Electricity trading between the Western Balkans and neighbouring European Union markets stayed well below last year’s levels in the first half of 2026. The shift provides an early indication that the EU Carbon Border Adjustment Mechanism is affecting regional commercial flows. Gross cross-border electricity trade fell by approximately 19% year on year during the first six months of 2026.
The decline was uneven across quarters. Cross-border volumes were down about 23% in the first quarter, before easing to roughly 15% in the second quarter. Hydropower output influenced price dynamics early in the period, with strong generation pushing Western Balkan prices below EU benchmarks during the first quarter.
After the initial hydrological surplus weakened, cross-border activity did not rebound to earlier levels. The region returned to a more typical operating position as a net electricity importer. This change coincided with continued softness in EU-bound trading beyond the first-quarter hydropower effect.
Day-ahead volumes rise while EU border flows weaken
Trading patterns on Western Balkan day-ahead exchanges moved in the opposite direction. Volumes increased by approximately 19% to 2.70 TWh in the second quarter. Part of the increase was supported by a recovery in activity on Serbia’s SEEPEX exchange.
The combined picture points to a more segmented regional market. Greater volumes were traded within the Western Balkans, while less electricity crossed into EU markets. This divergence aligns with changes in how carbon-related costs affect export economics.
Indicative CBAM carbon costs by country
Indicative carbon costs were estimated using CBAM default emissions factors and second-quarter certificate prices. The figures were €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia, and €73.70/MWh for Montenegro. Albania recorded a default cost of zero due to its predominantly hydropower-based generation mix.
The level of these charges can remove commercial room on coal-heavy electricity exports. Power traders may redirect transactions through jurisdictions with lower emissions factors or keep supply within Western Balkan markets when the EU price premium cannot offset carbon costs. Other market drivers also affected first-half trade outcomes, including hydrology, fuel prices, plant availability and demand.
Implications for lignite-dependent utilities
The overall decline therefore cannot be attributed solely to CBAM effects. However, cross-border weakness persisting after the first-quarter hydropower impact faded points to carbon pricing already influencing nominations and arbitrage strategies. For lignite-dependent utilities including EPS, Elektroprivreda BiH, and Elektroprivreda Republike Srpske, pressure extends beyond direct carbon payments.
Lower export competitiveness reduces access to higher-priced EU markets and affects the economics of ageing thermal assets. Verified plant-level emissions, renewable power-purchase agreements, and faster investment in low-carbon capacity are described as becoming commercially important rather than only regulatory requirements.