with the Council and would not apply to ordinary electricity trading. Nevertheless, its inclusion reflects growing recognition that applying a border carbon charge mechanically to interconnected power systems can create complications for the physical operation of regional electricity networks.
Further changes concern the calculation of embedded emissions in imported electricity. Under the existing methodology, electricity imports can be assigned a national default emissions value that is heavily influenced by the exporting country’s fossil-fuel generation. This can result in a carbon charge that does not accurately reflect the electricity actually delivered, particularly when exported power is generated from hydropower, wind or solar facilities.
Under Parliament’s proposed approach, default values would instead take into account the country’s entire electricity generation mix, including non-fossil generation. Non-EU countries could also seek lower values where reliable data demonstrate that their average system emissions, or those of their price-setting generators, are below the applicable EU default.
The proposed changes could be particularly significant for the Western Balkans. Based on existing default values and the Q2 2026 CBAM certificate price of €75.28 per tonne of CO₂, the indicative border cost is approximately €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia, €74.08/MWh for Kosovo, €73.70/MWh for Montenegro and €66.77/MWh for North Macedonia. Albania has a zero default factor, reflecting its predominantly hydropower-based electricity system.
In several cases, these liabilities are higher than the wholesale price spreads that normally make cross-border electricity trading commercially attractive. During the second quarter, Italian electricity prices averaged around €27/MWh above Montenegro, while Hungarian prices were approximately €13/MWh above Serbia. A CBAM liability exceeding €70/MWh can therefore remove the economic value of an otherwise profitable electricity export.
The first six months of the definitive CBAM period indicate that the mechanism is already affecting regional trading patterns. Gross scheduled electricity exchanges between the Western Balkans and neighbouring EU markets fell by around 15% year on year in Q2 2026 and by approximately 19% during the first half of the year.
At the same time, trading volumes on the four observed Western Balkan day-ahead power exchanges increased by 19% to 2.70 TWh in the second quarter. The contrasting trends suggest that electricity trading has not disappeared but is increasingly being retained within regional markets instead of crossing into the EU.
The Western Balkans also returned to a seasonal net-import position of approximately 1,048 GWh in Q2, reversing exceptional net exports of around 1,247 GWh in Q1, when favourable hydrological conditions generated a temporary electricity surplus. Lower hydropower output, falling EU benchmark prices and changing fuel economics also contributed to the shift, meaning that the decline in cross-border trade cannot be attributed exclusively to CBAM.
Nevertheless, the regional market has not returned to its 2025 structure. Electricity is increasingly being routed north through Serbia, while several traditional corridors towards Croatia, Bulgaria, Greece and Italy remain commercially weaker. The development points to a more segmented regional electricity market, even as governments seek to strengthen regional integration and connect Western Balkan power exchanges more closely with the EU single day-ahead market.
Electricity exports and trading can continue largely under existing arrangements, but EU-bound transactions increasingly require a CBAM evidence package identifying the electricity source and its embedded emissions, according to analysts at Virtu.Energy, a CBAM-focused engineering platform specialising in electricity imports. The documentation must be sufficiently complete and traceable to allow examination by an EU-accredited verification body.
Although the authorised CBAM declarant or EU importer retains formal responsibility for compliance, much of the required generation, metering, contractual and delivery information must originate from the exporter and electricity producer. As a result, importers are likely to pass substantial documentation requirements down the commercial chain to traders, generators and other counterparties.
Virtu.Energy analysts recommend introducing a pre-verification process at an early stage. Producers, traders and importers should establish the required evidence chain during generation and delivery rather than waiting for annual CBAM declarations and certificate-surrender deadlines. Information that was not collected at the time of generation or delivery can be difficult, and in some cases impossible, to reconstruct retrospectively.
The proposed legislative revision could ease some of the pressure on regional electricity markets by reducing default emissions values and making it easier for market participants to demonstrate actual plant-level emissions. Parliament and the Council must still agree on the final text, including the treatment of emergency electricity flows and safeguards that could apply during periods of severe market disruption.
A final agreement is targeted before the end of 2026, with some electricity-related amendments potentially applying retroactively from 1 January 2026. Until negotiations are completed, traders will need to continue pricing EU-bound electricity against existing default liabilities while simultaneously building the evidence required to support actual emissions. Without reliable emissions data and documentation, CBAM costs can continue to outweigh the underlying commercial value of cross-border electricity capacity.
