As the European Union’s Carbon Border Adjustment Mechanism (CBAM) begins reshaping regional electricity trade economics, Bosnia and Herzegovina is entering a major energy-market restructuring. A presentation by Prof. Dr. Admir Softić, Assistant Minister for Energy at Bosnia and Herzegovina’s Ministry of Foreign Trade and Economic Relations, links electricity market integration, carbon pricing reform and exchange-based power trading to economic survival in the CBAM era. The discussion was held in the context of Western Balkan electricity systems facing CBAM implementation beyond transitional reporting.
CBAM implementation raises pressure across Western Balkan power markets
The Sarajevo roundtable on electricity exchange formation highlighted growing pressure across Western Balkan electricity systems as CBAM moves into financial implementation. Bosnia and Herzegovina is described as the only European country without an organized electricity exchange. The presentation said this gap increasingly threatens export revenues and long-term market integration with the European Union.
Authorities are treating the proposed Law on the Regulator, Transmission and Electricity Market in Bosnia and Herzegovina as more than sectoral legislation. The law is positioned as a pathway toward eventual coupling with the EU electricity market through SDAC and SIDC platforms. At the same time, it is intended to create legal conditions for potential CBAM exemptions in electricity trade.
Electricity exports face full CBAM burden from 2026
The presentation states that without organized electricity trading, market coupling, and a domestic emissions pricing framework compatible with EU ETS rules, Bosnian electricity exports to the European Union could lose commercial viability. It also says rapid implementation of the electricity market law is considered critical for reducing CBAM-related risks. The discussion emphasizes that CBAM’s electricity provisions are materially harsher than those applied to most industrial sectors.
It was noted that Bosnia and Herzegovina’s power sector will face the full CBAM burden from 2026, without the gradual phase-in available to several other covered sectors between 2026 and 2034. The presentation ties this sensitivity to the region’s reliance on cross-border revenue from electricity exports. Bosnia and Herzegovina, Serbia and Montenegro are described as relying heavily on thermal generation fleets dominated by coal and lignite.
Default CBAM cost estimates and widening price spreads
The presentation provides estimated default CBAM costs for electricity exports among Western Balkan economies. Bosnia and Herzegovina is cited at €86.5/MWh, followed by Serbia at €78.5/MWh, Montenegro at €73.8/MWh, Kosovo at €74.2/MWh, and North Macedonia at €66.8/MWh. Albania is described as effectively at €0/MWh due to a hydro-dominated generation mix.
Q1 2026 assessments presented in Sarajevo indicate that price spreads between WB6 and EU electricity markets widened to more than €30/MWh. The presentation says this was roughly two to three times wider than during the same period in 2025. It also reports that commercial electricity trade flows from the Western Balkans into the EU declined by between 25% and 70% on certain corridors.
Physical flows remain stable while commercial schedules weaken
The analysis highlights a divergence between physical power flows and commercial schedules. Physical flows are described as remaining relatively stable due to system balancing and network realities. In contrast, commercial trading volumes are said to have weakened sharply where CBAM exposure became material.
The presentation links this shift to changes in dispatch economics, arbitrage opportunities, and cross-border trading behavior. It frames the issue as more than a future compliance matter because it is already affecting trading behavior under current conditions. It also describes implications for transmission system operators, traders, and regional policymakers.
Export economics under CBAM liabilities show early deterioration
The EU4Energy analysis referenced in the presentation states that electricity already represents 80.3% of Bosnia and Herzegovina’s total estimated CBAM burden during Q1 2026. The discussion also compares export prices with carbon-adjusted costs for that period. Bosnia and Herzegovina’s estimated CBAM cost of €86.5/MWh is calculated using a default emissions factor of 1.148 tCO₂/MWh.
The calculation uses a Q1 2026 EU ETS reference price of €75.36/tCO₂eq. The presentation says this CBAM cost exceeded Bosnia and Herzegovina’s average electricity export price of approximately €83.5/MWh during Q1 2026. It adds that some exports into the EU may already be commercially irrational once CBAM liabilities are fully internalized.
Market reforms include DAM, IDM, NEMO licensing and regional integration
The consequences described in macroeconomic indicators include reported declines in Bosnia and Herzegovina’s export performance during Q1 2026. The presentation cites a 4.9% decline in electricity export volumes, a 16% decline in export value, and a 6.6% reduction in sector gross value added. It connects these developments to accelerated discussions on exchange creation and market coupling.
The proposed reforms aim to establish a Day-Ahead Market (DAM) and an Intraday Market (IDM). They also include a designated NEMO operator and eventual integration with EU trading platforms. The roadmap presented suggests full integration could take roughly three to four years after the law enters into force.
Timeline for market operator setup and CACM-related rules
The conference timeline includes creation of an organized market operator within 90 days. It also cites adoption of CACM-related rules within 120 days. NEMO licensing is listed within 450 days, followed by regional market integration within approximately 1,260 days.
The presentation emphasizes that institutional requirements extend beyond market structure alone. It repeatedly states that Bosnia and Herzegovina must build a Monitoring, Reporting, Verification and Accreditation framework while establishing pathways toward an emissions trading system. It also calls for acceleration of decarbonization investments alongside these compliance systems.
EU exemption conditions link market integration with carbon pricing by 2030
The discussion describes an EU regulatory sequence tied to exemption eligibility for electricity-related CBAM claims under Article 2(7) of Regulation 2023/956. According to the interpretation presented, countries seeking exemptions must not only integrate their electricity markets with the EU but also introduce carbon pricing equivalent to the EU ETS by 2030. This requirement is presented as creating constraints for Western Balkan governments.
The presentation describes a tension between avoiding structural disadvantages under CBAM without carbon pricing and managing political or industrial consequences associated with introducing EU-equivalent carbon pricing into coal-heavy domestic economies. It also references “just transition” principles while calling for cleaner generation technologies, automation, digitalization, and improved energy efficiency.
Methdology disputes focus on default factors versus verified emissions
The analysis highlights emissions accounting methodology as another major issue raised by Bosnia and Herzegovina. It argues that current default emission factors overstate actual emissions intensity used for CBAM calculations on exported electricity. The default fossil-fuel emissions factor cited is 1.148 tCO₂/MWh, while a real factor is estimated closer to 1.1145 tCO₂/MWh.
The presentation also provides estimates using broader production-mix factors for grid intensity comparisons. Actual grid intensity is estimated at approximately 0.72 tCO₂/MWh, compared with a default assumption near 0.74 tCO₂/MWh. It estimates that using verified actual emissions instead of default factors could reduce annual CBAM-related costs by approximately 12 million KM.
MRV capacity becomes central as Brussels may refine default values
The presentation estimates production-mix methodologies could create differences approaching 27 million KM annually compared with default assumptions. It links these stakes to increased focus on MRV systems, hourly emissions tracking, and verifiable carbon accounting across regional energy strategies. In its framing, data quality becomes an economic input within CBAM reporting requirements.
The discussion also reflects expectations that Brussels may refine electricity-related CBAM methodologies over time. Proposed reforms discussed suggest future default values could shift from fossil-generation-only assumptions toward full grid-intensity calculations incorporating renewable generation such as hydro output or wind and solar capacity expansion.
Evolving regional competitiveness depends on institutional alignment with EU frameworks
The direction described in Sarajevo frames CBAM as a structural market transformation rather than a temporary adjustment for compliance purposes. It states that Western Balkans are moving toward conditions where liquidity of electricity markets, organized trading platforms, emissions accounting approaches, guarantees of origin processes, carbon pricing measures, and EU market integration affect export competitiveness alongside generation costs.
Bosnia and Herzegovina’s situation is described as more urgent due to weaker institutional starting conditions compared with neighboring states mentioned in the presentation. Serbia, Montenegro and North Macedonia are described as operating electricity exchanges already while advancing further in regional integration mechanisms within evolving European structures.
Pursuit of NECP adoption, ETS preparation and alignment with EU energy governance rules
The concluding priorities cited in the presentation describe simultaneous workstreams across policy implementation areas in Bosnia and Herzegovina. Authorities are pursuing electricity-market legislation alongside NECP adoption, long-term climate strategy development, MRV implementation, ETS preparation, and broader alignment with EU energy governance rules.
The wider regional implication described ties Southeast Europe’s power systems’ competition under CBAM-era conditions to institutional compatibility with the European Union’s carbon-regulated market framework rather than production cost alone or generation capacity alone. The presentation characterizes Bosnia and Herzegovina’s efforts to build an electricity exchange alongside carbon-governance architecture as central to how regional power-market economics are being reshaped by carbon policy.