Serbia’s steel producers are entering a period in which electricity procurement, carbon reporting and export competitiveness are increasingly connected. But renewable electricity and carbon compliance do not necessarily interact in the way some green power purchase agreement (PPA) offers may imply. The benefits of renewable power depend in part on the applicable CBAM rules.
HBIS Serbia illustrates the scale of the challenge. The company operates steelmaking facilities in Smederevo and Šabac, employs more than 5,000 people and has annual finished-product capacity of approximately 2.2 million tonnes, according to Serbia’s Ministry of Trade. At an operation of this size, electricity costs and supply security are significant commercial considerations, even before accounting for carbon requirements on exports to the European Union.
Under the current EU Carbon Border Adjustment Mechanism (CBAM) framework, covered iron and steel goods within the relevant Annex II category are subject to accounting for direct emissions, rather than emissions associated with purchased electricity. A Serbian steel producer that signs a renewable PPA may therefore improve energy-price visibility, its decarbonisation strategy, customer positioning and corporate reporting. However, purchasing renewable electricity does not automatically reduce the producer’s current CBAM certificate requirements.
That distinction does not remove the strategic value of green power for steelmakers; it defines where the commercial benefits arise. An industrial PPA can limit exposure to wholesale electricity price volatility, support lenders’ and customers’ decarbonisation objectives, strengthen environmental documentation and prepare manufacturers for potential future changes in regulatory scope. Renewable electricity can also support industrial electrification as production processes shift increasingly away from fossil fuels.
CBAM exposure and downstream emissions data
Banks and investors should assess steel production and electricity procurement as two separate risk categories. One concerns direct process emissions and current CBAM exposure; the other covers electricity procurement, including price, volume, renewable attributes, grid risks, PPA counterparty creditworthiness and metering-data reliability. Treating the two as one category could obscure the distinct risks involved.
Assuming that renewable electricity automatically reduces current CBAM liabilities could result in incorrect pricing, unrealistic financial projections and poorly structured contracts. The proposed expansion of CBAM to downstream goods makes it particularly important to distinguish current obligations from possible future coverage. The European Commission has proposed extending the mechanism from 2028 to selected steel- and aluminium-intensive manufactured goods.
Both the Council and the European Parliament have supported broader coverage, while Parliament has proposed a substantially wider range of products. Serbian manufacturers that use steel in machinery, industrial components, fasteners, wire products and other fabricated goods should begin treating supplier information as part of their future export-compliance infrastructure. Steel-related emissions data gathered today could become increasingly important in demonstrating the environmental performance of downstream products sold into the EU.
Structuring renewable electricity offers and PPA financing
Electricity traders can develop more detailed offerings for industrial customers than an undefined block of green electricity. A structured package could combine physical electricity supply, transparent allocation of renewable attributes, metering and reconciliation procedures, and data interfaces that manufacturers can use for product-emissions reporting where legally relevant. Each element can have commercial value even when it does not directly reduce the number of CBAM certificates required under the current methodology.
For HBIS Serbia and other major industrial electricity consumers, contract terms and counterparty creditworthiness are as important as environmental claims. A long-term PPA can support investment in new renewable capacity by giving developers predictable cash flows, provided the industrial offtaker has sufficient credit strength and the agreement allocates risks appropriately.
Project lenders will also need to assess how an arrangement would perform if industrial electricity demand falls, production schedules change, the buyer undergoes restructuring, or CBAM rules expand to cover additional products and emissions categories. Flexible volume bands, change-in-law provisions and clearly defined ownership of renewable attributes can therefore be important parts of the financing structure.
Serbia’s steel competitiveness depends on avoiding two misconceptions: treating CBAM solely as an export tax, and assuming that renewable electricity purchases automatically resolve related compliance requirements. A more durable approach integrates process decarbonisation, electricity procurement and reliable emissions-data systems while keeping their legal and financial implications distinct.
Although this approach may be less immediately marketable than claims of instant green steel, it provides a more credible basis for investment and financing decisions. Electricity is already a strategic input to the competitiveness of Serbia’s steel industry, while its precise CBAM implications will continue to depend on the product category, applicable emissions methodology and evolution of EU legislation.
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