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The implementation of the European Union’s cross-border carbon tax and an emissions trading system could cause losses for businesses in Bosnia and Herzegovina ranging from BAM 722 million to BAM 3.17 billion (EUR 369 million to EUR 1.62 billion), according to the latest analysis. At the same time, a statement from the Government of the Federation of BiH, one of the two political entities of BiH, indicates that the rollout of the tax could be postponed.
The EU’s Carbon Border Adjustment Mechanism (CBAM) is expected to come into effect on January 1, 2026. CBAM will impose taxes on imports of cement, iron, steel, aluminum, fertilizers, hydrogen, and electricity into the EU from countries that do not have a CO2 tax.
If CBAM and an emissions trading system (ETS) are both implemented starting next year, BiH’s economy could face financial losses ranging from BAM 722 million (EUR 369 million) to BAM 3.17 billion (EUR 1.62 billion) between 2026 and 2030, Akta reported.
The analysis was prepared at the request of the Ministry of Foreign Trade and Economic Relations of BiH, with support from the Delegation of the European Union to BiH and technical assistance through the EU4Energy project. The authors analyzed four scenarios based on CO2 prices ranging from EUR 118.53 to EUR 147.22 per ton.
Four models for implementing CBAM and ETS were analyzed
The electricity sector, one of the most important industries in BiH, could bear the highest costs under all four models analyzed.
According to the authors, the costs could be passed on to electricity prices, harming households and businesses. It could pose a serious challenge to the country’s economic stability in the coming years.
The first scenario assumes that BiH is paying CBAM, but an ETS is not introduced. Losses in this case would amount to BAM 1.2 billion (EUR 614 million), with electricity producers suffering the most – BAM 737 million (EUR 377 million). Steel and iron producers would lose BAM 454 million (EUR 232 million), and the cement industry BAM 58 million (EUR 30 million).
The least favorable scenario is a simultaneous implementation of both CBAM and ETS
The second scenario is based on a phased introduction of CBAM with free allocation, but still without ETS. The cost is estimated at BAM 722 million (EUR 369 million), with the electricity sector losing BAM 580 million (297 million), and the steel and iron industry BAM 100 million (EUR 51 million).
The third scenario is the worst for BiH. If ETS and CBAM are rolled out simultaneously, total cost reach BAM 3.17 billion (EUR 1.62 billion). The electricity sector would lose BAM 2.1 billion (EUR 1.07 billion), and the iron and steel industry BAM 504 million (EUR 258 million).
The fourth option involves free allocation within the ETS and CBAM applied only to fertilizers, which are not under the scope of the ETS. In this case, BiH’s industry would lose BAM 2.3 billion (EUR 1.2 billion). Electricity producers account for BAM 2 billion (EUR 1 billion) and the iron and steel industry is down BAM 117 million (EUR 59.8 million).
Nikšić: We must be prepared
Earlier this year, there were reports that the European Commission intends to propose a delay in the implementation of CBAM. However, it turned out that only the reporting and payments would be delayed.
Prime Minister of the Federation of BiH Nermin Nikšić said in Neum that there are indications the deadline for introducing CBAM might be extended.
However, FBiH cannot rely on it, and must create conditions to generate sufficient energy from renewable sources, he underlined. It will ensure that the industry does not have to pay taxes when exporting its products to the EU, Nikšić added.
He didn’t go into the details about the indications.
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