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Green transition challenges ‘persist’ in Western Balkans, report says

At the Berlin Process Leaders’ Summit in Tirana on Thursday (16 October), Energy Community Secretariat Director Artur Lorkowski presented a comprehensive report on the implementation of the Declaration on Energy Security and Green Transition in the Western Balkans

The document, signed by the Western Balkans Six leaders on 3 November 2022, outlined the region’s reforms related to sustainability and the green transition.

While the report acknowledges the progress made, it also highlighted the challenges that persist in the Western Balkans – including energy sector vulnerabilities, governance issues and the imperative need for reforms.

In his presentation, Director Lorkowski stressed the critical role of swift and efficient implementation of the Electricity Integration Package adopted in December 2022 and the necessity of enhanced regional cooperation.

Coal phase-out progress

As noted in the report, the European Commission provided 450 euros million from the EU Energy Support Package for the Western Balkans earlier this year. An additional 500 million-euro grant aims to boost the region’s energy transition and attract up to 1.4 billion  euros in investments, supported by contributions from the EBRD and World Bank.

This funding is currently used for short-term energy poverty measures, with North Macedonia and Kosovo prioritising renewables and efficiency for vulnerable groups, the report noted.

“The commitment to a green and equitable transition remains a top priority, as demonstrated by the ongoing efforts to develop Just Transition Plans,” the report said. Bosnia and Herzegovina’s Just Transition Roadmap, developed with assistance from the World Bank, is currently undergoing a public consultation process. Serbia’s draft Just Transition Action Plan, supported by international partners, is currently under review. In North Macedonia, progress is being made on the Just Transition Diagnostics and Action Plan, with the backing of EBRD.

Other notable developments in the coal phase-out include a 1.5 million-euro grant from the Western Balkans Investment Framework (WBIF) for North Macedonia’s former coal mine turned solar plant.

“A successful green and just transition hinges on phasing out of coal, which requires strategic guidance aligned with national plans to facilitate this shift. Leveraging NECPs as guiding frameworks can ensure coherent financing and provide a clear trajectory for coal phase-out. So far only North Macedonia has a coal phase-out date by 2030 and Montenegro by 2035,” the report noted.

Early reactions to CBAM

In May, the EU adopted the carbon border adjustment mechanism (CBAM) which entered into force earlier this month. Contracting Parties have been assessing the economic consequences of CBAM through their own resources and receiving support from international donors.

During an open discussion at the Informal Ministerial Council of the Energy Community earlier this year, considerations were made regarding potential coordinated measures to address CBAM’s effects, including the creation of a regional emission trading scheme (ETS), which is a key condition for exempting the electricity exports from CBAM.

“The objective of CBAM is to equalise carbon costs for specific imported product categories with EU production. Carbon leakage, especially in the Western Balkans’ electricity sector, has led to excessive profits for coal-based exporters. This underscores the need for effective policies to manage economic and social transitions during the process of cost internalisation. Failing to consider the true GHG emission costs incentivises the use of outdated coal units and poses environmental and security risks,” the report said.

Technical discussions on carbon pricing schemes such as ETS are currently taking place, with an assessment expected during the Ministerial Council meeting in December.

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