The EU’s Carbon Border Adjustment Mechanism (CBAM) is designed as a border measure, but it is increasingly relevant to electricity trading patterns. In the Western Balkans, it is also being treated as a factor affecting electricity-market outcomes. The mechanism changes how electricity exports are priced when carbon costs differ between exporting countries and the EU.
CBAM alters the economics of exporting electricity into the EU from countries without equivalent carbon pricing. The effect is described as a structural shock for parts of the Western Balkans where coal remains a major element of the power mix. Several countries in the region face exposure through their generation portfolios.
Early signals in EU-Western Balkans electricity exchanges
The first signs have been reported by the Energy Community Secretariat. In the first quarter of 2026, commercially scheduled electricity exchanges between the EU and the Western Balkans fell by 25% across borders with EU member states. The same reporting also indicated that day-ahead prices in Contracting Parties were on average €30/MWh lower than in neighboring EU markets.
The Secretariat’s figures point to a divergence between cross-border price signals and actual exchange volumes. In a well-integrated market, lower prices on one side of a border would typically support exports toward higher-price areas. With exchanges declining while prices remain lower, CBAM has been identified as one of the main candidates behind the shift.
CBAM coverage for electricity imports from 1 January 2026
Reuters reported that the EU’s CBAM applies from 1 January 2026 to imports including electricity. The reporting also stated that electricity from coal-reliant producers in the Western Balkans is likely to become more expensive for EU importers. This is linked to how carbon intensity is treated as part of the commercial cost base.
Under CBAM, embedded emissions become a factor in competitiveness for exported power. Electricity from coal-heavy systems exported into the EU can face reduced competitiveness because importers must account for associated emissions. For generators, this can affect how export demand translates into netback prices.
Implications for utilities and export revenues
The change affects how utilities value export markets under different carbon-cost assumptions. A coal generator in Bosnia and Herzegovina, Serbia, Montenegro or North Macedonia may still produce electricity, but access to EU demand can become less attractive if carbon costs reduce netback value. The effect is tied to whether export pricing can absorb additional carbon-related charges.
For countries that have historically relied on exports during favorable conditions, reduced attractiveness of EU sales can translate into lower revenue and liquidity. This is presented as an outcome that follows from changes at the border affecting competitiveness rather than from immediate changes to generation capacity. The impact is therefore described as operating through market economics around exports.
Policy choices for Western Balkan governments
CBAM creates a policy choice for Western Balkan governments, according to the reporting summarized here. Governments can treat CBAM as an external penalty or use it as a catalyst for domestic carbon pricing, renewable investment and power-sector reform. The second approach is described as more difficult but potentially more productive in terms of where revenues are collected.
If carbon revenues are collected domestically rather than paid at the EU border, they can potentially be used to fund transition measures. The cited uses include grid upgrades, social protection and coal-region diversification. The policy framing links revenue collection location with potential domestic spending priorities.
Certification and market integration requirements for clean power
For renewable exporters, CBAM raises technical questions even where generation is low-carbon. Clean power could benefit in a carbon-constrained market, but exporters need credible certification and documentation. Requirements mentioned include guarantees of origin, metering, carbon-intensity accounting and market-coupling arrangements.
The reporting also frames CBAM as more than a coal-related issue because it intersects with market integration. It highlights needs such as better tracking of electricity origin, stronger regulatory alignment, more transparent exchanges and faster integration with EU electricity markets. Without these elements, low-carbon electricity can still face commercial friction affecting export outcomes.
Country-by-country exposure across Southeast Europe
The impact varies by country based on generation mix and system characteristics. Albania, described as having a hydro-dominated system, is stated to be less exposed to coal-carbon costs but highly exposed to hydrology and import/export swings. By contrast, Bosnia and Herzegovina, Serbia, Montenegro, North Macedonia and Kosovo are described as facing larger coal-transition challenges.
EU neighbors connected to Western Balkan flows are also expected to feel trade effects. The countries listed include Croatia, Hungary, Romania, Bulgaria and Greece. The cross-border linkage is presented as a channel through which changes in Western Balkan export competitiveness can affect regional trading patterns.
No immediate closure of coal plants; effects through dispatch and planning
The reporting indicates that CBAM will not close coal plants overnight because coal remains important for domestic security of supply in several Western Balkan systems. Instead, it changes economics around exports, investment finance and long-term planning. The shift is described as occurring at the margins of trade competitiveness rather than through immediate capacity retirement decisions.
CBAM is characterized as a border mechanism with domestic consequences across the region’s power sectors. It is expected to influence dispatch decisions, investment choices, export strategy and coal economics alongside the pace of market reform. These effects are described as unfolding across multiple dimensions of electricity-system operation.
Elevated by virtu.energy