The introduction of the EU’s carbon border mechanism in early 2026 has already had a significant financial impact on Montenegro’s power utility EPCG, which reported losses of around 13 million euros in the first quarter. The new system effectively penalizes electricity generated from carbon-intensive sources, placing increasing pressure on producers that still rely heavily on coal.
The challenge is particularly pronounced in Montenegro, where a large share of electricity comes from the coal-fired thermal power plant Pljevlja. This dependence is reducing the company’s competitiveness in export markets, as the CBAM mechanism indirectly lowers achievable electricity prices compared to those within the European Union.
Despite these pressures, EPCG has so far avoided passing additional costs on to households, although officials acknowledge that price increases remain a possibility if geopolitical tensions—especially in the Middle East—further disrupt energy markets. In response, the company is focusing on electricity sales within the Western Balkans, where CBAM rules do not apply, while exporting only surplus volumes to EU markets.
Market dynamics are already reflecting the impact of the mechanism. Electricity prices in the region are between 20 and 70 euros/MWh lower than in the EU, limiting export revenues. The situation is further complicated by the absence of a national emissions trading system aligned with the EU ETS, leaving domestic producers to bear the full cost burden. While local carbon prices are around 24 euros per ton, EU levels remain significantly higher, creating additional competitive distortions.
Operationally, EPCG has still managed to place all available surplus electricity on the market in early 2026. Sales reached 486 GWh valued at 49.9 million euros in the first quarter, compared to 345 GWh worth 42.8 million euros a year earlier. Favorable hydrological conditions also boosted total production to approximately 1,204 GWh, marking a strong year-on-year increase.
However, uncertainty remains elevated. Future financial performance will depend heavily on regional electricity prices and potential adjustments to CBAM rules. The company expects continued pressure on export revenues, particularly from coal-based generation. To adapt, EPCG is advancing modernization efforts at TPP Pljevlja while accelerating a broader transition toward renewable energy sources. Planned investments of 800 to 950 million euros by 2035 aim to reduce exposure to carbon costs and strengthen long-term sustainability.