Beginning in 2026, the implementation of the Carbon Border Adjustment Mechanism (CBAM) will significantly alter the dynamics of electricity trading in Southeast Europe (SEE). This regulatory framework shifts the focus from traditional metrics such as €/MWh and capacity to a more complex valuation that incorporates factors like embedded CO₂ emissions, national carbon pricing, and the generation mix. As a result, power exports from the Western Balkans to the European Union will be scrutinized not only for their economic viability but also for their environmental impact.
Initial indicators suggest that this transition is already underway. According to the Energy Community’s monitoring for Q1 2026, electricity flows between the EU and the Western Balkans Six (WB6) have decreased by approximately 25% year-on-year. Traders are increasingly opting for routes that minimize exposure to CBAM-related challenges, indicating that this mechanism is influencing market behavior and interconnector usage even before its full implementation.
Five key structural trends are emerging in response to these changes. First, coal-dependent exports from countries such as Serbia, Bosnia, Montenegro, and North Macedonia are losing their competitive edge. While regional trading of thermal output remains possible, exports destined for the EU will incur carbon penalties that diminish profitability. The introduction of negative pricing by SEEPEX on May 5, 2026, with day-ahead prices dropping to -€500/MWh and intraday prices potentially reaching -€9,999/MWh, further complicates Serbia’s export economics.
Second, renewable energy sources like hydro, wind, and solar are gaining additional value beyond mere energy pricing. Low-carbon megawatt-hours (MWh) are increasingly seen as valuable assets when linked to industrial offtake agreements or EU buyers seeking cleaner supply chains. This trend has made Albania’s and Greece’s hydroelectric exports more significant in Q1 2026, while alternative routes less affected by CBAM constraints are becoming more appealing.
Third, power purchase agreements (PPAs) are evolving into critical instruments under CBAM regulations. For industries such as steel and cement production, PPAs now serve not only as price hedges but also as tools for managing carbon risk. These agreements must be supported by rigorous metering and emissions accounting to enhance the bankability of renewable projects across Serbia, Montenegro, Bosnia, and North Macedonia.
Fourth, domestic carbon pricing is emerging as a crucial variable in trading strategies. For instance, Montenegro’s EPCG has projected annual CBAM-related costs could reach €191 million. The immediate impact was noted at around €13 million in Q1 2026. Given that electricity constitutes a substantial portion of Montenegro’s exports and TE Pljevlja plays a pivotal role in generation, this exposure is particularly pronounced.
Lastly, the combination of negative pricing and CBAM is accelerating the importance of flexibility in energy markets. Negative prices penalize inflexible generation during surplus hours while CBAM imposes costs on high-carbon exports aimed at EU markets. This dual pressure enhances the economic viability of battery storage solutions, demand response strategies, and other flexible resources. Market participants will increasingly rely on sophisticated strategies involving hourly positioning and carbon-aware routing rather than traditional baseload export models.
The overarching implication is that SEE electricity markets are transitioning into a dual-price system: one reflecting traditional wholesale prices and another representing embedded carbon values or penalties associated with each MWh traded. As this evolution unfolds from 2026 onward, stakeholders—including traders, utilities, and financial institutions—must adapt their strategies to account for these new market realities or risk misjudging profitability and market dynamics.
