Assessment of the impacts of CBAM and carbon pricing on the electricity markets of the Energy Community Contracting PartiesUploaded: 7 of October, 2022

In July 2021 the European Commission published a proposal for the so-called Fit for 55 legislative Package, including the Regulation establishing a Carbon Border Adjustment Mechanism (CBAM). The primary purpose of the regulation is to address the risk of carbon leakage in the sectors with the highest CO2 emissions. Of these sectors, this report focuses only on the electricity sector of Energy Community Contracting Parties (EnC CPs) - the Western Balkan 6 countries, Ukraine and Moldova (with the exception of Georgia). The competing alternative to CBAM to avoid carbon leakage is the introduction of a national carbon pricing system in the Contracting Parties. Electricity market modelling shows that these approaches lead to different outcomes in the electricity mix, CO2 emissions, electricity prices, electricity trade, and TSO revenues. The analysis also covers the possible consequences and spill-over effects for policy solutions, particularly consequential for energy poverty and carbon revenues.