The implementation of the European Union’s Carbon Border Adjustment Mechanism (CBAM) is significantly impacting Montenegro’s electricity sector. A recent analysis by NGO Eko-tim indicates that CBAM is already affecting commercial electricity trading patterns, particularly with Italy, where Montenegro has historically exported power via submarine interconnection.
Data reveals a notable shift in electricity flows from Montenegro to Italy, with planned exports decreasing by over 2,100 MWh per day in early 2026 compared to the same period in the previous year, despite Italian wholesale electricity prices remaining considerably higher than those in Montenegro. The average price difference was approximately €43/MWh during this time.
However, the introduction of CBAM-related carbon costs—estimated at around €74/MWh for Montenegrin exports—has diminished this competitive edge. This situation signals a significant alteration in the profitability calculus for coal-dependent electricity systems, as high carbon intensity generation faces increased challenges in accessing EU markets, even when price differentials may suggest favorable trading conditions.
This development is particularly critical for Montenegro, given its reliance on the Thermal Power Plant Pljevlja, the country’s primary coal-fired power facility. As CBAM intensifies economic pressures on carbon-heavy electricity production, the feasibility of exporting lignite-based generated power is increasingly jeopardized.
Eko-tim projects that about 500 GWh of planned electricity sales in 2026 could be subject to CBAM-related risks. Consequently, reduced export volumes and market adjustments could result in lost revenues ranging from approximately €4 million to over €9 million, influenced by varying pricing and emissions scenarios.
A broader trend across the Western Balkans indicates that energy exchanges with the EU have declined since CBAM’s introduction. Reports show that total traded electricity volumes fell by around 25% year-on-year in early 2026, with exports from the Western Balkans to the EU decreasing by more than 8%.
The effects of CBAM are not confined to Montenegro; Serbia’s EPS has also reported a decline in export competitiveness due to increased carbon charges on delivered electricity. Serbian estimates place these charges at around €78/MWh, which significantly alters the economic landscape for cross-border trade.
Montenegro now faces a crucial strategic decision regarding its energy policy. Without a domestic carbon pricing framework that aligns with EU regulations, the country risks losing out on potential revenues from carbon pricing mechanisms that could otherwise be reinvested into renewable energy initiatives and infrastructure modernization.
This scenario presents important fiscal implications as revenues from carbon pricing in EU member states are typically reinvested into renewable energy projects and consumer support programs. Montenegro could miss out on vital funding opportunities if it fails to capture this value domestically through effective carbon pricing strategies.
The evolving situation also affects future investment decisions regarding energy generation assets. Renewable energy initiatives and lower-carbon technologies are becoming essential not only for meeting environmental targets but also for maintaining competitiveness in European electricity markets.
As a result, there is likely to be increased investment activity focused on wind, solar, and battery storage projects throughout Montenegro and the wider Western Balkan region. Stakeholders are now assessing electricity as a carbon-adjusted commodity where embedded emissions will directly impact market access and tradability.
For policymakers in Montenegro, CBAM has transitioned from a regulatory concern to a pressing macroeconomic challenge influencing export revenues and long-term investment strategies within the energy sector.
