Western Balkan countries need to adopt their own carbon pricing mechanism or establish pathways to enter the European Union Emissions Trading System (ETS) recommends a new study by German think tank Agora Energiewende. This is to ensure that the region is ready for the impact that the new European Carbon Border Adjustment Mechanism (CBAM) will have on power exports to the EU.
Despite the good potential for renewables, several Western Balkan countries continue to rely on lignite for power production and even plan for the construction of new lignite plants.
“There is no alternative to a CBAM in an EU with higher climate targets”, noted Matthias Buck, Director Europe at Agora Energiewende, adding that “a European CBAM is not a sanction imposed on trade partners, its aim is to protect the EU against carbon leakage. Its introduction is an opportunity to be seized by the Western Balkans countries to start decarbonising their energy sectors before 2030.”
Not only on the energy sector but European CBAM will have much broader repercussions since the EU is the leading trade partner of the Western Balkans, accounting for almost 70 per cent of total trade. With the introduction of CBAM, export markets for all goods with high carbon intensity will shrink for Western Balkans.
In that context, projects such as lignite power plants will be loss-making and should therefore be halted, argued Agora.
“Our report is a call to action: the EU should use CBAM revenues for technical assistance and transfer of knowledge in order to support a just transition in the region”, underscored Mr Buck and concluded that ”decision-makers in the respective countries should prioritise policies and mechanisms for climate protection to avoid costly, unpredictable disruptions of trade with the EU.”
In addition, the report suggests that Western Balkan countries should use a larger share of available EU funds for supporting a just transition and socio-economic convergence with the EU.