The European Commission has proposed adjustments to the Carbon Border Adjustment Mechanism (CBAM) that would allow lower carbon border charges for imports from countries demonstrating measurable progress in decarbonisation. The proposal, now under discussion in Brussels, directly affects electricity and other carbon-intensive products entering the European Union and is particularly relevant for neighbouring non-EU economies such as Montenegro.
Under the proposed approach, CBAM obligations would no longer be applied uniformly based solely on EU reference emission factors. Instead, importers would be able to benefit from reduced CBAM costs if the exporting country can prove lower carbon intensity in electricity generation or industrial production, either through cleaner power mixes, emissions monitoring systems, or concrete decarbonisation investments. The Commission has indicated that, if adopted, these changes could apply retroactively from the start of the current year.
CBAM was introduced as part of the EU’s broader climate framework to prevent carbon leakage and to align the carbon cost of imports with the price paid by EU producers under the EU Emissions Trading System. In its initial design, however, the mechanism was widely criticised by Energy Community members for failing to adequately recognise gradual decarbonisation outside the EU, particularly in power systems that are transitioning but still structurally constrained.
For Montenegro, the proposed adjustment is strategically significant. Montenegro is already one of the least carbon-intensive electricity systems in the Western Balkans, with hydropower accounting for a dominant share of generation and a limited role for coal compared with regional peers. However, under the existing CBAM methodology, electricity exports and energy-intensive goods were still exposed to carbon charges that did not fully reflect this structural advantage.
The Commission’s proposal explicitly aims to correct that imbalance by linking CBAM payments to actual decarbonisation performance, rather than static regional benchmarks. For Montenegro, this creates a clearer incentive framework: investments in grid stability, renewable integration, emissions monitoring and verification could now translate directly into lower border costs when exporting electricity or electricity-embedded industrial products to the EU market.
The proposal also aligns with Montenegro’s broader reform trajectory under the EU Growth Plan and accession process. By tying CBAM relief to measurable climate action, Brussels is effectively signalling that countries advancing regulatory alignment, emissions transparency and clean energy investment can reduce trade frictions even before formal EU membership. For Montenegro, this reinforces the economic logic of accelerating renewable projects, modernising transmission infrastructure and implementing EU-compatible emissions accounting systems.
At the same time, the Commission has stressed that any reduction in CBAM charges would require robust data and verification, meaning exporters and national authorities must be able to document emissions intensity credibly. This places additional importance on institutional capacity, particularly in power system monitoring and industrial emissions reporting—areas where Montenegro has already begun alignment but will need further upgrades.
The proposal now moves to deliberation in the European Parliament and the Council of the European Union. If adopted, it would mark a meaningful shift in CBAM from a purely defensive trade instrument toward a more dynamic policy tool that actively rewards decarbonisation beyond EU borders.
For Montenegro, the message is clear: decarbonisation is no longer only an environmental or accession objective, but a direct determinant of export competitiveness. The extent to which the country can capitalise on the Commission’s proposal will depend on how quickly it translates its relatively clean energy base into verifiable, EU-recognised emissions performance across electricity and industry.
