The Council of the European Union has made a significant move by adopting a decision on 12 June 2026 to strengthen the Carbon Border Adjustment Mechanism (CBAM), which is set to take effect from 1 January 2026. This revised framework extends beyond its initial focus on basic materials like iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen. The new measures introduce broader coverage and enhanced anti-circumvention strategies.
For exporters in Serbia, Montenegro, Bosnia and Herzegovina, North Macedonia, and Albania, the evolving CBAM signifies a shift from a simple reporting and payment system to a more complex industrial compliance framework that will permeate deeper into manufacturing supply chains.
A critical weakness of the original CBAM was its limited scope, primarily targeting upstream commodities while leaving many downstream manufactured products unregulated. This created opportunities for finished products made from high-emission materials to enter the EU without facing equivalent carbon costs. The Council’s updated position aims to address this by expanding CBAM to include additional downstream products containing significant amounts of steel and aluminium. Reports suggest that hundreds of product categories may fall under this expanded regulation during the legislative process.
This development is particularly relevant for Western Balkan manufacturers who typically do not export raw steel or aluminium directly to the EU. Instead, they are engaged in exporting value-added products such as:
- automotive components;
- fabricated metal products;
- machinery;
- industrial equipment;
- construction products;
- electrical equipment;
- metal assemblies.
If Parliament and the Council agree on the broadened scope, many of these products may become subject to CBAM requirements.
In Serbia, exports to the EU already include a significant volume of CBAM-affected products. The country’s steel sector, particularly operations like HBIS Serbia in Smederevo, has been identified as directly exposed to CBAM regulations. The implications extend further down the supply chain to companies producing fabricated steel items, industrial machinery, and automotive components. This also applies to aluminium processors and manufacturers in related sectors who increasingly face demands for carbon transparency from EU buyers.
The implications for carbon accounting are substantial; they may shift from being a facility-level responsibility to a product-level requirement within commercial operations.
Electricity remains a pivotal aspect of this regulatory landscape for both Serbia and Montenegro. Since its inception, electricity has been included in CBAM provisions. The recent proposal arrives shortly after the European Commission released additional technical guidelines on indirect emissions accounting and pathways for decarbonising electricity generation. European industrial clients are increasingly prioritising transparency regarding:
- electricity sources;
- generation profiles;
- hourly matching;
- metering systems;
- guarantees of origin;
- auditable emissions factors.
The Council’s decision emphasizes the EU’s commitment to reducing carbon leakage risks while enhancing traceability throughout industrial supply chains. This trend presents potential commercial opportunities for renewable energy developers in the Western Balkans. Wind farms, solar parks, and battery energy storage systems capable of demonstrating verifiable low-carbon electricity may become vital partners for manufacturers subject to CBAM as they export goods to the EU market.
The proposal also introduces stronger anti-circumvention measures aimed at preventing market participants from evading CBAM obligations through product reclassification or restructuring supply chains. The Council seeks enhanced monitoring capabilities and systematic reviews of products that could be incorporated into CBAM coverage in subsequent years. For exporters, reliance on regulatory loopholes may become increasingly precarious as competitive advantages shift towards demonstrable emissions reductions and transparent reporting practices.
This proposal holds particular significance for mining and processing projects across Southeast Europe. Companies engaged in:
- copper processing;
- zinc refining;
- aluminium production;
- steel manufacturing;
- critical minerals processing;
- battery-material facilities;
are likely to encounter growing CBAM-related requirements from European customers and partners. The strategic direction from Brussels indicates that future competitiveness will hinge not only on production costs but also on embedded carbon intensity. Projects that can demonstrate lower-carbon processes and renewable energy sourcing may secure better positions in EU procurement contracts.
The Council’s position is not yet final law; negotiations with the European Parliament are still pending before reaching a conclusive agreement. However, the direction is clear for industrial exporters who should begin preparing for:
- product-level carbon accounting;
- facility-level emissions verification;
- electricity consumption reconciliation;
- metering and SCADA traceability;
- supplier emissions data collection;
- CBAM audit trails;
- reporting requirements for downstream products;
- verification requests from importers.
The focus for Serbian and Montenegrin manufacturers has shifted from questioning whether CBAM will impact them to understanding how far down the value chain these regulations will extend and how quickly EU customers will begin demanding compliance evidence prior to formal regulatory enforcement.
The June 2026 position by the Council signals an intent to transform CBAM into a comprehensive industrial competitiveness tool, making carbon data increasingly critical alongside price, quality, and delivery considerations for exporters throughout the Western Balkans.
