The integration of Serbia and the broader South-East Europe electricity market with the European Union’s regulatory framework is entering a critical phase as the Carbon Border Adjustment Mechanism (CBAM) prepares to take effect. Starting on January 1, 2026, this mechanism will impose new requirements on electricity imports from non-EU countries, including Serbia, Bosnia and Herzegovina, Montenegro, and North Macedonia. The CBAM aims to align carbon costs between EU domestic production and imports, requiring importers to monitor and declare greenhouse gas emissions associated with their electricity imports.
Serbia’s electricity sector, which has a total installed capacity of approximately 8,981 MW and an annual gross generation of around 34,706 GWh, is particularly vulnerable to these changes. The country’s energy mix is heavily reliant on coal and lignite-fired plants, which account for about 60–65% of total generation. This reliance contributes to a carbon intensity of approximately 556 gCO2e per kWh, significantly above the EU average. As such, Serbian exports may face substantial competitiveness challenges under CBAM if carbon pricing reflects these higher emissions levels.
In recent years, Serbia has established itself as a net exporter of electricity, often exporting between 2–4 TWh annually. The SEEPEX exchange has facilitated this trade, with monthly traded volumes exceeding 420–450 GWh. However, the introduction of CBAM introduces an additional layer of carbon accounting that could impose costs equivalent to the EU carbon price per tonne of CO2 embedded in exported electricity. Estimates suggest that charges could reach as high as €60 per MWh for coal-based power.
The implementation of CBAM raises urgent questions for stakeholders in the region regarding the measurement and verification of carbon emissions for electricity imports, as well as the certification processes for green electricity aimed at minimizing CBAM charges. Current procedures mandate that importers measure and declare associated carbon dioxide equivalent emissions and surrender corresponding CBAM certificates based on these values.
The complexity of measuring emissions from electricity arises from the fact that power flows are not linked to specific generation units. The carbon content can fluctuate based on grid conditions and the mix of renewable energy sources. To mitigate this issue, the EU has proposed a verification methodology allowing importers to report actual emissions rather than relying solely on default averages. This will necessitate detailed installation-level reporting audited by accredited verifiers.
For renewable energy sources like hydropower—predominant in SEE—verification will focus on generation metering and reservoir inflow/outflow records. Producers participating in Serbian balancing markets must ensure that their green attributes are accurately documented alongside generation metadata. Such granularity aligns with evolving best practices in corporate renewable energy procurement.
The implications for investment in Serbia’s renewable energy sector are significant. Developers are increasingly delivering wind and solar projects, with wind generation reportedly increasing by more than 17% annually. National strategies aim to expand renewable capacity substantially through the next decade to meet EU decarbonization targets. However, until CBAM-compatible verification systems are fully operational, investors may encounter a “policy risk premium” affecting both capital expenditures (CAPEX) for renewable projects and operational expenditures (OPEX) related to carbon reporting.
Serbia’s national climate plans target a renewable energy share of 40.7% by 2030, necessitating rapid scaling of solar and wind technologies while maintaining supply reliability. Scenario modeling indicates potential reductions in CO2 emissions from power generation by 35–59% by 2030, contingent upon swift deployment of renewables and grid modernization.
The CBAM framework allows for exemptions or postponements if third countries meet specific conditions such as coupling their markets with the EU’s day-ahead market and implementing domestic carbon pricing aligned with EU ETS levels by designated deadlines. Serbia plans to couple its electricity market with the EU by Q4 2026, which could qualify it for temporary exemptions until 2030 if other criteria are satisfied.
The economic stakes are considerable; independent estimates suggest that without adjustments, annual CBAM revenues from Western Balkan electricity exports could total hundreds of millions of euros, with Serbia potentially contributing over €300 million annually. If exports face CBAM charges without accurate carbon accounting reflecting their low-carbon content, utilities in SEE risk losing revenues and deterring investments in regional grid projects and renewables.
This context underscores the argument for delaying full CBAM application on electricity imports until granular verification systems are established alongside harmonized market coupling and domestic carbon pricing frameworks. Such a delay would not only promote fairness but also enhance market efficiency and investment predictability within an integrated European electricity market.
