Published by Global Banking and Finance Review
Posted on October 30, 2025
2 min readLast updated: January 21, 2026
Western Balkan countries are advised to adopt carbon pricing to reduce the impact of the upcoming EU tax on fossil fuel-generated electricity.
SARAJEVO (Reuters) -Western Balkan countries should work towards introducing their own carbon pricing on electricity generation to mitigate the impact of new EU taxes on fossil fuel-generated energy to be introduced next year, an environmental agency said in a report on Thursday.
Under its Carbon Border Adjustment Mechanism to be introduced on January 1, 2026, EU importers of goods including electricity from outside the bloc will have to pay for the carbon dioxide emissions associated with their production in their country of origin.
This will make electricity from heavily coal-reliant producers like Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia much more expensive for EU importers such as Italy, Croatia, Hungary, Romania, Bulgaria and Greece.
Those countries' power exports under CBAM are therefore likely to plummet overnight, slashing revenues for Balkan power utilities, CEE Bankwatch Network said. Up to 60% of electricity imported to the EU by the four Balkan countries is coal-based.
However, the EU tax has conditions to allow for exemptions if countries "substantially progress" in applying EU energy and climate law, which could include carbon pricing.
"By introducing domestic carbon pricing, the countries could mitigate the impacts of CBAM and generate significant revenue to spend on a just and sustainable energy transition," it said.
Carbon pricing would also allow them to raise up to 4.2 billion euros ($4.90 billion) per year to fund a sustainable energy transition and support the coal-dependent region, the CEE Bankwatch report said.
"CBAM could finally force Western Balkan governments to tackle the elephant in the room and start closing their highly-polluting and increasingly uneconomic coal power plants," Pippa Gallop of the CEE Bankwatch Network added.
($1 = 0.8575 euros)
(Reporting by Daria Sito-Sucic; Editing by Jan Harvey)
Carbon pricing is a method for reducing global warming emissions by assigning a cost to emitting carbon dioxide. It encourages companies to lower their greenhouse gas emissions by making it financially beneficial to do so.
CBAM is a policy proposed by the EU that requires importers to pay for the carbon emissions associated with their goods, aimed at preventing carbon leakage and encouraging cleaner production methods.
Coal-based electricity is generated by burning coal in power plants. It is a significant source of energy but is also a major contributor to carbon emissions and climate change.
Exemptions refer to specific conditions under which countries can avoid certain EU taxes, such as those related to carbon emissions, if they show substantial progress in implementing EU energy and climate laws.
A sustainable energy transition involves shifting from fossil fuel-based energy systems to renewable energy sources, aiming to reduce environmental impact and promote long-term energy security.
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