Renewable electricity producers in Serbia and Montenegro are evaluating two routes to engage with Europe’s industrial decarbonisation market: exporting electricity directly to the EU under the Carbon Border Adjustment Mechanism (CBAM), or supplying domestic manufacturers whose products are sold to EU customers. The two approaches can create commercial opportunities but rely on different regulatory requirements. In particular, the CBAM relevance of cross-border electricity depends on the importing declarant, while the impact of domestic renewable purchases depends on the emissions methodology applied to the manufacturer’s specific products.
CBAM obligations differ for cross-border exports and domestic PPAs
When electricity is physically exported to the EU, the relevant EU importing declarant carries the CBAM obligation. If the importer cannot show that requirements for actual-emissions treatment have been met, a default methodology for electricity generally applies. A domestic power purchase agreement (PPA), by contrast, does not represent an electricity import into the EU. The renewable electricity may still influence a manufacturer’s energy costs, emissions accounting and decarbonisation claims, but CBAM liability depends on the legal methodology for the exported products.
This distinction means domestic renewable procurement is not automatically treated as equivalent to qualifying low-carbon electricity imported into the EU. The regulatory separation becomes especially significant because covered products do not receive uniform treatment for indirect emissions during CBAM’s definitive phase. Indirect emissions from electricity consumption are included in embedded-emissions calculations for covered cement and fertiliser products. For covered iron, steel and aluminium goods listed in Annex II, CBAM currently accounts only for direct emissions.
Indirect emissions treatment varies by CBAM-covered product
Even though the EU has examined potential future extensions, steel and aluminium manufacturers cannot assume that signing a domestic renewable PPA will immediately reduce CBAM certificates required for their exports. Their immediate CBAM exposure remains linked largely to direct process emissions and, where relevant, emissions associated with precursor inputs. For cement and fertiliser producers, electricity sourcing can affect embedded-emissions calculations more directly. Recognition depends on applicable actual-value criteria, allocation rules, verification requirements and prescribed methodology.
A Guarantee of Origin (GoO) or a commercial claim that electricity is green does not automatically establish eligible actual indirect emissions. Plant-level process records, metering data and contractual documentation remain important for determining what can be recognised. Domestic PPAs therefore do not translate into a single, uniform CBAM outcome across sectors or product categories.
Domestic industrial PPAs and export-linked revenue considerations
Domestic industrial PPAs can provide renewable generators with long-term local revenue while reducing exposure to cross-border transmission capacity constraints. They can also limit administrative and carbon-cost complications associated with importing electricity into the EU. For manufacturers, these contracts may improve electricity-cost predictability and support corporate decarbonisation objectives. A steel mill may value renewable electricity for energy security and emissions targets even when its immediate CBAM liability is driven primarily by direct production emissions and relevant precursor inputs.
For export-oriented independent power producers, potential benefits can include higher EU price benchmarks and, where requirements are met, value tied to actual-emissions treatment. At the same time, they need to account for balancing needs, cross-border delivery arrangements, verification processes and contractual protection against carbon-related risks. Domestic industrial offtakers may face fewer border-related costs, but their creditworthiness, electricity demand profiles and contract indexation arrangements can differ from those of export-oriented buyers.
PPA market structure in Serbia and Montenegro
Developers are expected to compare net risk-adjusted revenues rather than selecting a market based only on headline electricity prices. The expected export premium must be assessed alongside delivery costs and the risk that some volumes may not qualify for intended CBAM treatment. State-owned utilities in Serbia and Montenegro—EPS and EPCG—along with independent suppliers and trading companies can structure domestic industrial offers around physical electricity delivery. They can also separate renewable certificates, set contract duration terms and provide documentation supporting buyers’ reporting obligations.
These elements should not be marketed as a single product that is automatically “CBAM-compliant.” The regulatory significance of a renewable PPA depends on the transaction details and on which products the buyer manufactures. Where an industrial customer produces multiple categories of CBAM-covered goods, one electricity contract may have different implications across product lines because emissions rules are not uniform across sectors.
The corporate PPA market is likely to become more segmented as a result. Electricity exported directly to the EU requires import-specific contractual and nomination evidence, while electricity supplied to domestic industry requires reliable delivery and, where relevant, product-specific documentation related to indirect emissions. Producers serving both markets may improve commercial resilience if their contracts and financial models preserve the distinction between exporting under CBAM rules and supplying domestic manufacturing under product-specific methodologies.