Western Balkan exporters face an uneven competitive challenge under the EU Carbon Border Adjustment Mechanism (CBAM), as carbon costs apply to existing covered imports and policymakers consider extending the mechanism to additional manufactured metal products.
Exposure varies considerably across the region. Serbia has significant trade links in steel, aluminium and electricity, while Bosnia and Herzegovina combines exposure to power generation and metals. North Macedonia has electricity and industrial production links, and Montenegro’s position is more heavily centred on electricity and its remaining aluminium processing chain. Relevant manufacturers and electricity trade in Albania face different product and transmission conditions. Comparisons therefore need to be based on CN codes, individual installations and export routes, rather than a single regional emissions average.
European import patterns are also changing. EUROFER reported that finished-steel imports from Indonesia rose by 70% and imports from China increased by 40% in the first half of 2026, while shipments from Türkiye declined by 16%. Total EU steel imports fell by 5% over the same period. These figures provide context for Western Balkan exporters competing in the European market, but they do not establish that carbon charges caused the changes in purchasing patterns.
CBAM and steel import restrictions create separate cost pressures
Exporters must assess two distinct EU policy measures. CBAM imposes carbon-related obligations on imports of covered steel, aluminium, cement, fertilisers, hydrogen and electricity. Separately, an EU steel measure introduced in July 2026 limits annual tariff-free imports to approximately 18.3 million tonnes and imposes a 50% duty on volumes exceeding the applicable quota.
For Western Balkan steel producers, quota availability can therefore determine whether a sale remains commercially viable before the associated CBAM liability has been calculated. Carbon costs and quota restrictions need to be assessed separately when preparing quotations, negotiating contracts and evaluating access to EU customers.
Electricity exports present a different compliance challenge. Importers seeking to use actual emissions values must satisfy specific legal conditions relating to electricity generation, contractual arrangements and physical cross-border delivery. A guarantee of origin or renewable-energy label does not, by itself, establish eligibility to apply actual emissions values under CBAM.
The planned reform of electricity emissions calculations remains a proposal. Current imports must therefore be assessed under the rules already in force, rather than calculations that may apply following a future legislative change.
Installation-level evidence becomes a competitive requirement
Steel and aluminium exporters need reliable emissions measurements at installation level, traceability for raw materials and precursor inputs, and controlled allocation of emissions to the products being sold. Where upstream materials originate in a third country, processors must be able to obtain the supporting evidence needed for the relevant product-level calculation.
A generic national electricity-grid emissions factor or an annual company-wide emissions statement cannot substitute for the required product-specific calculation. This places greater importance on cooperation between exporters, upstream suppliers and European importers, particularly where production involves several facilities or countries.
The potential expansion of CBAM to downstream products could increase exposure for component manufacturers in Serbia and other Western Balkan industrial centres. European importers may begin requesting emissions documentation before the final legislation is agreed, potentially giving exporters with established data and verification procedures an advantage in retaining customers.
Banks financing new industrial capacity also need to consider both current CBAM coverage and plausible future product classifications. Investment assessments that account only for today’s obligations may underestimate the compliance requirements associated with products that could fall within a broader mechanism.
Verified emissions data could influence supplier selection
The Western Balkans benefits from geographical proximity to the EU and established commercial supply relationships. However, these advantages may be insufficient if customers cannot reliably determine the emissions associated with imported products.
Producers that integrate emissions measurement, traceability and verification into their operations can give European buyers a clearer basis for assessing delivered costs and compliance exposure. Exporters relying on unverified assumptions risk facing more conservative cost estimates from customers, potentially weakening their competitive position even before any proposed downstream expansion becomes law.
