Energy transition in the Western Balkans: 2020 missed opportunities

Europe in transition

Recent developments in the Western Balkans countries indicate that they can take concrete actions and join the EU in tackling the climate crisis, but the progress made so far is not enough.

By: Belgrade Open School, Climate Action Network (CAN) Europe, Eco-team, Green Home, HEAL, REC Albania

The recently published Energy Community Secretariat’s 2020 Implementation Report[1] is an additional source that highlights some of the key obstacles in reforming the energy system of the involved countries, especially the Western Balkans, in the foreseen timeline.

(Non) Decarbonisation efforts

On the bright side, the announcement of the Government of Montenegro about dropping the development of the second block of Pljevlja thermal-power plant ‘triggered’ an effect of cancellation of coal power plants in North Macedonia (Oslomej) and Kosovo (Kosova e Re).

On the other hand, emissions from the existing coal power plants in the region is still the primary concern for the health and wellbeing of the citizens. A recent analysis[3] concludes that all Western Balkans coal plants included in the National Emissions Reduction Plans (NERP), continue to emit over the legal limits set by the Energy Community Treaty.

Another analysis[4] showcases that the chronic coal pollution from the region’s sixteen outdated power plants is responsible for an estimated 3,900 premature deaths, 8,500 cases of bronchitis in children and other chronic illnesses annually, leading to health costs of up to EUR 11,535 million.

Although there is legislation in place, the countries fail to implement it. Kosovo has failed to transpose the directives related to the large combustion plants, while Serbia has just adopted the NERP, in a process which is being criticized for breaching environmental legislation, as the environmental assessment was not conducted in line with the Strategic Environmental Assessment Directive and Serbian legislation. Furthermore, there is a great concern that Serbia lacks the adequate institutional support[5] for monitoring and enforcing the NERP.

The power plants in the countries that have decided to opt out from the implementation of the Large Combustion Plant Directive are fast approaching their working hours limit. And these countries do not seem to have any plans beyond.

The Ministry of Economy of Montenegro sent a formal request to the Energy Community for additional working hours for the Pljevlja power plant, whose working hours are due to expire by the end of this year. The timing is critical for Montenegro as the retrofitting plans for that power plant are supposed to start soon, with the aim of lowering the air pollution. The project is heavily criticised by civil society organisations[6], as there are no economic nor feasibility justifications for such efforts. The decommissioning of the power plant should be the best way forward though, in order to guarantee ending Montenegro’s dependence on coal and truly decarbonise its electricity sector.

Climate and energy targets

The decarbonisation efforts are bound with the process of drafting the National Energy and Climate Plans (NECPs). Although not legally binding, all countries are drafting the NECPs according to the Secretariat guidelines.

Currently, North Macedonia is seen as a frontrunner in the energy transition, as its 2040 Energy Strategy envisages phasing out coal by 2030, making it the first country in the Western Balkans to have a coal phase-out date. The country is also the first one in the region to have an official draft NECP[7]. According to the review from the Energy Community Secretariat of the North Macedonia’s NECP, they still have to improve their coal phase out action plan and implementation. Serbia sends a completely different picture, where the process of developing NECPs has not even started yet[8].

The deadline for reaching the current 2020 climate and energy targets has been postponed to the end of 2021 and the situation on the ground shows that they are not on track to reaching them.

The countries’ plans for renewable energy, for example, are heavily dependent on hydropower, through which support schemes led to devastating effects on the environment throughout the Western Balkans. To address further the hydropower issues, the Secretariat adopted the Policy Guidelines on the development of small hydropower plants[9].

The Energy Community has for the last couple of years urged the countries to move from the feed-in tariff scheme to an auctioning system, in order to guarantee the lowest possible price for investing in renewables. This has had positive results for example, in Albania[10], while North Macedonia became the first country in the Energy Community to convert coal mines into solar fields[11], but both countries failed to remove the feed-in tariffs for small hydropower projects. After declaring a ban on small hydro projects, Bosnia and Herzegovina moved to take direct steps into phasing out the feed-in tariff for those projects[12].

Instead of addressing the challenges of reaching the renewables targets, based on reliable wind, solar and storage options, the countries have opted for creative accounting, which led to actually overachieving the biomass 2020 targets in the heating and cooling sector[13].
Last but not least, the energy productivity is still low, hence implementing energy efficiency in buildings, lowering energy transmission and distribution losses, and so on are key issues still to be tackled.

Keeping the coal fleet artificially alive

The efforts of the Energy Community Secretariat to design a carbon pricing for the countries should be seen as a stepping stone for preparing the contracting parties in joining the EU Emissions Trading Scheme.

Through the Green Deal, the EU is planning to set a Carbon Border Adjustment Mechanism, and the coal dependent electricity sector of the Western Balkans would be one of the first to take a hit.
In addition, the potential introduction of national carbon taxes will make coal even less profitable than it already is despite being heavily subsidised.

In the light of this, Montenegro became the first Western Balkans’ country to introduce a cap and trade emissions system[14].

In 2019, the Energy Community Secretariat published a study on how much coal costs to citizens’ tax money[15] (years 2015-2017), reaching up to EUR 2.4 billion annually in direct and indirect subsidies. The trend, according to the implementation report, which has continued steadily in 2019 as well. On top of the subsidies, , coal power generation in the region spurred additional costs through health expenses worth EUR 8,866 million.

Table 1: Costs of coal in WB

COUNTRY Bosnia and Herzegovina Kosovo Montenegro North Macedonia Serbia
Direct subsidies in 2019, in EUR Million 22.7 6.5 0.4 1.6 41
Indirect expenses through health costs, in EUR Million (2016) 3,399 179 300 390 4,598


While in 2019, Kosovo, Montenegro and North Macedonia have abandoned their investment plans for new coal-fired capacities, Bosnia and Herzegovina and Serbia on the contrary massively supported building new coal power plants. These projects directly contradict the efforts for decarbonisation and sustainability of the energy sector in the region.

This shows that without direct financial support from the governments, even the new projects would not be possible. What’s more, this assistance breachesthe Energy Community’s restrictions on state aid. The best example is in Bosnia and Herzegovina, where the state aid authorities cleared the state aid provided by the Federation for the EUR 614 million loan from the Chinese Export-Import Bank to the energy company Elektroprivreda BiH. Currently, this case is pending a decision on breach of the Energy Community Treaty, expected end of this year at the Ministerial Council of the Energy Community.

From coal to clean?

Decarbonisation efforts for the region should guarantee a clean and sustainable energy transition. One of the preconditions is market integration.

While the European Commission’s efforts play a key role in the energy transition of the region, the messages calling for an increased role for fossil gas in that transition are highly questionable[16]. The use of fossil gas does not only emit carbon dioxide, but also methane, a short lived and very potent greenhouse gas emitted during extraction, transport and use. Consequently investing in fossil gas today means locking the region into carbon-intensive energy generation for decades to come.

The expected decision on the Projects of Energy Community Interest (PECI) and the recommendations for the Projects of Mutual Interest (PMI) by the Ministerial Council in December 2020 should take into account the long-term vision of the energy transition of the region and avoid an unnecessary detour, as fossil gas is not a bridging fuel, but just another fossil, polluting fuel.

Following through with the current PECI and PMI lists is not advisable, especially without the revision of the Trans European Energy Network regulation, as well as proper impact assessment, as the decision of the EU Ombudsman expressively confirms[17], on the EU Projects of Common Interest list.





[5] According to the 2020 Implementation Report