Current CBAM-covered trade between Serbia and the European Union was worth approximately €2.21 billion in 2024. Based on Serbia’s 2025 export structure, a balanced extension of the mechanism to selected manufactured products could raise the value of goods exposed to CBAM reporting and carbon-cost allocation to between €4.3 billion and €5.3 billion, equivalent to roughly 20–25% of EU imports from Serbia, shows the estimates from CBAM.Clarion.Engineer
Serbia’s exposure to the European Union’s Carbon Border Adjustment Mechanism is no longer confined to electricity exports, primary metals, fertilisers and cement. The next phase of CBAM is designed to move further down the industrial value chain, capturing selected machinery, electrical equipment, vehicle components, metal furniture, prefabricated buildings and other products whose value is substantially derived from steel or aluminium.
For Serbia, this represents a much larger structural challenge than the present mechanism. The country’s trade relationship with the EU is dominated by manufactured goods, particularly electrical equipment, machinery, vehicle components and metal-intensive industrial products. These sectors are deeply integrated into European corporate supply chains and account for a much larger part of Serbian exports than the six sectors covered by the initial CBAM framework.
The first formal downstream extension has not yet been adopted as final law. The Council of the EU agreed its negotiating position on 12 June 2026, while the European Parliament’s responsible committee approved its report on 6 July 2026 and tabled it for plenary consideration on 9 July 2026. The indicative first-reading vote is scheduled for 14 September 2026. Under the Council position, the expanded product scope would begin applying on 1 January 2028, although the final CN-code list remains subject to negotiation between the institutions.
Current CBAM exposure was already above €2 billion in 2024
The most complete official sector-level assessment shows that products within the existing CBAM scope represented 11.7% of Serbia’s exports to the EU in 2024. EU imports from Serbia across all goods amounted to €18.879 billionthat year, producing an implied current-scope CBAM trade value of approximately €2.209 billion. (Energy Community)
Electricity was the largest category, accounting for 4.7% of Serbia’s EU-bound exports, equivalent to approximately €887 million when applied to the EU import value. Iron and steel represented another 4.5%, or roughly €850 million, while aluminium contributed 2%, equivalent to approximately €378 million. Fertilisers accounted for around €94 million, cement approximately €19 million, and hydrogen remained negligible.
Electricity and iron and steel therefore represented close to 79% of the estimated current CBAM trade envelope. This concentration explains why the initial debate in Serbia has been dominated by electricity generation, steelmaking and the carbon intensity of large industrial installations. It does not, however, reflect the much broader manufacturing exposure that will emerge when CBAM begins following steel and aluminium into finished and semi-finished products.
EU imports from Serbia increased by 12.2% in 2025 to €21.185 billion. Serbia’s Ministry of Finance subsequently estimated that more than 12% of the country’s exports to the EU were already within the current CBAM scope. The ministry identified more than 3,500 companies as directly or indirectly connected with covered sectors, with approximately 1,000 companies having exported covered or potentially covered goods to the EU during 2025.
Applying the ministry’s minimum 12% share to the EU’s reported €21.185 billion import value produces a conservative current-scope mirror estimate of more than €2.54 billion for 2025. This is not an official CN8 customs total because it combines Serbia’s export-share assessment with the EU’s import valuation, but it provides a reasonable floor for estimating the scale of trade before the downstream extension.
The Ministry of Finance estimates that the current CBAM mechanism could impose an annual cost of approximately €140 million in 2026, rising to around €161 million by 2029, assuming no Serbian carbon-pricing mechanism is credited against the EU liability. Under a scenario in which the EU fully recognises a carbon price paid in Serbia, the estimated burden falls to between €127 million and €148 million over the same period. The model assumes a CBAM certificate price of €75.36 per tonne of CO₂ equivalent and unchanged 2025 trade volumes.
Those financial estimates cover the existing product scope. They do not fully capture the reporting costs, contractual exposure or potential embedded-carbon charges associated with the proposed extension into manufactured products from 2028.
The expansion shifts CBAM from raw materials into manufacturing
The EU’s rationale is that carbon leakage could migrate downstream as free EU Emissions Trading System allowances are phased out. European manufacturers using EU-produced steel and aluminium will gradually bear a larger carbon cost, while foreign manufacturers may continue purchasing lower-cost, more carbon-intensive materials. Extending CBAM to selected finished products is intended to close that competitive gap.
The proposed list is selective rather than universal. It does not place every machine, electrical appliance, vehicle or piece of furniture under CBAM. The focus is on goods with significant steel or aluminium content and on products where the embedded emissions of those materials can be traced without constructing an excessively complex carbon-accounting system.
The Council’s negotiating text includes selected electric motors and generators, generator components, transformer categories, steel and aluminium electrical conductors, pumps, furnace burners, industrial furnaces, freezers, refrigeration equipment and heat pumps. It also covers selected goods vehicles, chassis, bodies and automotive components such as gearboxes, wheels, suspension systems and radiators. Metal-framed seats, office furniture, other metal furniture and prefabricated buildings containing steel or aluminium are included in the proposed downstream structure.
The Commission’s impact assessment examined three possible levels of expansion. A targeted option would add approximately 70–80 CN codes, a balanced option 150–180 codes, and a broad option 230–250 codes. The balanced approach was identified as the preferred option because it would cover almost as many EU production emissions as the broad alternative while involving significantly fewer products and importers. The Commission calculated that 85–90% of goods selected under the balanced option would contain at least 70% CBAM materials by weight, making their embedded emissions comparatively easier to attribute.
The Council has refined parts of the proposed list, and the Parliament may introduce further changes. The scenarios below should therefore be understood as estimates of Serbia’s exposure to different regulatory designs rather than predictions of the final legal text.
Expanded CBAM could cover €4.3–€5.3 billion of Serbia–EU trade
The central estimate uses the 2025 trade structure as a static base. It maps the principal candidate CN product families against detailed EU imports from Serbia, removes categories already within the existing CBAM scope, discounts products that do not meet the steel or aluminium content tests and adjusts for overlaps between components and broader customs chapters.
Detailed trade data show that EU imports of Serbian electrical and electronic equipment reached approximately $4.64 billion in 2025, including $2.07 billion of insulated wire and cable, $745 million of motors and generators and more than $300 million of motor, generator and transformer components. Imports of Serbian machinery totalled approximately $1.75 billion, while vehicles and vehicle components amounted to $2.12 billion, including $1.18 billion of parts and accessories. Furniture, lighting products and prefabricated buildings represented another $1.01 billion. These detailed dollar values were normalised against the European Commission’s official €21.185 billion total rather than converted through a single market exchange rate.
| Estimated regulatory scope | Additional downstream trade brought into scope | Total Serbia–EU trade potentially in scope | Share of 2025 EU imports from Serbia |
|---|---|---|---|
| Existing CBAM list | — | More than €2.54bn | More than 12% |
| Targeted extension: 70–80 codes | €0.9bn–€1.4bn | €3.4bn–€4.0bn | 16–19% |
| Balanced extension: 150–180 codes | €1.8bn–€2.7bn | €4.3bn–€5.3bn | 20–25% |
| Broad extension: 230–250 codes | €2.5bn–€3.4bn | €5.0bn–€5.9bn | 24–28% |
These figures measure the value of trade potentially subject to CBAM obligations. They do not represent the carbon tax or certificate liability itself. The estimates also hold the 2025 trade basket constant and therefore do not attempt to forecast changes in Serbian exports, exchange rates, industrial production or EU demand by 2028.
The balanced scenario provides the most relevant working estimate. It suggests that approximately €1.8–€2.7 billion of additional Serbian manufactured exports could be brought into CBAM, taking the combined trade envelope to approximately €4.3–€5.3 billion. The midpoint is around €4.8 billion, or approximately 23% of all EU imports from Serbia in 2025.
Electrical machinery and equipment represent the largest source of uncertainty and potentially the largest new exposure. The model attributes approximately €650 million–€1.05 billion of additional trade to selected cables, conductors, motors, generators, transformers and related components. The range is deliberately wide because Serbia’s cable exports include copper-dominant products, low-voltage wiring and automotive harnesses that may not satisfy the final material and CN-code tests. The Council list expressly covers certain high-voltage conductors containing steel or aluminium, but it does not automatically capture the entire $2.07 billion insulated-wire and cable category.
Non-electrical machinery could add another €450 million–€700 million. Serbia exported substantial volumes of pumps, compressors, refrigeration equipment, heat pumps, valves, industrial thermal-treatment machinery, gears and specialised mechanical equipment to the EU in 2025. The Council text includes selected pumps, furnace burners, industrial furnaces, refrigeration equipment, freezers and heat pumps, but coverage depends on the exact CN8 code and, for several “ex” classifications, evidence that the product contains qualifying steel or aluminium.
Vehicles and automotive components could contribute approximately €400 million–€650 million. Finished passenger cars are not broadly included in the first downstream expansion, meaning Serbia’s approximately $773 million passenger-car export category should not be treated as fully exposed. The more significant risk lies in the $1.18 billion components segment. Gearboxes, road wheels, suspension systems, radiators, selected bodies, chassis and other metal-intensive parts feature in the Council’s negotiating list. Serbia’s exports of completed goods vehicles were comparatively small in 2025, so the automotive impact will be driven primarily by components supplied to European production systems rather than by finished trucks.
Metal furniture, metal-framed seats and prefabricated buildings could add approximately €100 million–€200 million. Serbia’s broader furniture and prefabricated-building exports were worth more than $1 billion, but much of that value is associated with wooden furniture, upholstery, lighting and non-metal products. The estimated CBAM share is therefore limited to the metal-intensive portion that can be matched to the proposed classifications.
Another €150 million–€300 million could arise from specialised fittings, technical apparatus, industrial components and other steel- or aluminium-intensive products outside the principal machinery, electrical, automotive and furniture groups. This part of the estimate is especially sensitive to the Parliament–Council negotiations because the Council has already proposed narrowing or deleting several technical and medical categories considered in earlier versions of the list, reports CBAM.Clarion.Engineer
Trade exposure and carbon liability are different numbers
A product valued at €10,000 will not face a CBAM charge calculated as a percentage of the entire €10,000 customs value. For the proposed downstream goods, the principal calculation is based on the embedded emissions of qualifying steel and aluminium inputs or precursors used in the product. Emissions from subsequent finishing and final downstream manufacturing are generally excluded under the proposed methodology.
This distinction is critical for Serbian exporters. Two companies selling apparently identical machines at the same price could generate very different CBAM liabilities. One may use verified low-carbon European steel or aluminium with traceable production data, while another may use materials whose producer cannot provide emissions evidence. In the second case, the EU importer may have to rely on default values that are higher than the producer’s actual emissions.
The Serbian Ministry of Finance has already warned that default values can exceed the actual emissions of domestic producers. Verification can reduce the calculated liability, but it introduces additional operational, documentation and assurance costs. EU buyers may pass the financial burden back to Serbian suppliers through lower purchase prices, carbon-adjustment clauses, reimbursement mechanisms or supplier-selection criteria.
For downstream manufacturers, CBAM readiness will require more than a corporate carbon-footprint report. Exporters will need a product-level chain of evidence connecting bills of materials, purchase orders, steel and aluminium quantities, supplier declarations, origin information, precursor emission factors, production batches, customs codes and the goods ultimately delivered to the EU.
The first-wave downstream methodology also changes the role of electricity evidence. Renewable electricity used to assemble a final machine or vehicle component may improve the manufacturer’s broader product carbon footprint, but it will not by itself eliminate the CBAM liability embedded in high-carbon steel or aluminium inputs. Electricity procurement becomes directly decisive where the Serbian installation produces the relevant metal or precursor, and it may become more important under future revisions that extend indirect-emissions treatment. The immediate commercial priority for most downstream exporters is therefore control over the carbon characteristics of purchased metals, supported by auditable supplier data.
This will favour Serbian subsidiaries of international industrial groups that can connect local production to established group procurement, environmental and product-data systems. Even those companies will need evidence at Serbian installation and product level. A group-wide emissions target, ISO certificate or sustainability statement will not substitute for the precursor information required in an EU importer’s CBAM declaration.
Independent Serbian manufacturers face a more difficult transition. Their competitiveness will depend increasingly on whether they can obtain verifiable data from steel and aluminium suppliers, separate covered from non-covered materials, allocate inputs to exported products and provide information in the format required by EU customers. Companies unable to do so may remain legally able to export, but their European buyers will price the associated carbon and compliance uncertainty into commercial terms.
A wider extension remains possible after the first downstream wave
The proposed 2028 extension is concentrated on downstream steel and aluminium products. It should not be confused with the broader review of CBAM under Article 30 of the regulation. That review is considering possible future inclusion of other EU ETS sectors at risk of carbon leakage, as well as downstream products associated with cement, fertilisers and hydrogen. Refineries and chemicals have also been identified as possible areas for a later phase.
Those possible additions are not included in the €4.3–€5.3 billion balanced estimate. A later move into chemicals, refinery products or additional process industries would increase Serbia’s exposure further, although the scale would depend on the selected codes, exemptions and treatment of indirect emissions.
On the 2025 trade structure, Serbia is moving from a CBAM system affecting slightly more than one euro in every eightof EU-bound goods to a downstream mechanism that could reach between one euro in five and one euro in four. The regulatory centre of gravity will shift from a limited group of power producers and primary industrial installations towards hundreds of manufacturers embedded in European machinery, electrical, automotive and equipment supply chains.
The decisive competitive divide will no longer be between companies nominally inside or outside the initial six CBAM sectors. It will be between exporters that can identify, calculate and verify the embedded emissions of their industrial inputs and those whose products reach the EU market carrying an unquantified carbon liability.
Elevated by CBAM.Clarion.Engineer