Electricity trading between the Western Balkans and neighbouring European Union markets stayed well below last year’s level in the first half of 2026. The pattern is described as an early sign that the EU Carbon Border Adjustment Mechanism is affecting regional commercial flows.
EU border trade declines in first half of 2026
Gross cross-border electricity trade between the Western Balkans and the EU fell by approximately 19% year on year during the first six months of 2026. The decline was about 23% in the first quarter, before easing to 15% in the second quarter.
In the first quarter, strong hydropower production pushed Western Balkan prices below EU benchmarks. Cross-border activity did not rebound fully after the hydrological surplus weakened. The region returned to its more typical role as a net electricity importer.
Day-ahead volumes rise while EU-bound flows weaken
Trading on Western Balkan day-ahead exchanges moved in the opposite direction to cross-border volumes. Second-quarter volumes increased by approximately 19%, reaching 2.70 TWh. Activity recovery on Serbia’s SEEPEX exchange contributed partly to that increase.
The shift points to a more divided regional market structure, with more electricity traded within the Western Balkans and less crossing the EU border. CBAM default emissions factors are identified as central to this change in commercial flows.
Indicative carbon costs vary across Western Balkan markets
Based on second-quarter certificate prices, indicative carbon costs were estimated at €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia and €73.70/MWh for Montenegro. Albania carried a default cost of zero due to its predominantly hydropower-based generation mix.
The charges are described as large enough to eliminate commercial margins on many coal-heavy electricity exports. Power traders may redirect transactions through jurisdictions with lower emissions factors or keep supply within Western Balkan markets when EU price premiums cannot cover carbon costs.
Other drivers affect trade alongside CBAM
Hydrology, fuel prices, plant availability and demand also influenced first-half trade outcomes, so the full decline cannot be attributed solely to CBAM. However, weakness in cross-border activity persisted after the first-quarter hydropower effect faded.
For lignite-dependent utilities including EPS, Elektroprivreda BiH and Elektroprivreda Republike Srpske, the pressure extends beyond direct carbon bills. Lower export competitiveness reduces access to higher-priced EU markets and weakens economics tied to ageing thermal assets.
The source also highlights verified plant-level emissions, renewable power-purchase agreements and faster investment in low-carbon capacity as commercially important for these operators rather than only regulatory requirements.
