Serbia has started building a domestic response to the European Union’s Carbon Border Adjustment Mechanism, but the structure reveals a large carbon-price gap that will shape the country’s industrial and power-sector economics. The government has expanded its carbon-tax framework with decrees on decarbonisation grants and tax credits, while the existing domestic charge on greenhouse gas emissions and carbon-intensive imports stands at €4/tCO₂e. That compares with more than €75/t under the EU Emissions Trading System.
The gap is not a technical detail. It is the difference between a gradual domestic adjustment mechanism and the full cost environment facing exporters into the EU. Serbia’s approach gives companies time, but it does not eliminate future exposure. Elektroprivreda Srbije, or EPS, is already facing material cost pressure. General Manager Dušan Živkovićestimated that the new domestic tax would cost the state-owned utility around €100mn this year.
The new decrees are intended to soften that adjustment. Grants will be available for projects that reduce greenhouse gas emissions or improve energy efficiency in industrial activities. Eligible areas include hydrogen, hydrogen-based and low-carbon fuels, renewable energy production, energy storage, flexible electrification and CCS/CCUS. This is a broad support menu, but its effectiveness will depend on project readiness, public-call design and the ability of companies to prepare bankable investment cases.
For EPS, the issue is larger than one annual tax bill. Serbia has committed under its IMF-linked policy framework to regular inflation-linked electricity tariff indexation, EPS workforce optimisation by early 2027, and stronger governance ahead of large-scale investments. That means the utility faces three pressures at once: tariff reform, carbon cost and investment demand.
For industrial exporters, CBAM changes the value of electricity procurement. Low-carbon power, documented PPAs, renewable supply and storage-backed flexibility become commercial tools, not ESG decoration. Serbian producers selling steel, aluminium, fertiliser, cement or carbon-intensive goods into the EU will increasingly need credible emissions data and lower-carbon energy contracts.
Serbia’s domestic carbon price is deliberately modest. That may protect companies in the short term, but it also risks delaying deeper investment. The market will not wait for domestic prices to converge with EU levels. Buyers, lenders and importers will impose their own carbon discipline through contracts, margins and bankability tests.
