Gross cross-border electricity trade between the Western Balkans and the EU fell by approximately 19% year on year during the first six months of 2026. The decline was about 23% in the first quarter and about 15% in the second quarter. The change provides an early indication that the EU Carbon Border Adjustment Mechanism (CBAM) is affecting regional commercial flows.
Hydropower effects and net import position
Strong hydropower output initially pushed Western Balkan prices below EU benchmarks during the first quarter. Cross-border activity did not rebound fully after the hydrological surplus weakened. The region returned to its more typical role as a net electricity importer.
As hydropower conditions shifted, cross-border volumes remained below last year’s level through the first half of 2026. The pattern shows that the first-quarter price effect was not followed by a complete recovery in trade flows. Other market drivers also contributed to movements in the period.
Day-ahead volumes rise within Western Balkans
Trading on Western Balkan day-ahead exchanges moved in the opposite direction to cross-border flows. Volumes increased by approximately 19% to 2.70 TWh in the second quarter. Part of the increase was supported by a recovery in activity on Serbia’s SEEPEX exchange.
The shift resulted in a more divided regional market, with greater volumes traded within the Western Balkans. At the same time, less electricity crossed the EU border during the first half of 2026. The divergence aligns with changes in how costs are reflected across transactions.
CBAM default emissions factors and indicative carbon costs
CBAM default emissions factors are described as central to the shift in trade patterns. Based on second-quarter certificate prices, indicative carbon costs were estimated at €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia, and €73.70/MWh for Montenegro. Albania carried a default cost of zero due to its predominantly hydropower-based generation mix.
The estimated charges were described as large enough to remove commercial margins on many coal-heavy electricity exports. Power traders may redirect transactions through jurisdictions with lower emissions factors or keep supply within Western Balkan markets when EU price premiums cannot absorb carbon costs.
Other drivers affecting first-half trade
Hydrology, fuel prices, plant availability and demand also influenced first-half trade, so the full decline cannot be attributed solely to CBAM. Continued weakness in cross-border activity after the first-quarter hydropower effect faded indicates that carbon pricing is already affecting nominations and arbitrage strategies.
The pressure extends beyond direct carbon bills for lignite-dependent utilities including EPS, Elektroprivreda BiH, and Elektroprivreda Republike Srpske. Lower export competitiveness reduces access to higher-priced EU markets and weakens the economics of ageing thermal assets.
Verified plant-level emissions, renewable power-purchase agreements, and faster investment in low-carbon capacity are described as becoming commercially important rather than only regulatory requirements for these operators.