Serbia is nearing adoption of two climate-related laws that would introduce both domestic carbon pricing and a border adjustment framework aligned with the EU’s approach. The measures are scheduled to start in 2026, with the first payments due in 2027, following the operation of Serbia’s Monitoring, Reporting, and Verification system for emissions. For regional industry, the timing matters because EU CBAM rules enter a key implementation phase in January 2026 for several carbon-intensive products.
Domestic carbon tax: start date, rate and revenue design
Serbia’s Law on Greenhouse Gas Emission Tax is expected to apply primarily to the Electric Power Industry of Serbia (EPS), the country’s largest emitter. EPS is projected to generate about 90% of total tax revenues under the scheme. The law includes a tax credit for EPS tied to investment in CO2 reduction, set at at least 20% of funds invested during the tax period, with scope to increase it in light of decarbonization costs.
The carbon emission tax is set at four euros per ton of CO2 starting in 2026. While this level is below the current EU ETS price of around 80 euros per ton, it is still estimated to cost EPS around 100 million euros per year. That figure is described as roughly a quarter of EPS’s total investments in recent years and may be passed on to end consumers. The rate is also expected to rise over time, gradually tracking EU ETS levels.
Border adjustment law: simplified CBAM model and electricity carve-out
Serbia’s second measure, the Law on Carbon Border Adjustment Tax, is designed as a simplified mirror of the EU Carbon Border Adjustment Mechanism. Its stated objective is to protect domestic producers against competition from imports originating in countries without carbon pricing. Unlike the EU framework, Serbia’s version excludes electricity imports, citing unresolved implementation issues within the EU CBAM system.
This distinction is likely to affect how cross-border compliance obligations are mapped for trading firms and utilities operating across regional power markets. It also underscores how product coverage choices can shift commercial exposure even when border measures are conceptually linked to EU rules.
EU CBAM enters final phase in January 2026
Under EU CBAM implementation planning, the mechanism moves into its final phase in January 2026. Coverage during this phase includes imports of electricity, cement, aluminum, fertilizers, iron and steel, and hydrogen. Importers established in the EU are responsible for bearing these costs under CBAM requirements.
Those costs are expected to be passed back along supply chains toward exporters from non-EU countries, including Serbia. However, EPS’s direct exposure through electricity trade is expected to be limited because the company exports little electricity to the EU and mainly operates within regional markets rather than selling into EU power flows.
Carbon pricing negotiations since 2023 and implications for future ETS alignment
Serbia’s policy trajectory has been shaped by discussions involving the European Commission and the Energy Community Secretariat that have been ongoing since 2023. An earlier EU proposal would have required Western Balkans economies to adopt a regional ETS with prices equivalent to those in the EU ETS to avoid CBAM-related costs. Serbia and other countries rejected that approach as unrealistic and economically harmful.
Instead, Serbia selected a phased path beginning with a carbon tax and later evolving into a fixed-price emission trading system. Longer term, integration into the EU ETS would become necessary if Serbia joins the EU. Yet an “equivalent” carbon price requirement by 2030 for non-member states is viewed as unattainable in current conditions.
If Serbia were required to match projected EU ETS prices rising to between 100 and 150 euros per ton by 2030, EPS’s annual carbon costs could reach between 2.2 billion euros and 3.3 billion euros. Such an increase would likely translate into higher electricity prices—estimated at 75 to 110 euros per MWh—and could strain consumer affordability while affecting EPS’s financial stability.
Electricity CBAM challenges: market integration and calculation method
Technical concerns remain around how CBAM applies to electricity imports. The mechanism is described as incompatible with ongoing integration of regional electricity markets into the EU single market. In addition, CBAM charges for imported electricity are calculated using emission factors for fossil fuel generation rather than reflecting each country’s actual energy mix.
For countries with different generation profiles—such as Serbia—this calculation method could increase costs by up to 40%. Industry stakeholders have also argued that operational readiness is not yet sufficient: energy associations including ENTSO-E and EFET have called for a one-year delay in applying CBAM to electricity due to unresolved regulatory and operational problems, with Energy Community members echoing similar concerns.
Broader compliance outlook for industry and trade flows
Serbia’s planned package combines domestic carbon pricing with a CBAM-style border adjustment law that stops short of covering electricity imports domestically. The approach is scheduled to take effect in 2026 with first payments due in 2027, supported by an already operating MRV system. For exporters supplying covered goods—cement, steel-related products including iron and steel, aluminium, fertilisers and hydrogen—EU importers will face CBAM obligations starting from January 2026 under the final phase coverage list.
For industrial operators inside or linked to EU ETS value chains, these developments reinforce that decarbonization planning must account not only for national carbon costs but also for trade compliance exposure under CBAM product coverage rules. In parallel, uncertainty around electricity treatment highlights why market design questions can directly influence compliance burdens for utilities and cross-border power traders.