The National Alliance for Local Economic Development (NALED) has called on the authorities to establish a regulatory framework that would shield Serbia’s energy-intensive industries from the impact of the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM), which threatens jobs and businesses employing about 7% of the country’s workforce and accounting for 11% of its GDP.

Once the EU starts taxing the import of high-emission products on January 1, 2026, exporters from Serbia will face an increase in the prices of their products on the EU market. Simultaneously, they will face unfair competition on the domestic market from third countries that have not introduced a national carbon pricing system, according to the National Alliance for Local Economic Development (NALED).

The entry into force of the Carbon Border Adjustment Mechanism (CBAM) means that a levy will be charged on imports of cement, iron, steel, aluminum, fertilizers, hydrogen, and electricity into the EU from countries that do not tax CO2 emissions. Although there is more and more talk about delaying the implementation of the tax, it would not make the problem of CO2 taxation disappear – it would only give the affected countries more time to prepare for the change.

NALED has completed an analysis of CBAM’s potential impacts

NALED warns that the introduction of CBAM could have a severely adverse and destabilizing impact on the competitiveness of Serbia’s energy-intensive industries, which requires an urgent and appropriate response from state institutions. NALED’s recently completed analysis of potential impacts of CBAM suggests a high risk of financial pressures and loss of competitiveness of Serbia’s energy-intensive industries, which employ about 7% of the country’s workforce and account for 11% of its GDP.

“To maintain the competitiveness of domestic industry in the initial stage of its green transition, it is necessary to provide mechanisms for reducing CO2 emissions as soon as possible through a set of national regulatory measures. After that, a national mechanism should be established that would include levying a carbon tax on domestic industry, along with a national CBAM mechanism, modeled after the EU’s, to tax goods from third countries where climate policies are less ambitious than Serbia’s,” says Slobodan Krstović, director of NALED’s Sustainable Development Department.

Revenues from CO2 taxation would be used to decarbonize Serbia’s energy-intensive industries

This would ensure a level playing field, in terms of costs related to CO2 emissions, for the sale of energy-intensive products on the Serbian market, as is the case in the EU.

Additional budget revenues that would be secured in this way would primarily be used for supporting the decarbonization of energy-intensive industries, Krstović added.

The analysis further shows that introducing a national CO2 tax at the carbon price projected for 2034 in the National Energy and Climate Plan (NECP) –about EUR 40 per ton – would cost the economy up to EUR 539 million a year, not including the electricity sector.

A domestic CBAM would bring an additional EUR 13 million in state budget revenues in 2027 and as much as EUR 128.6 million in 2034.

Serbia needs mechanisms to decarbonize energy-intensive industries

NALED believes that such a measure, which would channel revenues into Serbia’s budget instead of the EU coffers, would be sustainably justified if the state first introduced regulatory mechanisms to help industry reduce its CO2 emissions.

Given that CBAM and the Green Agenda are new regulatory factors, which have not been taken into account before when defining state aid rules, it is necessary to thoroughly review the existing regulations for granting state aid to companies, according to NALED.

Adapting the national regulatory framework to ensure mechanisms for the decarbonization of energy-intensive industries primarily involves liberalizing the import of alternative fuels and raw materials, banning the export of waste that can be processed in Serbia, and incentivizing the construction of new renewable energy capacities.

If the state fails to react, the domestic industry will face a serious threat

In the absence of state action, NALED warns, the projected decline in the cost efficiency of domestic industry would irreversibly jeopardize Serbia’s exports to the EU market, as well as its competitiveness on the domestic market due to a sharp increase in imports of CBAM goods from non-EU countries.

This would inevitably lead to the loss of a large number of jobs and the financial sustainability of the entire energy-intensive industry operating in Serbia, NALED concludes.

The authorities in Bosnia and Herzegovina recently estimated the economy’s potential loss due to CBAM at between BAM 722 million and BAM 3.17 billion (EUR 369 million to EUR 1.62 billion).