According to the Energy Community, the Carbon Border Adjustment Mechanism (CBAM) implemented by the European Union may soon result in renewable energy from Western Balkan nations priced above lignite electricity. During the ETCSEE conference in Vienna last week on 11-12 June, CBAM representative Peter Pozsgai highlighted that the existing regulations disproportionately affect green energy producers, as they operate outside the carbon market while fossil fuel facilities can offset carbon costs.
The issue arises from how CBAM addresses electricity, applying a national emissions average to all cross-border sales, regardless of the source of power generation. This average is typically influenced by coal-based production, resulting in carbon-free facilities incurring a hidden tax on the grid, elevating their effective pricing. Traders have expressed concern, indicating a decline in forward trading volumes and cautioning that the current structure of the mechanism poses a significant risk to regional market connections.
The regulations from the 2022 integration package will create an opportunity for Energy Community states to receive a four-year grace period if they complete the necessary market coupling steps before the commencement of CBAM on January 1, 2026. However, as none of these nations have met their obligations, industry organizations are calling on the EU to postpone the full implementation of CBAM to allow the market additional time to adjust. A stakeholder meeting scheduled for July 1 may offer clarity on the future direction, with industry representatives already advocating for a postponement of full enforcement to mitigate further disruptions in the market.