Carbon-related costs are starting to affect where energy-intensive goods from the Western Balkans are sold. Exporters are weighing access to European markets against sales to destinations outside the European Union. The Carbon Border Adjustment Mechanism (CBAM) can alter the profitability of individual shipments without requiring changes in emissions at the production facilities.
For carbon-intensive manufacturers and electricity exporters, redirecting sales can help preserve commercial margins when non-EU buyers offer more favourable prices. Changing a shipment’s destination does not, by itself, reduce the emissions generated during production. This distinction is relevant for exporters considering whether trade diversion changes climate outcomes.
Exposure in Bosnia and Herzegovina’s export sectors
The International Monetary Fund (IMF) identified exposure to CBAM concerns in its 2026 country work on Bosnia and Herzegovina. Approximately 11% of the country’s exports were identified as affected. The exposed products include electricity, aluminium, cement, iron and steel.
The IMF also reported early indications that electricity exports were being redirected towards destinations outside the EU. The reported shift illustrates how carbon-related trade costs can influence commercial decisions before emissions at industrial sites change. The sustainability of this approach remains uncertain as neighbouring markets may expand generation capacity and introduce or develop domestic carbon-pricing arrangements.
If domestic carbon pricing expands in nearby markets, it could reduce the commercial advantages available to redirected electricity exports. Diversion may therefore provide temporary relief while not establishing a lasting competitive position. The IMF’s findings place electricity alongside other covered sectors in Bosnia and Herzegovina’s CBAM exposure.
Electricity trading requires net-return comparisons across destinations
Power trading shows how CBAM affects cross-border commercial decisions for electricity exporters. An exporter evaluating a sale into the EU needs to compare the wholesale electricity price with transmission costs while accounting for exposure and the applicable carbon adjustment.
A premium that appears attractive in the European market can narrow or disappear once CBAM costs are included. This outcome can be linked to calculations using a relatively high national electricity default emissions factor. Exporters therefore need to assess whether the final net position remains favourable after carbon-related adjustments.
The economics can also vary between trading hours rather than remaining constant across periods. Hourly price spreads, physical transmission routes, and the availability of compliance evidence all affect results. Annual average electricity prices may therefore mask times when EU exports stay profitable and other periods when alternative destinations provide better returns.
Industrial sectors face different timing and constraints
Steel and cement producers face different commercial conditions because benchmark-linked adjustments moderate the immediate CBAM obligation. This structure can give some industrial exporters greater flexibility over destination choices while the EU’s free-allocation phase-out progresses.
Companies still need to determine whether carbon-cost differences between markets justify changing customers, product specifications, and logistics. Some commodity shipments can be redirected relatively easily, while other producers rely on specialised purchasers, certification requirements, and established long-term supply relationships with European customers.
The ability to change destination is not uniform across industrial sectors. Existing commercial arrangements and buyer technical requirements can limit how quickly exporters respond to differences in carbon-adjusted prices. As a result, destination changes may occur at different speeds depending on sector-specific constraints.
Netbacks influence sales planning and investment assessments
A broader commercial assessment compares net returns after accounting for carbon and transport costs across multiple potential destinations. For electricity traders, this includes calculating the EU sale price after transmission expenses together with the relevant CBAM liability. Steel exporters need to compare European margins after border adjustments with returns available in regional and overseas markets, including freight and customer specifications.
Competition in alternative destinations also affects outcomes. Redirecting shipments may protect margins in the short term, but if multiple exporters target the same buyers, additional supply could weaken those markets’ economics. In that scenario, companies could face underutilised production capacity even when alternative customers exist.
Investment decisions increasingly depend on whether lower emissions improve an asset’s commercial position across markets. Exporters need to consider the value of emissions reductions alongside costs tied to maintaining customer access and meeting destination-specific requirements.
Measuring climate impact requires more than EU import volumes
A decline in carbon-intensive imports recorded by the EU does not necessarily mean global production emissions have fallen. If covered goods continue being manufactured but are sold to buyers outside the Union, emissions at exporting plants may remain unchanged.
The effect could be larger if redirected demand encourages producers to increase output. In that case, global emissions could exceed what would be associated with a trade pattern that provides stronger incentives for lower-carbon production.
Assessing CBAM climate impact therefore involves more than tracking covered imports entering the EU. Indicators include emissions per tonne of production and the destinations receiving goods displaced from European trade routes. The mechanism’s effectiveness also depends on whether it encourages genuine industrial emissions reductions outside the EU rather than only shifting where high-carbon production is located and sold.
Domestic carbon pricing and monitoring shape adjustment costs
Governments can respond through domestic emissions pricing, support for industrial investment, and more credible emissions-monitoring systems. Each approach involves implementation and financing requirements that affect how quickly sectors can adjust.
A domestic carbon tax can support eligibility for certain CBAM deductions where payments meet applicable conditions. At the same time, it increases production costs for local industry. Industrial upgrades require capital and may depend on additional electricity infrastructure, while emissions verification requires data some facilities have not historically collected.
Valuations depend on carbon-adjusted market access
The changing economics of trade routes introduce additional considerations for investors assessing electricity generation and industrial production assets under CBAM. Existing capacity does not guarantee that output can continue reaching profitable customers as market access shifts between destinations.
Valuations need to account for combined effects of carbon costs, transport expenses, financing requirements, and availability of alternative markets. Early trade responses in the Western Balkans show how CBAM can influence the commercial geography of electricity and industrial goods before underlying production technology changes.