For years, Serbia’s export success story has been built on a simple proposition: competitive industrial production positioned at the doorstep of the European Union. Steel from Smederevo, copper from Bor, automotive components from Kragujevac, electrical equipment from Niš and thousands of specialised industrial products manufactured across the country have transformed Serbia into one of Southeast Europe’s most export-oriented industrial economies.
That model is now entering a new phase.
The European Union’s Carbon Border Adjustment Mechanism (CBAM) is widely perceived as a challenge for steel, aluminium, cement and electricity producers. Yet the next stage of the mechanism may have far greater consequences for Serbia’s broader manufacturing sector than for the industries directly covered today.
Official trade data show that Serbia exported approximately €33.7 billion of goods in 2025, while imports reached €39.1 billion. The European Union absorbed approximately 59% of Serbian exports, confirming the bloc’s position as Serbia’s dominant export destination and the primary source of industrial demand for the country’s manufacturing sector. Serbia’s exports to EU member states therefore exceed €19 billion annually, creating a level of exposure unmatched by any other market.
Within that export structure, the sectors already directly exposed to CBAM account for several billion euros of annual trade. Iron and steel products remain the largest category. Serbia’s steel industry, led by HBIS Serbia in Smederevo, exports products worth approximately €2–2.5 billion annually, much of it destined for European industrial consumers. The country’s steel value chain extends far beyond primary production, encompassing pipes, tubes, reinforcement steel, structural products, wire rod and fabricated metal components integrated into European manufacturing networks.
The second major exposure comes from aluminium processing. Although Serbia is not a major primary aluminium producer, it has developed a substantial downstream processing industry producing profiles, extrusions, automotive parts and industrial components for export markets. Annual exports are estimated at €300–600 million, with Germany, Italy and Austria among the most important destinations.
The sectors currently covered by CBAM—including steel, aluminium, cement, fertilisers and electricity—collectively account for approximately €3 billion of Serbian export activity. While substantial, this is not where the greatest long-term risk lies.
The more significant issue is the European Commission’s proposal to expand CBAM coverage to approximately 180 downstream products from 2028 onward. The proposal aims to capture products containing significant quantities of steel and aluminium, including machinery, industrial equipment, automotive components, construction systems, transformers, cables and electrical equipment.
If adopted, the expansion would move CBAM directly into the heart of Serbia’s industrial economy.
The country’s automotive supply chain alone generates more than €3 billion in annual exports. Manufacturers supplying European vehicle producers increasingly face demands for carbon transparency, renewable-energy sourcing and product-level emissions reporting. Electrical equipment exports exceed €2 billion, while machinery, industrial equipment and fabricated metal products contribute several additional billions of euros to Serbia’s export portfolio.
Taken together, sectors potentially affected by future CBAM expansion represent well over €10 billion of annual exports.
For investors, this changes the discussion fundamentally. The issue is no longer whether a Serbian company produces steel or aluminium. Increasingly, the question is whether a Serbian manufacturer can document the embedded carbon content of a finished product destined for Germany, Italy or France.
This shift coincides with broader changes across European industrial policy. Through the Critical Raw Materials Act, Net Zero Industry Act and CBAM framework, Brussels is constructing an integrated system that links carbon intensity, industrial competitiveness and supply-chain security. The result is a manufacturing environment where energy sourcing becomes a strategic factor alongside labour costs, logistics and product quality.
Electricity is emerging as the most important variable.
Recent European Commission technical studies on CBAM indirect emissions suggest future compliance frameworks will increasingly examine how electricity is sourced, measured and verified. Renewable power purchase agreements, guarantees of origin, smart-meter infrastructure and auditable electricity-consumption records are becoming critical elements of industrial competitiveness.
This presents both risks and opportunities for Serbia.
On one hand, the country remains heavily dependent on lignite-based electricity generation. The carbon intensity of the Serbian power system remains significantly higher than the European average, creating potential disadvantages for energy-intensive manufacturers.
On the other hand, Serbia is experiencing an unprecedented renewable-energy investment cycle. More than 2 GW of wind, solar and battery-storage projects are at various stages of development. If successfully integrated into the power system, these investments could provide industrial consumers with access to lower-carbon electricity and strengthen the competitiveness of Serbian exports under future CBAM rules.
The mining sector illustrates the emerging dynamic. Serbia’s copper industry, centred around Zijin Mining Serbia, occupies an increasingly strategic position within European supply chains. Copper is essential for grid infrastructure, renewable energy projects, electric vehicles and data centres. As European manufacturers seek lower-carbon materials, access to renewable electricity may become almost as important as access to the resource itself.
A similar logic applies to future lithium developments, aluminium processing, steel manufacturing and industrial equipment production. Carbon intensity is gradually becoming another production metric alongside cost, quality and delivery performance.
Forecasts for 2027–2028 suggest the transition will accelerate. By 2027, European manufacturers are expected to expand supplier carbon-reporting requirements well beyond currently regulated sectors. By 2028, if the Commission’s proposal proceeds, downstream steel- and aluminium-intensive products could formally enter the CBAM framework. For Serbia, this would effectively shift CBAM from a sector-specific issue to a broad industrial-policy challenge affecting a significant portion of the country’s manufacturing base.
The implications extend beyond trade.
Banks, export-credit agencies and international investors are already incorporating emissions data into financing decisions. Industrial facilities capable of demonstrating renewable-electricity sourcing, verified emissions accounting and transparent supply-chain management are increasingly viewed as lower-risk investments. Conversely, manufacturers unable to document their carbon profile may encounter higher financing costs and weaker access to European customers.
Serbia’s export model is therefore entering a new stage of development. The competitive advantages that attracted industrial investment over the past decade—proximity to Europe, skilled labour, trade agreements and manufacturing capability—remain important. Yet they are gradually being supplemented by new requirements centred on carbon transparency, energy sourcing and environmental performance.
The next chapter of Serbian industrial growth may be determined not only by what the country exports, but by how those products are manufactured, how the electricity powering factories is generated and how effectively companies can demonstrate compliance with a rapidly evolving European regulatory landscape.
For an export economy generating more than €19 billion annually from EU markets, the stakes are substantial. The transition from traditional manufacturing competitiveness to carbon-adjusted competitiveness is no longer a future possibility. It is becoming one of the defining industrial trends of the decade.
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