Montenegro leads Western Balkans push to change EU carbon charges on electricity exports

Carbon pricing is meant to speed decarbonisation, but for the Western Balkans it is now colliding with a more immediate priority: keeping cross-border electricity trade moving as neighbouring markets work toward EU alignment. Montenegro has taken the lead in asking Brussels to adjust how the EU applies carbon-related charges to electricity exports after the introduction of CBAM triggered a rapid fall in export demand.

Montenegro asks for amendments to EU regulation covering CBAM

Energy minister Admir Šahmanović, acting on behalf of several regional countries including Serbia, Bosnia and Herzegovina, and North Macedonia, has written formally to members of the European Parliament. In the letter, he calls for amendments to Regulation (EU) 2023/956, which governs CBAM.

CBAM extension to electricity changes trading economics

The dispute centers on the extension of CBAM to electricity. Since 1 January 2026, the mechanism has added costs to power exports into the EU from the Western Balkans irrespective of how that electricity is generated. Regional governments say this has altered trading economics almost immediately.

In their account to Brussels, export volumes have declined despite strong generation—particularly from hydropower. EU counterparties have shown reduced willingness to purchase electricity once carbon-related costs are incorporated into pricing.

Renewable-heavy periods highlight a competitiveness problem

The effect is described as especially pronounced during times of high renewable output. Even when the region produces abundant and relatively clean electricity—particularly in hydrologically strong seasons—the blanket application of CBAM charges reduces competitiveness versus intra-EU supply.

This creates what regional ministries describe as a structural paradox: an EU framework intended to accelerate decarbonisation and support renewable integration is, in their view, currently penalising exports regardless of actual carbon intensity. The result is weaker incentives for cross-border electricity trade and slower market integration.

Regulatory gaps limit equivalence under CBAM rules

The regional position does not challenge carbon pricing as a principle. The letter explicitly acknowledges that carbon pricing matters for driving the transition toward low-emission energy systems. What is contested instead is uniform treatment of electricity under CBAM without transitional arrangements that reflect each candidate country’s integration status and reform trajectory.

Energy ministries argue that key structural gaps remain across the region. Most countries still lack fully operational ETS (emissions trading systems) and MRV (monitoring, reporting and verification) frameworks aligned with EU standards. That shortfall, they say, limits their ability to be treated as equivalent participants under CBAM rules.

Financial pressure feeds back into lower export flows

The financial implications are described as material. Estimates cited by regional stakeholders suggest carbon-related charges on electricity exports could amount to tens to hundreds of millions of euros annually for smaller systems such as Montenegro, depending on carbon prices and export volumes.

For utilities including EPCG and EPS, the mechanism functions like an external cost layer embedded into export pricing. While the charge is formally borne by EU importers, regional governments argue it ultimately feeds back into lower demand and weaker price realisation for exporters—compressing margins and reducing cross-border flows.

A request aimed at balancing two EU objectives

The letter frames the issue as a growing tension between two parallel EU goals: enforcing carbon discipline across borders and accelerating electricity market integration with neighbouring systems. From the Western Balkans perspective, the current framework shifts that balance toward protecting internal-market dynamics at the expense of integration momentum.

The request is therefore narrowly defined but strategically significant: adjust how CBAM applies to electricity so it does not suppress trade flows that—according to regional arguments—are often already aligned with EU decarbonisation objectives.