The impending implementation of the EU’s carbon border mechanism (CBAM) in early 2026 is poised to significantly influence Montenegro’s energy landscape, particularly impacting the state-owned power utility, EPCG. The company has already reported first-quarter losses of approximately 13 million euros, a direct consequence of the new regulatory framework that penalizes electricity generated from carbon-intensive sources, primarily coal.
This regulatory shift is particularly challenging for Montenegro, where a substantial portion of electricity is produced by the coal-fired thermal power plant Pljevlja. The reliance on coal not only diminishes EPCG’s competitiveness in export markets but also affects pricing strategies, as the CBAM indirectly reduces achievable electricity prices compared to those in the European Union.
Despite facing these challenges, EPCG has refrained from transferring additional costs to households. However, officials have indicated that price hikes could become necessary if geopolitical tensions—especially those arising from the Middle East—further disrupt energy supply chains. In light of these pressures, EPCG is concentrating on selling electricity within the Western Balkans, where CBAM regulations do not apply, while limiting exports to surplus volumes directed at EU markets.
The market response to the CBAM is evident, with regional electricity prices currently ranging between 20 and 70 euros per megawatt-hour lower than EU levels, which constrains export revenues for Montenegrin producers. Furthermore, the lack of a national emissions trading system aligned with the EU ETS exacerbates the situation, forcing local producers to absorb higher operational costs. While domestic carbon prices hover around 24 euros per ton, they remain significantly lower than EU benchmarks, creating further competitive disadvantages.
On an operational level, EPCG has successfully marketed all available surplus electricity in early 2026. The utility reported sales of 486 GWh valued at 49.9 million euros during the first quarter, a notable increase from 345 GWh worth 42.8 million euros in the same period last year. Favorable hydrological conditions contributed to a total production surge to approximately 1,204 GWh, reflecting a strong year-on-year performance.
However, uncertainty looms over future financial outcomes for EPCG. The company’s financial health will largely hinge on fluctuations in regional electricity prices and potential modifications to CBAM regulations. As coal-based generation continues to face mounting pressure on export revenues, EPCG is proactively pursuing modernization initiatives at TPP Pljevlja and accelerating its transition toward renewable energy sources. Planned investments between 800 and 950 million euros by 2035 are aimed at mitigating exposure to carbon costs and enhancing long-term sustainability.
