The European Commission is moving to change how emissions are attributed to imported electricity under the EU Carbon Border Adjustment Mechanism, a reform that will be felt most directly by exporters in carbon-intensive supply chains. While the proposal concerns electricity accounting, its practical impact is on trade competitiveness and compliance economics for firms whose CBAM exposure depends on embedded emissions. For Serbian producers, the update matters because electricity generation in the country is not uniformly fossil-based, even if lignite remains a dominant element.
What changes for imported electricity at the EU border
From 1 January 2026, electricity imported into the EU will no longer be assessed using a methodology that implicitly assumes fossil-based generation in non-EU countries. Instead, default emission values will be tied to the overall emission intensity of the exporting country’s electricity system. The Commission also proposes to make it easier in practice to use actual, verifiable electricity emissions data.
This alters how much carbon cost is attributed to covered goods when electricity is embedded in production processes. For exporters, the key effect is not a change in their operational footprint overnight, but a change in the baseline used for calculating CBAM liabilities at the border.
Why Serbian exporters have faced a structural disadvantage
Under the current CBAM framework, Serbian exporters of steel, aluminium, cement, fertilisers and other covered products face an embedded-electricity penalty that is not closely linked to their own decarbonisation efforts. Even where production is efficient and electricity consumption is partially or fully supplied by hydro or renewable generation, embedded emissions have effectively been treated as if they were coal-based. That approach has inflated reported emissions and, consequently, future financial exposure under CBAM.
The Commission’s proposal explicitly recognises that this method no longer reflects reality for electricity used in production. The practical implication is that electricity used in Serbian manufacturing will not automatically be penalised as fossil electricity when system-average emissions or actual emissions can be credibly demonstrated.
A new baseline linked to Serbia’s power mix
The most immediate consequence for CBAM-affected exporters is a shift in the default baseline used for electricity-related emissions. Serbia’s electricity mix is described as not decarbonised but also not uniformly fossil either. Large hydro assets, seasonal renewable output and non-thermal generation are expected to reduce system-average emissions intensity compared with a pure lignite benchmark.
Once the revised default methodology applies, exporters using default values should see lower embedded electricity emissions per unit of output without changing anything operationally. In sectors where margins are already under pressure from energy costs, logistics and financing, even modest reductions in reported emissions can influence profitability and pricing flexibility.
From fixed assumptions to usable evidence
The reform’s more consequential shift concerns whether actual electricity emissions data can realistically be reported and verified. Until now, Serbian exporters had limited ability to demonstrate that their production electricity was cleaner than the default assumption due to administrative, technical and verification hurdles. In practice, this meant electricity emissions were treated as fixed and unavoidable rather than differentiated.
By relaxing and adjusting conditions for reporting actual emissions, the Commission is effectively enabling exporters to differentiate their electricity footprint instead of inheriting a generic national or fossil-based assumption. This creates a hierarchy of outcomes: default users benefit from a more realistic system-average factor; exporters able to document low-carbon supply such as hydro-backed or renewable-backed electricity can reduce the electricity component of CBAM emissions; and those integrating sourcing decisions with metering, dispatch correlation and third-party verification can treat electricity as an optimisation lever rather than only a cost centre.
Where the impact will be felt most
The reform is particularly relevant where electricity represents a significant share of total emissions. Serbian steel producers using electric arc furnaces, aluminium processors, chemical producers and certain mineral processors are highlighted as falling into this category because electricity emissions are not a marginal detail but a core component of CBAM exposure.
It also affects how Serbian exporters interact with EU importers, banks and verifiers. Although CBAM compliance sits formally with the EU importer, data requirements and economic effects are pushed upstream toward suppliers. Importers increasingly expect credible and verifiable emissions data from exporters, including information on electricity inputs; suppliers unable to provide it risk being priced conservatively or losing access to preferred supply chains.
Timing: contractual behaviour before 2026
The revised rules apply from 1 January 2026, but reporting expectations are already shaping commercial decisions. EU buyers are increasingly asking not only whether products will be CBAM-compliant but also how defensible emissions data will be under future scrutiny. Exporters that delay addressing electricity emissions risk being locked into unfavourable assumptions during contract formation.
For compliance readiness, coordination with Elektroprivreda Srbije, grid operators and independent verifiers becomes part of export strategy. Electricity data quality, transparency and auditability move from technical back-office work into commercial and financial decision-making.
Broader implications for EU ETS-linked industry compliance
The Commission’s direction signals that CBAM is moving away from blanket assumptions toward evidence-based differentiation grounded in measured and verifiable reality. The reform does not eliminate CBAM costs or remove Serbia’s exposure to carbon pricing differences with the EU; lignite remains dominant in the system and marginal emissions still matter.
For importers operating within EU ETS-linked industrial supply chains, the change increases reliance on supplier-provided evidence while keeping formal responsibility with the importer under CBAM. For EU producers competing with imports, it may also sharpen competitive comparisons based on documented low-carbon electricity use rather than uniform default assumptions across non-EU systems.
Fact-based overview: The proposed CBAM electricity reform changes default emission calculations for imported power by replacing fossil-assumption methodology with exporting-country system-average emission intensity from 1 January 2026. It also aims to make actual verifiable electricity emissions data easier to report by adjusting reporting conditions. The update affects covered sectors including steel, aluminium, cement and fertilisers through embedded electricity accounting, with particular relevance for energy-intensive processes such as electric arc furnace steelmaking and other industries where power-related emissions are substantial.