Serbia Faces €140 Million CBAM Cost as EU Carbon Rules Enter Industrial Phase

Europe’s Carbon Border Adjustment Mechanism (CBAM) has moved from a reporting requirement into a direct industrial cost framework, creating a new compliance challenge for Serbian exporters of steel, aluminium, cement, fertilisers and electricity.

Since 1 January 2026, imports into the European Union of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen have entered the definitive CBAM regime. Although the formal obligation applies to EU importers or their customs representatives, the financial impact is expected to increasingly affect producers in Serbia and the wider Western Balkans through purchase-price adjustments, carbon clauses and supplier selection.

The first annual CBAM declaration covering goods imported during 2026, together with certificate surrender obligations, is due by 30 September 2027. CBAM certificates will become available through the EU’s central platform from February 2027. The delayed settlement does not postpone the accumulation of carbon costs linked to shipments entering the EU during 2026.

CBAM certificates were priced at €75.36 per tonne of CO₂ in the first quarter of 2026 and €75.28 per tonne of CO₂ in the second quarter. Prices are calculated quarterly during 2026 before moving to weekly publication from 2027. The amount payable can be reduced by remaining free EU ETS allowances available to comparable European producers and by eligible carbon prices already paid in exporting countries. Serbian companies are increasingly required to treat CBAM exposure as a variable export cost rather than a future reporting obligation.

Serbia Estimates Exposure Across Key Export Sectors

Serbia’s Fiscal Strategy for 2027 estimates that more than 12% of exports to the EU, representing more than 8% of total Serbian exports, fall within sectors currently covered by CBAM. More than 3,500 companies are directly or indirectly connected to these industries, accounting for around 4.5% of total employment. Approximately 1,000 Serbian companies exported CBAM-covered goods to the EU in 2025, making them potentially directly exposed to the mechanism.

Under a scenario where Serbia’s domestic carbon price receives no EU recognition, the estimated CBAM impact reaches €140.2 million in 2026 and rises to €161.4 million by 2029. The direct 2026 impact is estimated at approximately 0.16% of GDP.

The estimate is not a final liability. It assumes unchanged 2025 export volumes, uses default emissions values and maintains a carbon price of €75.36 per tonne of CO₂. Actual costs will depend on EU allowance prices, verified installation emissions, free-allocation adjustments, verification quality and recognised domestic carbon payments. Serbia’s analysis also notes that EU default emissions values can exceed the actual performance of domestic producers, increasing the importance of verified plant-level emissions data.

Steel Represents Majority of Serbia’s CBAM Burden

The largest share of Serbia’s projected exposure comes from iron and steel, estimated at €89.1 million in 2026, or almost two-thirds of the total burden.

Other sectors include:

• Electricity: €21.8 million
• Aluminium: €19.5 million
• Fertilisers: €7.8 million
• Cement: €1.9 million

By 2029, the steel-related CBAM impact is projected to reach €108.5 million, while electricity exposure remains broadly stable because imported electricity does not receive the same gradual free-allocation adjustment available to industrial products. HBIS Serbia’s steel operations in Smederevo are therefore among the companies most directly affected. Future competitiveness in European markets will increasingly depend on verified emissions per tonne of steel, alongside traditional factors such as production costs, logistics and trade conditions.

The company has already identified green steel and CBAM compliance as strategic priorities, but commercial competitiveness will depend on whether environmental investments generate emissions data accepted by European buyers in CBAM declarations. Other industrial companies face different forms of exposure. Impol Seval, Serbia’s largest aluminium processor and only producer of rolled aluminium products, must address emissions linked both to the Sevojno facility and to aluminium inputs and electricity consumption.

Elixir Group, which operates fertiliser and phosphoric-acid facilities in Šabac and Prahovo and exports more than 70% of production, faces requirements linked to process emissions, energy use and precursor data.

Elektroprivreda Srbije (EPS) faces electricity-specific CBAM rules, where national default emissions factors may significantly influence costs even when individual generation sources include renewable production.

Domestic Carbon Tax Introduced Ahead of CBAM Settlement

Serbia introduced a domestic greenhouse-gas emissions tax and a related carbon-intensive import tax from 1 January 2026, with collection beginning in 2027. The domestic carbon charge is set at €4 per tonne of emissions above the defined technological minimum. Electricity producers can receive a tax credit of up to 20% of qualifying decarbonisation investments, limited to 80% of their carbon-tax liability.

The domestic system is intended to retain part of carbon-price revenue within Serbia instead of allowing the full cost to be captured through the EU mechanism. The financial effect remains limited. Serbia estimates that full EU recognition of the domestic carbon charge could reduce the 2026 CBAM impact from €140.2 million to €127.3 million.

The projected annual saving is approximately €12 million, equivalent to around 8–9.2% of the gross liability. EU recognition is not automatic. CBAM rules allow deductions only for carbon prices effectively paid in the exporting country after considering exemptions, rebates, free allocations and other compensation mechanisms. The European Commission published draft rules on third-country carbon price treatment in May 2026, but no final implementing regulation had appeared in the Commission’s adopted-act register by the end of July. Serbian exporters therefore need documentation connecting domestic carbon payments with specific installations, reporting periods, embedded emissions and exported products.

Verification Becomes Part of Export Competitiveness

CBAM compliance increasingly depends on monitoring, reporting and verification systems capable of linking raw materials, energy consumption, production volumes, emissions measurements and product allocation. Exporters must provide European buyers with data suitable for verification and submission through the CBAM Registry.

Companies unable to provide verified actual emissions will leave EU customers dependent on Commission default values, which may be higher than real plant-level emissions.

The change affects procurement decisions because European buyers increasingly evaluate suppliers based on carbon-adjusted delivered costs. A Serbian producer with lower factory-gate prices may still lose competitiveness if it cannot provide verified emissions data, traceable precursor information or evidence of recognised domestic carbon payments.

Electricity Sector Faces Regional CBAM Pressure

Electricity represents one of the most complex CBAM challenges for the Western Balkans.

Using official default values and the second-quarter 2026 certificate price of €75.28 per tonne, the Energy Community calculated a gross CBAM cost of:

• Serbia: €78.37 per imported MWh
• Bosnia and Herzegovina: €86.42/MWh
• Montenegro: €73.70/MWh
• North Macedonia: €66.77/MWh
• Albania: €0/MWh

These figures represent fallback calculations rather than final costs because actual emissions and recognised domestic carbon payments can alter the outcome. Serbia’s average day-ahead electricity price reached €96.3/MWh in Q2 2026, compared with €109.2/MWh in Hungary, leaving a cross-border price difference of around €13/MWh. The default-value CBAM component for Serbian electricity was therefore significantly higher than the available conventional price spread.

Despite this, scheduled Serbia-to-Hungary electricity flows increased 111% year on year during the quarter. Western Balkan electricity trading continues to depend on commercial contracts, transit flows, renewable output, demand patterns, fuel costs and available cross-border capacity. At the same time, gross scheduled electricity exchanges between Western Balkan countries and EU markets declined by around 15% year on year in Q2 2026 and approximately 19% during the first half of 2026.

Renewable Projects Require Additional Certification

Renewable generation could theoretically benefit from near-zero actual emissions values, but companies must prove eligibility through documentation covering generation facilities, delivery arrangements, contractual relationships and monthly compliance. Accreditation programmes for CBAM verifiers began developing during 2026, with the Energy Community expecting the first accredited verifiers by late 2026 or early 2027.

The inability to verify renewable electricity could reduce the commercial value of low-carbon assets. The Energy Community estimated that a 130 MW onshore wind farm could lose €8.9 million over six months by being limited to a lower-priced non-EU market instead of selling against the Hungarian benchmark.

Power-purchase agreement structures have therefore become an important part of CBAM compliance planning. Current rules require electricity claimed at actual emissions values to be covered by a PPA between the authorised CBAM declarant and the third-country producer. Baseload and shaped PPAs create additional risks if replacement electricity from balancing markets cannot prove renewable origin.

Proposed EU Changes Could Alter Long-Term Impact

The European Commission has proposed revisions to electricity CBAM rules, including calculating default factors using weighted average emissions intensity of national or geographic electricity mixes rather than only fossil-fuel components. The proposal would also allow intermediaries within PPA chains where contractual links remain verifiable and remove the requirement to prove that no physical network congestion occurred between generation facilities and EU transmission systems.

The Commission has proposed applying these changes to electricity imported from 1 January 2026, but the amendments remain subject to the EU legislative process.

For Serbia, the impact could be significant. The government estimates electricity-related CBAM exposure at approximately €20.7 million under the current framework after domestic carbon-price recognition. Using the national generation mix could reduce this amount to around €14.5 million, representing a reduction of about 30%.

Downstream Manufacturing May Enter CBAM Scope

A further expansion of CBAM could affect a broader part of Serbia’s manufacturing sector. The European Commission has proposed extending CBAM from 1 January 2028 to around 180 additional customs codes covering selected steel- and aluminium-intensive downstream products.

The Council adopted its negotiating position in June 2026, while the European Parliament’s environment committee supported the expansion in July 2026. The final product list remains under negotiation.

Potentially affected Serbian industries include automotive components, machinery, electrical equipment, household appliances, metal structures, packaging and fabricated aluminium and steel products. Companies that are not currently direct CBAM exporters may need to collect emissions information from suppliers as carbon data moves through multiple manufacturing stages.

CBAM Preparation Enters Investment and Financing Decisions

On 17 July 2026, the European Commission proposed changes to the EU ETS that would extend reductions in free allowances for CBAM sectors through 2038. A slower withdrawal of free allowances would reduce the pace at which CBAM certificate obligations increase. However, the proposal does not remove reporting, authorisation, verification or certificate requirements for imports during 2026. For Serbian companies, the potential slower phase-in provides additional preparation time for investments in furnace modernisation, energy efficiency, renewable self-generation, long-term PPAs, waste-heat recovery and process electrification.

CBAM is also becoming relevant for financing decisions. Banks evaluating Serbian steel, aluminium, fertiliser, cement and renewable-energy projects are expected to consider certificate prices, default-value exposure, verification delays and changes in EU procurement practices. Lower verified emissions are increasingly linked to export contract stability and the quality of project cash flows.

Serbia has established a domestic carbon-price framework earlier than several neighbouring economies, but the €4-per-tonne rate remains significantly below EU carbon values near €75 per tonne. The competitive position of Western Balkan exporters will increasingly depend on verified emissions data, accredited verification systems and documentation supporting each exported tonne of industrial product or megawatt-hour of electricity.

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