As the EU tightens trade-linked climate compliance under the Carbon Border Adjustment Mechanism, Bosnia and Herzegovina is facing a sharper test in the electricity market. The country’s position as a regional exporter is weakening while imports remain elevated, narrowing the trade balance that once supported cross-border sales. Against that backdrop, CBAM is increasingly viewed as an additional cost factor for electricity flows into the EU.
Export revenues fall while import dependence persists
In the first two months of 2026, Bosnia and Herzegovina recorded electricity exports worth €63.1 million, compared with €75.1 million in the same period of 2025. The decline amounts to roughly €11.8 million and confirms a downward trajectory that has been developing over time. Export receipts had already slipped to €65.6 million in January–February 2024, signaling a gradual erosion of the country’s regional trading position.
Imports also decreased year-on-year but stayed at historically high levels. Bosnia and Herzegovina purchased €51.6 million worth of electricity in the first two months of 2026, down from €78.3 million during the corresponding period of 2025. Even with that reduction, import volumes remain well above early 2024 levels, when purchases from abroad totaled €13.8 million.
Hydrology helps temporarily, but system pressure remains
A more favorable hydrological situation at the start of the year may have reduced the need for imports, with stronger water inflows supporting hydropower generation. However, the overall picture points to an electricity system under increasing strain. Domestic production is no longer delivering the export surplus that characterized earlier market conditions.
This matters for trade compliance because fluctuating availability can affect volumes and contract patterns, which in turn influence how cross-border electricity transactions are assessed under EU-linked carbon rules. While hydropower output can ease short-term balancing needs, it does not remove structural exposure if export capacity continues to weaken relative to demand.
CBAM adds a carbon-related cost to EU-bound electricity
EU Carbon Border Adjustment Mechanism concerns are now extending into Bosnia and Herzegovina’s electricity sector as well as other CBAM-covered industrial supply chains. For electricity imports into the EU, CBAM creates a carbon-related cost where equivalent carbon pricing is not applied in the exporting country. This mechanism can translate into a competitive disadvantage for exports from non-equivalent systems.
The policy relevance is heightened by the broader European Green Deal direction of travel toward tighter emissions accountability across sectors such as cement, steel, aluminium, fertilisers, electricity and hydrogen. For exporters operating alongside EU ETS dynamics, any additional border-linked cost pressure can affect pricing power and market access even when production emissions are not directly regulated by EU ETS participation.
Regulatory reform urgency in Sarajevo
Officials in Sarajevo have warned that Bosnia and Herzegovina urgently needs legislation governing its electricity regulator, transmission system and electricity market. Without reforms, revenues associated with carbon-related charges could effectively flow to EU institutions rather than remaining within Bosnia and Herzegovina’s energy system. The concern is framed as both a competitiveness issue and a governance gap affecting how carbon-related costs are managed.
Estimates prepared with technical support from the EU for Energy project indicate that Bosnia and Herzegovina could face losses of up to €644 million under the most adverse scenario in the electricity segment alone. The figure underscores the scale of risk described by authorities if domestic action does not keep pace with evolving EU trade-linked climate requirements.
Market stability depends on more than price
Energy analyst Nihad Harbas said electricity markets are shaped by more than price signals, emphasizing supply security and the ability to meet end-user demand as top priorities. He noted that Bosnia and Herzegovina may still be competitive during certain periods of the year depending on market fluctuations, Europe’s generation mix and variable output from renewable energy sources.
At the same time, he argued that waiting for conditions to improve is not a viable strategy. In his view, introducing a domestic carbon pricing framework, accelerating decarbonization and expanding investment in renewable energy are durable ways to protect electricity exports from CBAM-type measures that are likely to make regional electricity trade increasingly challenging.
Analytical synthesis: trade imbalance meets compliance risk
The latest trade figures show exports declining while imports remain high, narrowing Bosnia and Herzegovina’s ability to sustain an export surplus through domestic generation alone. At the same time, CBAM-linked carbon costs for EU-bound electricity create an additional competitiveness challenge for exporters operating outside equivalent carbon pricing arrangements. With Sarajevo warning of urgent legislative needs across regulatory and market structures—and with estimates pointing to potential losses up to €644 million in adverse conditions—the immediate policy focus is on closing governance gaps while aligning domestic carbon policy direction with EU expectations.