European Rules and Domestic Inaction: Why BiH is Paying CBAM Instead of Filling Its Own Budget

(Patria) - As of January 1, 2026, the Carbon Border Adjustment Mechanism (CBAM), a European Union instrument that in practice functions as a fee for carbon dioxide emissions, has come into effect for Bosnia and Herzegovina.

The mechanism obliges companies from BiH, as well as from all non-EU countries, to pay an additional cost to Brussels for CO₂ emissions generated during production when exporting goods to the Union market, writes hayat.ba.

CBAM covers products whose production involves high carbon emissions and which are imported into EU member states. Among these are aluminum, steel, iron, cement, fertilizers, as well as electricity, making this mechanism particularly sensitive for the economy of Bosnia and Herzegovina. Although CBAM is now imposed as an inevitability, it is important to emphasize that there was a real possibility for BiH to avoid paying it. However, this would have required a timely reaction from domestic authorities and the fulfillment of several key conditions clearly defined by the European Union.

First and foremost, it was necessary to establish an electricity exchange and a connected market, then develop an internal CO₂ emissions trading system (EU ETS), as well as adopt a climate neutrality strategy by 2050. Of the aforementioned, Bosnia and Herzegovina has only made partial progress in the area of the electricity market.

Namely, the House of Representatives of the Parliamentary Assembly of BiH adopted the Bill on the Regulator, Transmission and Market of Electricity, which represents the basis for establishing an electricity exchange. However, for the law to enter into force, its adoption by the House of Peoples is necessary, which, given the political relations and blockades, was not realistically expected by the end of 2025.

On the other hand, the establishment of an internal CO₂ emissions trading system has remained only at the level of political promises. Although the Council of Ministers of BiH, including Chairperson Borjana Krišto (HDZ), have repeatedly announced its introduction, concrete steps have not been taken.
The EU ETS operates on the principle of trading emission allowances, i.e., pollution rights.

Companies can buy or sell allowances on the market, with their price depending on supply and demand. Those who reduce emissions can achieve financial benefits by selling surplus allowances, while those with higher pollution bear higher costs. Precisely in this way, the EU ETS represents both an ecological and fiscal measure, as the funds collected through this system would remain in the budgets of Bosnia and Herzegovina.

What does CBAM mean for BiH?

In contrast, with the application of CBAM, funds flow directly into the European Union's budget.

Given that BiH is not exempt from this mechanism, it is necessary to clarify its specific consequences. Exporters from Bosnia and Herzegovina will have to provide detailed data on annual CO₂ emissions to their buyers in the EU. Based on this data, European buyers will purchase CBAM certificates in an amount corresponding to the emitted carbon, while the sale of certificates will be carried out by the competent national authority in the EU.

The price is calculated per ton of emitted CO₂ and is not fixed, but depends on market trends. In practice, a range of estimated prices is most often applied, which further complicates cost planning for BiH entrepreneurs.

It is particularly concerning that the European Union warned the authorities in Bosnia and Herzegovina about the inevitability of CBAM more than four years ago. This was a period during which the necessary conditions could have been met and significant financial consequences avoided.

Due to the lack of concrete measures, the BiH economy could now suffer serious losses. The Foreign Trade Chamber of BiH previously estimated that the total cost of introducing CBAM could reach up to 300 million KM. In addition, the increase in production costs could lead to higher electricity prices, which would have a chain effect on the prices of other products and services.

Precisely because of this, the question remains open as to how it is possible that in a period of four years, a solution that would spare Bosnia and Herzegovina such a scenario has not been found.