Energy Community concerns highlight the tension between an increasingly connected regional power market and the EU’s country-specific CBAM requirements.
ANALYSIS · 5 NOVEMBER 2026
BUDVA/BRUSSELS, 5 NOVEMBER 2026 — The Western Balkans’ efforts to integrate their electricity markets with the European Union are facing an important regulatory challenge: determining how carbon-border charges should apply to electricity traded through an increasingly interconnected regional system. Speaking at the Berlin Process summit in Montenegro on 22 October, Energy Community Director Artur Lorkowski warned that the relationship between CBAM, electricity-market integration and EU accession requires careful management to avoid discouraging renewable investment or creating divisions between electricity markets on either side of the EU border.
The issue has direct commercial implications for Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, Albania and Kosovo. These markets have different generation structures, levels of cross-border connectivity and progress in market reform, but their electricity systems are linked through regional trading. Electricity imported by an EU buyer in a particular hour may be associated with generation, transit and commercial transactions involving several countries. CBAM nevertheless requires imported electricity to receive a defined emissions treatment, even when the interconnected grid makes it difficult to describe the transaction as a straightforward bilateral physical delivery.
Electricity has been covered by the EU’s definitive CBAM regime since 1 January 2026. Its treatment differs from the general 50-tonne mass-based threshold applicable to certain physical goods, as electricity is subject to separate provisions. The financial exposure depends on the applicable embedded-emissions methodology, whether default values or eligible actual emissions are used, the official CBAM certificate price and any relevant adjustments. The presence of renewable generation somewhere in the electricity trading chain does not, by itself, remove the potential carbon-border liability.
The Energy Community’s warning comes as the European Commission pursues amendments to the electricity provisions of CBAM. Its December 2025 proposal envisages changes to emissions calculations and to the conditions under which actual emissions may be recognised. The Council established its position in June 2026, followed by the European Parliament’s adoption of amendments in September. The legislative process has not yet produced a final binding framework. Electricity producers, developers and traders must therefore distinguish the requirements currently in force from changes that may result from negotiations between EU institutions.
A central difficulty is the distinction between energy security and carbon accounting. Regional electricity systems exchange power to manage outages, variations in hydropower production and unexpected changes in demand. Such transactions can support system stability and protect consumers, even when electricity is assigned a relatively high default emissions value. Policymakers therefore face the challenge of ensuring that carbon-border rules do not unintentionally discourage legitimate short-term balancing or imports needed for security of supply.
Investors must also consider how potential regulatory changes could affect project economics. The Commission’s proposal seeks to revise the default calculation methodology and relax certain restrictions on the use of actual emissions. If adopted, these changes could influence the commercial value of physical power purchase agreements and specific cross-border trading routes. However, the final provisions remain subject to agreement among EU institutions. Renewable developers should neither postpone all investment decisions while waiting for regulatory certainty nor base financing assumptions on the expectation that the proposed changes will be adopted without modification.
Regional transmission system operators have an important role in supporting reliable electricity trading. Accurate schedules, metered exchanges and transparent capacity allocation are necessary for reconciling cross-border transactions. Better information exchange can improve market operation and reduce settlement disputes independently of CBAM. For exporters, however, it is also important that commercial arrangements provide the right to use relevant operational data for compliance purposes. Information systems must retain the timing and origin records needed for independent verification.
National renewable-energy strategies must account for the relationship between domestic decarbonisation and export opportunities. Governments may seek to expand wind and solar generation to displace fossil-fuel production at home while also attracting investment through access to European electricity markets. CBAM can affect the relative financial attractiveness of these destinations. Policy decisions therefore need to consider domestic supply security, available grid capacity, export contracts and carbon-pricing exposure rather than treating all renewable electricity volumes as commercially equivalent.
The availability of renewable generation alone does not guarantee that electricity can be delivered to the market when it is produced. Network congestion, curtailment and balancing requirements can reduce the revenues assumed in a renewable PPA. Certain existing CBAM conditions for using actual emissions are also sensitive to cross-border circumstances. Project developers and their contractual partners need to establish which operating and commercial risks are borne by generators, traders and importers. The physical delivery arrangements and contractual evidence must support the same transaction.
The distribution of carbon-border costs across the region also deserves attention. Although the EU importer carries the formal obligation to declare emissions and surrender CBAM certificates, the resulting economic cost can be reflected in the prices offered to Balkan electricity suppliers and renewable generators. Focusing exclusively on which party purchases the certificates does not reveal who ultimately bears the financial burden. Greater transparency over contractual cost pass-through and its effect on market prices is therefore necessary to assess whether CBAM supports clean investment or reduces the competitiveness of cross-border electricity sales.
Electricity market coupling is another area where expectations need to be managed. Integration can improve cross-border capacity allocation, price formation and the ability to absorb renewable generation, but it does not automatically provide an exemption from CBAM. The existing framework allows for specific treatment of certain third-country electricity markets subject to defined legal, climate and market conditions and a formal EU decision process. Technical connection to an EU electricity trading platform does not, on its own, demonstrate compliance with all exemption requirements.
These conditions create uncertainty for renewable investment models. A Western Balkan project may depend on access to European buyers willing to pay higher prices for its electricity. If the exported power does not qualify for the expected CBAM treatment, net revenues may be lower than a calculation based solely on the wholesale price difference would indicate. Conversely, clearer rules allowing actual emissions to be demonstrated could improve the commercial position of projects with compliant generation and export arrangements. That potential advantage remains conditional on the final regulatory framework.
National reforms are equally important to the region’s integration prospects. Investment in transmission infrastructure, balancing markets, day-ahead and intraday trading, data systems and emissions-market development can strengthen readiness for closer market integration. These improvements can also support renewable deployment within the region. However, governments cannot resolve the CBAM challenge through market coupling alone. They must also address the climate-related and legal requirements established by the European framework.
The entire commercial chain needs to be considered when assessing compliance. Electricity may be sold by a generator under a power purchase agreement to a regional supplier, traded through additional intermediaries and eventually imported by an EU buyer. The identity of the CBAM declarant, metering arrangements, hourly schedules and attribution of generation must be established throughout this process. Eligibility to use actual emissions cannot be inferred simply from a market price, a contractual claim or a certificate of origin. The required physical and commercial evidence must satisfy the applicable legal conditions.
The underlying policy tension is between electricity as a product traded in an integrated regional market and electricity as an import subject to carbon regulation. Market coupling is designed to facilitate efficient cross-border transactions, while CBAM introduces additional emissions-data requirements and potential costs. If these frameworks are not sufficiently aligned, progress towards electricity-market integration may not translate into predictable revenues for renewable exporters. Lorkowski’s intervention at the October summit has brought this issue into sharper focus.
Banks and project developers should incorporate the regulatory uncertainty into their financial assessments. Renewable export projects need base-case calculations reflecting the rules currently in force, sensitivity scenarios for exposure to default emissions and alternative cases based on the possible adoption of the proposed reforms. PPA revenues should be assessed after accounting for the potential allocation of CBAM-related costs. Long-term financing should not depend on an assumption that future EU legislation will automatically recognise a particular physical or contractual electricity route.
The Western Balkans have strong economic and energy-security reasons to pursue closer electricity-market integration. Shared markets can improve system resilience, support renewable deployment and strengthen cross-border trade. A CBAM framework aligned with these objectives could encourage cleaner generation without undermining the benefits of regional cooperation. Turning integration ambitions into bankable export contracts, however, will depend on the regulatory details: how emissions are attributed to each megawatt-hour, which records substantiate that attribution and under what conditions a transaction can use actual rather than default emissions values.
