The European Union’s Carbon Border Adjustment Mechanism (CBAM) is designed to equalise the cost of carbon between EU domestic production under the EU Emissions Trading System (EU ETS) and imported goods. From 1 January 2026, CBAM formally extends to electricity imports from third countries. Importers will be required to monitor, declare, and settle the greenhouse gas emissions embedded in electricity brought into the Union.
The change affects South-East Europe (SEE) countries including Serbia, Bosnia and Herzegovina, Montenegro, and North Macedonia, where electricity exports are linked to EU neighbours through physical interconnectors. Cross-border flows are supported by day-ahead market trading and balancing arrangements. The CBAM rollout therefore intersects with accelerating regional electricity market integration.
Serbia’s generation mix and potential CBAM exposure
Serbia’s electricity sector is among the systems expected to be directly affected. Latest available figures place Serbia’s installed capacity at roughly 8,981 MW and gross generation at about 34,706 GWh annually. Coal and lignite-fired plants account for around 60–65% of total generation.
Hydropower provides approximately 24%, while gas and wind make up smaller shares. On average, the carbon intensity is roughly 556 gCO2e per kWh, described as significantly higher than the EU average. The mix is linked to a potential CBAM exposure that could affect export competitiveness if charged at full EU ETS-linked rates.
Cross-border exports and regional market volumes
In recent years, Serbia has returned to net export status under average hydrological conditions. Exports are often in the range of 2–4 TWh annually above domestic consumption. Day-ahead traded volumes on the SEEPEX exchange regularly exceeded 420–450 GWh per month in early 2026.
The cross-border trade supports balancing seasonal hydro variability and converting surplus generation into revenue. At the same time, CBAM introduces a carbon accounting layer for electricity entering the EU. Regional market analyses indicate costs could be roughly equivalent to the EU carbon price per tonne of CO2 embedded in exported electricity, potentially reaching €60 per MWh for coal-based power in some cases.
How CBAM measures emissions for electricity imports
CBAM procedures require importers to measure and declare carbon dioxide equivalent emissions associated with imported electricity. Importers must then surrender CBAM certificates reflecting those emissions. The certificate price is tied to the average price of EU ETS allowances, creating a carbon cost aligned with EU producers.
For products such as steel or cement, measurement typically relies on established direct emissions factors per tonne of output. Electricity differs because power flows are not tied to specific generation units, and marginal carbon content can vary hour-by-hour based on grid conditions and the relative supply of renewables, hydropower output, and cross-border imports and exports.
EU verification methodology for tracked carbon intensity
The EU has proposed a verification methodology that allows importers to declare actual emissions values rather than relying only on default grid averages. The approach is intended to address stakeholder feedback that rigid default rules disadvantage non-EU producers making progress in decarbonisation. Under the proposal, installation-level reporting of generation and emissions would be audited by accredited verifiers.
For solar and wind plants, verified hourly or daily generation records would be linked to commissioning documentation, remote monitoring telemetry, and certified emissions declarations under recognised standards. The goal is a “tracked carbon intensity” for each unit that can be verified by independent third-party auditors with credentials under EU accreditation frameworks.
Hydropower verification and metadata requirements
For hydropower, verification typically relies on generation metering alongside reservoir inflow and outflow records. Emissions assumptions are described as close to zero but still require certification so lifecycle emissions and ancillary impacts are accounted for correctly. This reflects the need for evidence beyond operational output alone.
For private producers participating in Serbian system balancing markets or day-ahead auctions, green attributes must be bundled with generation metadata. The metadata includes time stamps, GPS verification of asset location, turbine performance parameters, and certificate serial numbers. This information is used to demonstrate associated carbon intensity when electricity reaches the EU market.
Implications for renewable investment and reporting costs
The investment implications for SEE are linked to how CBAM-compatible verification and carbon pricing operate in practice. Renewable developers in Serbia are delivering wind and solar projects at an accelerating pace, with wind generation rising by more than 17% annually through recent years. National strategies envisage expanding capacity well into the next decade to align with EU decarbonisation targets.
If verification systems and carbon pricing structures are not fully operational, investors face a “policy risk premium” affecting both CAPEX for renewable projects and storage and OPEX tied to carbon reporting and certificate acquisition. If CBAM charges rely on conservative default emission factors that do not reflect actual low-carbon generation, export revenues could be offset by carbon levies even for genuinely green power.
Serbia’s decarbonisation targets alongside CBAM timelines
The impact is described as acute because SEE decarbonisation pathways are still developing. Serbia’s national climate plans indicate a target for renewable energy share in gross final energy consumption of 40.7% by 2030. Achieving this would require scaling solar, wind, and possibly energy storage technologies without undermining supply reliability.
Scenario modelling for Serbia’s electricity sector suggests CO2 emissions from power generation could fall by 35–59% by 2030 relative to earlier baselines under sustainable pathways. Under more aggressive assumptions, emissions could decrease by 66–100% by 2050. These scenarios depend on swift deployment of renewables and grid modernisation.
Potential exemptions tied to market coupling with the EU
The CBAM framework already provides for exemptions or postponements if third countries meet rigorous conditions. Conditions include coupling markets with the EU’s day-ahead market and implementing domestic carbon pricing commensurate with EU ETS levels by specified deadlines. Energy community contracting parties such as Serbia are included among those potentially eligible under these conditions.
Serbia aims to couple its electricity market with the EU by the fourth quarter of 2026. If other criteria are met, this step could qualify Serbia for temporary exemptions up to 2030. The rollout is therefore described as intersecting with regional market integration efforts and national climate policy implementation timetables.
Earnings estimates from Western Balkan electricity exports under CBAM
An economic assessment cited in independent studies estimates that annual CBAM revenues collected by the EU from Western Balkan electricity exports could reach into the hundreds of millions of euros each year without adjustments. A rough breakdown suggests Serbia alone could contribute over €300 million per year, based on conservative carbon price forecasts.
If electricity exports face CBAM without accurate carbon accounting reflecting their true low-carbon content, SEE utilities could lose export revenues. Investment signals for regional grid projects and renewables could also be affected under such circumstances involving misalignment between declared emissions values and actual low-carbon generation characteristics.
Elevated by cbam.engineer