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The Energy Community Secretariat has published the CBAM Readiness Tracker, with a focus on the progress made by the contracting parties regarding the conditions for the exemption from the European Union’s (EU) carbon border adjustment mechanism.
The CBAM Readiness Tracker assesses the steps made by the Western Balkans contracting parties – Albania, Bosnia, and Herzegovina, Kosovo*, Montenegro, North Macedonia, and Serbia – as well as Georgia, Moldova, and Ukraine, in fulfilling six conditions for CBAM exemption.
It also brings comprehensive insights into significant developments in their energy sectors regarding the achievement of the Energy Community 2030 climate and energy targets and the contracting parties’ progress in decarbonization, the secretariat said.
Regulation (EU) 2023/956 on the CBAM in the EU makes it possible to have electricity imports in the EU exempted, if the contracting party’s electricity market is coupled with the EU internal electricity market, and meets certain conditions related to climate and energy legislation.
These conditions include implementing an emissions trading system (ETS) by 2030 at least with regard to electricity, the secretariat said.
Related to these conditions, Secretariat Director Artur Lorkowski recently suggested that the contracting parties should coordinate their efforts, and warned that time is limited.
Agreement with EU
The first condition is a concluded agreement with the EU which sets out an obligation to apply EU law in the field of electricity, including the legislation on the development of renewable energy sources, as well as other rules in the area of energy, environment, and competition.
The condition is met by all the contracting parties having in mind that the Energy Community Treaty is an agreement signed between the EU and the contracting parties that obliges the latter to apply EU acquis on energy, renewables, environment, and competition.
Electricity market, renewables, and market coupling
The implementation of the main provisions of EU electricity market legislation, including on the development of renewable energy sources and the coupling of electricity markets is the second condition. It consists of rules for the electricity market, renewables, and the coupling of electricity markets.
The latest EU electricity market acquis is fully incorporated in the Energy Community laws, while the deadline for transposition is December 31, 2023.
Serbia and Kosovo* are expected to submit draft laws for the secretariat’s review in July, and August, respectively. Other contracting parties have announced a delay in drafting, which is expected to result in missing the transposition deadline.
No electricity market coupling between contracting parties or with the EU’s internal market for electricity has taken place yet
The RED II Directive has also been incorporated into the Energy Community laws. The deadline for transposition expired on December 31, 2022.
Albania, BiH, and North Macedonia have partially transposed the RED II. Kosovo* and Montenegro are in the process of preparing their first standalone renewables law, while Serbia has taken the necessary steps to adopt secondary legislation.
According to the tracker, no electricity market coupling between contracting parties or with the EU’s internal market for electricity has taken place yet.
The newly adopted Electricity Integration Package, namely the Electricity Regulation, the ACER Regulation, the CACM Regulation, and the Procedural Act on Regional Market Integration, sets a legal framework for the coupling of the contracting parties’ electricity markets into the EU single day-ahead coupling (SDAC) and intraday coupling (SIDC).
The deadline for the transposition of these acts by the parties is December 31, 2023, and all of them are currently working on it.
Roadmap for implementation
Countries interested in getting an exemption must also submit a roadmap to the Europen Commission which contains a timetable for the adoption of measures to implement the fourth and fifth conditions.
The contracting parties have yet to develop and submit a roadmap, and the secretariat was invited by the Athens Forum to coordinate its development and a regional approach to the fulfillment of the exemption conditions, the document reads.
Committing to climate neutrality by 2050
The fourth condition is to commit to climate neutrality by 2050. Also, where it can be applied parties have to formally formulate and communicate to the United Nations Framework Convention on Climate Change (UNFCCC) a mid-century, long-term low greenhouse gas emissions development strategy aligned with that objective, and have that commitment implemented in domestic legislation, according to the tracker.
According to the Decarbonisation Roadmap adopted by the Ministerial Council in 2021, the contracting parties support a path toward climate neutrality by 2050.
For now, North Macedonia remains the only one that has submitted its long-term low GHG emissions development strategy to UNFCCC.
No party has implemented the climate neutrality commitment in its national legislation.
Emissions trading system
The implementation of the roadmap must demonstrate the parties’ fulfillment of the set deadlines and the substantial progress towards the alignment of domestic legislation with EU law in the field of climate action on the basis of that roadmap.
“This includes carbon pricing at a level equivalent to that in the EU in particular insofar as the generation of electricity is concerned. The implementation of an emissions trading system for electricity, with a price equivalent to the EU ETS, is to be finalized by January 1, 2030,” the document reads.
Several contracting parties are working on aligning their climate legislation with the EU rules. Albania, Montenegro, and Serbia have adopted climate laws. North Macedonia is advanced in the process and has a finalized draft already in public consultation.
Only Montenegro has carbon pricing in place but at a level much lower than the price under the EU ETS.
At the Energy Community level, the next steps are to be taken within the framework of the Energy Community Decarbonisation Roadmap.
Indirect import of electricity into EU from other third countries
The final condition is to put in place an effective system to prevent the indirect import of electricity into the EU from other third countries or territories that do not fulfill the first and fifth conditions.
According to the tracker, no such system has been designed yet.
Its design will depend on the exposure of a contracting party to imports from third countries, or from other contracting parties that do not fulfill the above conditions, especially if no regional approach with a roadmap at the Energy Community level is agreed upon, the secretariat said in its report CBAM Readiness Tracker.
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