Serbia’s steel sector is entering a period when electricity procurement, carbon reporting and export competitiveness are increasingly connected. Yet the link between renewable electricity and carbon compliance is more complex than some green power purchase agreement (PPA) offers imply. HBIS Serbia illustrates the commercial and regulatory issues facing large steel producers.
According to Serbia’s Ministry of Trade, HBIS 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. For an industrial operation of this scale, electricity costs and security of supply are significant commercial considerations, even before accounting for carbon requirements on exports to the European Union.
Current CBAM accounting and electricity procurement
Under the current EU Carbon Border Adjustment Mechanism (CBAM) framework, covered iron and steel goods in 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 gain greater visibility over energy prices and support its decarbonisation strategy, customer positioning and corporate reporting. However, buying renewable electricity does not, by itself, automatically reduce the producer’s current CBAM certificate requirements.
That distinction does not remove the strategic value of renewable power for steelmakers; it clarifies where its commercial benefits may 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 possible future changes in regulatory scope. Renewable electricity can also support industrial electrification as production processes move increasingly away from fossil fuels.
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 and volume, renewable attributes, grid risks, PPA counterparty creditworthiness and the reliability of metering data. Treating renewable electricity as an automatic reduction in current CBAM liabilities could result in incorrect pricing, unrealistic financial projections and poorly structured contracts.
Proposed CBAM coverage and emissions data
The European Commission has proposed extending CBAM from 2028 to selected manufactured goods with high steel or aluminium content. Both the Council and the European Parliament have supported broader coverage, while Parliament has proposed a substantially wider range of products. The expansion remains proposed.
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 now could become increasingly important in demonstrating the environmental performance of downstream products sold into the EU.
Electricity traders can develop more detailed offers 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 for manufacturers’ product-emissions reporting where legally relevant. Each element can provide commercial value even if it does not directly reduce the number of CBAM certificates required under the current methodology.
PPA terms, financing and industrial competitiveness
For HBIS Serbia and other major industrial electricity consumers, contract design and counterparty creditworthiness matter as much 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 the arrangement would perform if industrial electricity demand falls, production schedules change or the buyer undergoes restructuring.
Lenders must also consider the possibility that 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. These terms address the performance of the arrangement under changes in demand, operations or regulation.
Serbia’s steel competitiveness depends on avoiding two misconceptions: that CBAM is solely an export tax, and that buying renewable electricity automatically resolves compliance requirements. A more durable approach is to integrate process decarbonisation, electricity procurement and reliable emissions-data systems, while keeping their legal and financial implications distinct. Although this is 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. Its precise CBAM implications will continue to depend on the product category, the applicable emissions methodology and the evolution of EU legislation.
Supported by CBAM.Clarion.Engineer