The European Union’s Carbon Border Adjustment Mechanism (CBAM) has begun reshaping the competitive landscape for heavy industry across Europe’s neighboring economies. For Serbia, whose industrial base remains closely integrated with EU manufacturing supply chains, the new carbon border policy introduces both immediate trade risks and long-term structural incentives to modernize production and energy systems. From 2026 onward, EU importers of carbon-intensive products must account for embedded emissions in goods imported from outside the EU and purchase CBAM certificates priced according to the EU Emissions Trading System (EU ETS). The mechanism initially applies to iron and steel, aluminium, cement, fertilizers, electricity, and hydrogen, sectors that overlap directly with several of Serbia’s most important export industries.
The implications for Serbia are unusually significant compared with many other economies in Southeast Europe. The country has a large industrial base by Western Balkan standards and exports substantial volumes of intermediate materials to European markets. Steel from Smederevo, cement from plants across central Serbia, copper from eastern mining complexes, and various chemical and industrial products feed into EU construction, infrastructure, and manufacturing supply chains. Estimates suggest that €9–10.5 billion of Serbia’s exports to the EU are associated with CBAM-exposed sectors or supply chains, meaning a large share of Serbia’s export economy could be indirectly influenced by carbon pricing at the EU border.
Yet the deeper structural issue lies not only in the composition of exports but also in the carbon intensity of the domestic energy system that powers Serbia’s industry. Electricity generation in the country remains dominated by lignite-fired power plants operated by the state utility EPS, which historically supplied inexpensive but high-emission electricity to heavy industry. Coal continues to account for around 60–65 percent of Serbia’s electricity generation, while hydropower provides roughly a quarter of production and wind, solar, and gas remain relatively minor contributors. This imbalance creates a fundamental tension: Serbian exporters increasingly face carbon pricing pressures from EU markets while relying on an electricity system whose emissions profile remains among the highest in Europe.
Within this broader framework, several specific industrial companies and sectors stand at the forefront of CBAM exposure. The single most prominent case is the HBIS Group steel plant in Smederevo, Serbia’s largest industrial exporter and one of the largest steel facilities in Southeast Europe. The plant produces flat steel products that are widely exported to EU markets and integrated into automotive, construction, and industrial supply chains. Its production technology relies primarily on the blast furnace–basic oxygen furnace process, a traditional steelmaking route dependent on coal-based inputs and associated with relatively high CO₂ emissions compared with electric arc furnace technologies. As CBAM progressively increases the carbon cost embedded in imported steel, the competitiveness of Smederevo’s exports could be influenced by both production emissions and the carbon intensity of electricity used throughout the manufacturing chain.
CBAM therefore introduces strategic pressure on HBIS Serbia to accelerate decarbonization efforts and explore pathways toward what industry increasingly describes as “green steel.” Such pathways may involve increased recycling of scrap steel through electric arc furnaces, greater reliance on renewable electricity, and eventual transition toward hydrogen-based production technologies if these become commercially viable. However, such transformations require significant capital investment and depend heavily on the availability of low-carbon electricity within Serbia’s power system.
Another group of companies facing direct CBAM exposure operates in the cement sector, which is among the most carbon-intensive industrial activities due to both fuel combustion and chemical reactions involved in clinker production. Serbia’s cement industry consists of three major integrated plants operated by multinational corporations. The Holcim Serbia plant in Beočin, owned by the Swiss-based Holcim group, represents one of the largest cement producers in the country and supplies construction markets both domestically and regionally. Holcim has already begun implementing sustainability initiatives including environmental product declarations and investments aimed at reducing emissions intensity.
The Moravacem plant in Popovac, part of the global CRH Group, produces approximately 1.35 million tons of cement annually, making it another key component of Serbia’s construction materials supply chain. Meanwhile, the Titan Cementara Kosjerić, owned by the Greece-based Titan Group, contributes additional production capacity of roughly 750,000 tons per year. Each of these plants exports or indirectly supplies products that may ultimately enter EU markets, meaning their emissions profiles are increasingly relevant to EU importers subject to CBAM reporting obligations.
In cement production, decarbonization strategies typically focus on reducing clinker content in finished cement, increasing the use of alternative fuels such as biomass or industrial waste, and improving energy efficiency in kiln operations. Multinational owners of Serbian cement plants are already implementing such measures across their global portfolios, suggesting that Serbian facilities will likely adopt similar approaches as CBAM costs begin to affect European construction supply chains.
Beyond steel and cement, Serbia’s industrial landscape includes other sectors potentially affected by CBAM, including fertilizer and chemical production. Fertilizer manufacturing involves significant emissions due to the use of natural gas and energy-intensive ammonia synthesis processes. Companies such as Elixir Group, which operates fertilizer and phosphate production facilities in Serbia, may therefore encounter indirect CBAM exposure depending on export destinations and supply chain integration with EU agriculture and chemical markets.
Mining and metal refining activities in eastern Serbia also intersect with the CBAM discussion. The Bor mining basin, operated by international investors, produces copper that feeds into European electrical and industrial supply chains. Although copper itself is not currently included in CBAM’s initial list of covered materials, the electricity intensity of smelting and refining operations means that carbon emissions associated with production could become relevant if CBAM expands to include downstream metal products or broader categories of industrial materials.
The availability of low-carbon electricity therefore becomes a central determinant of Serbia’s ability to maintain export competitiveness under CBAM. Recognizing this challenge, the Serbian government has launched an ambitious renewable energy expansion program designed to diversify the country’s electricity generation mix and reduce reliance on coal. A cornerstone of this strategy is the introduction of competitive renewable energy auctions, supported by international financial institutions including the European Bank for Reconstruction and Development.
The second round of these auctions, launched in 2024, allocated capacity for 300 megawatts of wind power and approximately 125 megawatts of solar photovoltaic projects, providing developers with 15-year contracts for difference designed to stabilize revenues and attract investment. The broader government strategy aims to support the construction of roughly 1,300 megawatts of new renewable capacity within a three-year period, signaling a substantial shift in the country’s energy policy.
Investor interest in these auctions has been strong. In the second auction round alone, developers proposed more than forty renewable projects, with bids exceeding available quotas for both wind and solar power. This level of participation indicates that Serbia’s renewable energy sector is increasingly attractive to international investors, particularly given the country’s growing electricity demand and strategic importance as a regional energy hub.
Wind power currently represents the most mature renewable technology in Serbia’s energy transition. Several wind farms already operate in northern regions such as Vojvodina, and additional projects are expected to emerge through future auction rounds. Solar energy, historically underdeveloped due to policy and regulatory barriers, is now gaining momentum as falling photovoltaic costs and improved market structures encourage new investments.
These developments are particularly relevant for industrial exporters seeking to secure low-carbon electricity through long-term power purchase agreements. Corporate PPAs allow companies to contract electricity directly from renewable energy producers, ensuring that their manufacturing processes are powered by verifiable low-emission sources. For companies exposed to CBAM costs, such agreements could become a critical mechanism for reducing the carbon footprint of exported products.
Despite these encouraging developments, the question remains whether Serbia will have enough renewable electricity to supply its energy-intensive industrial sector in the near term. Heavy industry requires continuous power supply, and facilities such as steel mills, cement plants, and metal refineries consume enormous quantities of electricity. Even if renewable capacity expands rapidly, the scale of industrial demand means that low-carbon electricity may remain scarce during the early years of CBAM implementation.
Grid infrastructure presents another challenge. Renewable energy projects must connect to Serbia’s transmission network, and integrating large volumes of intermittent wind and solar power requires significant investments in grid modernization, balancing capacity, and potentially energy storage technologies. Without such upgrades, renewable generation may be constrained even when projects are technically completed.
The issue is further complicated by the possibility that green electricity could become a premium commodity in the regional energy market. Serbia exports electricity to neighboring countries, and if renewable electricity becomes scarce, producers may find it economically attractive to sell low-carbon power into external markets rather than supplying domestic industrial consumers. This dynamic could increase costs for Serbian exporters seeking renewable electricity to reduce CBAM exposure.
Nevertheless, Serbia possesses several structural advantages that could support a transition toward green metals production over the longer term. The country hosts significant mineral resources, including copper deposits that are increasingly valuable in the context of global electrification and renewable energy expansion. Mining operations in eastern Serbia already supply metals used in electrical infrastructure and renewable technologies, creating opportunities for vertically integrated low-carbon supply chains.
European manufacturers are also actively searching for low-carbon sources of industrial materials. Automotive producers, construction companies, and renewable energy developers increasingly require green steel, green aluminium, and low-carbon copper to meet their own climate targets. Serbia’s geographic proximity to EU markets and existing industrial base could position it as a competitive supplier if the domestic energy system undergoes sufficient decarbonization.
Achieving this transformation will require several interlinked developments. Renewable electricity capacity must expand significantly beyond current levels to reduce the carbon intensity of industrial energy consumption. Industrial companies must invest in modern production technologies that reduce emissions per unit of output. Regulatory frameworks must support carbon accounting systems that allow Serbian exporters to demonstrate lower embedded emissions to EU buyers.
If these conditions are met, Serbia could gradually shift from being a carbon-intensive exporter of traditional industrial materials toward becoming a supplier of lower-carbon metals and construction inputs. Such a transformation would align with broader European industrial strategies seeking to secure regional supply chains for materials critical to the energy transition.
The introduction of CBAM therefore marks a pivotal moment for Serbia’s industrial future. In the short term, the mechanism introduces new costs and compliance obligations for exporters in sectors such as steel, cement, and chemicals. In the longer term, it creates incentives for investment in renewable energy, industrial modernization, and improved environmental performance.
Whether Serbia ultimately emerges as a green metals supplier to Europe by 2030 will depend on the speed and scale of this transition. The country’s industrial infrastructure, mineral resources, and geographic position provide a strong foundation. The decisive factor will be the ability to align energy policy, industrial investment, and regulatory reform in a way that converts CBAM from a constraint into a catalyst for industrial transformation.
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