Regulatory change is set to tighten the link between carbon performance and market access for Serbia’s exporters, with the EU Carbon Border Adjustment Mechanism scheduled to begin affecting trade flows. The compliance impact is expected to start with electricity supply and then broaden as additional covered sectors face CO2-related charges tied to EU carbon pricing. Policy analysts warn that the effect could propagate through industrial supply chains, raising costs well beyond the initial exporters.
CBAM timeline and the first pressure point: electricity
Starting next year, Serbia will be subject to the EU Carbon Border Adjustment Mechanism, which targets additional costs for certain energy-intensive industries. The first sector highlighted is Elektroprivreda Srbije, the country’s main electricity supplier that powers most Serbian companies. According to the Fiscal Council, this initial exposure can trigger a chain reaction that increases costs across the broader economy.
From 2026, a portion of Serbia’s exports—nearly two-thirds of which go to EU member states—will face additional charges for CO2 emissions during production. Companies in covered sectors are expected to provide proof of emissions and pay fees aligned with EU carbon pricing, shifting compliance from environmental reporting into trade cost calculations. For electricity exports linked to EPS, the additional cost could reach €60 per MWh, compared with an average export price of just over €100 per MWh.
Sectors covered and why carbon intensity matters
The industries identified as key CBAM-affected sectors include aluminium, iron and steel, cement, fertilisers, hydrogen, and electricity. For importers and downstream buyers in the EU market, this means procurement decisions may increasingly reflect embedded emissions documentation rather than only price and volume. For Serbian producers, it raises the operational importance of measuring emissions accurately and aligning reporting with EU requirements.
Serbia’s challenge is not only regulatory timing but also carbon intensity: its industries emit considerably more CO2 per unit of output than EU counterparts. The Fiscal Council points to decades of limited environmental and energy policy as a contributing factor. EPS continues to rely largely on lignite, producing high CO2 emissions and other pollutants that affect both the power producer and industrial customers dependent on its electricity.
Cost ranges for EPS under different implementation conditions
The Fiscal Council estimates that CBAM-related costs for EPS could vary widely depending on how the government approaches coverage and how conditions apply. Under current EU rules, annual costs are estimated at €200–300 million. Under stricter conditions that cover the entire sector, the estimate rises to €3 billion annually.
This cost spread matters for exporters because it changes how quickly firms may need to adjust contracts, pricing assumptions, and compliance systems. It also affects investment planning for decarbonisation measures that could reduce emissions intensity over time. Even where production volumes remain stable, changes in carbon-related charges can alter competitiveness against EU producers operating under the EU Emissions Trading System.
Energy transition constraints: project delays and rising budgets
Beyond CBAM accounting requirements, Serbia faces systemic obstacles in executing major energy projects that are relevant to decarbonisation pathways. The reported barriers include delays in permits, unresolved property issues, and insufficient pre-investment planning. Analyses of ten major energy projects totaling over €7.5 billion found frequent schedule overruns and rising costs.
Examples cited by analysts include Đerdap 3 hydroelectric plant costs rising from €1.4 billion to €2.6 billion (+85%), self-balancing solar plants increasing from €1.4 billion to €1.7 billion (+21%), and Bistrica hydroelectric plant moving from €835 million to €962 million (+15%). The increases were largely attributed to incomplete project documentation followed by subsequent design changes.
Institutional capacity as a bottleneck for compliance-linked decarbonisation
The Fiscal Council warns that even with timely funding, limited institutional and staffing capacity will remain a bottleneck for Serbia’s energy transition. This constraint can slow delivery of projects needed to reduce reliance on high-emitting generation sources such as lignite. In turn, slower transition can prolong exposure to carbon-related charges affecting CBAM-covered sectors.
Policy prioritisation is therefore central: success depends on how the government ranks these energy projects against other expenditures such as sports infrastructure or defense procurement. For industry participants—whether exporters preparing emissions evidence or EU-facing importers managing product-level risk—the practical implication is that compliance readiness must be paired with credible decarbonisation delivery timelines.
Overall, Serbia’s CBAM exposure begins next year through electricity-related impacts tied to EPS, then expands in 2026 as additional covered sectors face CO2-related charges for exports into the EU market. The combination of higher domestic carbon intensity than in Central European peers, potential large cost swings for EPS (€200–300 million annually up to €3 billion under stricter conditions), and execution risks in major energy projects creates a compliance challenge for both producers operating outside the EU ETS framework and buyers seeking predictable carbon-cost treatment under EU Green Deal-aligned rules.