The European Parliament has backed changes to the European Union’s Carbon Border Adjustment Mechanism that could soften some of its most disruptive effects on electricity trade with the Western Balkans, as evidence grows that the levy is reducing commercial exchanges and fragmenting the regional power market.
Lawmakers adopted their negotiating position on 15 September 2026 by 464 votes to 50, with 159 abstentions, clearing the way for negotiations with EU member states on the final legislation. Although much of the package concerns steel, aluminium and manufactured goods, several electricity provisions carry direct consequences for utilities, traders and renewable-energy developers in Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, Albania and Kosovo.
Parliament added a proposed exemption for electricity entering the EU when transmission system operators use cross-border flows to maintain network stability. The provision is intended to prevent emergency balancing, redispatch and other security-related exchanges from attracting CBAM liabilities when their purpose is operational rather than commercial.
That exemption remains subject to negotiations with the Council and does not cover ordinary electricity trading. Its inclusion nevertheless marks significant recognition that applying a border carbon charge mechanically to interconnected power systems can interfere with the physical operation of the grid.
More consequential changes concern the calculation of embedded emissions. The existing CBAM methodology can assign electricity imports a national default value based heavily on the exporting country’s fossil generation. That approach can produce a carbon charge disconnected from the actual electricity being delivered, particularly when the exported volume comes from hydropower, wind or solar plants.
The proposed revision would calculate default values using the country’s entire electricity generation mix, including non-fossil production. A non-EU country could also seek a lower value where reliable data demonstrate that its average system emissions or the emissions of its price-setting generators are below the EU default.
The changes would be material for the Western Balkans. Under the existing default values and the Q2 2026 CBAM certificate price of €75.28 per tonne of CO₂, the indicative border cost reaches approximately €86.42/MWh for Bosnia and Herzegovina, €78.37/MWh for Serbia, €74.08/MWh for Kosovo, €73.70/MWh for Montenegro and €66.77/MWh for North Macedonia. Albania carries a zero default factor, reflecting its predominantly hydropower-based electricity system.
Those liabilities frequently exceed the wholesale price spreads that make cross-border trading commercially viable. During the second quarter, Italian electricity averaged around €27/MWh above Montenegro, while the Hungarian price was approximately €13/MWh above Serbia. A default CBAM charge of more than €70/MWh can therefore eliminate the value of an otherwise profitable export.
The first six months of the definitive CBAM period indicate that this is already influencing regional behaviour. Gross scheduled electricity exchanges between the Western Balkans and neighbouring EU markets fell around 15% year on year in Q2 2026 and approximately 19% across the first half of the year.
At the same time, trading on the four observed Western Balkan day-ahead exchanges increased 19% to 2.70 TWh in the second quarter. The contrasting movements suggest that trading activity has not disappeared but is increasingly remaining inside regional markets rather than crossing into the EU.
The Western Balkans returned to a seasonal net-import position of around 1,048 GWh in Q2, reversing exceptional net exports of approximately 1,247 GWh in Q1, when favourable hydrology produced a temporary electricity surplus. Lower hydro generation, declining EU benchmark prices and changing fuel economics all influenced the shift, meaning the reduction in trade cannot be attributed exclusively to CBAM.
The market has nevertheless failed to return to its 2025 structure. Electricity is increasingly being routed north through Serbia, while several traditional corridors into Croatia, Bulgaria, Greece and Italy remain commercially weaker. The result is a more segmented market even as governments attempt to deepen regional integration and connect Western Balkan power exchanges with the EU’s single day-ahead market.
Electricity exports and trading can continue largely as business as usual, but EU-bound transactions must increasingly be supported by a CBAM evidence package identifying the electricity source and its embedded emissions, according to analysts at Virtu.Energy, a CBAM electricity-focused engineering platform. The evidence must be sufficiently complete and traceable to permit examination by an EU-accredited verification body.
Although the authorised CBAM declarant or EU importer retains formal responsibility for compliance, much of the required generation, metering, contractual and delivery information must originate with the exporter and electricity producer. The importer will therefore have to pass substantial documentation requirements down the commercial chain.
Virtu.Energy analysts said early integration of a pre-verification process is highly recommended. Producers, traders and importers should establish the required evidence chain now rather than waiting for annual CBAM declarations and certificate-surrender deadlines. Records that were not collected at the time of generation or delivery can be difficult, and sometimes impossible, to reconstruct retrospectively.
The legislative revision could ease the market pressure by reducing default values and making actual plant-level emissions easier to demonstrate. Parliament and the Council still have to agree on the final text, including the treatment of emergency electricity flows and the safeguards available during severe market disruption.
A final agreement is targeted before the end of 2026, with some electricity amendments potentially applying retroactively from 1 January 2026. Until the negotiations are completed, traders must continue pricing electricity against the existing default liabilities while simultaneously building the evidence needed to support actual emissions. Carbon exposure will otherwise remain capable of overwhelming the underlying value of cross-border capacity.