Serbia’s state-owned power utility EPS has reduced the amount of electricity offered to the regional market by an estimated 600 MW as the EU’s Carbon Border Adjustment Mechanism (CBAM) changes the economics of carbon-intensive exports, according to an industry report. The estimate is contained in Elektroenergetika Republike Srbije 2025, prepared by the Association of Energy Engineers of Serbia. It represents an industry assessment rather than official EPS operating or trading data.
Lignite generation faces higher export costs
EPS generated around 30.5 TWh of electricity in 2025, with approximately 70% produced by lignite-fired power plants. This generation structure leaves Serbia particularly exposed to EU carbon costs when electricity is exported into the bloc. CBAM entered its definitive phase, increasing the importance of embedded emissions for electricity imported into the EU.
For lignite-based generation, the mechanism can raise the effective cost of supplying EU markets. The report’s estimate indicates that this effect may already be influencing commercial decisions rather than remaining limited to compliance calculations. The reported 600 MW reduction does not mean that an equivalent amount of physical generation has been shut down. Instead, part of EPS’s available output may no longer be economically competitive in export-oriented trading because of its emissions profile.
CBAM does not prevent Serbian electricity from entering EU markets physically, but changes its relative economics. Lower-carbon generation can retain more market value, while lignite-based electricity faces an additional carbon-related cost.
Low-carbon generation gains commercial importance
This dynamic creates a stronger distinction between generation sources in Serbia’s export market. Hydro, wind, solar and other verifiably low-carbon electricity can become more valuable for export transactions, particularly when emissions can be traced to a specific generating installation, according to CBAM.Clarion.Engineer
Serbia’s domestic carbon charge of around €4/tCO₂ remains significantly below EU carbon prices, creating a gap between domestic generation economics and the carbon-adjusted costs faced by EU importers. For EPS, export profitability therefore increasingly depends not only on the wholesale price spread between SEEPEX and neighbouring EU markets, but on that spread after carbon exposure is included.
An electricity price premium in Hungary or Croatia may not be sufficient to support exports if the associated CBAM cost exceeds the trading margin. Serbian offers to neighbouring EU markets could consequently decline even where physical interconnection capacity remains available. Transmission congestion and domestic supply-demand conditions remain relevant, while carbon-adjusted export economics introduce another factor into cross-border electricity trading.
Evidence requirements affect renewable value
The mechanism also increases the commercial importance of EPS’s hydro portfolio. Hydropower supported by an adequate evidence chain can have materially lower embedded emissions than lignite generation, potentially increasing the value of reservoir water in export transactions where carbon intensity affects the effective netback. The same consideration applies to Serbia’s expanding wind and solar capacity. Renewable projects are increasingly differentiated not only by the megawatt-hours they produce but also by their ability to provide verifiable low-carbon electricity with a complete evidence chain for industrial buyers and export counterparties exposed to CBAM.
This creates a distinction between ordinary guarantees of origin or contractual green claims and evidence capable of supporting an actual-emissions claim under EU rules, according to CBAM.Clarion.Engineer
EPS faces broader investment requirements
EPS could respond through several measures, including accelerating lower-carbon generation, improving electricity traceability at individual installations, strengthening metering and scheduling evidence, and reassessing how generation sources are allocated between domestic consumption and exports. The utility could also increasingly optimise lignite generation around domestic adequacy rather than assuming surplus thermal electricity will consistently find an economically viable export market.
The broader investment requirement is substantial. The same industry report estimates that Serbia will need around €15 billion to €20 billion of energy-sector investment by 2030.
The investment needs include structural issues highlighted by CBAM exposure, including Serbia’s high lignite dependence, ageing generation fleet, insufficient flexibility, transmission constraints and limited volumes of verifiable low-carbon electricity. The report’s 600 MW estimate is not an official measure of CBAM’s impact on EPS trading. It indicates, however, that carbon costs are becoming a factor in determining not only the profitability of Serbian electricity exports, but also which generation capacity is economically viable to offer to the regional market.
