Serbia’s reliance on lignite-fired electricity is becoming a growing commercial issue for exporters as the EU Carbon Border Adjustment Mechanism (CBAM) began covering electricity and several carbon-intensive industrial products from January 1, 2026.
The mechanism applies to imports of electricity, iron and steel, aluminium, cement, fertilisers and hydrogen from outside the EU and requires importers to account for embedded emissions. Although the financial settlement under CBAM is not immediate, European buyers are already seeking verified emissions data and comparing suppliers according to their carbon profiles. Electricity exporters must therefore account for the emissions intensity of Serbia’s generation mix when competing in the EU market.
The Energy Community calculated Serbia’s default electricity emissions factor at 1.041 tonnes of CO₂ per megawatt-hour for the second quarter of 2026. Using the reference carbon certificate price of €75.28 per tonne for that quarter produces an indicative exposure of about €78/MWh before adjustments. That figure does not represent a direct charge imposed on every Serbian generator, but it illustrates the potential effect of carbon costs on the economics of electricity traded across the EU border.
EPS Faces Greater Exposure in Cross-Border Electricity Trade
Elektroprivreda Srbije (EPS) remains Serbia’s dominant power producer and a central company in the country’s energy transition. Coal and lignite generation amounted to 6.54 TWh in the second quarter of 2026, a 12% decline from the same period a year earlier. Serbian electricity flows to Hungary more than doubled year on year during the quarter, although weather conditions, electricity prices and transmission conditions mean the increase cannot be attributed solely to CBAM. EPS’s 2025 financial statements provide an indication of the potential scale of the exposure. Its EU trading subsidiary exported 146,449 MWh during the year.
Using EPS’s illustrative carbon assumptions, an equivalent volume could correspond to approximately €11 million in CBAM costs. This is a hypothetical calculation rather than a liability incurred during 2025. The change affects more than the cost of individual electricity transactions. Export-oriented power generation must increasingly be supported by lower emissions or reliable emissions data if Serbian electricity is to remain competitive in European markets. The consequences also extend to industrial exporters.
HBIS Serbia operates blast furnaces and flat-steel production at Smederevo, placing its operations within a sector covered by CBAM. Producers of fertiliser, cement and aluminium face comparable reporting and cost requirements. Automotive and appliance manufacturers are not directly covered during the first CBAM phase, but their European customers are increasingly seeking product-level carbon information and evidence of lower-carbon electricity as part of supplier qualification.
Renewable Projects Create Demand for New Energy Infrastructure
Serbia has begun expanding renewable generation as the carbon requirements of European trade increase. The second renewable-energy auction, held in March 2025, awarded support for 300 MW of wind capacity and 124.8 MW of solar capacity. Together with the first auction round, supported renewable capacity reached approximately 770 MW. A separate agreement involving Hyundai Engineering and UGT Renewables envisages at least 1 GW of alternating-current solar capacity together with battery storage of up to 200 MW/400 MWh. The assets are to be transferred to EPS once completed.
The investment programme creates opportunities for wind-turbine and solar-panel suppliers, battery companies, grid engineers, renewable-power traders and financial institutions. Industrial companies can use renewable power-purchase agreements and guarantees of origin to support their export requirements, while banks can finance contracted energy cash flows and technology companies can provide systems for measuring electricity production and emissions. The availability of generation is not the only constraint. Grid connections, balancing arrangements, permitting and the governance of state-owned energy companies will determine how quickly new renewable capacity can become operational.
Serbia has transposed elements of the EU electricity-integration package, while trading volumes on the SEEPEX day-ahead market increased in 2024. Gas-market access and storage unbundling remain weaker. Restructuring at EPS has progressed slowly, while distribution losses, payment discipline and tariff adequacy continue to influence the investment environment.
NIS Ownership Adds Another Energy-Security Risk
Serbia’s energy transition is also taking place against uncertainty surrounding Naftna industrija Srbije (NIS) and its Russian ownership. The United States had granted a sanctions waiver through August 28, 2026, while a proposed acquisition of the Russian stake by Hungary’s MOL was awaiting approval. The Serbian state owns 29.9% of NIS. The transaction had not been completed at the reporting cut-off. The sanctions are imposed by the United States rather than as part of the EU accession process. The NIS situation nevertheless illustrates the connection between ownership structures, foreign policy and energy security and their potential effect on corporate finances and energy supply.
Established energy companies retain assets that new market entrants cannot quickly reproduce, including mines, power stations, transmission infrastructure, a refinery and existing industrial sites. At the same time, incumbent companies carry legacy emissions, labour obligations and politically determined pricing structures. New investors can bring capital and lower-carbon technologies but remain dependent on permits, grid-connection availability and reliable buyers for their output. Serbia’s energy transition therefore involves changes across the existing industrial system rather than simply adding renewable generation.
The required investments include auditable emissions systems, cleaner electricity generation, more efficient industrial furnaces, battery storage, stronger electricity networks and commercial contracts that support investment in lower-carbon production.
As Serbia’s integration with European markets advances, carbon costs will increasingly affect exporters regardless of the timing of domestic policy changes. The country’s coal-based generation has historically supported the cost structure of Serbian industry. With CBAM now applying to covered trade with the EU, emissions have become a measurable commercial factor in electricity and industrial supply chains.
