Bosnia and Herzegovina is entering a major energy-market restructuring as the European Union’s Carbon Border Adjustment Mechanism (CBAM) starts reshaping the economics of regional electricity trade, investment attractiveness and industrial competitiveness. A presentation by Prof. Dr. Admir Softić, Assistant Minister for Energy at Bosnia and Herzegovina’s Ministry of Foreign Trade and Economic Relations, links electricity market integration, carbon pricing reform and exchange-based power trading to economic survival in the CBAM era.
The Sarajevo roundtable on electricity exchange formation in Bosnia and Herzegovina described growing pressure across Western Balkan electricity systems as CBAM moves from transitional reporting into financial implementation. Bosnia and Herzegovina is identified as the only European country without an organized electricity exchange. The gap is presented as a factor that can affect export revenues and long-term integration with the European Union.
Regulator and market law positioned for EU coupling and CBAM exemptions
The proposed Law on the Regulator, Transmission and Electricity Market in Bosnia and Herzegovina is framed as more than sectoral legislation. Authorities are treating it as a pathway toward eventual coupling with the European Union electricity market through SDAC and SIDC platforms. At the same time, the law is intended to create legal conditions for potential CBAM exemptions in electricity trade.
The presentation states that without organized electricity trading, market coupling and a domestic emissions pricing framework compatible with EU ETS rules, Bosnian electricity exports into the European Union could lose commercial viability. It also says rapid implementation of the electricity market law is considered critical for reducing CBAM-related risks. CBAM’s electricity provisions are described as materially harsher than those applied to most industrial sectors.
Full CBAM burden from 2026 and default cost estimates for exports
Bosnia and Herzegovina’s power sector is expected to face the full CBAM burden from 2026 onward, without a gradual phase-in available to several other covered sectors between 2026 and 2034. The analysis ties this to historical cross-border revenue reliance on electricity exports in the Western Balkans. Bosnia and Herzegovina, Serbia and Montenegro are described as relying heavily on thermal generation fleets dominated by coal and lignite.
The presentation provides estimated default CBAM costs for electricity exports across Western Balkan economies. Bosnia and Herzegovina is listed at €86.5/MWh, followed by Serbia at €78.5/MWh, Montenegro at €73.8/MWh, Kosovo at €74.2/MWh, and North Macedonia at €66.8/MWh. Albania is reported as effectively at €0/MWh due to its hydro-dominated generation mix.
Q1 2026 widening spreads and reduced commercial trade volumes
The Q1 2026 assessments cited in the presentation report that price spreads between WB6 and EU electricity markets widened to more than €30/MWh. The spread increase is described as roughly two to three times wider than during the same period in 2025. Commercial electricity trade flows from the Western Balkans into the EU reportedly declined by between 25% and 70% on certain corridors.
The analysis highlights a divergence between physical power flows and commercial schedules. Physical flows are said to have remained relatively stable due to system balancing and network realities, while commercial trading volumes weakened where CBAM exposure became material. The presentation links this shift to changes in dispatch economics, arbitrage opportunities and cross-border trading behavior.
Export prices versus carbon-adjusted costs under default factors
The EU4Energy analysis referenced in the presentation indicates that electricity already represents 80.3% of Bosnia and Herzegovina’s total estimated CBAM burden during Q1 2026 . The presentation also compares export prices with carbon-adjusted costs for that period. Bosnia and Herzegovina’s estimated CBAM cost of €86.5/MWh uses a default emissions factor of 1.148 tCO₂/MWh.
The calculation also uses a Q1 2026 EU ETS reference price of €75.36/tCO₂eq, according to the presentation . That estimated cost exceeded Bosnia and Herzegovina’s average electricity export price of approximately €83.5/MWh. The presentation states that this implies some exports may already be commercially irrational once CBAM liabilities are fully internalized.
Macroeconomic indicators tied to declining export performance
The consequences described in macroeconomic indicators include reported declines in export activity for Bosnia and Herzegovina. The presentation cites a 4.9% decline in electricity export volumes, a 16% decline in export value, and a 6.6% reduction in sector gross value added . These figures are presented alongside ongoing discussions on market structure changes.
Sarajevo is described as accelerating discussions around electricity exchange creation and market coupling as part of efforts to address CBAM-related risks . The proposed reforms aim to establish a Day-Ahead Market (DAM), Intraday Market (IDM), a designated NEMO operator, and eventual integration with EU trading platforms.
Implementation timeline for organized trading, NEMO licensing, and integration
The roadmap presented during the conference suggests full integration could take roughly three to four years after the law enters into force . The timeline includes creation of an organized market operator within 90 days, adoption of CACM-related rules within 120 days, NEMO licensing within 450 days, and regional market integration within approximately 1,260 days.
The presentation emphasizes that institutional requirements extend beyond market structure alone. It states that Bosnia and Herzegovina must build a Monitoring, Reporting, Verification and Accreditation framework, establish pathways toward an emissions trading system, and accelerate decarbonization investments . These steps are described as necessary alongside exchange formation.
EU exemption conditions under Article 2(7) of Regulation 2023/956
The EU regulatory architecture is described as creating a conditional sequence for exemption eligibility related to electricity under CBAM. According to the interpretation presented, countries seeking electricity-related CBAM exemptions under Article 2(7) of Regulation 2023/956 must not only integrate electricity markets with the EU but also introduce carbon pricing equivalent to the EU ETS by 2030. The presentation frames this requirement as creating tension for Western Balkan governments.
The analysis describes a paradox where carbon pricing absence could leave exports disadvantaged under CBAM, while introducing EU-equivalent carbon pricing into coal-heavy domestic economies could carry political and industrial consequences internally . It also references “just transition” principles alongside calls for cleaner generation technologies, automation, digitalization, and improved energy efficiency.
MRV methodology disputes over emission factors and grid intensity assumptions
A further issue highlighted concerns emissions accounting methodology used for CBAM calculations. Bosnia and Herzegovina argues that current default emission factors overstate actual emissions intensity . The default fossil-fuel emissions factor cited is 1.148 tCO₂/MWh, while an estimated real factor is closer to 1.1145 tCO₂/MWh.
The presentation also compares production-mix factors for grid intensity estimates at approximately 0.72 tCO₂/MWh, versus a default assumption near 0.74 tCO₂/MWh. It estimates that using verified actual emissions instead of default factors could reduce annual CBAM-related costs by approximately 12 million KM. It further estimates production-mix methodologies could create differences approaching 27 million KM annually .
Cited expectations for future CBAM methodology refinements on grid intensity
The presentation reflects expectations that Brussels may refine electricity-related CBAM methodologies over time . Proposed reforms discussed during the conference suggest future default values could shift from fossil-generation-only assumptions toward full grid-intensity calculations incorporating renewable generation . Such changes are described as potentially benefiting countries with higher renewable shares, hydro generation or expanding wind and solar capacity.
The analysis concludes that data quality becomes central within CBAM through MRV systems, hourly emissions tracking, verifiable carbon accounting, guarantees of origin, carbon pricing, emissions accounting approaches, ETS preparation, NECP adoption processes, long-term climate strategy development, MRV implementation efforts, broader alignment with EU energy governance rules . It also notes that Serbia, Montenegro and North Macedonia already operate electricity exchanges while advancing further in regional integration mechanisms compared with Bosnia and Herzegovina.
