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The European ‘Green Deal’ for the Western Balkans

The European ‘Green Deal’ for the Western Balkans

The ‘Green Agenda for the Western Balkans’, the goal of the EU states to become climate neutral by 2050 was extended to the six accession candidates in South-Eastern Europe. 

When they signed the Sofia Declaration in November 2020, the leaders of the Western Balkans region recognised the need for more ambitious climate action and reaffirmed their commitment to align with European climate targets as part of the EU accession process. This declaration was preceded by efforts by the European Union to include the region’s states in the ‘European Green Deal’ adopted in 2019 through the ‘Green Agenda for the Western Balkans’ and to commit them to the goal of COneutrality by 2050. The ‘greening’ of the Western Balkans envisaged by the Green Agenda is based on five pillars: climate action, including decarbonisation, energy and mobility, circular economy, biodiversity, fighting pollution, and sustainable food systems. The first pillar, decarbonisation, is central to achieving climate neutrality by 2050. The gradual introduction of emission certificates and the gradual phasing out of coal subsidies play an important role here. However, investments should also be made in more environmentally friendly technologies, such as natural gas and renewable energy sources. 

An Economic and Investment Plan for the Western Balkans 

To support this, the European Commission has simultaneously presented a comprehensive Economic and Investment Plan for the Western Balkans, which aims to boost the region’s economic recovery, support the ecological transition and promote regional integration and convergence with the European Union. This Economic and Investment Plan foresees a substantial EUR 9 billion investment package for the region, which will finance, among other things, renewable energy and the phasing-out of coal, as well as investments in greater energy efficiency and the reduction of greenhouse gas emissions. In addition to the substantial financial assistance provided to the region, the EU will provide guarantees to lower the cost of financing investments. Support from the new Western Balkans Guarantee Facility is expected to realise up to EUR 20 billion of investments over the next ten years. The Green Agenda and the associated investment package are the key to achieving climate goals in the region. But could the Green Agenda also be a catalyst for increased political engagement, thereby giving a much-needed impetus to the EU accession process for Western Balkan countries? 

The geopolitical component of the Green Agenda for the Western Balkans 

The Western Balkans is considered to be particularly vulnerable to the impact of climate change and is highly affected by air pollution and environmental stress. A host of mitigation measures can bring significant benefits for both air quality and climate alike. The Green Agenda for the Western Balkans is a promising tool with which to advance the necessary climate and energy policies in the region. The biggest challenge lies in reforming the energy sector, which is responsible for two-thirds of regional greenhouse gas emissions – and rising. Moving away from coal and diversifying the region’s electricity mix are critically important. Apart from Albania, where hydropower dominates, the countries of the Western Balkans rely heavily on coal for generating electricity. Given the substantial amounts of money the EU is providing to the Western Balkans, it seems to be in a good position to realise its Green Deal goals and, by extension, further expand its political influence. In fact, however, the EU is in danger of losing influence vis-à-vis external stakeholders such as Russia, Turkey, the Gulf states and, above all, China. The much-cited Belt and Road Initiative (BRI) means that China is the main player currently shaping the region’s energy sector, albeit not in the direction the EU had hoped. 

China has long been investing heavily in coal-fired power plants in the Western Balkans. The power plants in Tuzla (Bosnia and Herzegovina) and Kostolac (Serbia), which alone emits more sulphur dioxide than the Energy Community allows Serbia, Kosovo, Bosnia and Herzegovina and Northern Macedonia combined, are the best-known examples. Some of the coal-fired electricity from the region is already being exported to the European Union, where it even enjoys a competitive advantage because it is not covered by the European emissions trading system. 

Alongside China, Russia has also made significant investments in the energy industry and other energy-intensive sectors such as construction and mining in the Western Balkans, and, not least, is the main exporter of fossil fuels to the region. Consequently, the European strategy of decarbonising the economies of the Western Balkans seems to be in conflict with the interests of these two states. 

Opportunities for global cooperation? 

Even if the interests of the EU, Beijing and Moscow seem incompatible, China is keen to be seen by the international community as a responsible global player when it comes to climate issues. Stronger coordination between the European Green Agenda and Beijing’s investment projects could be mutually beneficial and, above all, mean good business for Chinese state-owned enterprises. This is especially true in view of the fact that, in the absence of binding procurement and subsidy rules, China’s state-owned enterprises can and will also bid for contracts, financed by the European Economic and Investment Plan for the Western Balkans. Russia, which has often been content with playing the role of ‘spoiler’ in the Western Balkans, could be motivated to cooperate on a deeper level by means of another aspect of the EU’s Green Deal: natural gas, as the transitional technology envisaged by the EU between coal-fired power production and the large-scale implementation of renewable energies in the region. This would further increase export opportunities for Russia, while having a substantially lower impact on the climate and pollution. 

The European Green Agenda for the Western Balkans carries some risks, including incentives for corruption and mismanagement, increased tensions with the global powers of Russia and China and also the chance that EU funds will end up in the coffers of state-owned enterprises in these very states. However, the opportunities presented by this new European Neighbourhood Policy outweigh its disadvantages: besides the necessary restructuring of the regional economy to protect the environment, the climate and the population, new stimuli for the EU expansion process and the promotion of the economic and political integration of the Western Balkan states, the Green Agenda for the Western Balkans could open the door to a deeper coordination of regional interests with China and Russia against the backdrop of growing geopolitical tensions. 


AUTHORS:

Dr. Wolfgang Petritsch, Botschafter a. D., Senior Expert Counsel at LANSKY, GANZGER + partner
Philipp Freund, MA. BA., Head of Business Development and Policy Advisor at LANSKY, GANZGER + partner

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