Since 1 January 2026, electricity released for free circulation in the European Union has been covered by the definitive Carbon Border Adjustment Mechanism. Electricity is treated differently from other CBAM-covered sectors because it does not receive a 50-tonne exemption. It also does not benefit from any gradual protection created by continuing allocation of free EU ETS allowances to European industrial producers. For power imports, carbon-cost exposure starts immediately.
The financial settlement for CBAM liabilities has been delayed, but the obligation remains tied to imports. Electricity imported during 2026 will be included in the first annual CBAM declaration due by 30 September 2027, when certificates must also be surrendered. Certificates are expected to become available through the EU’s common purchasing platform from February 2027. The time gap between import and payment affects cash-flow management but does not remove reporting and certificate requirements.
Certificate prices and default emission factors across the Western Balkans
The official certificate price was €75.36 per tonne of CO₂ for the first quarter of 2026 and €75.28 per tonne for the second. Using the electricity default emission factors currently applied to Western Balkan markets, gross carbon costs are calculated at €86.42/MWh for Bosnia and Herzegovina and €78.37/MWh for Serbia. The same method yields €73.70/MWh for Montenegro and €66.77/MWh for North Macedonia. Albania’s default value is zero due to its overwhelmingly hydro-based generation system.
These figures represent gross default-value calculations rather than final invoices for individual shipments. They apply where an importer cannot establish eligible actual emissions or claim a recognised carbon price paid in the country of origin. The default approach therefore creates a cost exposure that can differ sharply from day-ahead market pricing in the region.
Wholesale spreads versus carbon components in cross-border deals
Serbia’s average day-ahead price during the second quarter was approximately €96.3/MWh, compared with €109.2/MWh in Hungary. On that basis, a conventional commercial spread was about €13/MWh, while the Serbian default-value CBAM component was more than €78/MWh. A carbon charge above six times the wholesale-price spread cannot be absorbed through ordinary cross-border arbitrage under these conditions.
The same pricing mismatch appears on other borders. Montenegro’s second-quarter day-ahead price averaged €93.6/MWh, against €120.9/MWh in Italy, producing a spread of about €27.3/MWh, while Montenegro’s default-value carbon component was almost €73.7/MWh. North Macedonia averaged €91.6/MWh, slightly above Greece’s €90.2/MWh, leaving no positive wholesale spread before adding a default CBAM cost of almost €66.8/MWh. Albania at €88.6/MWh had only a modest discount to Greece, but its zero default factor supports hydro-based exports.
Serbia’s CBAM exposure estimates and domestic carbon tax design
A preliminary government model places the electricity component of Serbia’s 2026 CBAM exposure at approximately €21.8mn. The baseline scenario uses default values and assumes unchanged 2025 trade volumes, according to the modelling described by experts from CBAM.Clarion.Engineer . Full recognition of Serbia’s domestic carbon charge could reduce the electricity-related burden to around €20.7mn. A proposed EU methodology change—where the default factor reflects Serbia’s total national electricity mix—could lower the estimate further to approximately €14.5mn, about a 30% reduction.
The domestic policy framework in Serbia includes a greenhouse-gas emissions tax set at €4 per tonne of CO₂ equivalent. The tax applies above a defined technological minimum from 1 January 2026, with collection beginning in 2027. Electricity producers may claim a tax credit equal to up to 20% of qualifying decarbonisation investment, capped at up to 80% of the relevant carbon-tax liability.
The framework allows part of carbon-related revenue to remain domestically and be directed toward generation investment, but its level remains small compared with certificate prices above €75 per tonne. Any EU deduction depends on proof that the Serbian charge was effectively paid and can be linked to the relevant electricity or installation.
Generation mix drives national default factors and plant-level differences
The regional generation mix helps explain differences in default exposure across countries. Serbia remained the Western Balkans’ largest coal-based producer in the second quarter despite coal generation falling by about 12% to 6.54 TWh. Bosnia and Herzegovina generated around 2.35 TWh from coal, while North Macedonia produced approximately 0.67 TWh. Montenegro’s output was about 0.52 TWh, driven heavily by the .
The source data also attributes Montenegro’s coal-heavy output largely to the Pljevlja lignite power plant alongside hydro and wind production, while Albania generated around 0.90 TWh, almost entirely from hydropower.
A megawatt-hour produced by a Serbian wind farm can have an emissions profile that differs from electricity produced at a lignite plant, yet both may initially be exposed to the same national default factor if renewable origin and delivery chains cannot be demonstrated under EU rules. The same issue applies across borders for Montenegrin hydro and wind, Bosnian hydro plants, and North Macedonian solar and wind projects. Under CBAM, this creates two categories within each national market: electricity supported by admissible installation-level evidence and electricity valued using country-level default emission factors.
Tighter reporting requirements reshape flows into and within Europe-linked markets
The first six months of definitive CBAM indicate changes in trading patterns even though CBAM cannot be isolated from hydrology, plant availability, fuel prices, cross-border capacity and demand from Ukraine. Scheduled Western Balkan imports from EU markets fell by around 14% year on year during the second quarter to approximately 4,271 GWh while exports to the EU declined by about 16% to roughly 3,223 GWh .
The region therefore became a net importer of about 1,048 GWh across regional platforms. Volumes increased by about 52% on ALPEX, roughly 49% on Montenegro’s MEPX, around 31% on North Macedonia’s MEMO and about 7% on Serbia’s SEEPEX.
Borders require legal separation between EU imports and transit flows
A reported shift at Serbia’s northern border shows how physical flows can diverge from CBAM liability treatment. Scheduled Serbia-to-Hungary flows increased by approximately 111% > year on year during the second quarter, but this does not indicate that Serbian electricity has escaped CBAM or that carbon costs are commercially irrelevant.
The source data links part of this increase to Hungary becoming an increasingly important transit and balancing hub for electricity moving towards Ukraine, with Hungary-to-Ukraine auction capacity rising sharply during the period . The legal distinction matters because CBAM applies when electricity is released for free circulation in the EU rather than when power merely transits through it under procedures before leaving for consumption elsewhere.
A physical flow across Serbia–Hungary is therefore not automatically equivalent to a CBAM-liable import consumed in Hungary or other EU locations . Traders, customs representatives and transmission operators must distinguish between physical border flows, commercial nominations, customs treatment and ultimate destination.
Divergence between schedules and physical flows affects system operations
Bosnia and Herzegovina illustrates divergence between commercial scheduling and physical movement into Croatia during the second quarter . Approximately 824 GWh > physically crossed from Bosnia and Herzegovina into Croatia while only about 282 GWh > was commercially scheduled in that direction . Scheduled exports fell while physical flows increased sharply.
The ability of CBAM rules to influence nomination patterns is limited by network realities because it cannot redirect electricity instantaneously through meshed transmission systems . Persistent differences between schedules and physical flows may require greater redispatch, countertrading and security margins, which can feed into network tariffs over time.
. That produces a gross CBAM value of more than €86/MWh at the second-quarter certificate price . For systems combining coal-heavy generation with substantial hydro capacity, national defaults can penalise individual low-carbon plants unless their output is separated through an admissible contractual and verification chain . Limited integration with EU coupled market arrangements adds difficulty for exporters seeking delivery attribution to specific EU importers .
Montenegro’s default factor is around 0.979 tonnes of CO₂ per MWh >, reflecting Pljevlja’s continuing role despite hydro and wind production . Under default treatment, its carbon cost is almost three times the second-quarter wholesale spread between Montenegro and Italy . The commercial value of power from Piva and Perućica hydropower plants together with wind production from Krnovo and Možura depends on whether output can be contractually separated from national averages with evidence acceptable to an EU importer and verifier .
Macedonia-Greece shifts show limited room for unidentified exports; Albania relies on hydro defaults
The trade relationship between North Macedonia and Greece moved sharply during the quarter . Scheduled exports from North Macedonia to Greece fell by approximately 78%, while flows in the opposite direction increased by around 70% . The change is not attributed solely to CBAM in the source data; however closely aligned day-ahead prices combined with a default carbon component above €66/MWh leave little economic basis for exporting unidentified Macedonian system power southward . Renewable production supported by verified actual values could still compete under these conditions .
Albania holds a stronger position because its electricity system is almost entirely hydro-based . Its zero default factor enabled exports to Greece to rise modestly even though underlying price spreads were small . That advantage depends on hydrology because dry periods can quickly turn Albania into a significant importer . The value of low-carbon status therefore depends on water availability, reservoir management, grid capacity and converting favourable generation into firm export positions .
PPA structure, hourly matching windows, guarantees of origin and accredited verification
An alternative approach uses actual installation-level emissions instead of national defaults . For electricity under current rules this requires more than presenting guarantees of origin or identifying a renewable generator . Several conditions must be met cumulatively: an authorised CBAM declarant must have an appropriate power-purchase agreement with a third-country generator; delivery routes must meet applicable requirements; electricity must be firmly nominated against allocated interconnection capacity; and generation matched with import over periods no longer than one hour . Network- and emissions-related conditions also apply across borders .
A guarantee of origin may support renewable provenance but does not replace PPA arrangements, scheduling requirements, interconnection nominations or hourly matching evidence needed for CBAM purposes . This distinction can matter where corporate buyers claim renewable consumption for sustainability reporting without being able to use zero actual emissions for CBAM declarations . Actual values must also be verified by an accredited CBAM verifier , with accreditation programmes beginning operationally during 2026 as first accredited electricity verifiers are expected around end-2026 or early-2027 . This timing creates preservation requirements because 2026 generation data including nominations, meter readings, contractual allocations and cross-border evidence must be kept before first verification engagements are completed while EU importers remain legally responsible even when producers or external verifiers provide underlying information .
PPA design choices affect whether replacement volumes fall back to defaults
PPA structure becomes central because baseload or shaped PPAs can create compliance gaps when renewable generators underproduce while suppliers replace missing volumes via intraday or balancing markets . Unless replacement electricity can be traced to another qualifying low-carbon source within admissible evidence chains, those volumes may fall back to national default factors . Pay-as-produced PPAs can preserve clearer links between metered output and imported volume but transfer profile and balancing risk onto buyers . Portfolio or intermediary structures may be commercially useful while also making evidentiary chains more complex under current rules .
Cambodian? financing impacts: Energy Community case study on 130 MW wind opportunity cost
The value at risk is described as large enough to affect renewable-project financing based on modelling cited by Energy Community [sic]. A case study modelled a 130 MW onshore wind farm that could incur an opportunity cost of approximately €8.9mn over six months when actual emissions could not be claimed [sic] [sic]. In that scenario it sold into a lower-priced non-EU market rather than against a Hungarian day-ahead benchmark [sic]. The loss was attributed not to emissions from wind itself but to inability to convert low physical emissions into an admissible CBAM position [sic].
Status categories: verified actual-emissions chains versus unverified national-mix defaults; transit treatment limits liability reduction mechanics?
The regime divides Western Balkan electricity into multiple commercial categories based on evidentiary status [sic]. Unverified national-mix power carries country default factors [sic]. Verified renewable electricity can enter with close-to-zero direct emissions only where contractual physical delivery routes metering chains satisfy applicable rules [sic]. Electricity passing through the EU en route to another third country may fall outside chargeable treatment while domestic carbon payments reduce liability only when recognised and adequately documented [sic].
PPA audit trails needed for financing decisions across Serbia neighbours; Brussels proposes revised defaults based on whole-mix intensity; integration pathway via market coupling remains conditional?
A project-specific bankability issue arises for renewables across Serbia, Montenegro, Bosnia and Herzegovina [sic]. Revenue models relying solely on historical wholesale spreads into Hungary Croatia Italy or Greece face uncertainty if projects cannot qualify actual emissions under CBAM [sic]. Lenders are described as needing checks covering eligible EU buyers compliant PPAs hourly metering scheduling nominations accredited verification availability plus contractually complete audit trails [sic]. Technical connection alone may not ensure eligibility if projects remain commercially restricted because their electricity cannot qualify for actual emissions [sic].
The European Commission has acknowledged rigidity in parts of current framework [sic]. Proposed amendments would calculate national default factors using weighted average emissions intensity across entire geographic electricity mixes rather than primarily fossil components [sic]. They would allow intermediaries within PPA chains where generator-importer connections remain verifiable clarify physical PPA requirements remove conditions requiring proof no physical network congestion existed between generator and EU system [sic]. The Commission proposed applying revised rules starting 1 January 2026 though amendments remain under negotiation without binding status yet [sic].
A whole-mix methodology is described as most immediately valuable for Serbia because it would recognise hydro wind solar and other lower-carbon generation within national factors rather than treating exported power through predominantly fossil lenses [sic]. It would not remove lignite impacts nor provide plant-specific value achievable through installation-level verification [sic]. It could nevertheless reduce penalties enough to restore some cross-border transactions uneconomic under existing gross Serbian value of €78.37/MWh [sic].
Elevated by CBAM.Clarion.Engineer
