Proposed changes to the EU Carbon Border Adjustment Mechanism (CBAM) could give Western Balkan renewable electricity producers a more practical route into European markets by addressing rules that currently make it difficult for wind, solar and hydropower projects to demonstrate low or zero embedded emissions.
The main challenge is not the emissions generated by renewable plants, but the evidence chain needed to connect a specific generator with electricity imported into the EU through interconnected markets, where power can be traded, resold and physically mixed across several bidding zones.
Under the current framework, importers generally face national default emission factors unless they meet cumulative requirements for reporting actual emissions. While these conditions are intended to establish a credible link between electricity generation and imports, they can be difficult to apply to the commercial structure of European electricity trading.
A wind farm in Serbia, a solar plant in North Macedonia or a hydropower facility in Montenegro may sell electricity through an intermediary rather than directly to an EU importer. The electricity may cross several bidding-zone borders, while transmission capacity can be allocated through market coupling rather than a separately nominated cross-border contract. Physical power flows also follow network conditions and do not necessarily correspond to the contractual path between buyer and seller.
As a result, renewable electricity can be assigned the default emissions factor of the exporting country’s wider power system. This is particularly significant in coal-dependent markets. Serbia’s current default factor of 1.041 tonnes of CO₂/MWh produces an indicative CBAM liability of approximately €78.37/MWh at the Q2 2026 certificate price of €75.28/tCO₂. Bosnia and Herzegovina’s default factor of 1.148 tonnes of CO₂/MWh results in a charge of around €86.42/MWh.
These costs can arise even when electricity is contractually linked to a renewable generator, unless the importer can satisfy the conditions for reporting actual emissions. For project developers, this creates uncertainty over whether a power purchase agreement with an EU buyer can deliver the expected price and revenue premium.
The proposed revision would recognise physical PPAs involving intermediaries, provided that a verifiable contractual chain connects the generator, intermediary and EU importer. This could be particularly relevant in the Western Balkans, where utilities and independent renewable producers frequently rely on licensed traders to handle balancing, scheduling and access to regional and European markets.
The reform would not treat financial or virtual PPAs as proof of physical electricity delivery. Contracts would still have to be connected to actual generation and cross-border supply. Hourly metering, nomination records, production data and contractual allocation would remain central to demonstrating that the electricity covered by the agreement was generated and delivered during the relevant period.
Guarantees of origin could form part of the supporting documentation, but they would not automatically replace the full CBAM evidence chain. Producers and traders would still need to connect the commercial agreement with measurable generation, the applicable delivery period and the electricity presented for import into the EU.
The proposal would also remove the requirement to prove either a direct grid connection to the EU or the absence of physical congestion along the entire transmission route. This condition has been particularly difficult for renewable generators because they cannot control the operational status of multiple interconnectors at the time of delivery.
Another proposed amendment would limit firm capacity-nomination requirements to borders where capacity is explicitly allocated. Where market coupling allocates electricity and transmission capacity together, traders would no longer be required to provide a separate nomination that is not generated by the market design.
Taken together, the proposed changes could make actual-emissions reporting more practical for cross-border electricity transactions. They could also create a clearer economic distinction between carbon-intensive electricity and renewable power supplied under a traceable physical contract.
This distinction is increasingly important for renewable project finance. Western Balkan renewable projects are often developed around long-term PPAs designed to stabilise revenues and support debt repayment. When the final buyer is located in the EU, uncertainty over CBAM treatment can reduce the bankable offtake price, shorten contract tenors or increase the risk premium required by investors and lenders.
A 100 MW wind farm operating at a 35% capacity factor would generate approximately 307 GWh per year. Even a CBAM-related risk discount of €10/MWh would reduce potential annual revenue by roughly €3.1 million. If a renewable project were exposed to a default CBAM cost exceeding €70/MWh, the resulting liability could be greater than its operating margin and materially affect its debt-service capacity.
Wind projects require particular consideration because their generation profile and system value differ from those of solar plants. Wind output is more likely to occur during evening, winter and lower-solar periods, when European electricity prices can be stronger. Solar projects face greater midday price cannibalisation and increasingly rely on storage, aggregation or shaped PPAs to preserve the value of their output. CBAM traceability therefore needs to function at an hourly level while reflecting the different commercial characteristics of each technology.
Hydropower has a different operating profile. Reservoir plants can shift generation towards higher-priced periods and provide balancing services, while run-of-river facilities remain more closely dependent on hydrological conditions. Albania benefits from a zero national default factor, but renewable producers in Montenegro, Bosnia and Herzegovina and Serbia operate within mixed generation systems and need access to actual-emissions reporting if their renewable output is to avoid being treated according to the carbon intensity of the wider national system.
Analysts at Virtu.Energy, a CBAM-focused engineering platform specialising in electricity, said cross-border trading and renewable exports remain operationally possible, but each EU-bound transaction increasingly needs to be supported by a credible CBAM evidence package covering the generation source, hourly production, contractual allocation, metering and delivery.
The authorised CBAM declarant or EU importer remains legally responsible for the declaration and eventual surrender of certificates. In practice, however, substantial data and documentation responsibilities will have to be shared with the exporter, trader and electricity producer. An importer cannot independently create plant-level evidence that was never collected or preserved by the generator.
The supporting records must be sufficiently robust to undergo review by an EU-accredited verification body. Virtu.Energy analysts therefore recommend integrating a pre-verification procedure into PPAs, trading arrangements and plant data systems rather than treating verification as an exercise to be completed at the end of the reporting cycle.
For new PPAs, CBAM provisions should clearly establish responsibility for data preparation, access to metering records, verification costs, correction of inconsistencies and liability where an evidence package is rejected. Existing contracts may also require amendments, particularly where they were signed before the definitive CBAM regime established the current documentation requirements.
The proposed whole-generation-mix methodology could reduce fallback exposure even where a generator is unable to satisfy all requirements for actual-emissions reporting. Its impact will vary between countries depending on their generation mix, hydrological conditions and the availability and quality of national electricity data.
The revision would not automatically guarantee zero-CBAM treatment for Western Balkan renewable electricity. It could, however, replace several difficult-to-apply requirements with rules more closely aligned with the way cross-border electricity markets operate.
For renewable developers, traders and EU buyers, the key priority will be establishing a reliable evidence chain from generation to delivery and import. Projects that integrate data collection and pre-verification into their PPAs and trading arrangements from the outset will be better positioned to demonstrate actual emissions and preserve the commercial value of wind, solar and hydropower exports to the EU.
