Energy Community ministers meet in Bosnia and Herzegovina as EU tariffs loom

3 months ago 21

EU candidate countries from the continent’s South and East are meeting in Bosnia and Herzegovina on Wednesday, 3 July, to reinforce efforts to integrate with the bloc’s energy markets to avoid potential tariffs on power exports to the EU.

The energy ministers of the nine Energy Community member countries will meet in Banja Luka to push the integration of their power markets with those of the EU and align their legal frameworks.

The European Commission will be represented by the energy Deputy Director General Mechthild Wörsdörfer.

What is traditionally a low-key annual get-together is this year marked by two important events. On 21 June, the power went out in several Balkan countries for multiple hours. The reason behind the blackout remains disputed and is expected to be discussed intensely on the sidelines.

Then there is the Cross Border Adjustment Mechanism (CBAM), the EU’s new CO2 border tariffs. From 2026, they will begin penalising imports from even the closest neighbours and future members.

Most immediately affected are Bosnia, Montenegro, and North Macedonia – all of which generate significant revenue from exports of carbon-intensive coal power to the EU.

Western Balkan countries “exported 88 TWh (terawatt-hour) of electricity into the EU from 2011 to 2020, amounting to 12.7% of (their) total power generation,” states a report by CEE Bankwatch, an NGO active in the region. They also note that 60% of this generation is coal-based.

Among the six countries, Bosnia and Herzegovina leads with an average export to Europe of 20% of its annual generation, while Serbia exports 10% of its annual generation.

“The revenues from exporting coal power cross-subsidises the low prices offered to (domestic) consumers,” explains Pippa Gallop, an expert with the NGO.

But once CBAM applies, power exports will be penalised, and millions of euros of earnings could be lost.

Avoiding this fate is a key priority for the Energy Community countries, with CBAM rules leaving the door open for an exemption in the power sector.

The only problem is that it will require deeper integration of their energy markets with the EU – specifically the short-term electricity trading.

That is the “main precondition for obtaining the CBAM exemption,” states a briefing note sent to delegations before the meeting.

As part of their integration with European energy markets, Energy Community countries must implement a carbon pricing scheme equivalent to the EU’s Emission Trading Scheme.

This will allow them to sidestep any CBAM tariffs, but this is not required until the end of the decade.

[Edited by Donagh Cagney/Rajnish Singh]