The EU’s Carbon Border Adjustment Mechanism is scheduled to affect imports from 1 January 2026, including electricity. In the Western Balkans, the policy is also intersecting with electricity-market dynamics. The Energy Community Secretariat reported early signs of change in cross-border trading patterns.
Early signals in EU–Western Balkans power exchanges
In the first quarter of 2026, commercially scheduled electricity exchanges between the EU and the Western Balkans fell by 25% across borders with EU member states, according to the Energy Community Secretariat. The same reporting showed day-ahead prices in the Contracting Parties averaging €30/MWh lower than in neighboring EU markets. The combination of lower prices alongside reduced exports points to interference with normal trade signals.
A well-integrated market would typically see lower-priced areas exporting to higher-priced neighboring markets. With exports declining while prices in the Western Balkans remain lower, CBAM is identified as one of the main candidates for explaining the shift.
Embedded emissions and competitiveness for coal-heavy systems
CBAM alters the economics of exporting electricity into the EU from countries that do not have equivalent carbon pricing. For systems where coal remains a major part of the power mix, carbon intensity becomes a commercial variable for cross-border sales. Electricity exported from coal-heavy systems into the EU becomes less competitive because importers must account for embedded emissions.
Reuters reported that the EU’s CBAM applies from 1 January 2026 to imports including electricity. Reuters also said electricity from coal-reliant Western Balkan producers is likely to become more expensive for EU importers.
Implications for export revenues and dispatch decisions
The mechanism changes how utilities value export markets when carbon costs affect netback prices. A coal generator in Bosnia and Herzegovina, Serbia, Montenegro or North Macedonia may still be able to produce power, but access to EU demand can become less attractive if carbon costs reduce netback returns. For countries that previously relied on exports during favorable conditions, this can reduce revenue and liquidity.
CBAM does not remove coal generation overnight, since coal remains important for domestic security of supply across several Western Balkan systems. Instead, it shifts economics at the margin, particularly around exports, investment finance and long-term planning.
Policy options and requirements for renewable exporters
For policymakers, CBAM presents a choice between treating it as an external penalty or using it to drive domestic measures. Western Balkan governments can pursue domestic carbon pricing, renewable investment and power-sector reform as an alternative pathway. If carbon revenues are collected domestically rather than paid at the EU border, they can potentially be used for transition support, grid upgrades, social protection and coal-region diversification.
Renewable exporters face technical requirements under a carbon-constrained trading environment. Clean power should benefit in principle, but exporters need credible certification, guarantees of origin, metering, carbon-intensity accounting and market-coupling arrangements. Without these systems, even low-carbon electricity can encounter commercial friction.
Market integration effects across countries connected to regional flows
The impact extends beyond coal as a market-integration issue tied to how electricity origin is tracked and traded across borders. The Western Balkans need better tracking of electricity origin, stronger regulatory alignment, more transparent exchanges and faster integration with EU electricity markets. Without these tools, the region risks lower export revenues, weaker investment signals and fragmented liquidity.
The effect varies by country based on generation mix and exposure to cross-border swings. Albania’s hydro-dominated system leaves it less exposed to coal-carbon costs but highly exposed to hydrology and import/export variations. Bosnia and Herzegovina, Serbia, Montenegro, North Macedonia and Kosovo face larger coal-transition challenges.
EU neighbors connected to Western Balkan flows are also expected to feel trade effects through those interconnections. Croatia, Hungary, Romania, Bulgaria and Greece are listed among countries that will be affected due to their linkage with regional electricity movements.
Dispatch and investment adjustments tied to CBAM-linked trade economics
CBAM is described as a border mechanism with impacts that play out domestically in dispatch patterns and investment decisions. It influences export strategy and changes how utilities assess long-term planning under evolving market conditions. Across the region, it is expected to affect coal economics and the pace of market reform.
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