Serbia’s steel sector is entering a period in which electricity procurement, carbon reporting and export competitiveness are increasingly connected. But renewable power purchase agreements (PPAs) do not necessarily deliver the CBAM benefits some offerings may imply. The link between green electricity and carbon compliance depends on the applicable rules.
HBIS Serbia operates steelmaking facilities in Smederevo and Šabac, employs more than 5,000 people and has annual finished-product capacity of approximately 2.2 million tonnes, according to Serbia’s Ministry of Trade. For an industrial operation of this scale, electricity costs and supply security are major commercial considerations, even before carbon requirements for exports to the European Union are taken into account.
Under the current EU Carbon Border Adjustment Mechanism (CBAM) framework, covered iron and steel goods in the relevant Annex II category are subject to accounting for direct emissions, not emissions associated with purchased electricity. A Serbian steel producer that signs a renewable PPA may improve energy-price visibility, its decarbonisation strategy, customer positioning and corporate reporting, but the purchase alone does not automatically reduce current CBAM certificate requirements.
Electricity procurement and current CBAM exposure
This distinction does not diminish the strategic value of green power for steelmakers; it defines where the commercial benefits arise. An industrial PPA can reduce exposure to wholesale electricity price volatility, support lenders’ and customers’ decarbonisation objectives, strengthen environmental documentation and prepare manufacturers for potential future changes in regulatory scope. Renewable electricity can also support industrial electrification as production processes increasingly move away from fossil fuels.
Banks and investors should assess steel production and electricity procurement as two distinct risk categories. One concerns direct process emissions and current CBAM exposure; the other covers electricity procurement, including price, volume, renewable attributes, grid risks, PPA counterparty creditworthiness and metering-data reliability.
Treating these categories as one, on the assumption that renewable electricity automatically reduces current CBAM liabilities, could result in incorrect pricing, unrealistic financial projections and poorly structured contracts.
Potential downstream coverage and electricity products
The European Commission has proposed extending CBAM from 2028 to selected manufactured goods that are intensive in steel and aluminium. The Council and the European Parliament have both supported broader coverage, while Parliament has proposed a substantially wider range of products.
Serbian manufacturers that use steel in machinery, industrial components, fasteners, wire products and other fabricated goods should begin treating supplier information as part of their future export-compliance infrastructure. Steel-related emissions data collected now could become increasingly important for demonstrating the environmental performance of downstream products sold into the EU.
Electricity traders can develop more detailed offerings for industrial customers than an undefined block of green electricity. A structured package could combine physical electricity supply, transparent allocation of renewable attributes, metering and reconciliation procedures, and data interfaces for manufacturers’ product-emissions reporting where legally relevant.
Each of these components can have commercial value, even if it does not directly reduce the number of CBAM certificates required under the current methodology.
PPA design, financing and industrial competitiveness
For HBIS Serbia and other major industrial electricity consumers, contract structure and counterparty creditworthiness matter as much as environmental claims. A long-term PPA can support investment in new renewable capacity by giving developers predictable cash flows, provided the industrial offtaker has sufficient credit strength and the agreement allocates risks appropriately.
Project lenders will need to assess how an arrangement would perform if industrial electricity demand declines, production schedules change, the buyer undergoes restructuring, or CBAM rules expand to include additional products and emissions categories. Flexible volume bands, change-in-law provisions and clearly defined ownership of renewable attributes can therefore be important elements of the financing structure.
Serbia’s steel competitiveness will depend on avoiding two misconceptions: treating CBAM solely as an export tax, and assuming that purchasing renewable electricity automatically resolves related compliance requirements. A more durable approach is to integrate process decarbonisation, electricity procurement and reliable emissions-data systems while keeping their legal and financial implications separate.
Although this approach may be less immediately marketable than claims of instant green steel, it provides a more credible basis for investment and financing decisions. Electricity is already a strategic input to the competitiveness of Serbia’s steel industry, while its precise CBAM implications will continue to depend on the product category, applicable emissions methodology and evolution of EU legislation.
Supported by CBAM.Clarion.Engineer