One Region, Many Transitions - CBAM and Carbon Pricing in the Western Balkans

Published: January 5, 2026

Written by Ingrid Udd Sundvor, Sindi Kuci and Injy Johnstone.

Carbon Balance Initiative, in collaboration with Oxford Sustainable Finance Group - Smith School of Enterprise and the Environment, University of Oxford, presents this comparative policy report assessing how the six Western Balkan (WB6) countries – Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia – can respond to the EU’s Carbon Border Adjustment Mechanism (CBAM) through the design and sequencing of domestic carbon pricing policies.

The EU’s CBAM entered into force on 1 January 2026. With a carbon price on imports of electricity, iron and steel, aluminium, cement, fertilisers, and hydrogen, Western Balkan exporters face immediate competitiveness pressures. At the same time, CBAM strengthens the case for domestic carbon pricing as a tool to retain value at home, accelerate decarbonisation, and align with European climate policy.

The report evaluates the readiness of the WB6 to implement carbon pricing instruments following CBAM’s entry into force, building on regional commitments under the Sofia Declaration on the Green Agenda. It assesses feasible country-specific policy pathways based on the feasibility across institutional, economic, and social dimensions in the short- and medium-term.

Download the full report

Key Findings Include:

• Uneven readiness across the WB6: Serbia and Montenegro are most advanced in MRVA systems, with Montenegro operating a domestic ETS. North Macedonia and Albania are progressing, while Bosnia and Herzegovina and Kosovo remain at an early stage.

• No single regional model: Institutional and economic differences make a one-size-fits-all carbon pricing approach impractical. Phased, country-specific pathways are more effective.

• Carbon pricing can reduce CBAM exposure: Targeted carbon taxes and gradual ETS development can mitigate CBAM costs while supporting domestic climate goals.

• Institutions are critical: Governance, MRVA capacity, and transparent revenue use matter as much as carbon price levels.

Read the report for the comparative assessment of carbon pricing options across the Western Balkans, country-specific recommendations, and an overview of complementary measures that can be introduced alongside a domestic carbon price.