The latest Eurelectric response to the draft EU Implementing Regulation on carbon prices paid in third countries under the Carbon Border Adjustment Mechanism (CBAM) carries significant implications for electricity markets across South-East Europe (SEE). While the proposal is highly technical, its commercial impact is straightforward. Once CBAM’s financial phase becomes fully operational, electricity exports from non-EU countries into the European Union will no longer be valued solely according to wholesale power prices, transmission capacity or balancing costs. Carbon pricing, emissions verification and regulatory documentation will become equally important factors in determining the competitiveness of cross-border electricity trade.
For the Western Balkans, this represents a structural market shift rather than a minor regulatory adjustment. Countries including Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, Albania and Kosovo are closely integrated with EU electricity markets through trade with Croatia, Hungary, Romania, Bulgaria, Greece and Italy. Until now, regional electricity flows have primarily been influenced by hydrological conditions, coal availability, renewable generation, interconnector capacity and wholesale price differentials. Under CBAM, exporters will also need to manage carbon-price exposure and compliance risk, fundamentally changing the economics of regional electricity trading.
One of the most important issues raised by Eurelectric concerns the methodology for calculating carbon costs. The organisation argues that monthly CBAM reference prices would better reflect the realities of electricity trading than annual averages, since electricity markets operate continuously. This distinction is particularly important for exporters in Serbia, Montenegro and Bosnia and Herzegovina, where traders must assess carbon costs before securing transmission capacity, pricing forward contracts or scheduling cross-border deliveries. Delayed carbon-price calculations would increase uncertainty and likely result in higher risk premiums for electricity exported from non-EU SEE markets.
The response also highlights the growing importance of EU-recognised carbon pricing systems. Introducing domestic carbon levies alone will not necessarily improve market access if those mechanisms are not recognised under CBAM deduction rules. Countries such as Serbia, Bosnia and Herzegovina and Montenegro therefore face a critical policy challenge: carbon-pricing reforms must be designed from the outset to comply with EU recognition criteria. Otherwise, domestic producers could face higher operating costs while continuing to incur CBAM charges at the EU border, reducing their overall competitiveness.
Another major issue concerns default emissions factors, which may become one of the defining commercial variables in regional electricity trade. Countries with coal-intensive electricity systems—including Serbia, Bosnia and Herzegovina, North Macedonia and Kosovo—could face significantly higher CBAM costs unless they are able to demonstrate lower plant-specific emissions. Montenegro and Albania benefit from large hydroelectric fleets, giving them a comparatively stronger position, although prolonged droughts and increased thermal generation could reduce that advantage during certain years.
CBAM is also likely to divide the regional electricity market into two distinct commercial categories. Electricity supported by verified renewable generation or documented low-carbon production will become increasingly attractive to European buyers, while electricity with unclear emissions data or high carbon intensity will likely trade at a discount. This shift has important implications for regional utilities, independent traders, industrial consumers and long-term electricity purchasing agreements, where the quality of emissions documentation may become almost as valuable as the electricity itself.
The regulation further increases the importance of plant-level emissions verification. Renewable generators, hydroelectric producers and other low-carbon facilities across the Western Balkans will need to demonstrate the origin of electricity, measured emissions, generation data and contractual allocation. Without robust documentation, EU importers may rely on default emissions values that overstate actual carbon intensity, reducing the commercial value of otherwise low-emission electricity exports.
The treatment of cross-border balancing and electricity netting also carries particular significance for the Balkans. Many countries in the region alternate between electricity imports and exports depending on seasonal demand, hydrological conditions and renewable generation. Serbia may import electricity during one trading period and export during another, while Montenegro, Albania and Bosnia and Herzegovina frequently adjust market positions according to water availability. Clear CBAM rules governing import-export netting will therefore be essential to avoid overstating the carbon footprint of electricity that primarily serves regional balancing purposes rather than final EU consumption.
For coal-dependent power systems, the financial consequences could become increasingly pronounced. Serbia, Bosnia and Herzegovina, North Macedonia and Kosovo cannot assume that electricity exports to the EU will remain commercially attractive under existing market conditions. Unless generation portfolios gradually decarbonise or carbon-pricing systems become fully recognised under CBAM, carbon adjustment costs will steadily reduce export margins while also affecting investment decisions, asset valuations and long-term generation planning.
Montenegro illustrates both the opportunities and challenges created by the new framework. Its extensive hydroelectric capacity could become a significant competitive advantage, particularly in years with strong water availability. However, that advantage will depend on credible emissions documentation and transparent electricity tracing. Hydrological variability, balancing imports and insufficient contractual evidence could all weaken Montenegro’s position if supporting documentation fails to meet EU expectations.
For Serbia, the challenge is even broader. The country combines a coal-heavy generation mix, expanding renewable investments, an active electricity exchange and substantial industrial exports to the European Union. A comprehensive national CBAM strategy would therefore require recognised emissions methodologies, transparent carbon-pricing mechanisms, renewable electricity certification, support for low-carbon power purchase agreements and practical guidance for exporters selling electricity into neighbouring EU markets such as Hungary, Romania, Croatia and Bulgaria.
The commercial value of renewable power purchase agreements (PPAs) is also expected to increase considerably. PPAs will increasingly function not only as electricity price hedging instruments but also as evidence supporting embedded-emissions reporting under CBAM. Industrial exporters with access to documented renewable electricity will strengthen both their regulatory compliance and their long-term export competitiveness, improving the investment case for renewable generation across the region.
Regional power exchanges, transmission system operators and financial institutions will likewise need to adapt. As CBAM risks become embedded in electricity pricing, exchanges and grid operators will require more transparent emissions reporting and stronger cross-border data coordination. Banks and investors are also expected to incorporate CBAM exposure into financing decisions, making low-carbon generation, storage projects and renewable infrastructure increasingly attractive while raising transition risks for coal-dependent assets.
Ultimately, the implementation of CBAM transforms the energy transition from an environmental objective into a strategic trade and competitiveness issue. Access to EU electricity markets will increasingly depend not only on competitive prices but also on credible carbon reporting and regulatory compliance. For the Western Balkans, preserving long-term market access will require recognised carbon-pricing systems, transparent emissions accounting, plant-level documentation and closer integration with European regulatory standards.
The defining commercial distinction in the region’s electricity market will no longer be simply between cheap and expensive electricity. Instead, it will increasingly be between CBAM-compliant, well-documented low-carbon electricity and electricity whose carbon profile remains uncertain. Producers, traders and industrial consumers that can clearly demonstrate their carbon position before a transaction is priced will be best positioned to compete in the evolving European electricity market.