CBAM starts for key industrial imports from January 1
In an interview with Forbs Srbija, Blagoje Paunović, president of Serbia’s Fiscal Council, warned that the EU Carbon Border Adjustment Mechanism is likely to affect how Serbian goods compete in Europe even when exporters are not directly paying the charge. CBAM is scheduled to take effect on January 1 for steel, cement, aluminium, fertilisers, and electricity. Under the mechanism, EU importers pay according to the carbon content of imported products, linking border compliance costs to embedded emissions.
Paunović said this structure can translate into weaker market positioning for non-EU producers whose products carry higher carbon intensity relative to EU benchmarks. For firms selling into the EU market, the practical compliance challenge is less about direct payment at the border and more about maintaining competitiveness under a system that prices carbon at the point of import.
Electricity exports face a potential demand and price squeeze
The Fiscal Council president singled out Electric Power Industry of Serbia (EPS) as particularly exposed to CBAM-related market dynamics. He cautioned that EPS may need to reduce electricity exports significantly, or limit exports to periods when European prices are extremely high, which he described as rare. Such a shift could translate into lower export earnings.
Paunović estimated that EPS revenues from exports could fall by around 10% if the company is forced to scale back sales into EU markets under carbon-linked cost pressures. The risk is tied to how EU buyers respond to higher effective costs for electricity imports reflected through CBAM requirements.
Carbon pricing pressure intersects with Serbia’s fiscal planning
Beyond trade impacts, Paunović framed the CBAM challenge as part of a broader policy and budget constraint for Serbia heading into 2026. He said budget planning for next year must account for commitments already made this year, including salary increases for teachers, pension hikes, and an 8% wage increase. Those measures have already affected fiscal conditions.
He also noted that capital investment execution was somewhat lower this year but expected an acceleration in capital spending next year. At the same time, revenue growth is likely to slow within a framework targeting a 3% fiscal deficit.
Paris targets remain distant amid limited emissions progress
Paunović criticized Serbia for missing earlier opportunities to prepare for carbon taxation pressures affecting access to European markets. He pointed to Serbia’s Paris Agreement commitment to cut greenhouse gas emissions by 33.3% by 2030 compared with 1990 levels. According to his account, progress has been minimal.
Between 2010 and 2023, emissions fell by just 3.4%, implying that reaching the 2030 target would require a 10% reduction in the next five years—an extremely ambitious pace. In this context, CBAM is presented not only as a trade rule but also as a signal of how quickly decarbonization expectations are tightening across European supply chains.
Domestic carbon taxes proposed; ETS pathway discussed for EPS
The Fiscal Council expects measures to mitigate CBAM impacts and has highlighted proposals aimed at building domestic decarbonization funding. The government has put forward two laws intended to introduce carbon taxes domestically so that revenues remain in Serbia for decarbonization rather than flowing to the EU system. Paunović said projected revenue is around 1.5 billion euros by 2030.
He argued that this level is far below an estimated 30 billion euros needed for the climate transition. As an alternative or complement, he proposed negotiating with the EU for more favorable treatment for EPS, potentially exempting it from obligations until 2030.
After such a period, Paunović suggested EPS could gradually adopt the EU Emissions Trading System with 80–90% free emissions allowances, similar to arrangements in other countries. He added that this approach could also support better financing for modernization of EPS production.
Compliance implications across sectors and markets
The CBAM implementation phase beginning January 1 covers steel, cement, aluminium, fertilisers, electricity, and hydrogen is referenced in broader discussions around industrial decarbonization readiness even when not listed among the immediate covered sectors in this reporting. For importers in the EU market, compliance costs are tied to embedded emissions; for exporters outside the EU, competitiveness hinges on how quickly production footprints can be reduced or how commercial strategies adapt.
Together with EU ETS-linked expectations and Serbia’s stated Paris trajectory gap—3.4% emissions reduction between 2010 and 2023—the policy direction described by Paunović underscores how border measures can amplify pressure on industrial planning, investment timing, and fiscal capacity as Europe advances its Green Deal framework.