Starting January 1, 2026, electricity imported into the European Union from Energy Community Contracting Parties, including Serbia, will fall under the Carbon Border Adjustment Mechanism (CBAM). This regulatory change introduces new administrative and financial requirements for cross-border electricity transactions. For Serbian exporters, this means that the carbon intensity of their electricity will directly influence the costs faced by EU importers, who must consider embedded emissions when making declarations.
Serbia’s electricity production mix highlights a significant challenge. The country’s official residual-mix report for 2024 indicates that hydropower constitutes 28.97% of its energy generation, while wind, solar, and biomass account for only 3.89%, 0.35%, and 0.85%, respectively. The remainder is dominated by fossil fuels, particularly coal. Consequently, electricity exporters will have to navigate a market where high-carbon emissions are embedded in most grid-supplied megawatt-hours (MWh), impacting both export margins and the carbon sensitivity of industrial exports.
Under CBAM, exported MWh will effectively consist of two components: the energy price and an additional carbon adjustment linked to EU Emissions Trading System (ETS) conditions. This shift is expected to lead to several market behaviors. First, pricing for exports will become more conditional as EU importers seek protection against fluctuating CBAM certificate costs. This could diminish the competitiveness of Serbian exports during periods when alternative sources are available.
Second, the demand for low-carbon electricity attributes will rise as the financial difference between low-carbon and high-carbon MWh becomes more pronounced. Serbian domestic instruments like Guarantees of Origin (GOs) will play a crucial role in facilitating compliance with EU requirements.
Third, Serbian electricity exporters must strategically decide how to allocate their limited low-carbon resources. With premium pricing available for low-carbon attributes, these resources may be directed towards domestic industries aiming to mitigate CBAM exposure or toward international buyers.
While renewable energy producers in Serbia are not directly subject to CBAM obligations, their revenue models will be affected as demand for long-term green supply increases among industrial buyers. The current structure includes a second renewables auction with a quota of 424.8 MW aimed at expanding capacity through contracts for difference (CfD). However, actual delivery of green electricity remains contingent on grid connection schedules and balancing arrangements.
For heavy industry exporters affected by CBAM, the challenge lies not just in compliance but in addressing the underlying carbon emissions associated with their energy consumption. Many sectors rely heavily on lignite-based grid electricity, which can lead to increased costs due to embedded emissions in their products. This shift in focus from mere reporting to securing low-carbon power sources is becoming increasingly critical.
Currently, Serbia lacks sufficient low-carbon electricity to meet the demands of all CBAM-affected producers consistently. The existing production structure shows that renewable sources are still limited relative to industrial needs. As such, companies seeking to enhance their green credentials may find themselves competing for scarce clean energy resources.
The potential for Serbian heavy industry to develop its own green electricity sources exists but requires a structured approach that treats renewable projects as viable infrastructure investments rather than optional environmental initiatives. Companies can explore various tiers of renewable energy solutions: on-site generation like solar panels; corporate Power Purchase Agreements (PPAs) with local wind or solar projects; or building dedicated renewable capacity linked directly to industrial operations.
Ultimately, while transitioning to renewable energy is essential for compliance with CBAM and enhancing competitiveness within the EU market, it is not an isolated solution. Industries must also address process emissions that require technical innovation beyond mere electricity procurement. Without substantial access to reliable low-carbon power at scale, Serbian exporters may struggle to maintain a competitive edge in EU markets amid tightening regulations and rising costs associated with carbon emissions.
