The EU’s Carbon Border Adjustment Mechanism (CBAM) is designed to align the carbon cost of EU domestic production under the EU Emissions Trading System (EU ETS) with imported goods. CBAM now formally covers electricity imports from third countries starting 1 January 2026, requiring importers to monitor, declare, and settle greenhouse gas emissions embedded in electricity brought into the Union. The change affects South-East Europe (SEE) exporters including Serbia, Bosnia and Herzegovina, Montenegro, and North Macedonia, where electricity flows are linked to EU neighbours through physical interconnectors, day-ahead markets, and balancing arrangements.
Serbia’s generation mix is a key reference point for how embedded emissions may be assessed under CBAM. Serbia has roughly 8,981 MW of installed capacity and about 34,706 GWh of annual gross generation, based on the latest available data. Coal and lignite-fired plants account for around 60–65% of output, hydropower provides approximately 24%, and gas and wind make up smaller shares. The resulting average carbon intensity is about 556 gCO2e per kWh, cited as higher than the EU average.
Serbia’s exports, SEEPEX volumes and potential CBAM exposure
In recent years, Serbia has returned to net export status under average hydrological conditions. Exports have often been in the range of 2–4 TWh annually above domestic consumption. Cross-border trading activity on the SEEPEX exchange has also been substantial, with day-ahead volumes regularly exceeding 420–450 GWh per month in early 2026. Regional analyses cited in the source material indicate that CBAM could add costs roughly equivalent to the EU carbon price per tonne of CO2 embedded in exported electricity.
The same analyses suggest that in some cases the added cost could reach levels equivalent to up to €60 per MWh for coal-based power. This would create a new carbon accounting layer for exports that are physically integrated with EU markets. The source material links this exposure to how embedded emissions are calculated when electricity crosses into the EU under CBAM rules.
How CBAM measures emissions for imported electricity
CBAM procedures require importers to measure and declare carbon dioxide equivalent emissions associated with imported electricity and then surrender CBAM certificates reflecting those emissions. The certificate price is tied to the average price of EU ETS allowances, creating a carbon cost aligned with EU producers. For many industrial products such as steel or cement, measurement relies on established direct emissions factors per tonne of output.
Electricity differs because power flows are not tied to specific generation units. The marginal carbon content of a single MWh can vary hour-by-hour depending on grid conditions, renewables supply, hydropower output, and cross-border imports and exports. The source material describes this as a driver of complexity for carbon accounting under CBAM.
EU verification methodology for actual emissions values
The EU has proposed a verification methodology that allows importers, including those from SEE, to declare actual emissions values rather than relying only on default grid averages. The proposal is described as responding to stakeholder feedback that rigid default rules can disadvantage non-EU producers making decarbonisation progress. Under this approach, installation-level reporting of generation and emissions would be audited by accredited verifiers.
For solar and wind plants, verification would involve producing verified hourly or daily generation records tied to commissioning documentation and remote monitoring telemetry. Emissions declarations would be certified under recognised standards. The goal is a “tracked carbon intensity” for each unit that must be verified by independent third-party auditors with credentials under EU accreditation frameworks.
For hydropower, verification typically uses generation metering alongside reservoir inflow and outflow records. Emissions assumptions are described as close to zero but still requiring certification so lifecycle emissions and ancillary impacts are accounted for correctly. For private producers participating in Serbian system balancing markets or day-ahead auctions, green attributes would need to be bundled with generation metadata including time stamps, GPS verification of asset location, turbine performance parameters, and certificate serial numbers.
Implications for renewable investment and carbon reporting costs
The source material links CBAM implementation to investment risk for renewable projects in Serbia and across SEE. It states that renewable developers are expanding wind and solar delivery at an accelerating pace, with wind generation rising by more than 17% annually through recent years. National strategies envisage further capacity growth over the next decade to align with EU decarbonisation targets.
Until CBAM-compatible verification and carbon pricing structures are fully operational, investors face what the source calls a “policy risk premium” affecting both CAPEX for renewables and storage and OPEX tied to carbon reporting and certificate acquisition. It also notes that if CBAM charges use conservative default emission factors that do not reflect actual low-carbon generation, export revenues could be offset by carbon levies even when power is genuinely low-carbon.
Serbia’s decarbonisation targets and potential market-coupling pathway
The source material frames the issue against Serbia’s broader decarbonisation pathway still being described as nascent. It cites national climate plans indicating Serbia’s share of renewable energy in gross final energy consumption targeted at 40.7% by 2030. Achieving this would require scaling solar, wind, and possibly energy storage technologies without undermining supply reliability.
Scenario modelling referenced in the source suggests CO2 emissions from power generation could fall by 35–59% by 2030 relative to earlier baselines under sustainable pathways. Under more aggressive assumptions, emissions reductions could reach 66–100% by 2050, with dependence on swift deployment of renewables and grid modernisation.
The source also states that CBAM allows exemptions or postponements when third countries meet rigorous conditions. These include coupling markets with the EU’s day-ahead market and implementing domestic carbon pricing commensurate with EU ETS levels by specified deadlines. Serbia aims to couple its electricity market with the EU by the fourth quarter of 2026, which could qualify it for temporary exemptions up to 2030 if other criteria are met.
Evolving estimates of CBAM revenues from Western Balkan electricity exports
The source material cites independent studies estimating annual CBAM revenues collected by the EU from Western Balkan electricity exports could reach into the hundreds of millions of euros each year without adjustments. A rough breakdown suggests Serbia alone could contribute over €300 million per year at conservative carbon price forecasts. It links these figures to how exports may be treated under CBAM if accurate carbon accounting does not reflect true low-carbon content.
The same studies’ framing in the source connects potential revenue outcomes to whether embedded-emissions calculations align with actual generation characteristics rather than default factors. It also notes that investment signals for regional grid projects and renewables could be affected if export revenues decline under CBAM treatment.
The source material further argues for delaying full application of CBAM to electricity imports to allow time for granular carbon verification systems, harmonised market coupling, and domestic carbon pricing frameworks. It states that postponement would provide time for building verification infrastructure while scaling low-carbon generation in line with regulatory expectations related to interoperability within an integrated European electricity market.
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