Serbia has begun developing a domestic response to the European Union’s Carbon Border Adjustment Mechanism (CBAM), but the current framework highlights a significant carbon-price gap that is likely to influence both industrial competitiveness and power-sector economics in the years ahead. The government has expanded its carbon-pricing framework through new decrees introducing decarbonisation grants and tax incentives, while the existing domestic charge on greenhouse gas emissions and carbon-intensive imports remains at €4/tCO₂e. By comparison, carbon prices under the EU Emissions Trading System (EU ETS) exceed €75/tCO₂e, creating a substantial difference in regulatory and economic pressure.
This gap is far more than a technical distinction. It represents the divide between a gradual domestic adjustment process and the full carbon-cost environment already faced by exporters operating within EU markets. Serbia’s strategy provides companies with additional time to adapt, but it does not remove their long-term exposure to carbon-related costs. The impact is already visible at Elektroprivreda Srbije (EPS), where General Manager Dušan Živković has estimated that the new domestic carbon tax could increase costs for the state-owned utility by approximately €100 million this year alone.
To ease the transition, the government has introduced new support mechanisms aimed at accelerating decarbonisation investments. Grants will be available for projects that reduce greenhouse gas emissions or improve energy efficiency across industrial sectors. Eligible investments include hydrogen technologies, hydrogen-based and low-carbon fuels, renewable energy generation, energy storage systems, flexible electrification solutions, and carbon capture, utilisation and storage (CCS/CCUS) projects. While the scope of support is broad, its success will ultimately depend on project readiness, the design of public funding calls, and the ability of companies to develop financially viable and bankable investment proposals.
For EPS, the challenge extends far beyond a single year of additional tax obligations. Under Serbia’s policy commitments linked to its cooperation with the International Monetary Fund (IMF), the country has agreed to regular inflation-based electricity tariff adjustments, workforce optimisation measures at EPS by early 2027, and stronger corporate governance standards ahead of major investment cycles. As a result, the utility must simultaneously manage three interconnected pressures: tariff reform, rising carbon costs, and growing investment requirements.
The implications are equally significant for industrial exporters. CBAM is fundamentally changing the economics of electricity procurement, making access to low-carbon power an increasingly important competitive advantage. Renewable energy contracts, documented power purchase agreements (PPAs), and storage-supported flexibility solutions are becoming commercial necessities rather than voluntary sustainability measures. Serbian producers exporting steel, aluminium, cement, fertilisers, and other carbon-intensive products to the EU will face growing demands for transparent emissions reporting and access to lower-carbon energy sources.
Serbia’s domestic carbon price remains intentionally modest, providing short-term relief for businesses and reducing the immediate financial burden of decarbonisation. However, this approach also carries the risk of delaying critical investments needed for long-term competitiveness. Market forces are unlikely to wait for domestic carbon prices to gradually converge with EU levels. Instead, buyers, financial institutions, and importers are expected to impose their own forms of carbon discipline through contractual requirements, financing conditions, risk assessments, and margin expectations. In that environment, the ability to demonstrate credible emissions reductions may become just as important as compliance with formal regulatory obligations.
