The European Union’s Carbon Border Adjustment Mechanism (CBAM) is reducing the value of cross-border electricity sales from the Western Balkans, affecting cash flow and funds used to maintain power stations and the mines that supply them. In Serbia and Bosnia and Herzegovina, lower thermal generation is occurring alongside weaker export revenues and tighter competition for regional buyers. Utility operating data also show that changes in output are not explained by CBAM alone, with commercial pressure, stronger hydropower production and coal supply problems contributing to reported movements.
Energy Community Secretariat data show a 16% decline in scheduled electricity exports from the Western Balkans to the EU, to 3.223 TWh in the second quarter of 2026. Combined electricity trade in both directions fell by about 19% in the first half of the year, covering imports into the region and transit-related trading.
Export volumes and generation shifts in Serbia and Bosnia and Herzegovina
Elektroprivreda Srbije (EPS) points to one channel through which CBAM affects regional market outcomes. In its first-half operating results, the company said CBAM reduced regional exports to the EU, increasing electricity surpluses available for sale on regional exchanges and pushing wholesale prices down.
EPS reported that thermal generation fell by about 12% to 9.423 TWh in the first half of 2026, compared with 10.712 TWh in the same period of 2025. Hydro production rose by 9% to 5.307 TWh. The thermal figure includes combined heat and power generation, so it does not provide a direct measure of coal-fired output.
EPS said thermal units were in cold reserve for 8.2% of calendar time and reported 574.34 GWh of production reductions linked to operation at technical minimum. The company attributed weaker thermal output and higher procurement requirements to lower domestic coal production and poorer coal quality. It therefore said the full thermal decline cannot be attributed solely to CBAM.
Bosnia and Herzegovina shows a different pattern across generation types. Thermal electricity injected into the Bosnian transmission grid fell by 12.9% to 4.931 TWh in January-September 2026, while hydro injections rose by 27.3% to 3.926 TWh. Total generation injections increased by 2.6% to 9.849 TWh.
Declared commercial deliveries from Bosnia and Herzegovina to Croatia fell by 38.5% to 946 GWh. Deliveries to all neighbouring systems declined by 16.5% to 4.853 TWh, while receipts dropped faster, by 32.8% to 2.742 TWh. The resulting net outward commercial balance rose by 22% to 2.111 TWh as stronger hydro output altered the balance between coal generation, imports and exports.
Plant-level conditions also vary within Bosnia and Herzegovina. September thermal injections were only marginally below the previous year, while production at some individual facilities increased sharply. At Ugljevik, interruptions have been linked to insufficient coal, difficulties accessing mining areas and equipment constraints, which EPS said cannot reasonably be classified as a direct result of weaker EU export demand.
How CBAM affects export net revenue calculations
The legal responsibility under CBAM lies with an authorised declarant importing electricity into the EU. Its economic effect can still flow upstream to Western Balkan generators through lower purchase offers, revised contract terms and reduced demand.
For exporters, the calculation increasingly depends on EU selling price minus CBAM liability, cross-border costs, balancing, losses and trading costs to arrive at an export netback figure. The European Commission’s published CBAM certificate price for third-quarter 2026 imports is €82.32 per tonne of CO₂, compared with €75.28/tCO₂ in the second quarter.
Using published electricity default factors, implied gross carbon burden is estimated at around €94.50/MWh for Bosnia and Herzegovina, €85.70/MWh for Serbia, €80.59/MWh for Montenegro and €73.02/MWh for North Macedonia. These are indicative default-based estimates of CBAM exposure before eligible deductions and are not presented as production costs for any specific generating unit.
The impact on export margins can be large under illustrative pricing assumptions provided by utilities’ reporting framework. If Serbian electricity sells into an EU market at €120/MWh, gross CBAM exposure of about €85.70/MWh leaves €34.30/MWh before transmission capacity, balancing, losses and other commercial costs; if those additional costs total €5/MWh, net revenue would be around €29/MWh.
The same framework indicates that a coal unit with avoidable operating costs above that level has limited commercial incentive to produce additional electricity specifically for export hours at that price level. At an EU selling price of €180/MWh, remaining revenue increases substantially and exports can again become commercially attractive under those assumptions.
Earnings effects reported by EPCG alongside operational constraints
Elektroprivreda Crne Gore (EPCG) estimated that CBAM reduced the value of its first-quarter electricity sales by approximately €13 million compared with what those sales could have generated without the mechanism. EPCG said it remained profitable during the period.
EPCG reported that generation was significantly above plan and that hydrological conditions were favourable during the quarter when Pljevlja thermal power plant continued operating. The company’s assessment indicates that CBAM can affect utility earnings before any measurable change in physical output.
The same reporting framework describes how incentives shift when netback falls below avoidable operating costs for a plant rather than when volumes change immediately. Under those conditions, utilities may reduce loading, delay starts or hold capacity in reserve even while continuing production where system needs require it.
Redirected electricity flows into regional markets
If EU export opportunities become uneconomic under CBAM-adjusted economics, electricity can move toward domestic or neighbouring markets instead of being exported into the EU market segment where it previously cleared contracts.
The source data describe a two-stage effect: first CBAM weakens EU export economics, then displaced volumes can depress prices within Western Balkan markets where supply rises relative to demand. Coal generators may lose operating hours even if they have not exported directly into the EU market.
A similar mechanism can apply to renewables when hydro, wind or solar output cannot meet requirements for favourable CBAM treatment or cannot secure contractual and verification steps needed for that treatment chain. Additional renewable supply would further reduce residual demand available to coal generators within regional markets.
Utilisation impacts and fixed-cost pressures on coal systems
The main structural outcome described is a gradual decline in annual utilisation rather than immediate closure of coal-fired plants across the region. Thermal capacity remains relevant for security of supply during winter peaks, dry hydrological periods and times when electricity imports are limited.
A plant may remain necessary for system security while becoming harder to finance as commercial operating hours fall for export-related reasons or due to market pricing changes tied to carbon costs under EU-bound sales economics.
The reporting framework highlights fixed-cost exposure across coal mines and plant operations including maintenance programmes, environmental upgrades, staffing and debt service obligations. If annual production declines while most fixed expenditure remains unchanged, fixed costs per generated megawatt-hour increase.
An example provided indicates that a one-third reduction in electricity production with fixed costs unchanged would raise fixed costs per MWh by 50%. Utilities named as facing this type of challenge include EPS (Serbia), EPBiH (Bosnia and Herzegovina), ERS (Serbia) and EPCG (Montenegro).
Separating security-of-supply value from export margins
The source material says historical electricity exports provided additional cash used for domestic generation fleets, mines, overhauls and investment across Western Balkan utilities while CBAM potentially weakens that financing model through reduced predictability of export revenue streams.
Future investment assessments are described as needing separation across three value streams: domestic security-of-supply value tied to avoiding imports during scarcity periods; commercial export value defined as margin after CBAM-related charges plus cross-border costs; and system flexibility value including revenue from balancing services, reserves or capacity availability.
The reporting framework states that historic export margins should not be carried automatically into models such as coal mine expansion or power plant rehabilitation or life-extension projects without reassessing how many profitable operating hours can be achieved under conditions where EU access increasingly includes an explicit carbon cost component.
The source material also states that CBAM is unlikely to close Western Balkan coal plants overnight because domestic systems still require substantial thermal capacity while hydrological conditions, weather patterns, import availability and network constraints can quickly increase the value of coal generation within regional markets.
In this context, it says coal-fired generation may increasingly operate mainly when required by domestic system needs or when regional prices are exceptionally strong rather than serving both domestic demand and profitable EU exports on a consistent basis; this would involve lower utilisation, fewer profitable export hours and weaker cash generation relative to earlier financing patterns.