How the Implementation of CBAM Will Affect the Economy of Bosnia and Herzegovina

To achieve climate goals, not only are good intentions needed, but also concrete mechanisms that will translate them into practice, even at customs checkpoints. This is precisely what CBAM (Carbon Border Adjustment Mechanism) aims to accomplish: a mechanism that regulates carbon emissions in international trade. It is a policy that would allow European Union countries to charge a tax or fee on imported products that are produced with high carbon emissions.

The transitional period for its implementation began on October 1, 2023, and will last until December 31, 2025, meaning its definitive application will start next year. CBAM is intended to encourage less developed countries, including Bosnia and Herzegovina, to strengthen their climate regulations, introduce stricter emission reduction targets, and invest in renewable energy infrastructure.

We asked Pero Ćorić, President of the Chamber of Commerce of the Republic of Srpska, how the implementation of CBAM will affect exporters from Bosnia and Herzegovina, particularly businesses oriented toward the EU market.

Q: How will the introduction of CBAM affect the economy of Bosnia and Herzegovina?

A: The EU is increasingly focused on combating climate change, while in other countries outside the EU, less rigorous environmental and climate regulations are generally in effect. Precisely for these reasons, there is a significant risk of so-called carbon leakage, whereby companies based in the EU might relocate their production facilities that emit significantly more CO2 to other countries to take advantage of more favorable conditions. In such cases, goods produced outside the EU may end up on the EU market, resulting in higher CO2 emissions during their production. This would merely shift the emissions outside the EU to other countries. It is essential to note that this new EU customs policy will impose an additional burden on our economy. According to preliminary expert estimates, exported goods could become nearly 20 percent more expensive unless businesses improve their production processes and increase their energy efficiency.

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Q: Which industries will be most affected by the implementation of CBAM?

A: To provide legal certainty and business stability to entities in other countries, CBAM will be introduced gradually and, in the beginning, will apply only to goods at high risk of carbon leakage. Therefore, the industries producing the following goods will be most affected: iron, steel, cement, fertilizers, aluminum, hydrogen, and electricity generation. We believe that in the Republic of Srpska, electricity production will be most affected, and this impact will spill over, placing additional pressure on producers in the metal processing sector, which, of course, relies heavily on electricity.

Q: How will CBAM affect the competitiveness of domestic production, particularly in energy-intensive industries with high CO₂ emissions?

A: To redirect CBAM-related payments back into our country and use them to increase energy efficiency, it is necessary to adopt legislation aligned with European legislation — the EU ETS, i.e., the green certificate trading system. If such legislation is not adopted, the competitiveness of the domestic industry on the European market — where we export approximately 70 percent of our production — will likely decline significantly. Likewise, the impact of this mechanism on the energy sector is enormous — Srpska exports electricity, and its price will depend on the share of renewable energy sources in the total electricity price. Currently, this share is quite unfavorable, with about 60 percent of electricity coming from fossil fuels.

Interview by Jasna Dragojević