The introduction of CBAM is also reshaping the broader structure of electricity trading across Southeast Europe. As carbon pricing begins to influence cross-border electricity flows, a new trading pattern may emerge in which electricity with different carbon intensities circulates within distinct regional markets.
Under this emerging model, Serbia could become both an importer and exporter of electricity depending on the carbon intensity of the generation source.
Coal-based electricity produced within Serbia may increasingly remain within the Western Balkan region, where carbon border costs do not yet apply. At the same time, Serbia could export low-carbon electricity—primarily hydropower and renewable generation—to EU markets where carbon intensity determines market access.
This model implies a structural reconfiguration of electricity flows. Instead of exporting coal-generated electricity directly to the EU, Serbia could import electricity from neighboring coal-heavy systems during certain periods while reserving its low-carbon electricity for export to EU markets.
Two neighboring countries play a particularly important role in this scenario: Bosnia and Herzegovina and Bulgaria.
Bosnia and Herzegovina operates several lignite-fired power plants and historically exports electricity across the region. Bulgaria also maintains significant coal-fired generation capacity alongside nuclear and renewable assets.
In periods when electricity demand within Serbia exceeds domestic low-carbon generation capacity, Serbia could theoretically import electricity from these neighboring systems while exporting renewable electricity to the EU.
From a purely commercial trading perspective, the structure could resemble a form of carbon arbitrage. Electricity traders might import coal-based electricity at relatively low prices from neighboring markets while exporting higher-value renewable electricity to EU markets that reward low carbon intensity.
Such a system would depend on several operational factors. Transmission capacity between Serbia and neighboring countries must be sufficient to support large electricity flows. Cross-border market integration and transmission system operator coordination would also be necessary to manage these trading patterns.
The Western Balkans electricity network is already highly interconnected, with major transmission corridors linking Serbia with Bosnia and Herzegovina, Bulgaria, Romania, Hungary and North Macedonia. These interconnections allow electricity to flow across the region depending on price signals and system needs.
However, the introduction of carbon border costs adds a new layer of economic logic to these flows. Electricity is no longer traded purely on the basis of generation cost and demand conditions. Carbon intensity now influences whether electricity can enter EU markets at competitive prices.
This transformation may accelerate the development of renewable energy projects across Southeast Europe. Countries that succeed in expanding low-carbon generation capacity will gain access to premium electricity markets within the EU.
At the same time, coal-heavy electricity systems may find themselves increasingly confined to regional markets where carbon costs are lower or absent.
The longer-term outcome of this dynamic could be a two-tier electricity trading system across Southeast Europe: one market dominated by low-carbon electricity integrated with the EU, and another regional market where coal-based generation continues to play a central role.
For Serbia, navigating this transition will require careful coordination between energy policy, electricity market reform and industrial strategy. Successfully developing CBAM-compliant electricity exports could allow the country to remain a major participant in European electricity markets while gradually transforming its domestic energy system toward lower carbon intensity.
Elevated by cbam.engineer