As the EU moves deeper into CBAM implementation, electricity in South-East Europe is becoming more than a procurement line item for heavy industry. Under the Carbon Border Adjustment Mechanism, power used in production is increasingly tied to the embedded emissions that must be reported and, in the definitive period, financially absorbed at the border. That change is reshaping how exporters think about competitiveness across steel, aluminium, fertilisers, cement, hydrogen and electricity.
CBAM entered its definitive regime on 1 January 2026, following a transitional phase running from 2023 to 2025. The mechanism covers iron and steel, aluminium, fertilisers, cement, hydrogen and electricity. For firms operating under EU ETS rules and selling into the EU market, the compliance burden now extends to how electricity emissions are accounted for within traded products.
Electricity shifts from a cost to an embedded emissions factor
For decades in South-East Europe, electricity was treated mainly as an input cost—volatile but manageable for margins rather than a decisive element of trade strategy. CBAM changes that logic by linking electricity to the carbon content of goods. Export competitiveness is therefore affected not only by wholesale prices paid by industrial consumers such as steel mills and fertiliser plants, but also by embedded emissions that must be handled through CBAM reporting requirements.
The European Commission’s guidance and implementation material make clear that embedded emissions are not limited to direct process emissions. In defined cases and using specified methodology, indirect emissions associated with electricity consumed in production are included. As a result, the distinction between direct and indirect emissions has become commercially material for industrial producers across the Western Balkans and wider South-East Europe.
Definitive-phase data show where pressure will land first
Early signals from the definitive period point to where CBAM-related compliance pressure will concentrate. In a January 2026 snapshot of initial CBAM declarations, iron and steel accounted for 98% of reported volume. Fertilisers represented 1.2%, cement 0.5%, aluminium 0.3%, while electricity and hydrogen were still negligible in early data capture.
This sector mix matters for South-East Europe because the region’s most exposed tradable industrial base remains concentrated in steel and fertiliser-adjacent value chains rather than in direct electricity exports. For Serbia in particular, the implication is that CBAM’s commercial impact will be felt first through industrial electricity procurement inside steel and metals production.
Serbia’s steel case illustrates how procurement becomes export strategy
Serbia provides a clear test case through HBIS Serbia, operator of the Smederevo steel complex. The company describes annual production capacity of 2.2 million tonnes, more than 5,000 employees, two blast furnaces and an integrated hot and cold rolling platform. Its public materials also highlight energy management and efficiency efforts alongside long-duration power arrangements.
HBIS Serbia’s own 2025 communication states that the plant would receive electricity under a 25-year contractual structure involving both EPS and renewable sources. The significance under CBAM is not framed as cosmetic decarbonisation; it aligns with reducing exposure to volatile wholesale prices while improving traceability and lowering the embedded carbon burden of exported steel.
Carbon-linked power pricing changes project economics
Once electricity procurement is treated as part of export compliance economics, price sensitivity becomes more pronounced at industrial scale. A €10/MWh difference in procurement cost or structured renewable supply premium can translate into millions of euros per year for a large integrated steel plant. For example, if an industrial consumer uses 1 TWh annually, every €1/MWh change is worth €1 million on the cost base; at 2 TWh it becomes €2 million per €1/MWh.
In this environment, a premium for structured renewable supply can still be economically rational if it reduces carbon-adjusted export burden or supports acceptance in EU markets. The analysis underpinning current market discussions points to €5–15/MWh premiums for lower-carbon traceable electricity as potentially compatible with CBAM-driven competitiveness.
Beyond steel: aluminium and fertilisers face direct exposure
The shift is not confined to iron and steel. Aluminium and fertilisers are also directly exposed under CBAM coverage, with methodology linking electricity intensity to embedded emissions accounting through direct and indirect pathways. Aluminium is particularly sensitive because electricity has long been central to value-chain economics.
Fertilisers remain more directly gas-linked in process economics, but electricity still enters through plant operations and auxiliary systems and can feature in some process configurations. The combined effect pushes South-East Europe’s industrial base toward a three-part electricity agenda: lower carbon intensity, stronger documentation, and greater price certainty.
Documentation drives demand: merchant power becomes structured offtake
The power market response is tied to how buyers redesign contracts as compliance requirements become operationally relevant. A merchant renewable asset in South-East Europe has traditionally been valued against wholesale prices shaped by Greek gas-to-power volatility, Romanian and Hungarian forward curves, Serbian coal baseload and regional congestion. Under CBAM dynamics, part of that merchant demand begins converting into structured industrial demand.
The buyer profile increasingly includes steelmakers, metals processors and export manufacturers seeking electricity not only as a cost hedge but as part of compliance and sales architecture. For developers this creates different off-taker characteristics; for lenders it changes credit narratives by improving revenue visibility tied to compliant supply.
Premiums support bankability—and storage helps firm delivery
Industrial renewable PPAs are already being discussed across South-East Europe in broad ranges around €65–95/MWh depending on country, profile, firmness and credit quality. In a CBAM-driven context, comparisons shift away from the cheapest available wholesale hour toward the all-in cost of compliant versus non-compliant or poorly documented supply.
If an industrial offtaker pays a €5–15/MWh premium for lower-carbon traceable electricity, that premium can feed directly into project bankability metrics used by lenders. On illustrative scales used in current market assessments—100 MW solar producing 140–160 GWh annually—an assumed €10/MWh uplift can add roughly €1.4–1.6 million annually; for a 200 MW wind project generating 600–700 GWh it can add €6–7 million per year.
Storage becomes relevant because CBAM-sensitive offtakers typically do not want intermittent exposure without shaping or firming. Hybrid structures such as wind plus balancing or solar plus BESS increasingly match operational realities where plants do not shut down when solar output falls or where renewable value should not be delivered only into lowest-priced midday blocks. For a 100 MW solar plus 200 MWh BESS hybrid configuration, battery effects can recover part of capture discounts by flattening delivery profiles—potentially adding €8–20/MWh of realised value in high-volatility markets.
Simplification reduces administration but does not remove carbon pricing logic
The compliance workload has also been influenced by EU simplification measures adopted in 2025 during implementation preparations for importers entering reporting obligations under CBAM rules. The simplification reduced administrative burdens for many importers through a 50-tonne de minimis threshold for certain importers while leaving core carbon-pricing logic intact for relevant industrial flows.
The burden is therefore being rationalised rather than reversed—meaning exporters still need defendable carbon data rather than only lower average emissions performance across their product footprints.
A timing effect rewards early contract structuring
CBAM’s impact on procurement decisions is already visible ahead of later compliance exposures because industrial counterparties are redesigning contracts before they are forced into more expensive positions. Developers reaching commercial structuring while buyers are still building their electricity compliance architecture may secure longer tenors, stronger covenants and better price escalation than projects arriving later into a more crowded market.
Analytical synthesis: CBAM reorganises regional power value around export compliance
Taken together, CBAM is changing how electricity value is assigned within South-East Europe’s industrial system by turning power origin and documentation into measurable components of export costs linked to embedded emissions accounting. The definitive phase beginning on 1 January 2026 concentrates early volume primarily in iron and steel while extending exposure through aluminium and fertilisers via methodology that includes indirect emissions from electricity consumed in production.
For importers and exporters selling into the EU market—including firms operating within EU ETS frameworks—electricity procurement now intersects with trade compliance strategy rather than functioning as a standalone commodity decision. For investors financing renewable assets near large exporters or capable of serving them through structured contracts, CBAM-driven demand composition supports revenue floors where low-carbon supply can be demonstrated with credible delivery—often enhanced through hybrid structures that address firmness needs under industrial consumption patterns.