Serbian exporters and electricity traders must manage two regulatory frameworks as the European Union’s Carbon Border Adjustment Mechanism (CBAM) continues to evolve: the rules currently in force and proposed changes that could alter electricity import requirements and expand the mechanism’s reach across industrial supply chains.
CBAM has entered its definitive phase. The European Commission has published definitive-period guidance covering electricity, iron and steel, aluminium and other regulated sectors, and updated its general questions and answers. Compliance must be based on the requirements applicable to the import period, rather than anticipated changes still under negotiation.
Electricity Imports Remain Subject to Specific CBAM Conditions
The 50-tonne de minimis threshold introduced for cement, iron and steel, aluminium and fertilisers does not cover electricity or hydrogen. EU importers of Serbian electricity therefore cannot assume that small transactions fall outside CBAM because of their limited value or volume.
The European Commission has proposed changes to the electricity methodology under COM(2025) 989. The package would broaden the treatment of power purchase agreements (PPAs) involving intermediaries, remove the existing network condition in Annex IV, point 5(b), and revise the nomination test. The proposal also aims to encourage decarbonisation in third-country electricity systems by changing the methodology used to attribute embedded emissions.
Proposed Changes Remain Under EU Negotiation
The reform has advanced through the EU institutions but has not become final legislation. The Council of the European Union has agreed its position, while the European Parliament has adopted its first-reading position and returned the file for interinstitutional negotiations.
Serbian developers and electricity traders consequently need to maintain two sets of assumptions: an operating model based on current law and a separate scenario assessing the effects of any eventual reform. Long-term contracts should reflect the same distinction. A change-in-law clause can permit a PPA to adopt a broader intermediary structure once a defined legal trigger has occurred. That trigger should be the publication and application of an adopted rule, rather than a political announcement.
Historical evidence must remain linked to the regulations applicable when the electricity was imported. Reconstructing or rewriting data files under a subsequently amended methodology could create additional audit difficulties.
Project Finance Must Reflect Existing Requirements
Investors should not increase the capitalised value of expected export premiums solely because the Commission’s proposal could make CBAM qualification easier. Banks should assess whether a project remains viable under the current framework and treat potential benefits from reform as additional upside until the final regulation, its application date and implementing details are established.
This approach separates revenue supported by existing requirements from income that depends on legislative changes. It also allows developers to prepare for a revised electricity methodology without relying on it prematurely in their financial models.
CBAM Expansion Could Cover More Downstream Products
A separate element of the reform concerns the potential expansion of CBAM into downstream manufacturing. The European Commission proposed adding 180 steel- and aluminium-intensive downstream products, with the expanded scope intended to apply from 2028.
The Council’s position increased the proposed list to approximately 200 products, while the European Parliament supported a substantially wider scope of 457 products. Negotiations over the final list remain ongoing. The proposed expansion would extend the mechanism further into industrial supply chains, beyond its existing focus on basic materials. Serbian manufacturers should therefore assess their exposure not only through direct exports of covered goods but also through steel and aluminium inputs incorporated into products sold in the EU.
Serbia’s EU Trade Links Increase Exposure
Serbian goods exports reached approximately €23.7 billion, an increase of 8.8% year on year. EU member states accounted for 58.3% of Serbia’s total external trade over the same period.
These trade links make CBAM developments relevant to a broad range of Serbian businesses, including companies whose products are not currently included in the mechanism. Mapping steel and aluminium inputs throughout production and export supply chains can help businesses identify potential exposure if the proposed downstream expansion is adopted.
Exporters must continue meeting current CBAM requirements while developing data systems that can accommodate changes to the electricity methodology and incorporating appropriate conversion clauses into long-term contracts.
Supported by CBAM.Clarion.Engineer
