Montenegro’s annual costs for the European Union’s Cross-Border Carbon Adjustment Mechanism (CBAM) could reach up to €191 million ($219.3m), according to state-owned electricity producer EPCG.
The tax applies to carbon-intensive industrial goods such as steel, cement, and aluminium, as well as to cross-border electricity trade, which is the main export item in Montenegro’s foreign trade balance, accounting for over 35% of total exports.
EPCG generates approximately 45% of its electricity from the country’s only coal-fired power plant, TE Pljevlja, Kallanish notes.
According to the company, the calculations may vary depending on carbon prices and export volumes, however, it is clear that tariff payments will have a significant macroeconomic impact on national income.
“The fact that the final methodology for calculating the CBAM for 2026 has not yet been fully determined creates even more pressure on the economy,” it adds.
Montenegro still lacks a functioning emissions trading system that could reduce the cost or allow for exemptions from the CBAM. The carbon price on the domestic market (€24/t) and in the EU (€70–80/t) means that additional costs will be borne by electricity exporters, affecting the purchase price.
Last year, Montenegro announced it was negotiating with the European Commission to find a more flexible model for implementing the CBAM. In recent months, the country has adopted a new Energy Law and a package of bylaws and taken steps to develop renewable energy.
Special steelmaker Slovenian Steel Group (SIJ) has previously expressed interest in Montenegro-based Zeljezara Niksic. It has been idled since March 2021 when its former owner, Turkey’s Toscelik, suspended production due to a drop in orders due to the pandemic.
In late 2022, Montenegro state-controlled power producer EPCG acquired Zeljezara for €20m.
Niksic specialises in the production of alloy and non-alloy steel, roller bearing tool steel and heat-resistant steel. It has two electric arc furnaces that can produce 300,000 tonnes/year of crude steel.
