Bosnia and Herzegovina is working against the clock to establish a national emissions trading system (ETS) by the end of 2025. The driving force behind this ambition is the European Union’s Carbon Border Adjustment Mechanism (CBAM), which will begin applying financial charges on carbon-intensive imports from January 2026. Without a domestic carbon pricing system, exporters of cement, steel, aluminium, fertilisers, electricity, and hydrogen could face steep tariffs when selling into the EU. To protect its industry, Bosnia must develop the legal and technical infrastructure for a functioning ETS in record time.
Government leaders, including Prime Minister Nermin Nikšić, have confirmed that both state and entity-level institutions are coordinating the effort. Yet international organisations such as the OECD and IMF remain cautious, warning that the schedule is extremely ambitious given the country’s fragmented political structure and limited progress so far. The challenge is not only political consensus but also the rapid construction of the market’s core technical pillars: legislation, monitoring and reporting systems, registries, and auctions.
Building the Foundations of a Carbon Market
At the heart of the ETS will be a state-level legal act that empowers authorities to price carbon, enforce compliance, and administer allowance allocation. Alongside this, Bosnia will need to adopt monitoring, reporting, and verification rules that mirror those used in the EU ETS. This means every covered installation—ranging from power plants and refineries to cement kilns and steel mills—must develop a monitoring plan, report annual emissions, and have those figures verified by accredited auditors. To make this possible, a national accreditation body must establish and supervise a pool of verifiers, while operators receive guidance and training to prepare for compliance.
Technical infrastructure is another critical element. Bosnia must either procure or develop a secure national registry that tracks allowances, records transfers, and enforces surrender obligations. Auctions will need to be organised to sell allowances to industry, ideally via a trusted European exchange platform to ensure transparency and liquidity. Decisions will also be required on coverage and cap setting: whether to begin with a narrow group of energy and industrial sectors or adopt a wider scope, and how to calculate an emissions ceiling that aligns with both domestic climate commitments and EU expectations.
From Vision to Implementation
The government’s roadmap foresees passing the enabling legislation in the final months of 2025, publishing a coverage list, and opening pre‑registry accounts for operators. In 2026, monitoring obligations would begin, the first auctions would be launched, and operators would start acquiring allowances. The inaugural compliance deadline is envisioned for April 2027, when companies would surrender allowances for their verified 2026 emissions.
To reduce the risk of market instability in the first year, Bosnia may consider a transitional price stabilisation mechanism, such as a reserve price in auctions. Revenues from allowance sales could be channelled into industrial decarbonisation programmes, grid upgrades, and just transition support for workers. Above all, the ETS is meant to demonstrate to the EU that Bosnia is serious about climate alignment and economic integration.
The coming months will therefore be decisive. If Bosnia can pass the necessary legislation, establish the registry, and begin accreditation of verifiers by year’s end, the country could realistically launch an operational carbon market in 2026. Success would protect exporters from CBAM costs, send a powerful signal to investors, and position Bosnia and Herzegovina closer to the EU’s climate and energy community. Failure, however, would leave industry exposed to new trade barriers and slow the country’s energy transition at a critical moment.
