The European Union’s Carbon Border Adjustment Mechanism (CBAM) is no longer a future regulatory issue for Montenegro’s power sector. According to a new analysis by NGO Eko-tim, the mechanism is already altering commercial electricity trading behavior between Montenegro and the EU, particularly toward Italy, where the country has historically relied on export opportunities through the submarine interconnection link.
The findings represent one of the clearest signals so far that CBAM is beginning to change electricity market logic across the Western Balkans. Although wholesale electricity prices in southern Italy during the first quarter of 2026 remained significantly above Montenegrin market prices, planned commercial flows from Montenegro toward Italy declined by more than 2,100 MWh per day compared with the same period a year earlier.
Under normal trading conditions, such a price differential would strongly incentivize exports. Eko-tim estimates that the average spread between Italian and Montenegrin electricity prices during the quarter was approximately €43/MWh. However, the introduction of CBAM-related carbon costs — estimated at roughly €74/MWh for Montenegrin electricity exports — effectively erased that competitive advantage.
The consequence is structurally important for Montenegro’s energy sector. CBAM is not simply adding another cost layer; it is fundamentally changing export profitability calculations for coal-linked electricity systems. Electricity generated in systems with high carbon intensity is becoming increasingly difficult to place inside the EU market even when regional price spreads appear commercially attractive.
This is especially relevant for Montenegro because the country’s export economics remain closely connected to the performance of the Thermal Power Plant Pljevlja, the country’s dominant coal-fired generation asset. As CBAM progressively tightens economic pressure on carbon-intensive electricity, the profitability of exporting electricity produced from lignite-based generation becomes increasingly fragile.
Eko-tim’s analysis estimates that approximately 500 GWh of planned electricity sales in 2026 could qualify as EU-relevant exports exposed to CBAM-related risks. Applying reduced export volumes and market adjustments, the organization estimates that Montenegro could face lower export revenues or lost export premiums ranging from roughly €4 million to over €9 million, depending on pricing and emissions scenarios.
The broader regional pattern already appears visible across the Western Balkans. Energy Community data for the first quarter of 2026 showed commercial electricity exchanges between the Western Balkans and the EU declining materially after CBAM implementation. Total commercially traded electricity volumes reportedly fell by around 25% year-on-year, while flows from the Western Balkans toward the EU declined by more than 8%.
The impact is not limited to Montenegro. Serbia’s EPS has also acknowledged that exports toward the EU became commercially uncompetitive after CBAM implementation because carbon-related charges significantly increased delivered electricity costs. Serbian market participants estimate CBAM-related charges on exported electricity at around €78/MWh, levels that substantially alter cross-border trading economics.
For Montenegro, the issue extends beyond short-term export revenue. The country now faces a strategic energy policy dilemma. If Montenegro does not establish its own domestic carbon pricing framework aligned with EU systems, a growing portion of carbon-related value associated with electricity exports will effectively be collected externally through EU CBAM mechanisms rather than remaining inside the domestic economy.
That issue carries increasingly important fiscal and investment implications. Revenues from carbon pricing mechanisms inside EU member states are often recycled into renewable energy investment, grid modernization, industrial decarbonization and consumer transition support programs. Montenegro risks losing part of that financial transition capacity if the carbon adjustment cost is effectively externalized through CBAM payments abroad.
The situation also changes investment logic for future generation assets. Renewable energy projects, battery storage systems and lower-carbon generation are no longer driven only by ESG narratives or long-term climate targets. They are increasingly becoming necessary instruments for preserving export competitiveness and maintaining access to European electricity markets.
This dynamic is likely to accelerate investment pressure around wind, solar and battery storage projects across Montenegro and the broader Western Balkans. Developers, utilities and traders are increasingly forced to evaluate electricity not simply as a commodity priced in €/MWh, but as a carbon-adjusted product where embedded emissions directly influence tradability and market access.
For Montenegro’s policymakers, CBAM is rapidly evolving from a regulatory discussion into a macroeconomic issue affecting export revenues, energy sector profitability, industrial competitiveness and long-term investment positioning. The transition challenge is becoming immediate rather than theoretical.
