The implementation of the European Union’s Carbon Border Adjustment Mechanism (CBAM) is significantly transforming the electricity export landscape for Montenegro. A recent analysis by the NGO Eko-tim indicates that the mechanism is already influencing commercial electricity trading practices, particularly in relation to Italy, where Montenegro has historically capitalized on export opportunities via a submarine interconnection link.
Data reveals that despite wholesale electricity prices in southern Italy remaining considerably higher than those in Montenegro during the first quarter of 2026, planned electricity exports from Montenegro to Italy have decreased by over 2,100 MWh per day compared to the same period last year. This trend suggests a shift in market behavior, as the expected price differential typically encourages exports.
Eko-tim’s findings highlight that the average price difference between Italian and Montenegrin electricity was approximately €43/MWh during this quarter. However, the introduction of carbon costs associated with CBAM—estimated at around €74/MWh for Montenegrin electricity—has negated this competitive edge, fundamentally altering profitability calculations for coal-dependent energy systems.
This shift poses significant challenges for Montenegro’s energy sector, particularly given its reliance on the Thermal Power Plant Pljevlja, the country’s primary coal-fired generation facility. As CBAM increases economic pressure on carbon-intensive electricity, exporting power generated from lignite sources becomes increasingly precarious.
According to Eko-tim’s analysis, around 500 GWh of planned electricity sales in 2026 could be subject to CBAM-related risks. The organization estimates that this could lead to reduced export revenues or lost premiums ranging from €4 million to over €9 million, contingent upon varying pricing and emissions scenarios.
The impact of CBAM is not confined to Montenegro; it extends across the Western Balkans. Data from the Energy Community indicates a significant decline in commercial electricity exchanges between the region and the EU following CBAM’s implementation. Total traded electricity volumes dropped by approximately 25% year-on-year, while exports from the Western Balkans to the EU fell by more than 8%.
Serbia’s EPS has also reported similar challenges, noting that exports to the EU have become uncompetitive due to increased carbon-related charges, estimated at around €78/MWh. This development alters cross-border trading economics significantly for Serbian market participants.
Montenegro now faces a critical strategic dilemma regarding its energy policy. Without establishing a domestic carbon pricing framework aligned with EU standards, a substantial portion of carbon-related revenue from electricity exports may be siphoned off through external CBAM payments rather than benefiting the domestic economy.
This situation has important fiscal and investment implications. Revenues generated from carbon pricing mechanisms within EU member states are often reinvested into renewable energy projects, grid modernization, and industrial decarbonization efforts. Montenegro risks losing out on these financial resources if it fails to internalize carbon adjustment costs.
The evolving landscape also necessitates a reevaluation of investment strategies for future energy generation assets. Projects focused on renewable energy, battery storage, and lower-carbon generation are increasingly viewed as essential not only for meeting environmental goals but also for maintaining competitiveness in European electricity markets.
This trend is likely to intensify investment pressure on wind, solar, and battery storage initiatives across Montenegro and the wider Western Balkans region. Energy developers and traders are compelled to consider electricity as a carbon-adjusted product, where embedded emissions directly affect tradability and market access.
For policymakers in Montenegro, CBAM is rapidly transitioning from a regulatory issue to a macroeconomic challenge impacting export revenues, energy sector viability, industrial competitiveness, and long-term investment strategies. The urgency of addressing these challenges is becoming increasingly apparent.
