The Western Balkans are seeking closer integration with EU electricity markets as the Carbon Border Adjustment Mechanism (CBAM) introduces new conditions for power imports from non-EU systems. The two developments create a challenge for regional energy policy: cross-border market integration and compliance with EU carbon-pricing rules are separate processes, and progress in one does not automatically resolve the requirements of the other.
Market integration can improve trading efficiency and regional resilience. However, CBAM can make some cross-border electricity sales less competitive when emissions are calculated using high national default factors rather than evidence of lower-carbon generation.
Energy integration and carbon-border policy converge
At the Berlin Process summit in Montenegro on 22 October 2026, the Energy Community emphasised the importance of access to EU electricity markets for regional resilience and the energy transition. It also warned that the interaction between CBAM, EU accession and market integration should not undermine renewable investment or create divisions at the EU border.
The concern reflects a practical difficulty for renewable generators. A power plant may sell electricity through a regional trading system without retaining all the information required to demonstrate that its generation should receive a lower emissions attribution in a specific EU import transaction.
Why electricity imports face additional evidence requirements
The issue extends beyond the price of carbon allowances. Under CBAM, imported electricity can be assessed using a prescribed default emissions factor unless the conditions for actual-emissions treatment are met.
Those conditions include requirements relating to the generating installation, a qualifying power purchase agreement, network arrangements, hourly matching of generation and nominated capacity, and independent assurance.
Market coupling or a guarantee of origin alone cannot be assumed to satisfy all these requirements. As a result, a trader may face a carbon cost that differs from the emissions profile of the generation source presented in its commercial documentation.
Proposed changes are not yet settled rules
The European Commission’s December 2025 legislative proposal addresses some of these concerns. It includes possible flexibility for countries pursuing electricity-market integration and proposed adjustments to the methodology for calculating emissions from electricity imports.
Although the proposals have attracted support during the legislative process, the relevant changes should not be treated as fully enacted as of October 2026. Any potential exemption or adjustment depends on its final conditions, implementation timetable and the eligibility of the country and trading route concerned.
For project developers and power traders, the distinction is commercially important. A proposed regulatory change cannot be treated as a confirmed basis for long-term revenue forecasts or financing commitments.
Trading infrastructure needs to connect with emissions evidence
A central challenge is the gap between electricity-market infrastructure and the documentation required for CBAM compliance.
Exchange coupling can match orders and establish transparent market prices. CBAM, however, requires evidence connecting a non-EU generating installation to a specific EU import declaration under defined conditions. The systems therefore need compatible records, identifiers and timestamps, even though they serve different regulatory purposes.
A regional implementation programme could focus on:
- Generator metering and production records.
- Electricity nomination and scheduling data.
- Interconnector capacity allocation.
- Registry interoperability.
- Accredited emissions verification.
- Consistent records linking generation to EU import declarations.
Progress should be assessed not only by the number of borders connected through market coupling, but also by the volume of low-emissions electricity that can demonstrate an eligible carbon profile when imported into the EU.
Renewable projects face commercial and financing uncertainty
For the Western Balkans, the implications are particularly relevant to renewable investment and power-trading structures. A wind project may have competitive generation costs but struggle to secure attractive EU offtake terms if its contractual arrangements cannot demonstrate the required CBAM attributes.
The emissions profile of the national electricity system can also affect the calculation. A coal-intensive grid may influence default emissions factors even where an individual exporter claims to supply renewable electricity.
Power purchase agreements intended to support project financing therefore need to account for CBAM eligibility, available interconnector capacity and the responsibilities of generators, suppliers and EU declarants for maintaining the necessary evidence.
Grid operators and regulators face an implementation challenge
Transmission system operators and national regulators must coordinate market coupling, capacity allocation, balancing and settlement with the data used to establish electricity schedules and the generation origin claimed for CBAM purposes.
This requires practical connections between metering systems, transmission nominations, trading records and independent verification. Without those operational arrangements, a legal exemption or regulatory flexibility may deliver less commercial value than its headline terms suggest.
The challenge is not simply to create compatible market rules. It is to ensure that the information generated by regional electricity trading can also support the evidence required for EU carbon-border treatment.
Market access will depend on demonstrable emissions performance
Deeper integration with EU electricity markets offers the Western Balkans opportunities to improve trading efficiency and support the energy transition. CBAM adds another test: whether the region can demonstrate the emissions characteristics of electricity supplied across its borders under the applicable rules.
The next stage will depend on the ability to finance more low-carbon generation and trade that electricity through systems capable of preserving the required evidence. The commercial value of renewable power will increasingly depend not only on its generation cost, but also on whether its emissions advantage can be recognised in actual EU imports.
