It is becoming increasingly likely that the European Union will impose additional taxes on imports from Bosnia and Herzegovina, which would be a significant economic blow. This blow can be avoided, but whether it will be avoided depends entirely on Bosnia and Herzegovina itself.
Source: klix.ba
The EU plans to impose additional financial burdens not only on imports from Bosnia and Herzegovina but also on all non-member states. The proposed levy is called the Carbon Border Adjustment Mechanism (CBAM), and it will tax the import of goods whose production emits carbon.
There are two reasons for introducing this tax. One is environmental protection—CBAM is one of the measures to help the EU achieve its goal of becoming climate neutral by 2050. The second reason is to protect the Union’s economy from unfair competition, i.e., from the economies of countries that are not EU members and where carbon is either not taxed or inadequately taxed. CBAM is scheduled to begin collection on January 1, 2026.
Bosnia and Herzegovina, like all other non-EU countries, has the option to avoid CBAM, which suggests that the Union does not intend to simply fill its budget. Namely, CBAM can be avoided by introducing an Emissions Trading System (EU ETS), which has existed in the EU since 2005. The EU ETS allows companies to buy and sell quotas or “rights to pollute.”
These quotas are traded on the stock exchange or directly between companies, and the price of quotas depends on supply and demand. Some businesses may receive quotas for free. Those who do not use their quota can sell the surplus. Lower carbon emissions mean lower costs, which makes it clear that the EU ETS is also one of the EU’s environmental protection measures.
While EU ETS would fill the budgets of Bosnia and Herzegovina, CBAM would fill the budget of the Union. Bosnia and Herzegovina committed to establishing an EU ETS through the Sofia Declaration, and Chairwoman of the Council of Ministers Borjana Krišto (HDZ) promised that this trading system would be implemented.
However, the director of the Energy Community, Artur Lorkowski, recently stated that he doubts Bosnia and Herzegovina will meet all the conditions needed to avoid CBAM. These conditions include adopting a national electricity law and establishing a national electricity exchange.
The danger of a major economic blow
President of the Foreign Trade Chamber of Bosnia and Herzegovina (VTK BiH), Vjekoslav Vuković, explained in an interview with Klix.ba what impact CBAM could have on trade with the EU, to which Bosnia and Herzegovina exports 70 percent of its products. He primarily pointed out the potential financial losses for the Bosnian economy.
“Full implementation of CBAM would apply to over 40 percent of Bosnia and Herzegovina’s exports to the EU, including aluminum, steel, iron, fertilizers, electricity, and cement. Without the EU ETS, Bosnia and Herzegovina would lose 300 million KM by 2030, which would go to European countries,” Vuković emphasized.
He specifically noted the consequences of additional taxation on electricity, stating that this sector is the most sensitive to any form of carbon tax. Bosnia and Herzegovina is a major exporter of electricity, which is predominantly produced from coal.
“Considering the spillover effect that electricity can have on other industries and households through increased local market prices—which has yet to be evaluated—economic stability will be a key concern in the coming years,” he stated.
Discussing the possibility that CBAM may cause job losses, wage cuts, and/or company closures, Vuković concluded that small and medium enterprises would not be able to operate without profit or absorb losses to mitigate or eliminate negative impacts.
“We hope that companies will remain competitive, improve their operations, and retain existing jobs while creating opportunities in new markets, expanding production capacities, and enabling new employment,” he added.
We asked which industries would be most affected by the introduction of CBAM.
“This regulation initially applies to six sectors: the production of steel and iron, aluminum, electricity, hydrogen, cement, and fertilizers. According to VTK’s analyses, the most affected product groups will be aluminum, iron and steel, and electricity,” he responded.
He reminded that Bosnia and Herzegovina does not export hydrogen and that fertilizer exports are significantly smaller compared to the other sectors. He continued to discuss other Bosnian goods that the EU may additionally tax.
“Although cement exports are not large compared to the first three mentioned sectors, along with aluminum, they show the highest dependency on EU partners, making this industry especially vulnerable to the new conditions. Of the total Bosnian aluminum exports globally, 89.88% go to the EU, and 83.72% of cement exports,” he stated.
The president of VTK BiH highlighted data suggesting that domestic companies are partially aware of what EU ETS and CBAM mean. He pointed out that this data was gathered through a survey conducted in December last year.
“An analysis of responses from 76 companies showed that 58.7% do not know what direct and indirect CO2 emissions of their products are, but they want to learn more about it, while 38.7% do know what direct and indirect CO2 emissions of their product are. Furthermore, 42.1% of companies don’t know whether they must report emissions in precursors (chemical compounds) of their products, while 36.8% do know whether they must report emissions in their products’ precursors, i.e., their suppliers’ emissions,” he explained.
According to Vuković, the analysis showed that large companies are primarily prepared to enter CBAM and that some companies are already saving money to pay this tax.
“It is true that many processes in companies are implemented ad hoc or under pressure from foreign buyers, but a significant number already apply different practices (LED lighting, thermal insulation, solar power generation for internal use, use of biomass or biogas, etc.). Some are investing in innovation and sustainability,” he added.
He claims that most businesses have expressed readiness to invest in green technologies, having recognized a business opportunity in them.
What are the authorities doing?
While VTK BiH and business representatives call on the government to meet the conditions to avoid CBAM, there is silence from the ministry most responsible for fulfilling these requirements. The Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina did not respond to our inquiry. Federal Ministry of Energy, Mining, and Industry (FMERI) also calls for a faster response from the state government.
“The Federation of Bosnia and Herzegovina advocates for the urgent adoption of a national electricity law. FMERI has submitted its position on the draft law to the Ministry of Foreign Trade and Economic Relations, thereby fulfilling its obligation,” they pointed out.
FMERI emphasized that it will be very difficult to undertake any measures if CBAM is implemented.
