CBAM Cuts Western Balkans-EU Power Trade 15% in Q2, Extending Two-Quarter Contraction
Commercially scheduled flows fell to 7.49 TWh despite narrowing price spreads, with physical and scheduled electricity trades diverging and lifting regional grid costs.
Commercially scheduled electricity flows between non-EU Western Balkan states and their EU neighbours fell to 7.49 TWh in the second quarter. The 15% decline, which the Energy Community reported on Wednesday (2026-07-29), came despite narrowing price spreads and was attributed to higher costs and regulatory uncertainty created by the EU's carbon border adjustment mechanism.3
The figure follows a roughly 25% slide in the first quarter, documented by the Energy Community in a study released on Wednesday (2026-05-20), as Montel reported. Two straight quarters of declining volumes establish the impact as persistent. But the Q2 data are more awkward than the headline percentage suggests: trade fell even as price spreads between Balkan exporters and EU buyers narrowed, meaning compliance costs are now depressing flows independently of underlying market price signals.3,2
A regional trader flagged the spread compression in May. The price differential between Western Balkan power and Hungary — the regional EU benchmark — had already fallen far below expectations since CBAM was introduced, the trader told Montel on Friday (2026-05-15). Tighter spreads reduce the margin available to absorb compliance costs. When that margin shrinks enough, scheduled cross-border trades stop being viable regardless of demand.1
The disruption reached beyond commercial volumes into physical infrastructure. Physical electricity flows in Q2 increasingly diverged from scheduled cross-border trades, the Energy Community said on Wednesday (2026-07-29), and the mismatch pushed up system costs across the region.4
When physical deliveries diverge from contracted schedules, transmission system operators cover the imbalance through balancing markets, a process that distributes costs across market participants. The Q2 data suggest this divergence intensified rather than corrected from the first quarter, turning what might have seemed like a transitional friction into a recurring operational issue. For regulators in the Western Balkans and the EU, the system cost implications are emerging as a material second-order consequence of CBAM.4,3
The first-quarter contraction of 25% was steep enough on its own to attract the Energy Community's attention. A further 15% fall in Q2 is proportionally smaller, but the context changes its interpretation. Early CBAM quarters might plausibly have produced one-off adjustment costs — compliance frameworks to build, contract language to test, uncertainty about what the levy would mean in practice. A second contraction, against narrowing spreads, is harder to characterise as transitory.3,2
The Western Balkans corridor has historically connected central European markets with Balkan coal and hydro generation, offering access to flexible, often lower-cost power during periods of supply tightness. Sustained reductions in scheduled flows shrink that flexibility. The Energy Community's findings do not address how much of the lost export capacity is being redirected within the Balkans or simply sitting idle, a gap that limits any full assessment of the regional generation impact.3
Spread dynamics will shape the pace of any adjustment. If Balkan power prices continue converging toward EU levels, the economic case for scheduled cross-border exports weakens further before CBAM compliance costs enter the calculation at all. The trader's May (2026-05-15) observation that the discount to Hungary was already far smaller than expected pointed to something more durable than a short-term pricing anomaly.1
The Energy Community's Q3 data release will indicate whether the divergence between physical and scheduled flows is stabilising or widening, and whether balancing cost burdens prompt any regulatory response before the corridor contracts further.4,3