Applying the EU Carbon Border Adjustment Mechanism (CBAM) will cost Serbia’s power sector between 200 and 300 million euros annually from 2026 to 2030, according to the Fiscal Council’s report “Serbia’s Climate and Energy Transition and Public Finances: Will CBAM Trigger Change?”
By accepting CBAM, Serbia risks becoming an “energy island” in Europe, as every megawatt-hour of electricity exported to the EU would be subject to an additional charge of 60–70 euros. This would seriously threaten the operations of the state-owned power utility EPS.
If Serbia joins the EU Emissions Trading System (EU ETS) under current rules in 2030, the cost could reach around three billion euros per year, which would effectively double household electricity prices—an outcome deemed economically and socially unsustainable.
Introducing a domestic carbon tax on electricity, similar to that on industrial products, would also be costly—about 1.2 billion euros for EPS in 2030—and would still require electricity price increases of more than 50 percent.
The Fiscal Council stated that the best solution would be Serbia’s entry into the EU ETS, but only if the country secures significant concessions, including a transition period without payments until 2030, 80–90 percent of emission allowances granted for free, and about ten years for full adjustment. Given that Bosnia and Herzegovina and North Macedonia face similar challenges, joint negotiations with the EU were recommended.
The Council emphasized that energy transition must become a top priority for Serbia’s government and public finances.
According to the report, Serbia is unlikely to meet its greenhouse gas reduction targets under the Paris Agreement or its National Energy and Climate Plan (INEKP), which envisages 30 billion euros of investment by 2030. Although Serbia pledged in the Sofia Declaration to align with EU climate policies, progress has been minimal. From 2010 to 2023, Serbia reduced greenhouse gas emissions by only 3.4 percent. To meet its declared 2030 target, it would need to triple that reduction within just five years—an extremely ambitious goal.
Fiscal Council President Blagoje Paunović warned that without prioritizing climate and energy policy, Serbia will face growing fiscal and economic risks, declining competitiveness of its exports to the EU, and a loss of credibility among investors.
To avoid escalating costs, the Council urged the swift establishment of a monitoring, reporting, and verification (MRV) system and stronger institutional capacity for energy sector reform.
The CBAM-related cost for exports of iron, steel, aluminum, fertilizers, and cement is expected to rise from moderate levels in 2026 to 150–200 million euros annually by 2030.
The government’s draft Carbon Emission Tax Law, now under public review, proposes a gradual introduction of a domestic carbon tax starting in 2027 at 4 euros per ton of CO₂, increasing to 40 euros by 2030. This measure could generate around 220 million euros annually for Serbia’s budget by the end of the decade.
Fiscal Council advisor Slobodan Minić noted that while the tax could be treated as general revenue, doing so would weaken its environmental purpose. Ideally, collected funds should be reinvested in Serbia’s green transition—supporting decarbonization projects and protecting vulnerable energy consumers—rather than flowing to the EU budget.
