Proposed changes to the EU Carbon Border Adjustment Mechanism (CBAM) could create a more practical route for Western Balkan renewable electricity to enter European markets, addressing rules that currently make it difficult for wind, solar and hydropower producers to demonstrate that their exports have low or zero embedded emissions.
The main challenge is not the emissions generated by renewable plants, but the evidence chain required to connect a specific generator with electricity imported into the EU through interconnected markets where power is traded, resold and physically mixed across multiple bidding zones.
Under the current framework, importers generally have to use national default emission factors unless they meet a set of 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 way modern European electricity markets operate.
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. Power can cross several bidding-zone borders, while transmission capacity may be allocated through market coupling instead of through a separately nominated cross-border contract. Physical electricity flows also depend on network conditions and do not necessarily follow the contractual route agreed 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 creates a particular problem in coal-dependent markets. Serbia’s current default factor of 1.041 tonnes of CO₂/MWh corresponds to an indicative CBAM liability of around €78.37/MWh at the Q2 2026 certificate price of €75.28/tCO₂. Bosnia and Herzegovina’s default factor of 1.148 tonnes results in a charge of approximately €86.42/MWh.
These costs can apply even when electricity is contractually linked to a renewable generator, unless the importer can meet the requirements for reporting actual emissions. For renewable developers, this creates uncertainty over whether a power purchase agreement with an EU buyer can deliver the expected commercial value.
The proposed revision would recognise physical PPAs involving intermediaries, provided a verifiable contractual chain connects the generator, intermediary and EU importer. This could be significant for the Western Balkans, where utilities and independent renewable producers often rely on licensed traders for balancing, scheduling and access to European markets.
The reform would not, however, treat financial or virtual PPAs as proof of physical electricity delivery. Contracts would still have to be linked to actual generation and cross-border supply. Hourly metering, nomination records, production data and contractual allocation would remain important for 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 wider CBAM evidence chain. Producers and traders would still need to connect the commercial agreement with measurable generation, the relevant delivery period and the electricity presented for import into the EU.
Another proposed change would remove the requirement to demonstrate either a direct grid connection with the EU or the absence of physical congestion across the entire transmission route. This requirement has been particularly challenging for renewable generators because they cannot control the operational condition of multiple interconnectors at the moment electricity is delivered.
The proposal would also limit firm capacity-nomination requirements to borders where transmission capacity is explicitly allocated. Where market coupling allocates electricity and transmission capacity together, traders would no longer need to provide a separate nomination that the market design itself does not generate.
Taken together, the amendments could make actual-emissions reporting more practical in real-world electricity markets, rather than merely available in principle. They could also strengthen the distinction between electricity generated from fossil fuels and power supplied under a traceable renewable contract.
This distinction is increasingly important for renewable project finance. Western Balkan renewable developments are often structured around long-term PPAs designed to provide predictable 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 duration or increase the risk premium demanded by investors and lenders.
A 100 MW wind farm operating at a 35% capacity factor would generate approximately 307 GWh per year. A CBAM-related risk discount of €10/MWh would therefore reduce potential annual revenue by around €3.1 million. If renewable electricity were instead exposed to a default CBAM cost exceeding €70/MWh, the resulting liability could exceed the project’s 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 generation 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 still reflecting the different commercial characteristics of each technology.
Hydropower has a different operating profile. Reservoir-based 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 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 the eventual surrender of certificates. In practice, however, significant data and documentation responsibilities will have to be shared with the exporter, trader and electricity producer. An importer cannot independently produce plant-level evidence that was never collected or preserved by the generator.
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 if 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 when 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 proposed changes would not automatically provide zero-CBAM treatment for Western Balkan renewable electricity. They could, however, replace several difficult-to-apply requirements with rules that are more closely aligned with the way cross-border electricity markets actually operate.
For renewable developers, traders and EU buyers, the key issue will be establishing a reliable evidence chain from generation to delivery and import. Projects that build data collection and pre-verification into their PPAs and trading arrangements from the outset will be better positioned to demonstrate actual emissions and protect the commercial value of renewable electricity sold into the EU.
