The impending implementation of the EU’s carbon border mechanism in early 2026 is poised to exert considerable financial pressure on Montenegro’s state-owned power utility, Elektroprivreda Crne Gore (EPCG). The company has already reported losses amounting to approximately 13 million euros in the first quarter of this year. This regulatory framework is designed to penalize electricity generated from carbon-intensive sources, significantly impacting producers reliant on coal.
In Montenegro, a substantial portion of electricity generation is sourced from the coal-fired thermal power plant Pljevlja. This reliance on coal not only diminishes EPCG’s competitiveness in regional export markets but also results in lower achievable electricity prices compared to those within the European Union due to the indirect effects of the carbon border adjustment mechanism (CBAM).
Despite the financial challenges posed by CBAM, EPCG has refrained from transferring additional costs onto consumers thus far. However, company officials have indicated that price hikes could become necessary if geopolitical tensions—particularly those affecting energy markets in the Middle East—intensify. In light of these developments, EPCG is pivoting its focus towards electricity sales within the Western Balkans, where CBAM regulations do not apply, while limiting exports to surplus volumes directed at EU markets.
The market dynamics are already indicative of the CBAM’s impact; electricity prices across the region are currently between 20 and 70 euros per megawatt-hour lower than those in the EU. This price differential constrains export revenues for Montenegrin producers. Furthermore, the lack of a national emissions trading system that aligns with the EU Emissions Trading System (ETS) places a heavier cost burden on local producers. With domestic carbon prices hovering around 24 euros per ton, they remain significantly below EU levels, exacerbating competitive disadvantages.
Operationally, EPCG has managed to sell all available surplus electricity early in 2026, achieving sales of 486 GWh valued at 49.9 million euros compared to 345 GWh worth 42.8 million euros during the same period last year. Favorable hydrological conditions have also contributed to an overall production increase to approximately 1,204 GWh year-on-year.
However, uncertainty looms over future financial performance as it will largely depend on regional electricity pricing trends and potential modifications to CBAM regulations. The utility anticipates ongoing pressures on export revenues stemming particularly from its coal-based generation capacity. To navigate these challenges, EPCG is advancing modernization initiatives at TPP Pljevlja and accelerating efforts towards transitioning to renewable energy sources. Planned investments ranging from 800 to 950 million euros by 2035 are aimed at mitigating exposure to carbon-related costs and enhancing long-term operational sustainability.
