Montenegro’s electricity exports to Italy face an indicative carbon cost of €80.59 per megawatt-hour (MWh) under the European Union’s Carbon Border Adjustment Mechanism (CBAM), while the wholesale electricity price difference between the two markets has narrowed to €9.88/MWh. The combination puts pressure on export margins and raises questions about the competitiveness of conventional electricity trading, renewable-energy investments and the financial outlook for state-owned utility Elektroprivreda Crne Gore (EPCG).
Montenegro’s direct electricity connection with Italy provides access to one of Europe’s largest electricity markets. The financial value of that connection increasingly depends on how carbon costs affect cross-border transactions and whether exporters can demonstrate the actual emissions associated with electricity deliveries. Montenegro’s official CBAM default emission factor for electricity is 0.979 tonnes of CO₂ per MWh. Applying the European Union’s latest published CBAM certificate price of €82.32 per tonne of CO₂ for the third quarter of 2026 results in an indicative gross carbon liability of €80.59/MWh for electricity imports assessed using Montenegro’s national default factor.
This calculation does not represent the final CBAM charge for electricity deliveries during October. The applicable certificate price will be determined by EU carbon auctions in the fourth quarter. Nevertheless, the calculation illustrates the potential difference between wholesale electricity prices and the additional carbon cost of supplying the EU market.
Wholesale Price Differences and Export Economics
Montenegro’s day-ahead electricity price on the BELEN market stood at €223.39/MWh, compared with approximately €233.27/MWh in Italy’s Centre-South bidding zone. The resulting difference of €9.88/MWh was less than one-eighth of Montenegro’s indicative default-based CBAM exposure, before transmission capacity charges, balancing costs and other transaction expenses. For traders relying on wholesale price differences between Montenegro and Italy, a carbon liability of this scale could eliminate the commercial advantage of conventional electricity exports.
Trading figures for the second quarter of 2026 show that export volumes do not depend on the price difference alone. Average wholesale electricity prices were approximately €120.9/MWh in Italy and €93.6/MWh in Montenegro, leaving an Italian market premium of around €27/MWh.
Despite an indicative default-based CBAM cost of nearly €74/MWh at the time, scheduled electricity exports from Montenegro towards Italy increased by approximately 19% year on year to 708 GWh. These figures indicate that trading decisions also reflect hourly price differences, existing contractual commitments and the value of cross-border transmission capacity. Scheduled flows can include electricity originating outside Montenegro, making the origin of the electricity involved in individual transactions important for CBAM compliance.
EPCG Faces Domestic and EU Carbon Costs
For EPCG, the relationship between Montenegro’s hydropower resources and its remaining reliance on coal-fired generation is central to the export challenge. The Piva and Perućica hydropower plants provide substantial low-carbon electricity, while the Pljevlja thermal power plant remains an important source of dispatchable generation, particularly during periods of weak hydrology.
Electricity exports that do not meet the requirements for verified actual emissions are assessed using Montenegro’s national default emission factor rather than the emissions characteristics of an individual hydropower or wind installation. This can place renewable electricity at a commercial disadvantage when sold through conventional trading arrangements.
Montenegro’s domestic carbon-pricing framework adds another financial consideration. EPCG has said it would pay €75 per tonne of CO₂ under the country’s emissions-trading system, with payments directed to the national Eco-Fund. The carbon price has increased from an earlier minimum of around €24/tCO₂. Depending on emissions and applicable payment obligations, the measure could create an annual financial burden approaching €70 million for the utility. It also increases the operating costs associated with coal-fired electricity generation.
Domestic carbon payments do not automatically remove a utility’s CBAM obligations on electricity exports. EU rules permit qualifying carbon prices effectively paid in the country of origin to be recognised, subject to requirements covering emissions, proof of payment, rebates and verification. For electricity assessed using national default emissions values, deductions also depend on the EU framework for recognising country-level default carbon prices. EPCG and prospective EU electricity buyers must therefore assess domestic carbon-pricing compliance separately from CBAM requirements.
Renewable Projects and Verified Emissions
Montenegro’s expanding wind and solar portfolio offers another route to supplying lower-carbon electricity to European markets. The portfolio includes EPCG’s Gvozd wind project, which entered trial operation after an investment of approximately €82 million. Expected annual generation is around 150 GWh. Renewable generation alone does not guarantee that electricity will qualify for CBAM treatment based on actual emissions instead of national default values.
An authorised EU declarant seeking actual-emissions treatment must demonstrate compliance with strict requirements covering the physical power purchase agreement, generating installation, network conditions, cross-border nominations and hourly correspondence between electricity generation and deliveries. The emissions evidence must also undergo independent verification. Guarantees of Origin do not independently establish eligibility for actual-emissions treatment under electricity CBAM, despite their commercial relevance to renewable electricity transactions.
These requirements affect how banks and investors assess wind, solar and battery storage projects. Financing models must distinguish between revenue from domestic electricity sales, conventional exports and physical exports that qualify for treatment based on verified emissions.
Renewable projects that depend on Italian wholesale price premiums may require revised revenue forecasts, additional compliance expenditure and stronger contractual arrangements with EU buyers. Existing renewable-energy loans could also face exposure if their financial models assumed unrestricted access to higher Italian prices without accounting for the carbon-adjusted cost of electricity deliveries.
Implications for Industry and Investment
Electricity pricing also affects Montenegro’s industrial sector, including aluminium processing, metal manufacturing and other energy-intensive activities. However, indirect electricity emissions are not currently included in CBAM certificate obligations for aluminium and steel in the same way as they are for cement and fertilisers.
The European Commission has proposed changes to electricity CBAM rules that could improve the position of renewable producers in countries whose national default emission factors reflect carbon-intensive electricity systems. Any commercial benefit will depend on the final legislation and the ability of producers and importers to satisfy its conditions. For Montenegro, the commercial challenge extends beyond generating electricity from hydropower, wind and solar installations and selling it into Italy at a higher wholesale price. Producers, transmission operators and European buyers must also establish verifiable contractual and physical delivery arrangements that allow qualifying low-carbon electricity to be valued according to its actual emissions.
Without that capability, Montenegro could continue investing in electricity infrastructure and expanding renewable generation while losing a substantial part of the price premium associated with direct access to the Italian market.
