Banks assessing loans to manufacturers in Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia and Albania increasingly need to account for electricity costs, embedded emissions and supplier-data requirements tied to EU sales. The issue is whether a borrower can preserve its EU export margin when customers face higher carbon liabilities or cannot substantiate emissions linked to exported goods. A factory may maintain output and improve energy efficiency while still face competitiveness pressure if the EU buyer’s compliance burden rises.
For these markets, the investment challenge extends beyond renewable electricity procurement. Manufacturers are expected to explain their production route, how relevant precursors are treated, and what evidence supports an EU importer’s use of emissions data. The assessment also needs to reflect how electricity costs interact with domestic carbon pricing and procurement contract terms.
CBAM coverage and the credit assessment starting point
The exposure has multiple layers: electricity affects operating costs, domestic carbon pricing can influence direct emissions and energy supply, and CBAM applies to covered goods entering the EU. Buyers may also impose broader environmental requirements through procurement contracts. The importance of each layer varies by product, technology and commercial arrangement.
The current CBAM scope covers specified goods in iron and steel, aluminium, cement, fertilisers, electricity and hydrogen, including selected precursors. Coverage is determined through the goods and their classification rather than only the company’s industry label. For credit analysis, banks should identify which products the borrower exports, their EU destinations, tariff classifications and the share of revenue linked to customers importing covered goods.
Where a manufacturer produces multiple product families within the same facility, exposures can differ materially. Applying a single estimated carbon charge across turnover can distort both risk assessment and investment decisions. This is particularly relevant for electricity used in production under current definitive-period rules.
For steel and aluminium goods listed in Annex II, purchased-electricity indirect emissions are generally excluded from the calculation under current definitive-period rules. Cement, fertilisers and agglomerated iron ore have relevant indirect-emissions coverage, with detailed rules governing precursor contributions. A renewable PPA can therefore improve cost stability or wider footprint while not necessarily reducing every CBAM liability that applies to a finished product.
Electricity procurement risk in steel and aluminium value chains
Steel provides a regional example of how production route changes priorities. HBIS Serbia’s Smederevo configuration includes blast furnaces and a converter shop, while Makstil in North Macedonia describes an electric-arc-furnace steel shop producing slabs for its plate mill. These routes imply different priorities for energy procurement, raw materials and direct-emissions reduction. Neither description establishes either company’s verified emissions intensity.
For blast-furnace operations, purchasing renewable electricity cannot eliminate emissions arising from coke-based ironmaking. The investment focus shifts toward fuel and reductant use, process efficiency, input mix and whether changing the production route is feasible. An efficiency retrofit can still create value by lowering fuel consumption and potentially reducing relevant emissions.
However, the financial benefit needs comparison with expected operating life, maintenance requirements and future competitiveness of the product. For electric-arc-furnace producers, electricity procurement plays a larger role in operating economics. Scrap quality, metallic yield, electrode consumption, fuel use and any purchased iron-bearing inputs remain relevant to overall assessment.
A lower direct-emissions profile does not remove exposure to power-price shocks. An EAF mill may face modest CBAM exposure for its own process yet experience margin pressure when electricity prices rise or scrap becomes more expensive.
Delivered power price sensitivity example
An illustrative calculation assumes 0.50 MWh of electricity per tonne of steel. A €30/MWh increase in delivered electricity price adds €15 per tonne to production cost. At 300,000 tonnes of annual output, that equals €4.5 million before any offsetting changes in production volumes, efficiency or selling prices.
The figures are operating assumptions rather than forecasts for a named producer. They illustrate why banks need to examine electricity costs even where purchased-power emissions are excluded from current CBAM calculations for finished products. Procurement can reduce some risk but contract structure matters.
A fixed-price PPA should be evaluated alongside profile charges, balancing arrangements, network costs and replacement electricity exposure when needed power is not covered by generation output. Industrial demand also differs from renewable generation patterns: continuous production may require power when solar output is low or absent. A wind PPA can diversify supply while still leaving substantial hourly shortfalls depending on who covers gaps and at what price.
Upstream metal inputs and embedded-emissions documentation
Aluminium introduces a distinction between factory operations and upstream supply chain profiles. Impol Seval describes Serbian production through casting as well as hot rolling and cold rolling. For this manufacturing type, electricity and heat efficiency matter alongside assessment of purchased aluminium inputs and relevant upstream production history.
A processor buying primary metal faces a different upstream profile than a business using qualifying scrap inputs. Changing feedstock mix may improve competitiveness but must meet product specifications while maintaining yield. The investment case therefore includes metallurgy considerations as well as customer acceptance because cheaper or lower-emission inputs can be commercially unsuitable if they increase rejects or require additional processing.
Renewable electricity procurement can be important for aluminium producers’ wider product footprint and customer procurement needs. Banks should not count assumed reductions in current CBAM certificates unless reductions align with applicable emissions rules under the scheme that governs those goods. Direct emissions attributed to processing and precursor-related emissions remain separate concerns.
A rolling or remelting investment improving electricity efficiency does not necessarily change emissions attributed to purchased unwrought aluminium inputs under applicable accounting boundaries. Conversely, better-documented metal supply can improve an EU buyer’s assessment even if the processor’s own electricity contract remains unchanged.
Cement and fertilisers: capital allocation across embedded emissions
Cement and fertilisers require different capital allocation logic because their applicable electricity-related emissions mean renewable procurement can have a more direct role in reducing relevant embedded-emissions calculations if accounting conditions are met. The largest operational emissions may still lie elsewhere in both sectors.
A cement investment needs consideration of clinker content, kiln fuel use, thermal efficiency and process emissions. A fertiliser investment needs assessment of feedstock characteristics alongside production chemistry together with electricity consumption. Electrification can improve a production route but its value depends on both electricity price exposure and how emissions are treated under applicable rules.
Replacing fuel with electricity may reduce direct emissions while increasing exposure to power costs; projects therefore need evaluation across both dimensions rather than being promoted only by equipment technology labels used for electrification claims.
Precursor chains: verification reports and contract terms
Banks seeking comparability among measures can calculate cost per unit of output alongside cost per tonne of relevant emissions avoided. This approach enables comparisons among maintenance improvements, heat recovery projects, renewable procurement options, process conversion initiatives and larger production-route changes across different technologies.
The precursor chain adds commercial risk for SEE manufacturers exporting into the EU market. A manufacturer may purchase pig iron, DRI, slabs or billets for steel processing or aluminium inputs from Türkiye or other third markets before exporting finished goods to the EU after further processing.
Regional processing does not automatically remove embedded emissions associated with those inputs because accounting follows prescribed production boundaries and precursor rules while customs origin is assessed through separate requirements tied to origin determination processes.
For steel specifically, Commission guidance states that actual data for externally produced precursors require an appropriate verification report covering the relevant production period and accredited scope; otherwise default values apply where required by the rules. Relevant precursor indirect emissions can also enter final calculations where those rules require them.
This makes procurement documentation part of material value because two suppliers offering similar grades at comparable prices can create different downstream risks depending on whether usable emissions evidence is provided to support verification needs by importers.
Supplier evidence requirements in long-term contracts
Long-term supply contracts should address documentation issues before production begins by identifying producing installations, specifying relevant production periods, stating evidence required for verification purposes, defining update obligations and setting out treatment of missing or corrected information during reporting cycles.
The same discipline is needed inside factories because reliable emissions calculations depend on reconciled records covering production quantities, fuel use, material inputs and allocation methods aligned with operational reporting systems used during manufacturing runs.
A spreadsheet prepared at year-end cannot necessarily reconstruct missing measurements or distinguish products produced on shared equipment lines without adequate monitoring design around actual processes. Responsibility for data quality needs assignment across operations teams as well as procurement functions plus finance management roles involved in preparing submissions used by importers.
Product-level claims versus corporate carbon accounting
The commercial purpose of these data systems is to allow EU buyers to connect imported quantities with defensible emissions figures supported by evidence packages that make connections understandable rather than leaving importers to interpret disconnected energy bills alongside supplier declarations and production summaries submitted from different sources.
Corporate carbon accounting can support broader management systems but should not be assumed to provide required product-level calculations under CBAM-style attribution rules because company-wide totals do not show how emissions should be attributed to each covered good category exported into the EU market.
This distinction limits marketing claims such as “low-carbon” or “renewable-powered” descriptions because such statements are commercially useful only when buyers understand boundaries used in calculations along with supporting evidence sources used for product footprints under applicable accounting methods like those applied in CBAM embedded-emissions assessments.
Certificate-price sensitivity and loan review priorities
The certificate price is another variable affecting financing sensitivities under CBAM-related liability estimates referenced by banks during credit reviews. At €82.32/tCO₂e, a difference of 0.50 tCO₂e per tonne of goods corresponds to €41.16 per tonne in gross carbon-price exposure before relevant adjustments; for 100,000 tonnes this equals €4.116 million based on that sensitivity framing.
The calculation functions as a sensitivity measure rather than a final CBAM invoice amount because industrial liability requires free-allocation adjustments plus any eligible carbon-price deductions tied to product-precursor calculations rather than applying universal phase-in percentages directly to total emissions without rule-based tailoring.
Sensitivity analysis remains useful for financing decisions because it shows how an emissions-data problem can become material for customer negotiations and cash flow even when manufacturers do not purchase certificates themselves under their own compliance responsibilities.
Banks should assess borrowers’ EU sales agreements because if customers bear formal liability they may seek compensation via lower prices or revised contract terms or reduced order volumes depending on bargaining power reflected in supply agreement wording rather than assuming uniform pass-through outcomes across all counterparties.
Existing loans deserve particular attention where facilities were approved before financial CBAM obligations became relevant since export volumes and margins assumed at approval may no longer be secure under updated compliance expectations tied to covered goods entering the EU market.
Financing instruments aligned with compliance gaps
An actionable credit assessment distinguishes among compliance gaps that require metering upgrades or record improvements versus cases needing changes in precursor suppliers or cases where production-route constraints cannot be solved through documentation alone due to underlying process boundaries affecting embedded-emissions outcomes.
A small equipment facility may support metering additions or efficiency improvements while working capital can fund improved input mixes or settlements related to carbon documentation requirements between suppliers and customers exporting covered goods into the EU market after verification cycles.
Larger process conversions typically need longer-term finance supported by credible commissioning assumptions plus sufficient equity given project timelines required for plant modifications that affect both energy use patterns and embedded-emissions attribution under applicable rules during future export periods.
Policy developments affecting future scope assumptions
The investment sequence matters when integrating renewables into broader export-risk planning because financing large renewable installations before understanding covered-emissions implications could leave central export risk unresolved tied to which goods fall within current CBAM scope based on classification rules rather than industry labels alone.
Conversely delaying basic monitoring work can prevent manufacturers from demonstrating improvements already achieved through operational changes that would otherwise support buyer declarations during reporting periods used by importers responsible for legal obligations even when technical work is delegated to service providers or consultants.
Wider policy changes increase preparation needs without justifying assumptions that proposals become law automatically: the EU is considering expansion to additional steel- and aluminium-intensive downstream goods along with anti-circumvention measures plus changes related to electricity attribution methods used within embedded-emissions frameworks under evolving indirect-emissions coverage approaches referenced through Commission study work on indirect emissions evolution.
