December 19, 2025

by AEA in News

CBAM tests market integration and green investments

Author: Zoran Gjorgjievski, CEO of North Macedonia’s National Electricity Market Operator MEMO

This text reflects a personal viewpoint and represents an attempt to present the Macedonian position in an argument-based manner — with respect for European objectives, but also with a clear message that the implementation of CBAM must be just, proportionate, and based on clearly defined implementation phases.

The Carbon Border Adjustment Mechanism (CBAM), which is scheduled to enter into force on 1 January 2026, represents one of the most ambitious instruments within the European climate package. Its objective – to create a level playing field between industries within the European Union and those outside the Union – is, at a theoretical level, justified and logical. However, the application of CBAM to electricity in regions such as ours, where market and regulatory conditions are still transforming, raises serious risks and challenges that deserve careful assessment. This is particularly relevant given the increased volume of investments in renewable energy sources (RES) recorded in recent years, accompanied by ambitious plans for their further expansion through active institutional support.

For Macedonia, which has invested significant efforts in the development of an organized electricity market – currently operating at the day-ahead level and, as of next year, also at the intraday level – as well as in its gradual integration with the single European market, the application of CBAM may create structural imbalances.

Changes in the structure of electricity generation and price formation on European markets in recent years indicate high volatility, which is even more pronounced in markets of a similar size to ours, primarily due to limited liquidity and the specific characteristics of the generation mix. The introduction of an additional carbon component, based on indirect verification methodologies, may introduce further unpredictability and reduce the competitiveness of domestic RES producers.

At the same time, subjecting exports to CBAM could create pressure during hours of low consumption and increased RES production – periods in which the majority of electricity exports from our country are concentrated. This could lead to a paradoxical situation in which RES producers are forced to curtail or suspend production in order to avoid imbalance costs.

Risks for the organized electricity market

Although initial analyses suggest that an increase in trading volumes on the day-ahead market may be expected in the short term, the inability to place total production through the organized market will encourage market participants to seek alternative channels. This carries the potential to undermine the development of a transparent and competitive market and to reduce trading liquidity.

For a young market like ours, which has recorded significant liquidity growth of over 40% and a record number of active participants in just the past year, this could represent a real slowdown of its development momentum.

The energy crisis of the 2021–2023 period clearly demonstrated that security of supply and price stability cannot be ensured without functional, liquid, and investment-attractive electricity markets. Under such conditions, the application of CBAM to electricity, without taking into account the specific characteristics of organized markets in non-EU countries, may produce the opposite effect: reduced liquidity, increased uncertainty, and delayed investments in renewable energy.

Differing speeds of two interrelated mechanisms – market coupling and CBAM – call into question the integration of electricity markets

This is particularly important given that regional integration into the single European market has been slowed by a number of objective and subjective factors, both in the Energy Community Contracting Parties and within the EU itself, and cannot proceed at the same pace as the implementation of CBAM. These differing speeds of two interrelated mechanisms – market coupling and CBAM – call into question the very rationale of the Energy Community, namely the integration of electricity markets.

It thus becomes evident that introducing CBAM without adequate progress in market integration with the EU creates a structural imbalance, whereby Energy Community countries incur additional costs without fully benefiting from an integrated market. Therefore, accelerating market coupling and aligning the start of CBAM implementation accordingly is a key prerequisite for mitigating the economic and investment impacts of CBAM.

Potential slowdown of renewable energy investments

Although CBAM is theoretically intended to stimulate green investments, in practice, there is a risk that it could have the opposite effect on already implemented projects, primarily due to the seasonal and daily characteristics of RES generation and the limited capacities for electricity storage.

A premature and insufficiently calibrated introduction of CBAM for electricity may create a perception of increased regulatory risk

This situation may place serious pressure on the financing sources of RES projects, exposing them to increased credit risk, especially in cases where expected returns on investment (ROI) are brought into question due to CBAM-related effects. This analysis does not even address the distorted investment expectations created during the energy crisis, when extreme electricity price growth further skewed investment projections.

Furthermore, Macedonia’s energy transition largely depends on private capital and strategic investors, who expect a stable, predictable, and competitive market environment. A premature and insufficiently calibrated introduction of CBAM for electricity exports by the EU may create a perception of increased regulatory risk, which could result in the postponement or redirection of investments to other markets.

Need for a transitional period and regional coordination

Despite the challenges outlined above, it is important to emphasize that Macedonia supports the objectives of European decarbonization and is already making substantial efforts to align with EU policies. What is essential is the provision of an appropriate transitional period, aligned with the pace of integration into the single European market.

Such a transitional period would allow the domestic industry and the energy sector to adapt gradually, without compromising already established market instruments and ongoing investments.

The regional context is equally important. The electricity systems of the Western Balkans are highly interconnected, and the risk of destabilization in one country can easily spill over into others. Therefore, it is necessary for the European Commission to consider a model that rewards reforms, supports the gradual phase-out of coal, and enables the integration of electricity markets without creating new barriers.

Where is the market headed?

Although CBAM has a clear climate and economic rationale, the question remains whether its application at this point in time is aligned with the realities in the countries of the Energy Community.

Macedonia demonstrates a clear commitment: market liquidity is increasing, renewable energy sources are developing dynamically, and concrete steps are being taken toward market coupling with the EU. Excessive rigidity in the application of CBAM could undermine this positive trajectory.

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December 19, 2025

by AEA in News

EU simplifying CBAM exemption for electricity, improving emissions calculation

The European Union is further simplifying the Carbon Border Adjustment Mechanism (CBAM), but with stricter oversight and an extension to 180 steel- and aluminium-intensive downstream products. From January 1, importers of designated goods and commodities will be paying the emissions tax.

Among the novelties, countries in the Energy Community that transposed the relevant EU regulations are getting an opportunity for exemptions for CBAM for electricity earlier than initially planned. The new legislation is tackling the hurdles for electricity transit as well. The calculation of emissions on national levels in the same sector is becoming more favorable for the payers of the cross-border CO2 tax. There is even a possibility, in theory for now, to declare the actual emissions level, which would suit renewable energy producers.

In response to feedback from industrial producers and other stakeholders, the European Commission proposed measures to prevent circumvention of CBAM and strengthen its efficacy. The next step is to expand it to 180 manufactured products with high steel or aluminum content, 79% on average. The list mostly consists of machinery and hardware, and 6% of the items are household appliances.

From January 1, importers will be paying a carbon price within the Carbon Border Adjustment Mechanism, which is tied to the Emissions Trading System (EU ETS). It concerns aluminum, cement, electricity, iron and steel, hydrogen and fertilizers, and the expenses will spill over to their suppliers in third countries such as the Western Balkans and Turkey.

The charge for downstream products is planned to be rolled out in January 2028.

Striving for level playing field

The system gradually levels the field, by the beginning 2034, with producers of the same goods and commodities in the EU. The measures are introduced in the form of delegated and implementing acts. They enter into force if other institutions responsible for them, like the European Parliament, don’t block them.

Hoekstra: Our system was too broad, too clunky and had too many loopholes.

“CBAM makes sure there is a level playing field – that we’re not asking anything more, or asking anything less for those goods that come into the EU. And in doing so, we’re rewarding investments in low carbon… We’re not going to ask anything more from others, than we’re asking from ourselves. During the CBAM transition period, we learned important lessons. Our system was too broad, too clunky and had too many loopholes,” said European Commissioner for Climate, Net Zero and Clean Growth Wopke Hoekstra.

Thoroughly against evasion

The tax level is envisaged to be proportional to an established quantity of greenhouse gases released in production. However, if the authorities notice attempts to evade the levy, they can make the process of providing evidence stricter and, in the meantime, switch to a charge under the emissions factor of the particular country of origin.

“If I had to summarize these points in a few words, I would say: a simpler CBAM, more robust in its application, and fairer in its scope,” said the European Commission’s Executive Vice-President for Prosperity and Industrial Strategy Stéphane Séjourné.

Shortcut to exemption from CBAM for electricity

One of the measures is intended for easing the administrative burden for countries in the process of electricity market coupling with the EU, namely the Energy Community contracting parties.

There is going to be a possibility to sign an MoU with the European Commission with a detailed schedule

The commission may sign a memorandum of understanding with a third country, once the commission has assessed that the country has fully transposed the electricity market acquis, the proposal reads. The document would lay down details on the timeline for the CBAM exemption, including in relation to technical work still to be carried out between transmission system operators (TSOs), and for implementing a carbon pricing instrument equivalent to the EU ETS as far as electricity generation is concerned.

Hoekstra said technical adjustments to CBAM would be made to facilitate market coupling when the relevant countries are ready.

Import tax for electricity from Energy Community to be 30% lower on average

Stakeholder feedback and the experience with the implementation of CBAM during the transitional period – before the actual charge – demonstrated that the rules for electricity imports are overly rigid, the European commissioners added. In particular, they ascertained that progress in decarbonizing electricity production isn’t sufficiently acknowledged or encouraged.

Unlike with the goods, for electricity there is a default country-specific emissions value. It is based on production from fossil fuels and a five-year average. Coal is mostly dominant in the Western Balkans, except for Albania, which has a completely green mix. In addition, the conditions which must be met to declare actual emissions of electricity have proven to be almost impossible.

The proposed package is introducing solutions for electricity transit and cross-border PPAs

In the new setting, the national value will reflect the carbon intensity of all sources of electricity. The estimated taxes in the Energy Community would be over 30% lower on average.

The procedure is being streamlined for declaring actual emissions. On the other hand, at least in the Western Balkans, there has been almost no progress in that area. The proposed package is also introducing solutions for the hurdles in electricity transit through Energy Community Contracting Parties and cross-border power purchase agreements (PPAs).

Power imports from the Western Balkans account for 1% of the EU’s demand, but their share in Croatia, Bulgaria and Greece is significant, the European Commission explained. Importantly, exports of electricity to the EU represent some 58% of Montenegro’s exports to the EU, compared to 5% for Serbia and Albania.

Funds for maintaining competitiveness of domestic industrial producers in third countries

A fund has been launched to temporarily support EU producers of CBAM goods and mitigate carbon leakage risks. It addresses the competitiveness loss in third-country markets with a weaker climate policy and lower costs. Potential beneficiaries will have to demonstrate decarbonization efforts.

Th European commission is also preparing proposals for limiting scrap aluminum exports and using more scrap metal. Furthermore, it said pre-consumer metals scrap, from manufacturing, would come under CBAM.

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December 11, 2025

by AEA in News

Energy Community: Serbia best in Western Balkans in alignment with EU regulations

Integration with the European Union is advancing in practice, and the decade ahead must sustain the momentum with focus and determination, Energy Community Secretariat Director Artur Lorkowski pointed out in this year’s Annual Implementation Report.

Serbia fares best in the Western Balkans, as it advanced to 63% from 55%. Bosnia and Herzegovina is at the bottom of the entire Energy Community chart, with alignment at just 26%.

Following the 2025 CBAM Readiness Tracker, the Energy Community Secretariat also published its Annual Implementation Report 2025. The international organization marked its 20th anniversary this year.

“The message from Athens was clear: integration with the European Union is advancing in practice, and the decade ahead must sustain this momentum with focus and determination. The 2025 Implementation Report reflects this direction. It shows a region taking decisive steps toward alignment with the EU acquis and strengthening the foundations required for accelerated integration. It also highlights where further effort is needed for gradual integration with the EU energy markets – completing the electricity market coupling, boosting the cross-border trade in renewables, eliminating bottlenecks for gas flows, synchronising energy infrastructure development and gradual alignment of carbon pricing mechanisms,” Energy Community Secretariat Director Artur Lorkowski stressed.

He added that electricity integration remains central. Several contracting parties completed the required transposition of the European Union’s Electricity Integration Package (EIP), while others advanced significantly.

Deadline for requests for 2028 market coupling to expire in seven months

Intensive market coupling efforts throughout 2025 by contracting parties and EU stakeholders have laid the groundwork for a compliant and sustainable integration process, according to the Annual Implementation Report. Of note, market coupling is the requirement for an exemption from the EU’s Carbon Border Adjustment Mechanism (CBAM) for electricity.

Contracting parties aiming to go live in 2028 must submit a formal request by July, the secretariat warned.

Energy Community Serbia best score Western Balkans — Photo: Energy Community Secretariat

Montenegro, North Macedonia advance slightly to match average

Five main indicators measure the integration with the EU energy markets and they are combined into an overall score. The Energy Community as a whole is at 53%.

Moldova has advanced the most in the process by far, climbing eight points from last year to reach 74%. Serbia fares best in the Western Balkans, as it advanced to 63% from 55%. It ranked the highest last year as well. Bosnia and Herzegovina is at the lowest level again. It retreated four points, to just 26%.

Montenegro and North Macedonia advanced slightly, both to 53%, to match the Energy Community average. Kosovo* has weakened to 46% while Albania remained at 50%.

At 61%, North Macedonia is in the lead in the Western Balkans in the markets and integration segment. Serbia reached the highest level in the Energy Community in energy sector decarbonization, 83%.

Post Views:52

* This designation is without prejudice to positions onstatus and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo declaration of independence.

December 10, 2025

by AEA in News

EU considering Montenegro’s proposals for changes to CBAM

Minister of Energy and Mining of Montenegro Admir Šahmanović met with several senior officials of the European Commission. The messages in Brussels regarding the Carbon Border Adjustment Mechanism (CBAM) were encouraging – changes in the regulation are being considered, including Montenegro’s demands, according to the ministry.

Minister of Energy and Mining of Montenegro Admir Šahmanović led a delegation that visited the European Commission’s headquarters. They met with Director General for Taxation and Customs Union Thomas Gerassimos, Deputy Director-General for Climate Action Jan Dusík and Director for Western Balkans Valentina Superti and Head of the Unit for Bosnia and Herzegovina and Montenegro Barbara Jésus-Gimeno, both from the Directorate-General for Enlargement and Eastern Neighbourhood.

The focus of the discussions was on key processes in the energy sector and especially on the Carbon Border Adjustment Mechanism (CBAM), which is currently Montenegro’s main priority, the ministry said. Šahmanović presented the reforms that the country conducted and stressed that the government is almost entirely aligned with its European requirements in the legal and strategic sense.

CBAM is now Montenegro’s priority

Over the last eight months, Montenegro adopted a new Law on Energy alongside dozens of bylaws, including some tied to the Law on the Use of Energy from Renewable Sources. The government launched the first renewable energy auction, for solar power, and signed a memorandum of understanding on market coupling with Italy, with which talks continue on the construction of the second wire in the undersea cable. Laws on cross-border energy exchange and the construction of cross-border energy assets are drafted, the update adds.

The minister said Montenegro is finalizing its National Energy and Climate Plan.

More flexible models for CBAM to be considered

The European Commission’s representatives acknowledged Montenegro’s progress and asserted that it is in the lead in the region as concerns the degree of compliance in the energy sphere, the ministry said.

“Within the same context it was agreed that discussions would be continued on a technical level in the following weeks to consider the possible, more flexible models of applying CBAM and to enable candidate states to adjust to the mechanism faster and more efficiently. A special focus will be on the elaboration of compromise solutions – especially the ones that enable a gradual, just and predictable implementation, with a minimal burden on the Montenegrin energy sector, which is significantly reliant on electricity exports,” the update reads.

EU’s cross-border tax on greenhouse gases to have weaker impact than in earlier projections

The European Commission conveyed encouraging messages: a smaller impact from CBAM is expected than in earlier projections, and amendments to the regulation are being considered, including demands from Montenegro from the consultations, according to the ministry.

Minister Šahmanović said Montenegro is remaining fully dedicated to its European obligations, but that it expects an acknowledgment of the results that it achieved, so that the implementation of CBAM is harmonized with the realities of the country’s energy system and its strong renewables investment cycle.

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December 8, 2025

by AEA in News

Serbia rolls out taxes on greenhouse gas emissions, imported carbon-intensive products

The Serbian Law on Greenhouse Gas Emissions Tax and Law on Carbon-Intensive Product Imports Tax, both at EUR 4 per ton of CO2 equivalent, are coming into effect on January 1. It is the country’s answer to and equivalent of, respectively, the European Union’s Carbon Border Adjustment Mechanism (CBAM). Notably, several bylaws are still required for the new legislation to be enforced.

The National Assembly of Serbia passed the Law on Greenhouse Gas Emissions Tax and Law on Carbon-Intensive Product Imports Tax today, without accepting any of the opposition’s proposals for changes in the two bills.

On January 1, importers of electricity, cement, iron and steel, aluminum, hydrogen and fertilizers to the European Union will start paying the CBAM carbon dioxide tax. If the country of origin also has a CO2 pricing system and the EU recognizes it, the sum will be deducted from CBAM.

The domestic greenhouse gas emissions tax is Serbia’s answer to the cross-border levy, while with the new import tax it is establishing a corresponding mechanism. Both are EUR 4 per ton of CO2 equivalent, covering also nitrous oxide (N2O) and perfluorocarbons (PFCs).

They are intended to lower pollution, improve energy efficiency, incentivize the deployment of renewable energy and secure a more equal position for the Serbian industry in the domestic and international markets, according to the sidenotes.

Both laws to enter into force on January 1, when EU also starts charging CBAM

The first of the two taxes is for big industrial emitters in the sectors of cement, fertilizers, iron and steel, aluminum and electricity. Both laws are coming into effect on January 1, just like the CBAM charge. However, several bylaws are still required for Serbia to enforce the new legislation.

The CBAM tax is envisaged to rise every year until in 2034 it becomes equal as the prices of greenhouse gas emission certificates in the EU’s Emissions Trading System (EU ETS). Electricity is different, as the amount will from the start correspond to the carbon intensity of the country of origin’s entire production mix.

According to Special Advisor at Serbia’s Economics Institute Ljubo Maćić, charging CBAM will prevent power market coupling between Serbia, other Energy Community contracting parties and the European Union, and discourage investment in renewables.

Of note, the administration in Brussels plans to expand the mechanism to other segments that EU ETS covers.

No electricity in carbon imports tax

The Law on Carbon-Intensive Product Imports Tax doesn’t cover electricity because of technical limitations and a lack of a precise taxing methodology.

The tax on imported carbon-intensive products covers only the entities that import five or more tons of the designated products per year

Importers are taxed based on emissions embedded in the production of the goods from abroad, but they will be able to use tax credits if an emissions levy has already been paid in the country of origin, similar to the EU system. The obligation is only for companies importing five or more tons of designated products per year.

Serbia imports an estimated 3.5 million tons of carbon-intensive products per year.

CO2 tax scope limited to larger producers

The CO2 tax law will be applied to firms obligated to have a license for emissions from their plants. Mostly they are large and medium-sized companies. Fifty companies have obtained such licenses for 92 facilities. They measure emissions data, in line with the Law on Climate Change, and send them to the Ministry of Environmental Protection.

The production of synthetic fertilizers and nitrogen compounds, cement, pig iron, steel and ferroalloys, aluminum and electricity accounts for over 57% of emissions in Serbia and more than 90% within the national monitoring and reporting system.

Tax deductions for large electricity producers that invest in decarbonization

A payer of the greenhouse emissions tax that predominantly generates electricity, accounting for at least 80% of its income in the previous annual tax period, is eligible for a tax credit amounting to 20% of the sum that it invested in decarbonization measures, the law stipulated.

The deduction can’t exceed 80% of the due tax. The government determines the said measures.

The greenhouse gas emissions tax envisages incentives for the taxpayers to finance green projects, the just transition and protection of vulnerable households

In addition, entities that pay the tax are eligible for incentives, from the state budget, for financing climate and energy transformation through investing in renewables and energy efficiency, innovative low-carbon technologies, decarbonization of industrial production, green construction and support to the just transition and protection of vulnerable households.

Proceeds from the tax “can be invested in green transition projects,” the sidenote reads, while there is still no dedicated decarbonization fund.

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December 2, 2025

by AEA in News

3rd Conference on Advancing Renewable Investments – guarantees of origin could drive Europe’s green energy integration

As CBAM nears implementation, the Ljubljana conference highlighted market tools and partnerships to accelerate clean energy integration with the European Union, the Energy Community Secretariat said. It pointed out that as more renewables capacity is connected to the grid, storage and flexibility solutions would become increasingly vital to enable the sector’s continued growth and integration.

The rollout of national electronic registries for guarantees of origin was recognized as essential to verifying the low-carbon value of regional electricity exports and advancing market-based integration with the EU.

Ministers, regulators, investors, and private sector representatives from across South East and Eastern Europe gathered in Ljubljana for the 3rd Conference on Advancing Renewable Investments, hosted by the Energy Community Secretariat and the Government of Slovenia, to boost renewable investment and advance the region’s shift toward clean, interconnected energy systems.

“Energy Community contracting parties are advancing accelerated integration with the EU’s electricity market – a process that, thanks to the Energy Community framework, with market coupling nearing completion, can be achieved even ahead of full EU membership. Expanding renewables is central to this effort, enabling countries to align with EU policy targets and speed up decarbonisation,” the update reads.

Integration with the EU’s electricity market can be achieved ahead of full membership

The results are tangible, according to the Energy Community Secretariat’s 2025 CBAM Readiness Tracker. Renewable energy excluding large hydropower has increased by more than 50% since 2020 – reaching 5.1 GW, fuelled largely by governmental support schemes.

While it is a notable success, continued progress will depend on the contracting parties’ ability to build on this momentum and mobilize efforts beyond government support to fully meet the ambitious 2030 targets set out in their national energy and climate plans (NECPs) and achieve carbon neutrality by 2050. As more renewables capacity is connected to the grid, storage and flexibility solutions will become increasingly vital to enable the sector’s continued growth and integration, the organizers said.

Uncertanties emerging ahead of CBAM charge introduction

At the same time, as the definitive phase of the EU’s Carbon Border Adjustment Mechanism (CBAM) begins on January 1, uncertainties are emerging for renewable energy investors, the secretariat stressed.

Discussions at the conference highlighted stakeholders’ expectations for the European Commission to clarify CBAM implementation rules, while continuing to rely on the secretariat to raise concerns about potential risks to renewable energy investments arising from unintended CBAM impacts.

As a no-regret pathway, participants discussed measures to accelerate the shift toward market-driven renewable investments, strengthening the sector’s credibility and long-term financial stability. A matchmaking dialogue brought together renewables producers and corporate buyers, reflecting growing private-sector interest in long-term power purchase agreements (PPAs) to boost investment and market confidence.

Lorkowski: GOs turn transparency into trust, trust into investment

Finally, the rollout of national electronic registries for guarantees of origin (GOs) was recognized as essential to verifying the low-carbon value of regional electricity exports and advancing market-based integration with the EU.

“Guarantees of origin are the compass guiding Energy Community markets toward the EU’s clean energy future. They turn transparency into trust, and trust into investment, enabling regional producers to access new markets, attract financing, and build confidence in the energy transition,” said Energy Community Secretariat Director Artur Lorkowski.

Ongoing efforts to establish a mutual recognition framework with the EU are underway, in close coordination with the European Commission and the Association of Issuing Bodies (AIB), to enable cross-border trade in renewable electricity.

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October 30, 2025

by AEA in News

Renewable electricity should not be subject to EU’s CO2 import tax

The European Commission is collecting evidence to come up with solutions for unintended effects of the Carbon Border Adjustment Mechanism (CBAM) on renewable electricity in the Western Balkans, Director of the Energy Community Secretariat Artur Lorkowski pointed out in an interview with Balkan Green Energy News, as one of the most important developments in the sector. Boosting renewable energy development and trade with third countries such as the Western Balkans was supposed to be accelerated by the European Union’s CO2 import tax.

To reduce the payment obligations of EU importers under CBAM, the contracting parties in the region are planning carbon pricing systems, but under different models. The ultimate goal is eventually joining the EU Emissions Trading System, implying the need for coordination and cooperation between the governments in the process, Lorkowski stressed.

Looking back twenty years since the Energy Community Treaty was signed, it proved to be a successful format of cooperation, the Energy Community Secretariat Director Artur Lorkowski said. On the occasion of the anniversary, Balkan Green Energy News sat down with the head of the international organization to speak about the achievements and benefits for the contracting parties, and the remaining milestones that the Western Balkans need to reach in order to integrate with the EU’s energy union.

“Economic growth depends on energy security and fair pricing. There is visible progress in transformation, clearly seen from the 2024 figures. And the final element is the accelerated energy market integration with the EU, and this is what we can be really proud of,” Lorkowski asserted.

Among the segments with tangible improvements, he also highlighted the convergence on the wholesale gas and electricity markets. It is facilitating competitiveness in the Energy Community, the secretariat’s chief added.

Renewables capacity doubled in four years

Fossil fuels used to account for 60% of electricity production in the contracting parties five years ago, compared to 50% now, Lorkowski noted. The significant results in renewables except for large hydro are illustrated by the fact that the overall capacity in the segment has more than doubled between 2020 and 2024, he stressed. More importantly, the carbon footprint – the CO2 emissions per unit of the nominal gross domestic product, fell 11% last year alone.

CO2 emissions per unit of the nominal GDP fell 11% last year in the Energy Community

As for EU integration, electricity market coupling is progressing very well, as a good example, in Lorkowski’s view. The legislation is mostly aligned, so most countries are just waiting for the process to be concluded, the director of the Energy Community Secretariat explained.

“There are operating wholesale markets everywhere in the Western Balkans except in Bosnia and Herzegovina, which is about to adopt the required law. Serbia is at the forefront of that process. North Macedonia and Montenegro are very close, with small elements yet to be achieved. It is a non-reversible point, point of no return on a path towards EU integration,” Lorkowski said. He recalled that when capacity calculations regions (CCRs), operationalization and verification are cleared from the to-do list, it would take 18 months to join the EU’s market coupling project.

Electricity can be exempted from CBAM at later stage

Energy Community contracting parties may become eligible for exemption until 2030 from CBAM in electricity, if they meet the CBAM requirements. However, the EU is starting to charge the CO2 import tax already on January 1.

“I wish the contracting parties followed my messages from the Belgrade Energy Forum in 2023, because you might remember me saying that CBAM is coming and we have to prepare for that. But unfortunately, we have observed a lot of delays and hiccups in the preparatory process. Fair enough, this is the reality we have to face now – no country of the Energy Community will be exempted on 1 January 2026. But we can still work to be exempted at a later stage,” Lorkowski underscored.

Artur Lorkowski was a keynote speaker at Belgrade Energy Forum 2025, organized by Balkan Green Energy News

European Commission expected to clarify rules by end of year

The second part of the story is that CBAM, in addition to its intended impacts, especially on coal power, also has unintended impacts, Lorkowski explained. For example, electricity transit between EU member states through the contracting parties, in practice, may also be subject to the tax, even if it was not intended by the European legislators.

CBAM was intended to provide equal treatment for products produced inside and outside the EU when it comes to carbon payments. “Renewable energy, not being subject to the EU ETS, would – logically – not need to be subject to CBAM, but with the current rules, even EU off-takers with cross-border power purchase agreements (PPAs) may still be subject to payment obligations, as the implementing rules remain overly complex, effectively treating them in the same way as fossil fuel importers. These are real problems that stakeholders have been raising with us in our targeted outreach to power companies, traders, and other stakeholders both from the EU and Energy Community,” Lorkowski added.

Legislative efforts to further improve trade in renewables with the EU continue under the Energy Community

The Energy Community Ministerial Council reported it in Athens to the European Commission and asked it to find a solution.

Lorkowski said he expects the EU’s top executive body to soon issue implementing and delegated acts, by the end of 2025, clarifying the CBAM implementation rules, and to follow it up in 2026 with a targeted amendment proposal on electricity.

Legislative efforts to further improve trade in renewables with the EU continue under the Energy Community. “The European Commission has presented to the contracting parties a draft decision on the mutual recognition of guarantees of origin and is now awaiting their feedback. I hope that in 2026 we can have a decision. But it does not mean that the guarantees of origin can be used as the currency for paying the CBAM fee. That would require amending the CBAM legislation,” he stated.

Carbon pricing systems need to evolve toward matching EU ETS

For a potential reduction of CBAM payments in other areas as well – iron and steel, aluminum, fertilizers, cement and hydrogen – third countries need to introduce carbon pricing systems. Serbia recently drafted legislation for a CO2 tax and for a tax on imports of carbon-intensive products. It is a good step forward, according to Lorkowski.

“We expect each and every country to make a decision on the carbon pricing. All of the countries of the Energy Community, with the exception of Kosovo*, have communicated to the secretariat which model they will implement. And the models vary: from Serbia’s carbon tax to a domestic emissions trading system of Montenegro, which is already in place,” he revealed.

There is no uniform carbon pricing model for the Energy Community

Namely, the Energy Community Ministerial Council decided not to implement a uniform regional carbon pricing mechanism but opted for individual models. They should all be built with the perspective of aligning eventually with the EU Emissions Trading System (EU ETS), Lorkowski said.

“The key challenge now for the Energy Community is how to maintain the integrity of the electricity market between the contracting parties and the European Union after CBAM enters its definitive phase from next January. We need to figure out how to coordinate among the systems. It implies not only the existence of the domestic carbon markets, but also the cooperation within the region,” he pointed out.

Ministerial Council to announce way forward on carbon pricing coordination

The Ministerial Council is due to conclude on carbon pricing at its regular annual meeting in December, Lorkowski said.

“The three critical elements are how much the CO2 will cost, who will pay – which businesses and sectors are in scope – and when those carbon pricing systems will be introduced. They need to maintain the integrity of the market, the level playing field of the market, and avoid market distortions,” the top Energy Community official added.

Practical policies more important than coal phaseout dates alone

Turning to the coal phaseout, essential for the decarbonization of the economy, Lorkowski acknowledged the significance of political declarations such as the Sofia Declaration and commitments from the national energy and climate plans (NECPs).

“That said, it is critically important to anchor the actions for the future with practical policies. The decisions on the establishment of carbon pricing mechanisms are even more important. In addition, we should focus on monitoring, reporting and verification – MRV systems. The contracting parties need to identify emitters and measure quantities,” the director of the Energy Community Secretariat underscored.

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* This designation is without prejudice to positions onstatus and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo declaration of independence.

October 3, 2025

by AEA in News

Serbia proposes taxes on greenhouse gas emissions, imported carbon-intensive products

The Ministry of Finance of Serbia launched public consultations on the draft Law on Greenhouse Gas Emissions Tax and Law on Carbon-Intensive Product Imports Tax, both at EUR 4 per ton of CO2 equivalent.

On January 1, importers of electricity, cement, iron and steel, aluminum, hydrogen and fertilizers to the European Union will start paying the CBAM carbon dioxide tax. If the country of origin also has a CO2 pricing system and the EU recognizes it, the sum will be deducted from CBAM.

The greenhouse gas emissions tax won’t be a new fiscal burden, but an incentive for modern and cleaner production, the Ministry of Finance of Serbia stressed in its public consultation call on what it said would be two key laws for the country’s green transition. It intends to charge producers and importers of certain goods EUR 4 per ton of CO2 equivalent.

The draft Law on Greenhouse Gas Emissions Tax and draft Law on Carbon-Intensive Product Imports Tax are intended to lower pollution, improve energy efficiency and secure a more equal position for the Serbian industry in the domestic and international markets, according to the announcement.

The public consultation process lasts until October 21, the deadline for submitting comments and suggestions. Presentations and discussions are scheduled for October 8 and October 15 in Belgrade, and online meetings are to be held on October 10 and October 17.

Both laws to enter into force on January 1, when EU also starts charging CBAM

The first of the two taxes is for big industrial emitters in the sectors of cement, fertilizers, iron and steel, aluminum and electricity. The ministry added that it is targeting January 1 for both laws to come into effect.

On the same date, the EU is set to start charging its Carbon Border Adjustment Mechanism (CBAM) tax on imported electricity, the other said goods as well as hydrogen. If the country of origin also taxes CO2 and the EU recognizes its system, the sum that was paid will be deducted from CBAM.

The CBAM tax is envisaged to rise every year until in 2034 it becomes equal as the prices of grenhouse gas emission certificates in the EU’s Emissions Trading System (EU ETS). Of note, the plan is also to expand the mechanism to other segments that EU ETS covers. The price has held above EUR 75 per ton of CO2 equivalent in the past month.

Institutional infrastructure isn’t sufficiently developed to roll out domestic ETS

The draft Law on Carbon-Intensive Product Imports Tax, envisaged as an equivalent to CBAM on the home market, doesn’t include hydrogen (and neither does the other draft), due to negligible production, while electricity wasn’t included because of technical limitations and a lack of a precise taxing methodology, the ministry explained.

The tax on imported carbon-intensive products would cover only the entities that import more than five tons of the designated products per year

Importers would be taxed based on emissions embedded in the production of the goods from abroad, but they will be able to use tax credits if an emissions levy has already been paid in the country of origin, similar to the EU system. The obligation is only for companies importing more than five tons of designated products per year.

The government opted for a tax instead of an ETS because “an emissions trading system requires a developed institutional infrastructure and market mechanisms that currently aren’t completely established,” an accompanying document reads.

Importantly, an independent verification system is under development.

The taxes would cover CO2, nitrous oxide (N2O) and perfluorocarbons (PFCs).

CO2 tax scope limited to certain larger producers

The ministry pointed out that the draft law wasn’t made to be applied extensively, but only to the firms obligated to have a license for emissions from their plants. Mostly they are large and medium-sized companies. The increase in administrative expenses would be limited, as the entities in the group already measure emissions data, in line with the Law on Climate Change, and send them to the Ministry of Environmental Protection.

Tax deductions for large electricity producers that invest in decarbonization

The deduction wouldn’t exceed 80% of the due tax. The government determines the said measures.

The draft greenhouse gas emissions tax envisages incentives for the taxpayers to finance green projects, the just transition and protection of vulnerable households

In addition, entities that pay the tax would be eligible for incentives, from the state budget, for financing climate and energy transformation through investing in renewables and energy efficiency, innovative low-carbon technologies, decarbonization of industrial production, green construction and support to the just transition and protection of vulnerable households.

In the short term, the new fiscal obligation can cause a moderate increase in production costs for facilities with significantly high emissions, the ministry said. Then there is a possibility, over the long term, for a moderate indirect effect on prices of some products, like construction materials and energy, but it would be limited and gradual, the law’s authors claim.

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August 4, 2025

by AEA in News

Serbia adopts Just Energy Transition Plan until 2030

Serbia now has a Just Energy Transition Plan until 2030. The document contains suggested measures for the mitigation of the impact of reducing fossil fuel use, primarily coal, so that workers, firms and communities aren’t left behind.

Following last month’s completion of the public consultation process regarding the proposed Just Transition Action Plan, the Government of Serbia passed, at its last session, the Just Energy Transition Plan of the Republic of Serbia until 2030. The document leans on the Integrated National Energy and Climate Plan (INECP or NECP)

It lays out sustainable energy policy measures that would need or could be undertaken. The point is in reducing fossil fuel dependence and improving security and efficiency of electricity supply by switching to renewable energy sources, and in an energy efficiency boost.

A just transition aims to promote environmentally sustainable economies in a way that is fair and inclusive for all

“A just transition aims to promote environmentally sustainable economies in a way that is fair and inclusive for all – workers, businesses and communities – by creating opportunities for decent work and leaving no one behind. This initiative should not be seen as a fixed set of rules, but as a dynamic process based on dialogue with a focus on addressing the concerns and needs of local populations and affected stakeholders,” the plan reads.

The approach is based on mitigating the negative effects of the energy transition process. It implies significant investments in retraining and reskilling, to assist workers in adjusting to new industries, as well as education, the plan adds.

It highlights the importance of incentivizing the development of new industries, and supporting small and medium-sized enterprises, which can enable alternative sources of income and employment.

Electricity system collapse in December 2021 marked as turning point?

Until December 2021, domestic electricity production met domestic needs, although even before that, the power system had been making maximum efforts for many years to provide sufficient amounts of electricity or, rather, provide sufficient amounts of coal for the operation of thermal power plants, the document notes.

There is no elaboration on the time reference, but that’s when a major outage struck coal-fired thermal power plants of state-owned power utility Elektroprivreda Srbije (EPS). Of note, it was one in a string of serious incidents in the electricity system.

Coal plants are old and they mostly don’t comply with environmental standards

“The fact is that existing electricity generation plants are old and most of them are not in line with new operating conditions and standards when it comes to environmental protection. Therefore, it is quite clear that in the case of the Serbian energy sector, the energy transition should lead to a radical change in the structure of sources and methods of electricity production,” according to the plan.

Coal plants, open pit mines could be replaced with wide range of activities from culture to gas power plants

Listed among the possibilities for repurposing coal plants and coal mine land after shutting them down are green power plants (but also gas-fueled energy facilities), launching industrial production, logistical and commercial activities, together with sports, culture, education, agriculture, tourism and waste management.

In 2023. there were 25,288 employees in thermal power plants (22.2%) and coal mines (77.8%), the document notes. The oldest coal plant, Kolubara A of 239 MW, was built in 1956, and the newest unit is Kostolac B3, of 350 MW. It came online last year.

“Social dialogue mechanisms should be established to ensure that the voices of all stakeholders are heard and their concerns are addressed. This includes consultations with trade unions, local self-governments and civil society organisations,” the Just Energy Transition Plan of the Republic of Serbia until 2030 suggests.

Expenses are envisaged at EUR 75.4 million, of which EUR 12 million would be for incentives for entrepreneurship and self-employment and EUR 60 million for improving business structure at existing industrial parks.

Carbon pricing system to make coal power plants in Serbia increasingly uncompetitive

One section covers the upcoming rollout of charges within the European Union’s Carbon Border Adjustment Mechanism (CBAM). The tax affects imports of a group of raw materials and electricity. Third countries can be exempted if they establish their own carbon pricing and emissions trading systems.

“In order to balance the economic and environmental impacts of the introduction of domestic carbon pricing in Serbia, a phased approach could be adopted, starting with a modest carbon price and gradually increasing it. Support for affected industries, such as subsidies for low-carbon technologies and worker retraining programs, along with recycling revenues to finance green projects and providing direct rebates to citizens, can mitigate negative effects,” the plan adds.

NGOs have criticized the action plan draft for only describing preparatory activities

Actually, proceeds from greenhouse gas emissions allowances in the EU are used only for the green economic transition, and it is similar with most environmental levies.

The introduction of a carbon tax mechanism will make domestic coal-fired power plants increasingly uncompetitive, especially in regional electricity markets, the government warned.

Nongovernmental organizations and associations earlier criticized the draft, arguing that it delays the energy transition until 2030, only lists preparatory activities and that, inter alia, there is no targeted date for ending the use of coal for electricity production.

In any case, a just energy transition requires defining deadlines and projects and securing funds exclusively for the said purposes. Otherwise the market will trample coal plants and mines, and it will probably happen abruptly, which would jeopardize energy security and employment. Such effects are already tangible in Southeastern Europe, especially in Bosnia and Herzegovina, as well as in Bulgaria and Slovenia.

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July 23, 2025

by AEA in News

Germany supports Serbia in clean energy supply, environmental protection

The Republic of Serbia and Germany’s KfW Development Bank signed a loan agreement on July 18 for EUR 135 million for the second phase of the credit program Green Transition Development Policy Operation (DPO II).

The signatures underscore the joint activities by Germany and Serbia aimed at a climate-compliant and socially just energy transition, said Chargés d’Affaires ad interim Carsten Meyer-Wiefhausen from the Embassy of the Federal Republic of Germany in Serbia. “We will continue to be with Serbia on this path and support its reform efforts,” he stressed.

Within the financing for the reforms, the World Bank, French Development Agency (AFD) and the German KfW Development Bank are supporting the Republic of Serbia in conducting its ambitious reform agenda. The goal is to accelerate the transition to energy from clean sources and align with EU standards in environmental protection and climate.

Series of reforms through DPO II

Several successful reforms have been materialized within DPO II, among which:

Promoting investments that are acceptable in environmental and climate terms: Public investments are graded under environmental criteria and with regard to the risk of natural disasters, and with models developed solely for the purpose. The citizens of Serbia benefit from the government’s more sustainable investment decisions.
Enhanced transparency in the public budget: The Government of the Republic of Serbia has committed to publishing information on the execution of the public budget, not only at the end of the fiscal year, but also during the year. It improves the transparency of public expenditures, primarily concerning investments in environmental and climate protection.
Affordable energy prices: The Government of the Republic of Serbia has rolled out temporary targeted subsidies for households with low income, like citizens with low pensions. The share of households receiving such aid has grown from 2.7%, registered in 2021, to last year’s 8%.
Improvement in waste disposal: Aligning with EU standards brings a better approach to sanitary landfills, namely from 42% (2021) to last year’s 50%. The citizens of Serbia benefit from improved waste disposal and a cleaner environment.
Prepared for CBAM: Since this year, large industrial facilities and power plants report their CO2 emissions in line with EU standards. That way Serbia is more prepared for the upcoming full implementation of the European Carbon Border Adjustment Mechanism (CBAM) for carbon prices. For instance, the country would be able to price CO2 emissions and charge them.

Financing reforms within climate partnership

Germany’s contribution to financing reforms is an integral part of Germany’s climate partnership with Serbia and the entire Western Balkans. The purpose of the partnership is to support Serbia’s work on achieving its national climate goals and adapting to climate change. The key goal of the partnerships is for the transformation that is necessary to meet climate goals, in the interest of Serbian citizens, to be socially just, a just transition.

This year, Serbia and Germany are celebrating the 25th anniversary of their development cooperation. In the meantime, KfW financed projects worth EUR 2.5 billion in Serbia.

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