In recent decades, the role of carbon in global warming has become one of the most critical topics in economic and environmental discussions worldwide. Carbon, or more precisely carbon dioxide (CO₂), is one of the main greenhouse gases contributing to climate change.
To reduce the negative impact of carbon emissions, countries are developing increasingly stringent policies to control emissions by introducing mechanisms that encourage cleaner production and trade. In this context, the European Union has introduced the Carbon Border Adjustment Mechanism (CBAM).
CBAM (Carbon Border Adjustment Mechanism) is a new European Union mechanism, currently in the implementation phase, which aims to address climate change by imposing carbon-related charges on imports of products whose production involves high levels of carbon emissions.
Kosovo, as a country with an imbalance between exports and imports, imports a wide range of products that may be affected by CBAM, particularly products used in heavy industry and the construction sector, including:
- Steel;
- Aluminium;
- Cement;
- Nitrogen fertilizers;
- Electricity;
- Hydrogen, among others.
The purpose of CBAM is to protect EU industries against unfair competition from countries that do not implement comparable climate policies and to encourage global decarbonization.
Although Kosovo is not a member of the EU, its economy is closely connected to the European market. As a country that imports a wide range of industrial products from the EU, Kosovo may be significantly affected by the implementation of CBAM.
Products such as steel, aluminium, cement, and energy-related products, which are widely used in construction and heavy industry, are particularly sensitive to carbon-related costs. If these products are imported from the EU or from countries exporting to the EU, but are manufactured using technologies that generate high carbon emissions, Kosovo importers may face higher prices as CBAM-related costs are reflected in the final prices of these products.
The economic impact of CBAM on Kosovo is twofold. On the one hand, it may increase costs for importers, potentially leading to higher prices in the domestic market. On the other hand, it creates opportunities to transform import practices and encourage a transition toward cleaner technologies.
Products that do not meet EU environmental requirements may become more expensive, potentially stimulating demand for products manufactured with lower carbon intensity.
This provides Kosovo’s private sector with an opportunity to explore alternative import sources from countries pursuing environmental policies aligned with those of the EU and to develop partnerships with more sustainable producers.
From a broader strategic perspective, Kosovo may use the implementation of CBAM as an incentive to improve its industrial infrastructure and increase alignment with EU climate policies.
The EU has provided support to Western Balkan countries through green transition funding, which Kosovo may utilize to invest in the sectors most affected, particularly renewable energy and the decarbonization of manufacturing industries.
In terms of exports, although the number of Kosovo companies exporting products covered by CBAM remains relatively small, exporters targeting the European market will face requirements to report carbon emissions associated with their products.
Sectors such as steel production, aluminium production, and electricity generation, which are directly affected by CBAM, currently represent a modest share of Kosovo’s exports to the European market but have considerable potential for future growth and expansion.
As exports increase, particularly in the energy sector, Kosovo will need to meet the emissions reporting standards required under CBAM.
This mechanism also creates a need for Kosovo to establish a reliable system for monitoring, reporting, and verification of carbon emissions data, known as the MRV system, as well as to pursue gradual alignment with the Paris Agreement.
Kosovo has also signed the Sofia Summit Declaration and committed to achieving full decarbonization by 2050. However, Kosovo currently does not have an emissions trading system or fully developed capacities for monitoring and verifying greenhouse gas emissions in accordance with EU standards.
This may become an obstacle for Kosovo exporters seeking access to the European market, while simultaneously presenting opportunities for cooperation with the EU in developing institutional and technical capacities.
In this context, one of the most important developments is the introduction of a carbon emissions reporting framework for exporters affected by CBAM. At the time addressed in this article, the mechanism was in its transitional phase, requiring emissions data reporting without direct financial implications until the end of 2025.
This transitional phase was intended to help exporters adapt to the new technical and administrative requirements, allowing them time to establish internal reporting mechanisms and improve transparency throughout their production chains.
In the long term, CBAM may contribute to the transformation of Kosovo’s economy by encouraging greater energy efficiency and the adoption of cleaner technologies.
This will require coordinated action by the private sector and policymakers to establish a legal framework aligned with EU environmental regulations.
CBAM is not a mechanism that applies directly to Kosovo as a jurisdiction. However, through its trade relations with the EU, its economic impact is unavoidable.
Through Law No. 08/L-250 on Climate Change, which entered into force in January 2024, Kosovo has addressed this matter in Article 39, paragraph 3, which provides:
“3. The Ministry shall, by decision, appoint a working group to study the impact of the Carbon Border Adjustment Mechanism (CBAM) on Kosovo, following the entry into force of this Law.”
Therefore, given the unavoidable impact of CBAM, it is essential for Kosovo businesses to remain informed and prepared to meet new requirements throughout their supply chains, while also taking advantage of the opportunities for sustainable development that this mechanism may create in the future.
Authors: Agnesa Azemi Ademi and Urim Vokshi
