The implementation of the European Union’s Carbon Border Adjustment Mechanism (CBAM) presents a complex challenge for Serbia’s export economy. This mechanism, which varies in its impact across different sectors and product categories, highlights Serbia’s vulnerability due to the composition of its exports and the carbon intensity present in its industrial activities. While Serbia is not among the top countries facing direct CBAM costs in the EU steel market, it still faces significant risks stemming from its export structure.
Current projections indicate that Serbia’s projected CBAM costs related to steel trade will be approximately €7.9 million by 2030. This figure suggests a lower exposure compared to major global suppliers such as India, Russia, Ukraine, and China. However, this perspective can be misleading when considering Serbia’s actual trade dynamics. In 2024, iron and steel exports to the EU were valued at around €556 million, indicating a notable segment of the export market despite not dominating overall figures. The higher carbon intensity associated with upstream and semi-finished steel products contributes to increased vulnerability under CBAM regulations.
The World Bank has estimated that Serbia exported about $3 billion worth of goods subject to CBAM in 2022, accounting for nearly 10% of total exports. Under assumptions of an $80 per tonne CO₂ price and the elimination of free allowances without domestic carbon pricing adjustments, Serbia’s potential annual CBAM liability could reach approximately $240 million. This amount represents around 1.5% of total fiscal revenues, indicating a substantial macroeconomic impact.
Electricity plays a crucial role in this context, as Serbia’s reliance on lignite-based power generation introduces additional vulnerabilities. The carbon intensity embedded in electricity exports affects both direct costs on exported electricity and indirect costs on industrial goods that depend on this energy source. Consequently, the measurement of Serbia’s export risk must consider both industrial outputs and the underlying energy system.
Sector-specific estimates reveal that while steel is the most prominent area of exposure, it may not have the largest overall impact. Assuming Serbia maintains an annual export range of €500–700 million in iron and steel to the EU, CBAM costs could vary between €50 million and €120 million by 2030 based on carbon pricing and emissions benchmarks. This indicates a cost ratio of approximately 8–18% for the most affected product categories.
Aluminium exports present a smaller exposure but are sensitive due to their reliance on electricity. Although primary aluminium smelting is not currently significant in Serbia, downstream processing linked to regional supply chains may still experience cost increases driven by embedded emissions from energy consumption.
Fertilizers and chemicals also represent another layer of risk, particularly due to high emissions from natural gas or other carbon-intensive production inputs. Current estimates suggest potential CBAM-related cost increases for this sector could reach €10–30 million annually by 2030.
Electricity exports further complicate matters; if these reflect high carbon intensity associated with lignite generation, substantial CBAM costs could arise under varying carbon price scenarios. Electricity exports could incur cost burdens equivalent to 20–40% of wholesale value at prices between €80 and €100 per tonne CO₂.
Collectively, these sectoral assessments suggest that Serbia’s total CBAM-related exposure by 2030 could range from €150 million to €300 million annually, aligning closely with the World Bank’s estimate of $240 million. The lower end reflects potential efficiency improvements and changes in product mix, while the upper end assumes full cost pass-through without structural changes in industry or energy systems.
The implications extend beyond individual exporters as CBAM introduces a carbon cost into Serbia’s external trade balance. Without substantial reductions in grid carbon intensity, Serbia risks establishing a structural cost disadvantage within its export model. Conversely, investment in renewable energy generation and grid modernization could provide pathways for reducing exposure across various sectors.
As Serbia navigates these challenges, there exists an opportunity for transformation through investments in renewable projects and enhanced energy efficiency. Successful implementation of these initiatives could enable Serbia to transition from being a high-carbon exporter to supplying lower-carbon industrial goods within European markets.
The gradual phase-in period for CBAM from 2026 to 2034 offers a window for adjustment; however, it also presents risks associated with delayed responses from exporters. Those who proactively adapt their strategies regarding energy sourcing and process improvements will likely maintain competitive margins, while those who do not may face ongoing challenges as carbon costs become increasingly integrated into trade flows.
Serbia’s export framework stands at a pivotal moment as it shifts towards a model where carbon emissions are factored into pricing structures. The key figures—€556 million in steel exports and $3 billion in CBAM-covered trade—underscore this transition from an export system indifferent to costs to one where carbon emissions are critically evaluated as part of operational strategy.
