Montenegro’s state power utility EPCG estimates that its annual carbon cost could reach about EUR 70 million as the domestic price for emissions rises to EUR 75 per tonne, according to board chairman Milutin Djukanovic. The higher carbon charge increases the utility’s operating costs and adds pressure to its generation mix.
Djukanovic presented the figures to Montenegro’s Green Parliamentary Group, saying EPCG would pay the higher emissions price into the Eco-Fund under the government’s emissions-trading decree. The previous carbon price was EUR 24/t.
The EUR 70 million figure is a management estimate rather than a reported audited annual expense. The increase in the domestic carbon charge comes as the utility also assesses the financial effects of uncertainty surrounding the EU’s Carbon Border Adjustment Mechanism (CBAM).
EPCG links first-quarter revenue decline to CBAM uncertainty
Djukanovic attributed a EUR 12 million to EUR 13 million decline in EPCG’s first-quarter revenue to uncertainty over the application of the EU CBAM.
The mechanism is relevant to the cost position of eligible goods entering the EU market, with the treatment of carbon prices paid in the country of production affecting the residual amount due at the border.
Under EU rules, a qualifying carbon price already paid outside the EU can reduce the corresponding CBAM obligation. The adjustment depends on the applicable calculation and the evidence supporting the carbon payment.
A domestic carbon payment therefore does not automatically remove the CBAM liability. The fact that Montenegro’s headline carbon price reaches EUR 75/t does not by itself establish that EPCG or every shipment associated with the utility would receive an equivalent reduction.
Eco-Fund revenue tied to energy-sector investment
Djukanovic said administrative measures would not be sufficient to address the utility’s exposure and called for carbon revenues collected through the Eco-Fund to support investment in the energy sector.
The higher domestic charge has a dual effect for Montenegro’s electricity sector. It increases the cost assigned to carbon emissions within the country while potentially lowering the residual CBAM cost attached to eligible exports if the domestic payment meets the conditions for recognition under EU rules.
For EPCG, the distinction between the location of the payment and the underlying emissions remains significant. Redirecting part of the carbon cost into a domestic fund does not itself reduce the emissions generating that cost.
Investment in new generation could, however, affect EPCG’s future carbon exposure by changing the composition of its electricity production. The immediate effect of the higher carbon price is therefore an increased operating burden, while the longer-term effect depends on changes to the utility’s generation mix.
