The EU’s Carbon Border Adjustment Mechanism, commonly discussed as climate policy, is also affecting electricity trade in the Western Balkans. The mechanism changes the economics of exporting power into the EU from countries that do not have equivalent carbon pricing. In several Western Balkan systems, coal remains a major part of the power mix.
Early market signals have been reported by the Energy Community Secretariat. In the first quarter of 2026, commercially scheduled electricity exchanges between the EU and the Western Balkans fell by 25% across borders with EU member states. The Secretariat also reported that day-ahead prices in the Contracting Parties averaged €30/MWh lower than in neighboring EU markets.
In a well-integrated market, lower prices on one side of a border would typically support exports to higher-price neighboring areas. With exchanges declining while prices remain lower, other factors are affecting normal trade signals. CBAM is identified as one of the main candidates for that shift.
CBAM links embedded emissions to electricity import costs
CBAM makes carbon intensity a commercial variable for cross-border electricity flows. Electricity exported from coal-heavy systems into the EU becomes less competitive because importers must account for embedded emissions. Reuters reported that the EU’s CBAM applies from 1 January 2026 to imports including electricity.
Reuters also reported that electricity from coal-reliant producers in the Western Balkans is likely to become more expensive for EU importers under CBAM. That change affects how utilities value export markets when carbon costs reduce netback prices. A coal generator in Bosnia and Herzegovina, Serbia, Montenegro or North Macedonia may still be able to produce power, but access to EU demand can become less attractive.
The shift can reduce revenue and liquidity for countries that have historically relied on exports during favorable conditions. For operators, it changes the commercial attractiveness of selling into EU markets compared with alternative domestic or regional opportunities. The impact is therefore tied to how carbon costs are reflected in cross-border pricing.
Policy options and implications for market integration
For policymakers in the Western Balkans, CBAM creates a choice between treating it as an external penalty or using it to drive domestic policy changes. The source scenario describes domestic carbon pricing, renewable investment and power-sector reform as potential pathways. It also notes that collecting carbon revenues domestically rather than paying at the EU border could support transition measures.
Those measures include funding for grid upgrades, social protection and coal-region diversification if carbon revenues are collected domestically. For renewable exporters, CBAM introduces technical requirements beyond generation itself. Clean power should benefit in a carbon-constrained market, but exporters need systems for certification and documentation.
The technical needs cited include credible certification, guarantees of origin, metering, carbon-intensity accounting and market-coupling arrangements. Without these systems, even low-carbon electricity can face commercial friction when traded into the EU under CBAM rules.
Country differences and regional cross-border effects
The impact varies across countries depending on generation mix and trading patterns. Albania has a hydro-dominated system, making it less exposed to coal-related carbon costs while still exposed to hydrology and import/export swings. Bosnia and Herzegovina, Serbia, Montenegro, North Macedonia and Kosovo face larger coal-transition challenges under the described framework.
EU neighbors connected to Western Balkan flows are also expected to experience trade effects. Croatia, Hungary, Romania, Bulgaria and Greece are listed as markets that would feel impacts because they are linked to Western Balkan electricity exchanges. The reported fall in scheduled exchanges across borders with EU member states provides context for those linkages.
The mechanism is not expected to shut down coal plants immediately because coal remains important for domestic security of supply in several Western Balkan systems. However, it changes economics at the margins by affecting exports, investment finance and long-term planning decisions for utilities and market participants.
Dispatch and investment decisions under CBAM from 2026
The described direction is that carbon considerations are becoming embedded in electricity trade flows into the EU. CBAM is characterized as a border mechanism with effects that extend into domestic decision-making across dispatch and investment planning. It influences export strategy and coal economics alongside the pace of market reform across the region.
The region’s ability to adapt is tied to operational readiness for cross-border compliance requirements. The source highlights needs including better tracking of electricity origin, stronger regulatory alignment, more transparent exchanges and faster integration with EU electricity markets. Without those tools, lower export revenues, weaker investment signals and fragmented liquidity are identified as risks within this framework.
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