Long-awaited implementing acts and amendments to the CBAM Regulation brought only a minor relief for the Western Balkans, investors in renewables, and electricity traders. The documents has been analyzed that the European Commission published in December 2025, and the impact of the proposed measures on Energy Community contracting parties – Albania, BiH, Kosovo*, Montenegro, North Macedonia and Serbia.

From January 1, European firms importing aluminum, cement, electricity, iron and steel, hydrogen and fertilizers are obliged to pay a carbon price within the European Union’s Carbon Border Adjustment Mechanism (CBAM).

Last year, the CBAM Regulation was criticized by experts from the Western Balkans (Ljubo Maćić, Zoran Gjorgjievski), European think-tanks (Bruegel), and organizations (Energy Traders Europe). Even the European Network of Transmission System Operators for Electricity (ENTSO-E) requested that the transitional period be prolonged.

They said charging the tax, which started on January 1 as scheduled, would harm countries outside the EU, but also EU member states, market coupling of Western Balkan countries, and electricity trade.

Uncertainty surrounding electricity transit and trade remains high

The analysis showed that the European Commission is proposing changes to the CBAM regulation that would introduce a more favorable method for calculating the national emissions factor and actual emissions values. This benefits non-EU countries that export electricity to the EU, owners of operational renewable energy power plants in these countries, and future green energy investments.

The proposal foresees amendments to the procedure for market coupling, but it is unclear whether these will bring any concrete changes. The commission didn’t propose changes regarding transit, and consequently, electricity trading.

Provided that the proposal is accepted as proposed, it will bring the said positive changes in calculating the national emissions factor and actual emissions values only by the end of the year, meaning that uncertainty in the market will persist until then.

Uncertainty surrounding electricity transit and trade remains high. The impact on the Western Balkans, as well as on the EU member states Bulgaria, Croatia, Greece, Hungary, Romania, and Slovenia, will become clear in the coming weeks and months.

There are two legislative streams

There are two relevant streams currently ongoing in EU legislation for CBAM for electricity. The first are the so-called implementing acts, which are similar to secondary legislation in national law. They further define the technical details of the CBAM regulation.

The other part is the commission’s proposal to amend the CBAM Regulation itself. It will become part of the law when the other co-legislators in the EU – the Council of the EU, which includes the member states, and the European Parliament – together agree on it.

Nobody can say exactly when that process will be finished, but most likely not before the autumn.

National emissions factors, actual emission values: improvement

There is a proposal to change the way the national emission factors are calculated in the main CBAM Regulation. Currently it only includes the part of the electricity mix based on fossil fuels, regardless of their share in the country’s power generation mix.

For example, for Serbia, a contracting party of the Energy Community, this factor is 1.04. If the national power mix is taken into account, it would go down to 0.7, making the cost of CBAM about 40% lower.

The commission proposed to replace the electricity mix based on fossil fuels, in its accounting system, with one encompassing all energy sources.

The commission also intends to change the requirements for switching to actual emission values

The commission also intends to change the requirements for switching to actual emission values. These are relevant for the producers of renewable energy in non-EU countries. Current conditions are very strict and, to some stakeholders, not achievable.

For example, if a wind farm in the Western Balkans, owned by a domestic or foreign investor, cannot meet these conditions the CBAM payments for the electricity from the facility exported to the neighboring Croatia would be calculated based on the national emissions factor.

The commission suggested that an importer shouldn’t need to have a power purchase agreement (PPA) with a producer directly, which is one of the conditions, but that it could be done through intermediaries. It also proposed the removal of the requirements related to congestion.

These proposals could remove negative impacts on renewable electricity exports and development in non-EU countries, including contracting parties.

Transit: nothing new

The issue of transit hasn’t been addressed in the acts and amendments.

Under the CBAM Regulation, it is unclear how electricity transit costs would be calculated. For example, from Bulgaria to Hungary via Serbia, and who would be required to cover them.

The commission clarified several times that transit isn’t subject to CBAM. However, the physical, practical implementation is the problem.

For example, a trader buys electricity from Greece, transits it through North Macedonia, and puts it on the Serbian SEEPEX power exchange. Somebody else buys it and sells it in Hungary.

It would be very difficult or impossible to say that electricity from Greece was sold into Hungary.

This is why stakeholders take a conservative approach and say that they cannot prove. So, most likely they wouldn’t opt for these countries – non-EU countries, like contracting parties – for transit.

Retroactivity: possibility for improvement

One of the provisions in the commission’s proposal to amend the CBAM Regulation is that the changes in the electricity sector could apply retroactively, starting from January 2026.

Just as a reminder, EU firms are obliged since the start of this month to pay a CBAM fee for importing designated goods and raw materials and electricity via purchasing so-called CBAM certificates.

Obviously, an importer will try to pass on this cost partly or fully to its counterparts in the third countries. But, importantly, EU firms won’t be able to purchase CBAM certificates yet this year, but only from February 1, 2027.

If the amendment on national emissions factor is adopted, for example in October, this could mean lower CBAM costs for EU importers of electricity from non-EU countries.

Without details on the path forward, market participants lack certainty about the level of CBAM costs

The commission intended to remedy some of the negative impacts on the electricity markets with amendments with retroactive effect. But without details on the path forward, market participants lack certainty about the level of CBAM costs to be paid for 2026.

Based on the current rules, CBAM costs for countries which have lignite in their generation mix could be EUR 70 per MWh to EUR 80 per MWh if the EU ETS price is around 80 EUR per ton of CO2. In some cases, the fee is almost 100% above the electricity price itself.

It is clear that it would rarely make sense to import electricity to the EU from third countries. The price difference, let’s say between Hungary and Serbia, would need to be more than EUR 70 per MWh to EUR 80 per MWh to make the business case.

Market coupling: nothing new or possibility for improvement

There are several references to market coupling in the proposal. Energy Community contracting parties are in different phases of market coupling with EU countries.

The commission has proposed signing memoranda of understanding with third countries. It would set out the timeline and conditions for an exemption from CBAM on electricity.

This could be done after the commission approves the so-called verification process of a contracting party’s transposition of the Electricity Integration Package (EIP). It would be a green light for the next stage, which entails the technical tests, leading up to the completion of market coupling.

The current wording in the proposal leaves room for various interpretations

The current wording in the proposal leaves room for various interpretations, one being that the MoU may open the door for an exemption already when the “point of no return” is reached. It is when the contracting party has done all its homework and only the technical tests remain.

However, the commission didn’t propose the other conditions for CBAM exemption to be changed, such as the development of a roadmap on the introduction of a CO2 price that would be equivalent to the level in the EU’s Emissions Trading System (EU ETS).

The question is what the MoU would exactly be about, and if “equivalent” could be defined more precisely.

Why is this important?

No contracting party has yet met the conditions to receive a CBAM exemption in the electricity sector. A critical requirement is to agree to charge an emissions price from 2030 equivalent to the EU ETS.

The CBAM regulation says that the tax cannot technically be implemented on a market which is coupled with the EU internal energy market

If equivalent means the same price, here is the outcome for Serbia, for example: The current CO2 price in the EU is EUR 80 per ton of CO2 equivalent, but is expected to rise to above EUR 100 by 2030, or even reach EUR 150. It would raise prices to consumers by about EUR 75 per MWh and EUR 110, respectively.

The CBAM regulation says that the tax cannot technically be implemented on a market which is coupled with the EU internal energy market. This is why there is a possibility for an exemption for electricity for imports from those countries which are coupled until a technical solution is found how to implement CBAM.

Starting from January 1, any country that is ready to be coupled would in parallel also need to qualify for and receive an exemption from CBAM for electricity. If you fulfil the conditions, you get coupled and get an exemption and CBAM will disappear.

What next?

It could be said that CBAM implementation as of January 1 will certainly affect market integration in the sense that people, businesses would react to market uncertainty.

Trade will be impacted; imports from contracting parties to the EU will be expected to disappear. Of course, contracting parties will continue to import electricity from the EU member states.

The weeks and months ahead will show to what extent the prices and liquidity would be affected in the contracting parties and neighboring EU member states Bulgaria, Croatia, Greece, Hungary, Romania, Slovenia.

For example, Greece would have only the Bulgaria-Romania route to export electricity, and it is already congested. Greece could face curtailments in renewable electricity.

We will also see what the effect on the renewables deployment in contracting parties will be. Are investors going to postpone investments until they see if the changes proposed by the commission are adopted, or are they going to leave for other markets?

Pozsgai: Amendments point in the right direction

Péter Pozsgai, Lead of the EU Carbon Border Adjustment Mechanism Readiness Task Force in the Energy Community Secretariat:

“The European Commission’s proposed amendments point in the right direction, reflecting a consideration of the progress of contracting parties in electricity market coupling, and better outlining the operational details of an exemption via an MoU. The refinement of the rules on national emission factors and the conditions for using actual emission values also demonstrate the intention to minimize the unintended impacts of CBAM on renewable development in contracting parties”.