Montenegro’s undersea electricity connection with Italy gives exporters direct access to a higher-priced European power market, but the country’s €73.70/MWh indicative CBAM cost can significantly affect export economics unless installation-specific emissions are verified. Montenegrin electricity is assigned a national default emissions factor of 0.979 tonnes of CO₂ per MWh. Based on the second-quarter CBAM certificate price of €75.28 per tonne, that factor produces an estimated carbon cost of €73.70/MWh for electricity imported into the European Union.
The amount is more than twice the approximately €27/MWh average price difference between Montenegro and Italy during the second quarter. On a spot-market basis, applying the default factor can therefore remove the price advantage available through the interconnector. Despite this, scheduled electricity exports from Montenegro to Italy increased by approximately 19% year on year in the second quarter. The recovery may reflect existing contracts, transit activity, power-plant conditions or expectations of changes to the EU electricity methodology. Unless exported electricity qualifies for treatment based on actual emissions, however, the Italian price premium may frequently be insufficient to cover the CBAM charge.
Montenegro’s national default factor is strongly affected by the Pljevlja lignite power plant, despite the country’s substantial hydropower generation and expanding renewable-energy pipeline. This creates a difference between the national default factor and the emissions profile of individual hydro, wind and solar facilities. A zero-emission generator can still be treated under a carbon-intensive factor if the EU importer cannot establish that the electricity meets the conditions for using actual emissions.
Evidence Requirements for the Italy Interconnector
Physical access to the Montenegro-Italy cable does not by itself establish eligibility for a CBAM actual-emissions claim. The authorised EU declarant must have a qualifying physical power purchase agreement with the named Montenegrin producer. If a trader is involved in the delivery, the relevant documentation should operate as a controlled tripartite contractual structure. Production claimed under the arrangement must correspond to firmly nominated capacity within a period of no more than one hour. Metering information, schedules, imported volumes and contractual allocations must correspond to the same installation and declarant.
An accredited verifier is required to review monthly interim reports and confirm that the applicable conditions have been fulfilled. Final evidence must identify both the authorised declarant and the quantity allocated to that party. The requirements make it more difficult for EPCG or independent traders to classify commercially aggregated portfolios of hydro, wind, solar and thermal generation as renewable electricity based on actual emissions. Maintaining installation-specific treatment requires controlled allocation procedures to ensure that the same renewable electricity volume is not sold to multiple buyers, linked to several certificates or claimed simultaneously for domestic and export use.
Proposed EU Changes to Electricity Default Factors
The European Commission has proposed changes to electricity default factors that would take the full national generation mix into account. For Montenegro, greater inclusion of hydropower and other renewable generation in the calculation would produce a lower national factor than one primarily influenced by fossil-fuel generation. The proposal would also eliminate the requirement for actual-emissions claims to demonstrate that there was no physical congestion between the generating installation and the EU during the export hour.
That change would simplify electricity deliveries through the Italy interconnector and land-based routes because producers would no longer have to provide evidence concerning network conditions outside their control.
If adopted in its proposed form, the electricity provisions could apply retroactively from January 1, 2026. Until the methodology is amended, traders face uncertainty over whether current electricity imports will ultimately be assessed under the existing rules or the proposed system. The issue also affects revenue projections for Gvozd, Gvozd 2 and Montenegro’s emerging solar portfolio, as the commercial value of renewable electricity sold into Italy depends increasingly on whether it can avoid treatment under the national thermal-generation factor.
Guarantees of Origin Could Add a Separate Revenue Stream
The Commission has also proposed mutual recognition of Guarantees of Origin (GoOs) between the EU and qualifying Energy Community countries. Montenegro already operates an electronic GoO registry and issued approximately 1.35 million certificates in 2024. Recognition within the EU could make those certificates more marketable to Italian utilities, corporate purchasers and electricity traders. Before recognition could apply, Montenegro would need to meet proposed requirements covering the implementation of EU-aligned renewable and electricity legislation, registry reliability, double-counting controls, technical transfer testing and either Association of Issuing Bodies (AIB) membership or equivalent independent oversight.
GoO recognition would support renewable electricity disclosure and corporate PPAs but would remain separate from CBAM actual-emissions verification. A GoO can be transferred independently of the physical electricity, whereas CBAM treatment requires evidence that the electricity claimed by the authorised declarant was contracted, produced, nominated and imported through a qualifying chain. The highest-value export arrangement would therefore combine physical renewable electricity delivered through the Italy cable, a recognised GoO and independently verified CBAM documentation. Montenegro could also apply verified renewable supply to domestic customers. Tourism businesses, ports, data centres and industrial exporters may pay a premium for electricity supported by credible carbon and origin documentation, particularly as European banks and commercial partners increase emissions-related requirements.
The Italy interconnector provides Montenegro with direct access to the EU electricity market without the contractual complexity associated with multiple transit jurisdictions. The commercial value of that connection will depend on the documentation attached to each exported megawatt-hour, including evidence establishing the electricity’s generation source and emissions characteristics.
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