The Carbon Border Adjustment Mechanism: how are Balkan companies affected?

For the time being, the CBAM covers seven sectors where notable risk of carbon leakage has been identified, including iron and steel, cement, fertilisers, aluminium, hydrogen and electricity. Under this mechanism, importers will be obliged to submit annual reports on the emissions embedded in the products they have imported, and to purchase and present a corresponding number of CBAM certificates to cover these emissions.

However, the CBAM is currently in its transitional phase, during which importers are only required to report the emissions associated with the production of imported products, without incurring financial obligations. Failure to submit these reports, or submitting incomplete or incorrect reports, may result in fines set by each EU Member State, ranging from EUR 10 to 50 per ton of unreported or incorrectly reported emissions. The obligation to purchase and present CBAM certificates, i.e. the definitive regime, will gradually come into force starting in January 2026.

Although all obligations under the CBAM formally rest with the importers, it also has significant implications for exporters, regardless of their origin, including companies from the Balkans operating in the affected sectors.[1]

Exporters already need to monitor, collect and calculate emissions generated in the production process to enable their EU partners to fulfil their reporting obligations. Therefore, they can use this transitional period to estimate and assess the future CBAM costs that their businesses will incur. These include new administrative costs related to specific calculation methods and reporting, the risk of fines, and, most importantly, the carbon price that their partners will have to pay when importing their products in the future, given that the amount of embedded emissions dictates the carbon price due under the CBAM. Ultimately, their relationships with EU partners could take a financial hit if the carbon tax becomes excessively high.

The CBAM will no doubt profoundly impact international trade, including the businesses of non-EU producers. This encompasses not only administrative requirements and financial burdens, but also possible effects on the local industrial landscapes, as the market could become saturated with carbon-intensive products that are no longer imported into the EU due to the high carbon cost.

Naturally, the effects of the CBAM could be mitigated by local companies investing in decarbonising technologies and by legislators outside the EU implementing their own carbon pricing methods. In any case, companies in affected sectors should carefully assess their obligations under this mechanism, both in the transitional period and the definitive regime.

authors: Srđana Petronijević, Nina Rašljanin