As the EU embeds carbon pricing into cross-border trade, one of the most consequential effects is emerging far from the compliance spreadsheets. In Southeast Europe, evidence from Q1 2026 points to a growing divergence between commercially scheduled electricity exchanges and the physical power movements actually observed on the grid. The development matters for CBAM-linked trade compliance because it changes how market participants manage exposures, while the physical system continues to follow network physics.
Commercial nominations diverge from grid reality
In an integrated electricity market, nominations for cross-border trades typically track the physical flow of electricity across interconnectors. That alignment supports predictable congestion management, balancing operations, and security of supply for transmission system operators. In Q1 2026, however, scheduled exchanges between the Western Balkans and the EU fell sharply while physical flows through the region stayed largely intact, and in some corridors increased.
The pattern indicates that the drivers of electricity movement shifted at the commercial level without changing the underlying physical determinants. Market decisions increasingly reflect CBAM-related costs and regulatory considerations, while generation patterns, demand centres, and network constraints continue to govern how electricity moves. The result is a structural mismatch between what traders contract for and what the grid delivers.
Corridor data show larger schedule than flow drops
The divergence is visible in corridor-level comparisons. On the Hungary–Romania interface, commercially scheduled flows declined by nearly 14,000 MWh per day, while physical flows decreased by around 4,100 MWh per day. On the Romania–Bulgaria border, commercial exchanges fell by 8,800 MWh per day, whereas physical flows dropped by just 2,900 MWh per day.
These discrepancies suggest that electricity continued to move along those paths even as scheduled trading activity contracted. For policy and industry stakeholders focused on CBAM compliance risk management, such gaps can complicate assumptions about how contractual schedules map onto real-world outcomes that affect operational exposure and settlement dynamics.
Why electricity behaves differently from other traded goods
The phenomenon is not treated as an anomaly because electricity cannot be routed like a single contractual commodity stream. Physical power flows distribute across available network paths according to Kirchhoff’s laws, influenced by impedance and network topology. When commercial schedules change due to price signals or regulatory costs, the grid does not instantly reconfigure to match those nominations.
This means that even when traders adjust schedules to minimise carbon-cost exposure under CBAM-related incentives, physical flows can persist along established pathways. The disconnect becomes a predictable feature of system operation rather than a short-lived market glitch.
CBAM intensifies schedule adjustments while flows follow physics
CBAM’s introduction is described as intensifying the disconnect by altering the economics of cross-border trade. Traders adjust nominations in ways intended to reduce exposure to carbon costs, which can reduce scheduled exchanges along certain corridors—particularly those linked to coal-heavy Western Balkan systems. Yet physical drivers of flow do not change in tandem with commercial decisions.
In practical terms for regulated sectors covered by CBAM—such as cement, steel, aluminium, fertilisers, electricity and hydrogen—the compliance logic is built around carbon-cost alignment across borders. For electricity trading specifically, however, CBAM-influenced scheduling behaviour can diverge from actual power movements that remain governed by grid constraints.
South–north corridor highlights mismatched exports under hydro conditions
The south–north corridor through the Western Balkans offers a detailed case study. The route runs from Greece through Albania and Montenegro to Bosnia and Herzegovina and onward into EU markets, functioning as a key artery for regional power movements. In Q1 2026 increased hydro generation in Albania and Greece contributed to a surge in physical flows along this corridor.
At the same time, CBAM-related considerations altered commercial trading patterns so that scheduled exports did not match actual flows. Electricity generated in Albania was often scheduled for export to Greece but physically flowed through Montenegro and Bosnia and Herzegovina toward other EU destinations.
Operational implications for TSOs: predictability and “loop” flows
For transmission system operators, predictability of flows is central to maintaining stability. When commercial schedules align with physical movements, TSOs can anticipate congestion points, allocate capacity efficiently and manage balancing requirements within expected parameters. When alignment breaks down, operational planning becomes more difficult as unscheduled or “loop” flows can emerge.
The additional uncertainty increases stress on parts of the network and raises risks of congestion or outages. While the June 2024 blackout in Southeast Europe—triggered by near-simultaneous outage of key lines in Montenegro and Albania—is not attributed directly to CBAM, it underscores how vulnerable critical corridors can be when disruptions coincide.
Capacity allocation inefficiencies may raise system costs
Divergence also affects how transmission capacity is utilised. Interconnectors are designed to facilitate cross-border trade based on economic signals reflected in scheduling decisions; when those schedules do not correspond to physical needs, capacity can be reserved yet underutilised commercially while still loading the network physically in different directions. This produces suboptimal allocation of resources with potential cost implications for both system operators and market participants.
Those inefficiencies are expected to translate into higher system operation costs. TSOs may need additional balancing measures to manage unexpected flows, procure reserves for stability and invest in monitoring and control systems to handle increased uncertainty. Over time these costs are typically passed on through network tariffs.
Congestion management weakens when prices no longer reflect constraints
The divergence complicates congestion management mechanisms that rely on price signals and capacity allocation processes reflecting scarcity of transmission resources. If physical flows diverge from commercial schedules, prices may not accurately signal congestion levels and capacity allocation may fail to represent actual system constraints. The result is reduced efficiency in market functioning.
For importers and exporters operating under EU ETS-linked carbon-cost frameworks—and for EU producers managing compliance obligations across covered sectors—such distortions can affect expectations about hedging effectiveness and imbalance risk when contractual positions appear aligned but physical outcomes differ.
Regulatory relevance: reconciling CBAM objectives with grid realities
From a regulatory standpoint, CBAM aims to align carbon costs across borders and prevent carbon leakage but does not directly account for how electricity physically moves through networks. The Q1 2026 divergence suggests additional coordination between market design choices influenced by carbon policy objectives and operational requirements of electricity systems may be necessary to avoid compromising stability.
Potential mitigation pathways highlighted include enhanced cross-border coordination among TSOs through improved data sharing, joint capacity calculation and coordinated congestion management aimed at reducing impacts from unscheduled flows. Greater clarity on CBAM implementation—particularly regarding treatment of transit flows—is also described as relevant because it could reduce incentives for traders to alter schedules in ways that exacerbate divergence.
Synthesis: carbon-cost signals are reshaping trading behaviour without changing physics
The evidence from Q1 2026 indicates that CBAM-related cost considerations are influencing how traders schedule cross-border electricity exchanges in Southeast Europe. Yet physical power movements remain largely governed by generation patterns, demand centres and network constraints rather than by nominations alone. As a consequence, operational predictability declines: congestion management becomes less effective, transmission capacity utilisation can become inefficient and balancing requirements may increase.
If these patterns persist, stakeholders face higher system costs and gradual erosion of market efficiency driven by misalignment between commercial schedules and physical flows—an outcome that policy design will need to address alongside broader decarbonisation objectives across CBAM-covered sectors including cement, steel, aluminium, fertilisers, electricity and hydrogen.