Bulatović: We are aware of decarbonization, we will have to rely on coal-fired electricity production for some time to come

The first panel of the fourth edition of one of the most eminent energy conferences in the Southeast European region - EPCG NET Budva was dedicated to the application of the CBAM mechanism and the EU ETS emissions trading system.

As a reminder, electricity generated from coal is one of the exports with the highest carbon footprint in the Western Balkans region and will be covered by the EU's new Carbon Cross-Border Adjustment Mechanism (CBAM), which will impose duties on imports of products with a high carbon footprint.

The European Network of Transmission System Operators for Electricity (ENTSO-E) has proposed to the European Commission (EC) to extend the transitional period for the Cross-Border Carbon Adjustment Mechanism (CBAM) until 1 January 2027.

"The CBAM mechanism is something that, conditionally speaking, hangs over our heads. It is mostly a problem of energy companies that are majority or fully owned by the state of Montenegro or the countries of the region. I would say that we have finally started to seriously address this issue because we have seen that Europe is not giving up on CBAM. I think that CBAM is a problem of all those power companies that rely predominantly on coal, and this is the case with most countries from the WB6 region. In Montenegro, electricity production from coal is 40 percent on an annual basis, in the summer months even 70 percent when it is a dry period. CBAM, which would be an imposition on all exports, would certainly make the situation in Montenegro even more difficult. We are aware of the decarbonization process, we are moving in that direction, but I think that we will have to rely on electricity production from coal for some time to come," said Ivan Bulatović, Executive Director of EPCG.

He drew attention to short-term and long-term challenges.

"Short-term challenges would definitely affect the economic operations of the regional power companies by introducing CMAB. On the other hand, I think we would not encourage the development of new renewable sources because there would be less and less money. The long-term challenge is the decarbonization of the energy sector, which is not an easy process; it takes three to four years to build a wind farm. We have a problem with solar power plants in terms of issuing permits and completing electrical and construction works. As a region, we are ready for decarbonization, but we need time," Bulatović said.

CBAM (Carbon Border Adjustment Mechanism) is conceived as a simple principle: whoever emits CO₂ should pay for their emissions. The aim is to charge EU importers an equivalent price for the CO₂ emissions contained in products, if those emissions are not already taxed in the country of origin or production, explained Maja Rašović from the EFT Group.

However, in the electricity sector, CBAM has encountered certain challenges. Namely, the mechanism foresees charging for emissions that did not necessarily occur, which is considered a significant shortcoming. Rašović points out that renewable electricity sources are particularly affected: not only will they pay for emissions they did not produce, but they will also bear additional costs. This situation arises from the current rules of the CBAM regulation, which does not make a clear distinction between electricity sources.

We hope that July 1st will be an opportunity to point out these imperfections to the European Commission, and that changes will be made to the implementing acts. The goal is to rationalize the CBAM and adapt it to the realities of the electricity market, concluded Rašović.

Sanel Buljubašić, General Director of Elektroprivreda Bosnia and Herzegovina, spoke about the CBAM mechanisms – the Carbon Border Adjustment Mechanism – as well as the EU ETS emissions trading system. He highlighted:

"It is up to the state to urgently pass laws regulating carbon emissions in international trade, so that the economy, and consequently the population, do not have even greater costs and problems... from January 1, 2026, our exporters must pay the CBAM tax for every euro of products exported from BiH to EU countries," he said.

Dušan Živković, CEO of EPS, pointed out the implications for power companies that must initiate strategic adjustments with the introduction of CBAM:

"Energy companies will be under additional pressure due to CBAM and CO₂ footprint, they will face the challenge of financing new RES projects. We need a long-term financing mechanism for decarbonization and we expect the Energy Community and the EU to find solutions," he said.

Ivan Koprivica, director of MHERS (Association of Electric Power Companies of the Republic of Srpska), clearly stated that the basic problem in Republika Srpska is not changing – the lack of support from the EU:

“What is not changing in Republika Srpska is that there is no help from the EU. Due to financial constraints, we are working with Chinese partners – we simply cannot complete this transition on our own.”

Koprivica emphasizes that financial resources from the EU and other Western institutions are crucial to support the decarbonization and modernization of the electricity sector. Since this support is lacking, reliance on financial arrangements with China remains, which also raises the question of the long-term sustainability of such partnerships – not only economically, but also strategically.

Pablo Obrador, head of the energy and transportation sector, pointed out that the problem with CBAM is not the mechanism, but that the rules are not clear.

“However, the implementation of this mechanism is also an opportunity that we must not miss. It is an opportunity to put things right and to push decarbonization forward,” Obrador said.