The implementation of the EU’s Carbon Border Adjustment Mechanism (CBAM) is reshaping the landscape of electricity in South-East Europe, transitioning it from a mere input cost to a critical factor influencing export competitiveness. Set to enter its definitive phase on January 1, 2026, after a transitional period from 2023 to 2025, CBAM encompasses key sectors including iron and steel, aluminium, fertilisers, cement, hydrogen, and electricity. This regulatory shift emphasizes the need for exporters to account for the carbon content of their production processes, fundamentally altering how electricity is valued in trade.
In South-East Europe, where industrial electricity consumption is high and power systems remain unevenly decarbonised, this change is particularly significant. Serbian steel exporters and Balkan aluminium producers must now consider not only traditional factors like labor costs and logistics but also the carbon profile associated with each megawatt-hour used in production. Consequently, the procurement of electricity has evolved into a strategic component of export planning, with low-carbon electricity increasingly viewed as a premium product that can enhance revenue stability and improve financing conditions for renewable energy projects.
The European Commission’s guidance on CBAM clarifies that the embedded emissions related to relevant goods include both direct process emissions and indirect emissions from consumed electricity. This means that power procurement is no longer an isolated issue but rather an integral part of the overall carbon cost associated with exported products. The distinction between direct and indirect emissions has thus become crucial for industrial producers throughout the Western Balkans and the broader SEE region.
Initial data from January 2026 indicates that iron and steel accounted for a staggering 98% of reported CBAM declarations, while other sectors like fertilisers (1.2%), cement (0.5%), and aluminium (0.3%) were less affected initially. This distribution highlights that the most significant impact of CBAM in South-East Europe will be felt through industrial electricity procurement within steel and metals production rather than through direct electricity exports.
HBIS Serbia operates the Smederevo steel complex with an annual production capacity of 2.2 million tonnes and employs over 5,000 workers. The company is actively pursuing energy management strategies that include long-term power arrangements aimed at reducing exposure to volatile wholesale prices while improving traceability and lowering carbon emissions associated with its steel exports. Such strategies reflect a broader trend where companies are re-evaluating their electricity procurement to align with CBAM requirements.
The financial implications of these changes are substantial. For instance, a large integrated steel plant consuming 1 TWh annually could see every €1/MWh fluctuation in electricity pricing translate into €1 million in cost variations. In this context, transitioning from generic grid power to more sustainable sources can add significant economic value by mitigating carbon-adjusted export burdens. As such, “CBAM-safe electricity” is emerging as a relevant market concept.
Other sectors like aluminium and fertilisers are also under the scrutiny of CBAM regulations, as they remain susceptible to changes in electricity intensity due to their operational requirements. The overarching strategy for South-East Europe’s industrial base now involves reducing carbon intensity while ensuring stronger documentation and greater price certainty in energy procurement.
The market dynamics are shifting as industrial demand becomes more structured under CBAM guidelines. Buyers are increasingly not just utilities or traders but also manufacturers who require reliable energy sources as part of their compliance frameworks. This evolution creates new opportunities for renewable energy developers who can meet stringent documentation requirements while offering competitive pricing.
Current discussions around industrial renewable Power Purchase Agreements (PPAs) indicate pricing ranges between €65–95/MWh depending on various factors such as country-specific conditions and credit quality. In this new environment, industrial consumers may be willing to pay a premium of €5–15/MWh for lower-carbon electricity that meets compliance needs, thereby enhancing project bankability.
For example, a 100 MW solar project generating approximately 140–160 GWh annually could see an annual revenue increase of €1.4–1.6 million with a €10/MWh price uplift linked to CBAM compliance. Similarly, a 200 MW wind project could yield an additional €6–7 million per year under comparable circumstances.
As Serbia’s energy landscape evolves amid increasing imports and tighter system conditions projected for 2024, large industrial users require more predictable energy solutions than what spot markets can provide alone. This necessity drives the convergence of industrial electrification strategies with renewable procurement efforts under CBAM guidelines.
This trend extends beyond Serbia; across the Western Balkans and SEE region, exporters must provide verifiable carbon data alongside lower average emissions to maintain competitiveness in EU markets. Although recent simplifications to CBAM regulations have reduced administrative burdens for some importers, they have not altered the fundamental logic behind carbon pricing for relevant industrial flows.
Additionally, early movers in renewable energy development stand to gain advantages as industrial buyers adapt their contracts ahead of stricter compliance timelines imposed by CBAM regulations. Developers who establish commercial structures while buyers are still refining their compliance strategies may secure more favorable terms compared to those entering a crowded market later.
Storage solutions are becoming increasingly relevant as manufacturers seek stable energy supplies without exposure to intermittent generation fluctuations. Hybrid generation models combining solar or wind with battery storage systems are gaining traction as they offer more consistent delivery profiles suited for industrial applications under CBAM contracts.
Ultimately, CBAM is transforming the demand landscape within South-East Europe’s power market by shifting parts of industrial electricity procurement towards creditworthy contracts driven by compliance needs. This transition supports renewable revenue stability for projects capable of demonstrating low-carbon supply while enhancing the value proposition for assets positioned near major exporters or those able to offer structured off-take agreements.
For industries operating within this framework, optimizing electricity procurement will necessitate balancing price considerations with carbon content verification and traceability requirements—an essential evolution given that even minor shifts in pricing can significantly impact overall competitiveness in international markets.
