The Energy Community Secretariat urged closer alignment between Western Balkan electricity market integration and the Carbon Border Adjustment Mechanism (CBAM) at the Berlin Process Summit in Montenegro on 22 October 2026. It warned that poorly coordinated arrangements could discourage renewable investment and create new commercial divisions between EU and non-EU electricity markets.
The EU aims to integrate Western Balkan electricity markets before the countries achieve full membership. Across the region, countries are progressively adopting EU electricity rules through the Energy Community framework, with integration covering market coupling, transparency, transmission capacity allocation, balancing arrangements and greater regulatory alignment.
Market integration does not remove CBAM obligations
Closer integration could improve electricity price convergence and support more efficient use of regional generation and interconnection capacity. But market integration and CBAM compliance operate under different legal requirements: electricity imports into the EU remain subject to the applicable CBAM framework unless a specific legal exemption applies.
Article 2(7) of Regulation (EU) 2023/956 provides for a conditional exemption for electricity. Its conditions include market coupling, regulatory alignment, climate-policy commitments and assessment by the European Commission. Market coupling alone does not automatically exempt imported electricity.
The European Commission has proposed amendments to the treatment of imported electricity under CBAM, including changes to emissions calculations and greater flexibility in demonstrating actual emissions. The proposal is identified as COM(2025)989. The Council of the EU adopted its negotiating position in June 2026, while the European Parliament voted on amendments in September 2026 under procedure 2025/0419(COD).
By early November 2026, the legislative process had not produced a final enacted replacement for the existing CBAM rules. Western Balkan power exchanges may therefore move closer to European trading practices while electricity exported from the region continues to face carbon-related obligations.
Interconnections and investment decisions
The transitional commercial challenge affects Serbia, Montenegro and neighbouring countries seeking access to European wholesale electricity markets, cross-border balancing arrangements and longer-term investment opportunities. Transmission corridors connect Western Balkan systems with EU markets in Hungary, Croatia, Romania, Bulgaria and Italy, supporting electricity supply, commercial trading and regional security of supply.
Additional border costs can change how the interconnections are used even when wholesale price differences would otherwise make electricity trade economically attractive. The effects could be especially important during periods of strong renewable generation, when low-cost Western Balkan electricity could serve demand in neighbouring EU countries.
Governments in the region face the twin tasks of advancing electricity market integration and developing the carbon-pricing, emissions-monitoring and verification arrangements needed for durable access to the EU market. The outcome will affect investors’ assessments of the commercial value of interconnectors, renewable generation and cross-border power purchase agreements.
For Serbia and Montenegro, the outcome could shape electricity export strategies, renewable project financing and participation in European power markets for the remainder of the decade. The longer-term objective is for integration and decarbonisation to reinforce one another rather than create conflicting investment signals. A key policy question is whether Western Balkan electricity can gain access to EU market prices on commercially equivalent terms before regulatory uncertainty weakens investment incentives.