Serbia’s CBAM Challenge Puts Industrial Carbon Data at the Centre of Export Competitiveness

Serbia’s estimated €140mn exposure to the European Union’s Carbon Border Adjustment Mechanism (CBAM) in 2026 is shifting from a policy discussion into a practical challenge for exporters, manufacturers and industrial supply chains. The mechanism will not operate as a single financial obligation paid by Serbia, but as a product-level carbon cost linked to goods entering the EU market.

The financial impact will be formally managed by authorised EU importers, which must purchase CBAM certificates covering the embedded emissions of imported products. However, the cost is expected to influence commercial relationships through export prices, contract negotiations and purchasing decisions involving Serbian producers.

For Serbian companies, compliance will depend on their ability to calculate and verify emissions at product level. Businesses must establish monitoring, reporting and verification systems, document production emissions and prove any domestic carbon price claimed as a deduction has actually been paid. Companies unable to provide reliable emissions data risk facing higher costs through default emissions values, reduced bargaining power with European customers and potential difficulties maintaining access to EU supply chains.

Industrial sectors facing the highest CBAM exposure

Around 1,000 Serbian companies exported CBAM-covered goods to the EU in 2025, although the level of exposure differs significantly between individual businesses. The broader industrial impact extends to more than 3,500 companies directly or indirectly linked to CBAM sectors. These companies account for approximately 12% of Serbia’s exports to the EU and support around 4.5% of national employment.

The largest areas of exposure are electricity, iron and steel, and cement, followed by aluminium, fertilisers and other materials included within the mechanism. Future expansion of CBAM to downstream steel- and aluminium-intensive products could bring additional industries into the system, including machinery, industrial equipment, household appliances, automotive components, metal furniture and other manufactured products. This expansion would extend the impact beyond major primary producers and create new requirements for processors, component manufacturers, engineering companies, logistics providers and exporters using carbon-intensive materials.

The Ministry of Finance has estimated that the overall effect could reach approximately €140mn in 2026, increasing to around €161mn by 2029. Under a scenario where the EU fully recognises Serbia’s domestic carbon pricing system, the estimated impact would be lower, ranging between €127mn and €148mn.

Carbon pricing gap remains a key issue

The difference between the two scenarios is linked to Serbia’s ability to claim deductions for carbon costs already paid domestically. Serbia currently applies a carbon price of €4 per tonne of CO₂ equivalent, significantly below EU carbon market levels. The official CBAM certificate price was €75.36 per tonne in the first quarter of 2026 and €75.28 per tonne in the second quarter of 2026.

Although recognition of a domestic carbon price could reduce the final burden, the effect remains limited unless Serbia gradually increases its carbon price and establishes a system accepted by EU authorities for emissions calculation and payment verification.

CBAM entered its definitive phase on 1 January 2026. EU authorised declarants are required to report embedded emissions and purchase certificates corresponding to imported carbon content, adjusted for the gradual phase-out of free allowances available to EU producers. Certificates covering 2026 imports will be purchased from February 2027, while the first annual declaration and certificate surrender deadline is 30 September 2027. The financial impact is therefore building during 2026, even though the main settlement process occurs later.

Export contracts increasingly affected by carbon costs

The timing creates immediate commercial pressure for Serbian exporters because EU buyers are already assessing future certificate requirements and potential costs. Importers may introduce carbon adjustment clauses, request emissions guarantees, seek price reductions or require contractual rights to recover additional CBAM-related expenses if reported emissions are later revised.

As a result, Serbian companies treating CBAM only as a future tax obligation may already be facing its economic effects through 2026 export agreements. The estimated €140mn national exposure represents a combination of direct certificate costs, lower export margins, administrative expenses, reduced competitiveness and possible lost sales. The final burden will depend on the negotiating position of exporters, European buyers and supply-chain participants.

A steel producer selling standard products in a market with alternative suppliers may have limited ability to transfer additional costs. A specialised manufacturer with differentiated products and fewer substitutes may retain greater pricing power. Product quality, reliability, certification capabilities and supply-chain position will influence how much of the carbon cost each company absorbs.

Electricity emissions remain a structural challenge

Serbia’s electricity system represents one of the central challenges because of its continued reliance on lignite-based generation, particularly thermal power plants operated by Elektroprivreda Srbije (EPS) in the Kolubara area. The carbon intensity of electricity used by industrial producers directly affects the embedded emissions of exported goods and creates exposure in electricity exports to the EU.

Electricity is subject to specific CBAM rules that differ from manufactured products. For cross-border electricity trade, compliance depends on physical flows, contractual arrangements, nominated capacity and evidence demonstrating the connection between electricity generation and imported power.

Renewable energy producers cannot automatically treat guarantees of origin as sufficient CBAM evidence. Unbundled renewable certificates alone do not replace the need to demonstrate actual emissions performance and the required physical and contractual links. For industrial consumers, renewable electricity procurement can improve sustainability performance and reduce broader greenhouse-gas inventories, but it will lower CBAM exposure only where EU methodology allows the evidence to affect embedded emissions calculations. Power purchase agreements therefore need to be supported by metering systems, production data, delivery records and auditable documentation.

Companies need plant-level emissions systems

The first operational priority for Serbian exporters is establishing visibility over product-level emissions. CBAM does not operate on the basis of general corporate carbon footprints. Companies must identify relevant production installations, allocate emissions to specific goods, determine energy and material inputs and reconcile production volumes with reported emissions.

A functioning monitoring, reporting and verification framework requires consistent links between production data, customs records, energy consumption, raw materials, laboratory information, waste streams and recycled content.

The purpose of this system extends beyond regulatory compliance. Accurate emissions data allow companies to identify where carbon costs originate and determine which investments generate the largest reduction per unit of capital spending.

For example, a steel processor may achieve greater benefits from increasing recycled content than changing electricity supply. A cement producer may reduce embedded emissions more effectively through lower clinker use and alternative fuels. An aluminium producer may find that upstream material selection has a greater impact than internal energy efficiency measures. Without this analysis, companies risk investing in projects that improve sustainability but provide limited reductions under CBAM calculations.

Verification quality becomes a commercial advantage

Reliable verification will become increasingly important because EU importers depend on accurate emissions information when completing CBAM declarations. Companies unable to support reported figures may expose importers to additional scrutiny, corrections or the application of default emissions values. Default values are designed for situations where actual emissions data are unavailable or unreliable and may create a higher carbon obligation than verified installation-specific performance.

This means data quality becomes a competitive factor. Two producers with similar technology may have different market positions if one can provide verified emissions information while the other cannot. Verification systems must therefore be established before reporting deadlines, with clear installation boundaries, measurement points, allocation methods and internal controls.

Contract structures must adapt to CBAM obligations

Serbian exporters and EU importers will need to revise commercial agreements to define responsibilities related to emissions reporting and carbon costs. Contracts should specify who provides emissions information, who bears the cost of inaccurate data, how corrections are handled and how benefits from lower verified emissions are distributed.

Relevant provisions include reporting deadlines, data formats, verification obligations, access to records, confidentiality requirements, carbon price references, currency calculations and adjustments for domestic carbon payments. A general obligation to “comply with CBAM” does not address the division of responsibilities. Serbian producers provide emissions and production data, while EU importers remain legally responsible for declarations and certificate surrender.

Investment decisions increasingly linked to carbon exposure

Reducing emissions will require investment, but companies may not immediately need large-scale transformation projects. Initial measures can include improved metering, operational efficiency, compressed-air optimisation, heat recovery, motor upgrades, power-factor improvements and waste reduction.

These projects can reduce costs while establishing the emissions data required for future investment decisions.

Later phases may involve renewable electricity procurement, electrification of thermal processes, fuel switching, increased recycled material use and equipment replacement. More advanced transformation may require low-carbon materials, major process redesign and dedicated renewable or storage assets.

This investment sequence is important for financing because banks and investors increasingly require verified emissions baselines and measurable links between decarbonisation projects and commercial outcomes. Projects that demonstrate reduced CBAM exposure, secured export contracts and lower carbon costs can be positioned as revenue-protection investments.

Domestic carbon policy must support industrial transition

Serbia has introduced a domestic greenhouse-gas emissions tax and a carbon-intensive import tax at €4 per tonne of CO₂ equivalent.

The policy aims to retain part of carbon-pricing revenue domestically and reduce the amount transferred through CBAM. Effective implementation will depend on transparent methodologies, reliable monitoring, credible verification and clear documentation procedures.

Under EU rules, domestic carbon payments can reduce CBAM obligations only when the payment is effective and documented. Financial support mechanisms, rebates or free allocations may reduce the recognised deduction. Domestic carbon revenues could also play a role in financing industrial transition, including renewable energy development, grid improvements, efficiency measures and low-carbon technologies. Without such reinvestment, companies may face additional domestic costs while still carrying the full burden of European carbon requirements.

Supply chains beyond direct exporters face new requirements

The Serbian Chamber of Commerce has supported selected manufacturing companies through advisory and co-financing programmes focused on circular economy measures, greenhouse-gas management, energy audits and green business development. The scale of the challenge extends beyond individual support programmes.

Many smaller suppliers outside direct CBAM categories may still face increasing requests for emissions and material data from larger exporters and European customers. A Serbian automotive component manufacturer, for example, may not directly export a CBAM-covered product but could still be required to provide carbon information to customers managing supply-chain emissions and future regulatory exposure.

The potential extension of CBAM to around 180 downstream products would accelerate this trend. Products under consideration contain an average of approximately 79% steel or aluminium content and include industrial equipment, motors, pumps, refrigerators, robots, cranes, lifts, vehicles, medical equipment and metal furniture.

Carbon intensity becomes an investment-location factor

Foreign investors evaluating Serbia will increasingly consider carbon performance alongside labour costs, logistics, incentives, trade access and workforce capabilities. Future investment decisions may include assessments of renewable electricity availability, grid capacity, local material carbon intensity, waste infrastructure, supplier readiness and environmental data quality.

A manufacturing location with lower production costs can lose competitiveness if exported products carry significant carbon costs at the EU border. For some emissions-intensive and low-value goods, CBAM costs could exceed 50% of the underlying product value, creating pressure for companies to change technology, energy sources or product portfolios.

The difference between companies will increasingly depend on their ability to establish verified emissions systems, protect customer relationships and direct investment towards measurable carbon reductions. Serbia’s CBAM challenge is therefore not only a question of national financial exposure. The decisive factor will be how individual companies measure, manage and reduce the carbon content of every exported product.