Ms Sylvia Bakardjieva is a legal professional with extensive experience in EU policy-making, regulatory affairs, and legal enforcement in environmental and climate legislation. She has built her career as a government official, Climate Attaché at the Permanent Representation of Bulgaria to the EU, and Legal Officer at the European Commission (DG SANTE), gaining in-depth knowledge of EU decision-making processes and developing strong diplomatic skills. During the Bulgarian Presidency of the Council of the EU, she chaired the Council Working Party on the Environment and led negotiations on the climate aspects of the Regulation on the Governance of the Energy Union and Climate Action. Ms Bakardjieva holds a Master’s degree in Law from the University of National and World Economy in Sofia and a Postgraduate Diploma in European Union Law from King’s College London. Currently, she serves as a Legal Consultant and Account Director at EPPA, a Brussels-based specialist management consultancy, and as an international expert on the IED Serbia project.
IED Serbia: Ms Bakardjieva, the EU Emissions Trading System (EU ETS) is now in its fourth phase (2021-2030), covering major industrial sectors and energy, and is central to EU climate policy by setting a carbon price and driving emission reductions. In addition, the upcoming separate emissions trading system ETS 2 will extend carbon pricing to transport, building and additional sectors upon its planned implementation in 2027. This represents a significant shift in how climate policy directly affects citizens, households, and smaller economic actors. How do you assess the rationale behind ETS 2, what key implementation challenges do you foresee at the EU level, and what lessons or signals does this new system send to countries like Serbia that are gradually aligning with EU climate and energy policies?
Ms Sylvia Bakardjieva: ETS 2 has been one of the most debated elements of EU climate policy in recent years due to the anticipated social impacts. There was strong discussion, particularly in the European Parliament, about whether it should be postponed, given the current economic pressures, inflation concerns and the potential impact on the final consumers. As a result of this debate, the EU decided to delay its full application, moving the start from 2027 to 2028. This gives both governments and industries some additional space to organise the implementation of the new rules in the most sustainable way.
That said, the postponement does not mean the system is being slowed down in substance. Preparatory work is continuing. The technical rules for monitoring and reporting emissions are already in place, and fuel suppliers are expected to build the necessary systems well ahead of the formal start. In other words, while the financial obligations are delayed, the groundwork is already being laid.
Once ETS 2 becomes fully operational, its effects will be felt quite directly. Unlike the existing ETS, which focuses on large industrial installations, ETS 2 covers fuels used in transport and buildings. This means that carbon costs most likely will be reflected in fuel and heating prices and, ultimately, passed along the value chain to final consumers. This was precisely the reason for the political sensitivity around its timing.
From a regulatory perspective, as regards Serbia, ETS 2 can be integrated into existing national planning documents by aligning new provisions with the current framework. However, the timing and form of its introduction remain a political decision, and long-term investment certainty for companies will be crucial. Member States should have already finalised the transposition of the Directive in their respective legal frameworks.
At the same time, the EU is preparing a major revision of the Emissions Trading System (ETS), with a legislative proposal expected in July 2026. This reform will define the rules for the period after 2030 (Phase 5) and is expected to bring significant changes. These may include revisions to free allocation and carbon leakage lists, updates to benchmark methodologies, possible expansion of sector coverage, including lower thresholds for installations and the inclusion of municipal waste, as well as changes to funding mechanisms. Both the Modernisation Fund and the Innovation Fund are expected to be reshaped. Political negotiations are likely to continue throughout 2026 and 2027, with final adoption expected by the end of 2027, meaning that the new rules will apply from 2030. While the process will take time, the direction of change is already clear and firmly on the horizon.
Major industries and some governments are already flagging the need of maintaining free allocation beyond 2030. Indeed, free allowances could still serve as a supportive tool against carbon leakage and a fresh financial relief for the ETS sectors, as long as the integrity of the ETS is preserved. Intense debates are anticipated with the publication of the proposal of the Commission in July.
This is also why ETS and CBAM need to be viewed together. They are closely linked instruments designed to reinforce the carbon pricing and steer investment decisions towards faster decarbonisation. The key message for companies and policymakers alike is that these changes are coming. Even with delays, preparation should not be postponed, because long-term competitiveness will increasingly depend on how quickly systems, technologies and strategies adapt to carbon pricing.
IED Serbia: The Carbon Border Adjustment Mechanism (CBAM), fully in effect from January 1, 2026, is designed to protect EU industries from carbon leakage by ensuring importers account for the embedded greenhouse gas emissions in their products. From your expert perspective, how might CBAM reshape global trade relationships and create opportunities or challenges for countries like Serbia, and what lessons can be drawn from its broader international impact?
Ms Sylvia Bakardjieva: This is a very timely and important question, especially because there is still quite a lot of uncertainty around CBAM in third countries, including Serbia. From the EU perspective, the message is clear: CBAM is no longer a future instrument, it is already in force and actively being implemented. Over the past year, and particularly in December, the European Commission adopted a large batch of delegated and implementing acts to finalise the system and ensure it is fully operational and stable ahead of 2027, when CBAM certificates will become available and financial obligations will start to apply.
At the heart of the system is the CBAM Registry, a central EU online platform used by authorised EU importers. Through this platform, importers will report the embedded greenhouse gas emissions of imported goods, purchase CBAM certificates at prices linked to the EU Emissions Trading System (ETS), and surrender them annually to demonstrate compliance. For Serbian exporters, this means that EU customers will increasingly require accurate emissions data, starting already with production and emission data for 2026, as this data will determine future CBAM costs. The definitive phase began on 1 January 2026, this is why monitoring really needs to start now to guarantee a normal undisturbed first compliance cycle by 30 September 2027.
It is also important to understand that CBAM and the EU ETS are closely connected. They are essentially two sides of the same coin, aligned in terms of sectors and goods covered and overall climate ambition. CBAM is not a static mechanism – the Commission indicated in the CBAM Scope Assessment Report in December 2025, that additional sectors are likely to be included from 2027 onwards, such as paper, ceramics, glass, ferro-alloys, certain chemicals and polymers. At the same time in December 2025 the European Commission proposed a list of 180 downstream goods based on iron, steel and aluminium to be included in the scope of the CBAM. In the list you will find goods such as automotive parts and chassis, as well as home appliances. This shows that CBAM will continue to evolve and expand.
Another key issue is how emissions are calculated. Importers can rely either on real, verified emissions data provided by producers or on default values set by the Commission. While default values may appear simpler at first, they are designed to become stricter over time. In many cases, using real emissions data will be more cost-effective in the medium and long term. This makes early monitoring and reporting a strategic decision, not just a technical one.
CBAM will also influence trade dynamics across entire value chains. Even where certain small exporters benefit from exemptions, CBAM-related costs will be reflected in higher input prices and passed along the value chain. In practice, this means that almost everyone might feel the impact in some way. The system is designed to push companies towards investing in decarbonisation rather than postponing action. Trying to minimise costs in the short term without addressing emissions will likely prove far more expensive in the years ahead. CBAM is, in that sense, a real enabler of decarbonisation.
There is also some good news. At the end of last year, the EU also adopted the so-called Omnibus simplification amendment, which significantly reduces the burden for smaller operators. Instead of the previous de minimis threshold based on shipment value, a new cumulative threshold of 50 tonnes per year across all CBAM goods now applies. To some extent, it is a kind of a safety net for the small producers. In addition, administrative burden is significantly reduced. Compared to the transitional phase, reporting obligations in definitive phase have been simplified. Instead of quarterly reporting, companies will submit a single annual declaration covering the previous year’s imports.
IED Serbia: Serbia has introduced a GHG Emissions Tax effective January 1, 2026, establishing an initial carbon pricing instrument aimed at encouraging cleaner technologies and aligning domestic industry with EU climate objectives. However, carbon pricing is only one element of a broader policy framework that also includes emissions monitoring, reporting and verification (MRV) system. From your perspective, how do you assess the role of the GHG Emissions Tax within this wider transition, what impacts can be expected for Serbian industry, and what key institutional, regulatory, or technical steps still need to be addressed to ensure alignment with EU climate policies?
Ms Sylvia Bakardjieva: Introducing a greenhouse gas emissions tax in Serbia is an important and positive first step towards alignment with the EU climate policy. From a policy perspective, it establishes an initial carbon pricing instrument and signals a clear intention to move closer to EU mechanisms such as the Emissions Trading System (ETS) and, indirectly, CBAM. Politically and economically, this approach is timely and sensible. Rather than immediately imposing a complex and costly system across the entire economy, Serbia has chosen to start with larger emitters, particularly in sectors such as energy and steel production. This targets the main sources of emissions while avoiding disproportionate pressure on smaller companies in the supply chain. Starting with a relatively modest and more broadly acceptable measure is often more effective than introducing a heavy administrative and financial burden all at once. In that sense, a small step is always better than no step at all. However, it is equally important to recognise that this is only the beginning. Much more will need to follow.
Serbia is just starting this journey, while EU member states have been operating under the ETS for more than two decades. Even countries that joined the EU later, such as Bulgaria and Romania, have had nearly 20 years to adapt. The experience shows that carbon pricing has a real structural impact on industry. In Bulgaria, for example, the number of installations covered by the ETS decreased over time due to closures or reallocation to third countries, partly as a result of carbon costs, alongside other factors such as labour costs, regulatory pressure and international competition.
This illustrates a key challenge for accession: climate policy does not operate in isolation. The ETS interacts with a wide range of environmental legislation, and this web of requirements becomes increasingly complex over time. The Industrial Emissions Directive (IED), for instance, is closely linked to water protection rules, chemicals legislation and waste regulation. At the same time, many of these laws are being revised and becoming more stringent, including the Water Framework Directive and the Environmental Quality Standards, and the upcoming Circular Economy legislation and revision of REACH. The result is a growing web of obligations that industrial operators must navigate, making compliance progressively more demanding over time.
For candidate countries, this creates a demanding but unavoidable reality. Environmental and climate legislation in the EU is evolving continuously, with higher standards and stronger enforcement. Preparedness is therefore critical. Establishing carbon pricing, developing monitoring and reporting systems, and building institutional and industrial capacity early on will make the transition smoother.
Ultimately, alignment with EU climate policy is not only about meeting formal accession requirements. It is about helping industry adapt gradually, remain competitive and avoid sudden shocks later in the process. The sooner this adaptation begins, the better positioned both the economy and institutions will be for EU membership.