How (not) to green the Western Balkans
01 April 2025
From Sarajevo to Skopje, the Western Balkans generally rely on fossil fuels for their electricity. But this could blow up in their faces, as the EU introduces green customs duties next year.
Concretely, it's about a wordy EU instrument called the Carbon Border Adjustment Mechanism (CBAM). This CBAM aims to prevent so-called carbon leakage – companies moving production to countries with weaker environmental rules to avoid EU regulations.
Starting in 2026, CBAM will require producers of cement, iron, steel, aluminium, fertilisers, electricity, and hydrogen from outside the EU to buy CBAM certificates to cover their CO₂ emissions if they haven't been taxed in their origin countries. This incentivises both countries to introduce carbon taxes and companies to become greener.
For the Western Balkans, where between 60% and 95% of the electricity production depends on coal, this could become quite costly. Analysts predict that exports to the EU could become more expensive, and revenues in the WB could drop and even affect public finances, as many energy-exporting companies are state-owned.
 | Milica Lipovac Will the CBAM have the desired impact and greenify the Western Balkans? Albania is in the pole position, as it primarily relies on hydropower, reducing its exposure to CBAM and making the shift to renewables easier. In contrast, coal dominates the energy sector in Bosnia and Herzegovina, and there is no clear strategy for phasing it out – complicated by its political situation. The overall transition remains slow due to limited funding, outdated infrastructure, and weak policy implementation. The region needs €40 billion for the energy transition, according to the German clean energy institute Agora Energiewende, yet available EU funds are insufficient. To mitigate such risks, the Western Balkans may seek a transition period to implement EU environmental and competition rules, aiming to establish an emissions trading scheme by 2030. Without stronger investments and reforms, the region risks rising energy costs, loss of EU market access, and economic instability. |
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