Electricity trading between the Western Balkans and neighbouring European Union markets remained sharply below last year’s level during the first half of 2026, providing an early indication that the EU Carbon Border Adjustment Mechanism is changing regional commercial flows.
Gross cross-border electricity trade between the Western Balkans and the EU fell by approximately 19% year on year during the first six months of 2026. The reduction reached about 23% in the first quarter and remained at 15% in the second quarter.
Strong hydropower production initially pushed Western Balkan prices below EU benchmarks during the first quarter. However, cross-border activity did not recover fully after the hydrological surplus weakened and the region returned to its more typical position as a net electricity importer.
Trading on Western Balkan day-ahead exchanges moved in the opposite direction. Volumes increased by approximately 19% to 2.70 TWh in the second quarter, supported partly by a recovery in activity on Serbia’s SEEPEX exchange.
The result is a more divided regional market: greater volumes are being traded within the Western Balkans, while less electricity is crossing the EU border.
CBAM default emissions factors are central to that shift. Based on second-quarter certificate prices, indicative carbon costs were estimated at €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia and €73.70/MWh for Montenegro. Albania carried a default cost of zero because of its predominantly hydropower-based generation mix.
These charges are large enough to eliminate the commercial margin on many coal-heavy electricity exports. Power traders may consequently redirect transactions through jurisdictions with lower emissions factors or retain supply within Western Balkan markets when the EU price premium cannot absorb the carbon cost.
Hydrology, fuel prices, plant availability and demand also influenced first-half trade, meaning the entire decline cannot be attributed to CBAM. Yet the continued weakness in cross-border activity after the first-quarter hydropower effect faded suggests that carbon pricing is already altering nominations and arbitrage strategies.
For lignite-dependent utilities such as EPS, Elektroprivreda BiH and Elektroprivreda Republike Srpske, the pressure extends beyond the direct carbon bill. Lower export competitiveness reduces access to higher-priced EU markets and weakens the economics of ageing thermal assets. Verified plant-level emissions, renewable power-purchase agreements and faster investment in low-carbon capacity are becoming commercially important rather than merely regulatory requirements.