Serbia’s industrial operators are entering a compliance period shaped by two linked pressures: the European Union’s Carbon Border Adjustment Mechanism and the practical difficulty of delivering energy infrastructure at pace. The regulatory shift is expected to translate carbon-accounting requirements into direct costs for exports, while the transition agenda depends on projects that have repeatedly faced permitting and planning friction. Together, these factors raise questions for utilities, manufacturers, and contractors about how quickly emissions data, operational controls, and delivery systems can be aligned.
CBAM starts next year, with EPS as the first pressure point
Beginning next year, Serbia will be covered by the EU’s Carbon Border Adjustment Mechanism, which adds costs to selected Serbian industries, especially those with high energy intensity. The first sector identified as being affected is Elektroprivreda Srbije, the country’s main electricity supplier that powers most Serbian companies. The Fiscal Council warns that the impact could spread through the economy as electricity-linked production costs rise.
For EPS specifically, the CBAM-related cost exposure tied to electricity exports could reach €60 per MWh. That figure would challenge competitiveness because the current average export price is just over €100 per MWh. The mechanism’s design also implies that operators will need emissions proof and fee payments consistent with EU carbon pricing rules.
From 2026, export flows face CO2 charges across multiple industries
In 2026, additional charges are expected to apply to a portion of Serbia’s exports—nearly two-thirds of which go to EU member states—based on CO2 emissions generated during production. Key sectors named as likely to be affected include aluminum, iron and steel, cement, fertilizers, hydrogen, and electricity. Companies in these supply chains will need to demonstrate emissions performance and align payments with EU carbon pricing.
This creates a compliance requirement that goes beyond corporate reporting: it links operational emissions profiles to export eligibility economics. For industrial facilities that rely on carbon-intensive inputs or electricity generation dominated by high-emitting sources, the CBAM effect can become a structural cost driver rather than a one-off adjustment.
Higher carbon intensity and lignite dependence raise compliance risk
Serbia’s industries emit considerably more carbon per unit of output than EU counterparts, reflecting decades of limited environmental and energy policy. EPS continues to rely largely on lignite, which drives high CO2 emissions alongside other pollutants. This operating profile affects not only the utility itself but also downstream industrial users dependent on its power supply.
Historical analysis cited by the Fiscal Council shows that from 2010 to 2023, Central and Eastern European countries reduced emissions by about 20%, while Serbia achieved only a 3–4% reduction. In compliance terms, this gap increases the challenge of meeting future carbon-related cost pressures without major changes in generation mix and industrial efficiency.
Projected CBAM costs for EPS range from hundreds of millions to billions
The Fiscal Council estimates that CBAM-related costs for EPS could vary widely depending on how the government approach aligns with EU rules. Under current EU conditions, annual costs are projected at €200–300 million. Under stricter conditions covering the entire sector, annual costs could rise to €3 billion.
Such a spread matters for environmental management planning because it affects how operators prioritize investments in monitoring systems, operational controls, and generation or process upgrades. It also influences contracting decisions for engineering services tied to emissions measurement readiness and reporting capability.
Energy project delivery problems compound transition timelines
Alongside carbon pricing pressure, Serbia faces systemic obstacles in executing major energy projects. Reported issues include delays in permits, unresolved property matters, and insufficient pre-investment planning—factors that can disrupt construction schedules and delay commissioning of lower-emission assets. Analyses of ten major energy projects totaling over €7.5 billion found frequent schedule overruns and rising costs.
Examples include Đerdap 3 hydroelectric plant rising from €1.4 billion to €2.6 billion (+85%), self-balancing solar plants increasing from €1.4 billion to €1.7 billion (+21%), and Bistrica hydroelectric plant moving from €835 million to €962 million (+15%). The cost escalations are largely attributed to incomplete project documentation followed by subsequent design changes.
Institutional capacity bottlenecks may slow implementation regardless of funding
The Fiscal Council cautions that even if funding arrives on time, limited institutional and staffing capacity will remain a bottleneck for Serbia’s energy transition. That constraint can affect how quickly environmental permitting processes move from application through approvals and how effectively project teams can manage engineering revisions without triggering further delays. It also raises operational risk for contractors tasked with meeting environmental requirements under compressed timelines.
The council further indicates that outcomes will depend on whether the government prioritizes these energy projects relative to other expenditures such as sports infrastructure or defense procurement. For operators across utilities and heavy industry—including aluminum, steelmaking inputs like iron and steel products, cement manufacturing, fertilizer production, hydrogen-related activities, and electricity supply—the practical implication is clear: compliance readiness depends not only on regulations but also on whether delivery capacity can support the transition plan.
Overall, Serbia’s near-term compliance challenge combines CBAM-driven emissions cost exposure beginning next year with export-related CO2 charges from 2026 across multiple industrial sectors. At the same time, permitting delays, property disputes, weak pre-investment planning, incomplete documentation, and design changes have already pushed major energy projects off schedule and upward in cost. For regulators and industry stakeholders across Southeast Europe watching implementation closely, these factors suggest that emissions monitoring capability and infrastructure oversight will need to advance alongside engineering delivery performance to reduce both financial exposure and operational environmental risk.