CBAM compliance risks extend beyond trade costs
Serbia’s Fiscal Council has warned that the EU Carbon Border Adjustment Mechanism could translate into direct financial pressure on the country’s power sector and broader industrial competitiveness. In its report on climate transition and public finances, the council estimates that applying CBAM would cost Serbia’s power sector between 200 and 300 million euros every year from 2026 to 2030. The analysis also links the mechanism to a wider risk of electricity price escalation as cross-border charges feed into domestic cost structures.
The council cautions that the exposure is not limited to a narrow set of exporters. It argues that if Serbia becomes an “energy island” in Europe, electricity flows to the EU could face an additional charge of 60–70 euros per megawatt-hour, undermining the economics of exports. That dynamic would be particularly sensitive for EPS, the state-owned utility at the centre of Serbia’s electricity supply and export capacity.
Electricity pricing scenarios under ETS and domestic carbon taxation
The report places CBAM within a broader carbon pricing landscape that includes potential participation in the EU Emissions Trading System and alternative domestic measures. If Serbia were to join the EU ETS under current rules in 2030, the council estimates costs could reach around three billion euros per year. It says this would effectively double household electricity prices, a result it describes as economically and socially unsustainable.
As an alternative, the council also evaluates a domestic carbon tax on electricity aligned with approaches used for industrial products. It estimates that such a tax could cost about 1.2 billion euros for EPS in 2030, while still requiring electricity price increases of more than 50 percent. The combined message for industry is that carbon-related charges—whether border-based or domestically applied—may quickly become embedded in energy prices rather than remaining confined to trade compliance calculations.
CBAM-related exposure for energy-intensive goods
Beyond electricity, the Fiscal Council expects CBAM-related costs for exports of iron, steel, aluminium, fertilisers, and cement to rise over time. It projects that costs would move from moderate levels in 2026 to 150–200 million euros annually by 2030. For importers and exporters trading these materials into the EU market, the figures underscore how carbon accounting requirements can affect procurement decisions, pricing strategies, and contract terms even when production emissions are not immediately visible to buyers.
The council’s framing is relevant for EU producers as well: higher compliance costs faced by non-EU suppliers can change competitive dynamics within sectors covered by CBAM reporting obligations. At the same time, it signals that supply chains may need faster decarbonisation pathways to avoid recurring cost pressure as carbon pricing tightens across Europe.
Policy response: MRV capacity and a conditional ETS pathway
To limit escalating costs, the Fiscal Council urges rapid establishment of monitoring, reporting, and verification systems for emissions data and stronger institutional capacity for energy sector reform. The emphasis on MRV reflects a core compliance requirement for credible carbon accounting, which affects how companies substantiate emissions inputs used in CBAM-related calculations. Without robust data infrastructure, exporters may face higher administrative burdens or greater uncertainty in meeting documentation expectations.
The council also presents what it calls the best solution: Serbia’s entry into the EU ETS under conditions designed to reduce near-term shocks. It says concessions would be needed, including a transition period without payments until 2030, 80–90 percent of emission allowances granted for free, and about ten years for full adjustment. Given similar challenges faced by Bosnia and Herzegovina and North Macedonia, it recommends joint negotiations with the EU.
Green transition financing gap and proposed domestic carbon tax
The report argues that Serbia is unlikely to meet its greenhouse gas reduction targets under both the Paris Agreement framework and its National Energy and Climate Plan (INEKP). INEKP envisages 30 billion euros of investment by 2030, but progress has been limited since Serbia pledged alignment with EU climate policies in the Sofia Declaration. From 2010 to 2023, Serbia reduced greenhouse gas emissions by only 3.4 percent, leaving the council warning that meeting the declared 2030 target would require tripling reductions within five years.
Alongside these concerns, Serbia’s government draft Carbon Emission Tax Law—currently under public review—proposes a gradual domestic carbon tax starting in 2027 at 4 euros per ton of CO₂ and increasing to 40 euros by 2030. The council estimates this measure could generate around 220 million euros annually for Serbia’s budget by the end of the decade. Fiscal Council advisor Slobodan Minić notes that treating revenues as general income would weaken the environmental purpose; he argues collected funds should be reinvested into decarbonisation efforts and support vulnerable energy consumers rather than being directed toward EU budget flows.
Broader compliance implications across EU Green Deal industries
The Fiscal Council’s warning illustrates how CBAM interacts with energy pricing, emissions trading exposure, and domestic carbon policy choices—factors that can determine whether industrial decarbonisation plans remain financially viable. For importers and exporters dealing with covered materials such as cement, steel, aluminium, fertilisers, electricity flows into the EU market, and hydrogen-related value chains over time, compliance readiness depends on both data quality and investment timing. For EU producers already operating under ETS constraints within the European Green Deal framework, shifting cost pressures from third-country suppliers may affect competitive positioning while reinforcing incentives to accelerate low-carbon production.
Overall, the report highlights a compliance challenge that is simultaneously regulatory and operational: meeting carbon-related requirements requires MRV systems now, while investment decisions on power generation and industrial processes must align with timelines extending through 2026–2030 implementation phases referenced in CBAM cost projections.