Western Balkans Competitiveness Outlook 2024: North Macedonia

14. Environment policy

Abstract

A healthy and sustainable environment is crucial for economic competitiveness as it supports resource efficiency, enhances resilience to climate-related risks, fosters innovation, and attracts investments while mitigating environmental degradation and associated costs. The chapter analyses the robustness and comprehensiveness of environment policies across four sub-dimensions. The first sub-dimension, climate action, assesses strategies aimed at both mitigating and adapting to climate change. The second sub-dimension, circular economy, focuses on policies promoting waste minimisation, resource efficiency, as well as sustainable production and consumption. The third sub-dimension, protection of ecosystems, explores challenges in managing freshwater, biodiversity and forestry, as well as land-use. The fourth sub-dimension, depollution, analyses policies related to air quality, water supply and sanitation, and industrial risk management, paramount for enhancing competitiveness while ensuring environmental sustainability.

Key findings

North Macedonia's environment policy score has remained stable since the last Competitiveness Outlook and aligns with the regional average (Table 14.1). This is despite notable progress in developing a circular economy framework and strengthening climate change mitigation policies. However, the climate change adaptation framework is still in an early stage of development, and additional efforts are needed to enhance water and land use management.

Table 14.1. North Macedonia’s scores for environment policy

Dimension	Sub-dimension	2018 score	2021 score	2024 score	2024 WB6 average
Environment	13.1: Climate action			2.3	2.5
	13.2: Circular economy			2.0	2.2
	13.3: Protection of ecosystems			2.3	2.1
	13.4: Depollution			2.3	2.3
North Macedonia’s overall score		1.6	2.3	2.3	2.3

The key findings are:

• North Macedonia has bolstered its climate change policy framework by adopting strategic documents that outline emission reduction targets until 2030 and projections until 2050. These documents also anticipate the phaseout of coal-fired power plants and the introduction of a carbon tax to meet the EU's Carbon Border Adjustment Mechanism (CBAM) requirements. However, climate change adaptation has received comparatively less coverage, and limited measures have been implemented to ensure preparedness and build resilience in the face of climate impacts.

• North Macedonia has developed its Circular Economy Roadmap during 2023-24 with the involvement of a wide range of stakeholders, reflecting a commitment to strategic planning and development in this sphere. Simultaneously, circular economy considerations have gained prominence in waste and industry-related policies.

• While waste management remains an important challenge in North Macedonia, the revised legal and policy frameworks are expected to accelerate the circular transition by reducing waste production and increasing levels of reuse, recycling, and recovery of products.

• Ongoing efforts are under way to strengthen the protection of ecosystems, with specific initiatives focused on regulating freshwater, forestry, and biodiversity management. Despite these efforts, the framework for land use management remains unchanged and underdeveloped. Additionally, the monitoring of natural ecosystems remains limited, impeding the ability to make informed policy decisions regarding competitive uses of land and water.

• Air, water and soil pollution remain significant environmental challenges in North Macedonia. However, there are planned measures to address air quality issues through an improved policy framework and the modernisation of the monitoring network. Ongoing investments are dedicated to upgrading the water supply and sanitation system, and remediation efforts have been initiated for certain industrial contaminated sites.

State of play and key developments

Sub-dimension 13.1: Climate action

In the past decade, North Macedonia's greenhouse gas (GHG) emissions have fluctuated, ultimately rising by 1.3% from 2011 to 2019 (Eurostat, 2023[1]). The energy sector was the largest GHG emitter in 2019, responsible for 75.4% of emissions. Agriculture and industry followed, with 12.1% and 6.8% respectively (Republic of North Macedonia, 2023[2]). Energy consumption is still predominantly fossil fuel‑based (84% in 2019) despite renewable energy's share doubling to about 14% since 1990. Facing significant climate change impacts, North Macedonia is particularly vulnerable to floods and wildfires, with an increasing frequency and severity of these events anticipated. The historical prevalence of flooding, coupled with the risks of landslides and wildfires, highlights the urgent need for enhanced climate adaptation and disaster preparedness. In particular, the anticipation of potentially damaging and life-threatening river and urban floods occurring at least once in the next decade emphasises the critical importance of proactive measures (IMF, 2024[3]).

North Macedonia has made substantial strides in strengthening its climate change framework, further aligning with the commitments set forth in the United Nations Framework Convention on Climate Change (UNFCCC) and the Green Agenda for the Western Balkans. The Long-Term Strategy on Climate Action and Action Plan and the revised Nationally Determined Contributions (NDC),1 adopted in 2021, set a net GHG emissions target of 82% by 2030 compared to 1990 levels and projections until 2050. North Macedonia upholds its commitments under the UNFCCC, as evidenced by the submission of the Fourth National Communication on Climate Change in 2023, which includes the most recent GHG emissions inventory up to 2019. The Law on Climate Action, which is yet to be adopted, will transpose relevant EU directives2 by regulating the mechanism for monitoring and reporting GHG emissions and removals by sinks and the permitting requirements for GHG emissions applicable to operators of stationary installations. Moreover, the law will consolidate co-ordination between relevant institutions and stakeholders, with the establishment of three bodies: the National Co-ordinating Council, the National Council for Sustainable Development and the Scientific Advisory Body. These bodies will provide guidance, opinions, and recommendations for overall climate actions undertaken at the national level, with the aim of facilitating implementation and contributing to the integration of climate actions in sector policies, plans, and measures. The framework is currently being implemented with the backing of a Global Environment Facility project, which primarily focuses on developing the “Transparency Platform for Monitoring, Reporting, and Verification of Climate Actions” and strengthening institutional and technical capacity in this regard. This platform aims to facilitate seamless co-ordination among government institutions on data sharing for regular reporting to the UNFCCC, EU, and Energy Community. Additionally, it will enhance the efficiency of monitoring climate actions outlined in the revised NDC.

In addition to the Long-Term Strategy on Climate Action, North Macedonia became the first economy in the Western Balkans to enhance its climate change mitigation efforts by adopting the National Energy and Climate Plan (NECP)3 in 2022. The NECP document includes concrete targets for renewables and energy efficiency measures. It also foresees the phasing out of coal-fired power plants and the introduction of a carbon tax to comply with the obligations of the EU’s CBAM.4 Nevertheless, the objective of shutting down all coal-fired thermal power plants, originally planned for 2027, has been postponed to 2030 to mitigate the effects of the energy crisis by reducing reliance on electricity imports. North Macedonia has continued to feed dated power plants by importing lignite coal and reactivating thermal power plants.5 Nonetheless, in order to ensure a just and inclusive transition away from fossil fuels, North Macedonia developed the Roadmap for a Just Transition in 2023. This strategic plan incorporates measures promoting alternative energy sources, concurrently addressing the challenges faced by coal workers and vulnerable communities. The objective is to facilitate a smooth transition to environmentally sustainable practices while actively mitigating the social and economic impacts through the creation of new green jobs.6

While North Macedonia has made notable progress in developing a mitigation framework, its climate change adaptation and resilience framework lags behind. The Long-Term Strategy on Climate Action addresses adaptation considerations but to a lesser extent than mitigation measures, and the revised NDC lacks specific adaptation targets or a system of indicators for tracking adaptation measures. Additionally, the absence of established early warning systems leaves communities unprepared for climate-related hazards. However, the adaptation framework will be bolstered in the upcoming period with the drafting of the National Spatial Plan,7 which will include adaptation measures and the National Adaptation Plan supported by the Green Climate Fund. The latter, still in its early stages of development at the time of writing, aims to incorporate both cross-sectoral and sector-specific adaptation actions, along with identified investment priorities for adaptation.

Sub-dimension 13.2: Circular economy

Shifting to a circular economy necessitates measures addressing the complete life cycle of products, from design and manufacturing to consumption, repair, reuse, recycling, and reintegrating resources into the economy. Currently, resource productivity remains low in North Macedonia (0.67 EUR/kg in 2021 compared to 2.26 EUR/kg in the EU) (Eurostat, 2022[4]). The adoption of circular practices remains limited, though gradually picking up pace, involving various stakeholders, primarily civil society organisations and academia, in diverse activities and initiatives. However, the efforts currently lack co‑ordination, primarily concentrating on waste management and awareness-raising measures. Nonetheless, concepts envisaging sustainable resource use, consumption, and production have been increasingly mainstreamed in policy documents across different sectors, namely the National Plan for Waste Management (2021-31) and the National Waste Prevention Plan (2022-28), the Long-Term Strategy on Climate Action, and the newly adopted Smart Specialisation Strategy.8 Commitment to North Macedonia’s transition to a circular economy has been backed by the government, notably as part of its strategic priorities for 20249 and with the development of the overarching roadmap toward a circular economy, undertaken with the support of the OECD. The roadmap was developed with the involvement of a wide range of stakeholders from all parts of society (relevant authorities, academia, civil society, the private sector, and international organisations), with a view to ensuring synergies between existing policy measures and initiatives (Box 14.1).

Box 14.1. Roadmap Towards a Circular Economy in North Macedonia

Within the framework of the “Supporting Green Transition through Circular Economy Roadmaps” project, the Ministry of Economy, in collaboration with the OECD, has developed a Circular Economy Roadmap. The roadmap's design process comprised the following key pillars:

• Co-ordination mechanism: nomination of a Circular Economy co-ordinator and formation of a working group, incorporating stakeholders from relevant government institutions, academia, civil society, and the private sector. The Circular Economy Working Group was consulted throughout the entire design process.

• Diagnostics: development of a diagnostic report assessing the current state of the circular economy in North Macedonia, outlining key economic features, recent circular economy and environmental trends, ongoing initiatives, projects, critical sectors, and horizontal policy areas addressing barriers to the circular economy.

• Prioritisation: meetings and consultations are held to pinpoint priority areas for inclusion in the roadmap. Of the 11 identified potential priorities1 for the transition to a circular economy, North Macedonia has chosen five priority areas for which the OECD provided more in-depth analysis and recommendations.

The roadmap, published in March 2024, addresses five priority areas:

1. Circular business models for SMEs represent fundamentally different ways of producing and consuming goods and services from the traditional linear business models. They aim to reduce the extraction and use of materials, minimise waste generation, and use existing materials and products as inputs to production through reuse and recycling.

2. Construction, which is among the biggest consumers of energy and raw materials worldwide and an important economic sector in North Macedonia. The circular economy offers several opportunities for transforming the construction sector into a more sustainable industry with lower environmental impacts throughout the life cycle (production, design, manufacturing, use of buildings and end-of-life).

3. Biomass and food, with a focus on circular bioeconomy, encompassing economic activities in which biotechnology contributes centrally to primary production and industry. It also includes residues and “bio-waste” generated at different stages of the agricultural and forestry supply chains, as well as waste from processing, consumption and bioenergy production stages.

4. Textiles create environmental impacts throughout their life cycle and are the second biggest industrial sector in North Macedonia. Circular potential in the economy mainly lies in sustainable textile production processes (manufacturing, treatment and dyeing) and waste reduction in fabric usage during the production of textile products.

5. Mining and metallurgy, which provide key materials central to the circular economy transition. Circular initiatives in the sector include circular supply and use of the physical infrastructure, equipment and assets of a mining and processing company and circular management of resources that are extracted and used in mining and processing operations.

Each priority area contains between seven and ten recommendations, organised as short, medium and long term, and relevant good practice examples, accompanied by monitoring indicators.

1. These included construction, textiles, mining, automotive, wood industry, municipal waste management, plastics, biomass and food, circular business models for small and medium-sized enterprises, economic instruments and awareness raising and education.

Source: OECD (2024[5]).

More than 80% of the population in North Macedonia was served by waste collection services in 2022, mainly in urban areas. Despite increasing from 72% in 2008 to 83% in 2022, the figure falls short of the EU average of 98% and did not attain the government’s target of 90% by 2020 (MAKSTAT, 2022[6]) (Eurostat, 2023[7]). Waste disposal to landfills – often unsanitary – remains a common practice in North Macedonia, though the process for closing non-standard landfills has commenced in some regions. Recycling rates remain extremely low (0.3%), and waste separation at source has remained limited (Eurostat, 2021[8]). While implementation of the National Waste Management Strategy (2008-20) has been limited mainly due to insufficient administrative and financial resources and lack of ownership (EEA, 2021[9]), the waste management legal and policy frameworks have been revised since then to include concrete objectives and targets. The Law on Waste Management and relevant bylaws10 were adopted in 2021, further transposing the EU Waste Framework Directive and the Landfill Directive as well and regulating extended producer responsibility (EPR) schemes. Moreover, concrete objectives and targets have been set through the National Plan for Waste Management (2021-31) and National Plan for Waste Prevention (2022-28), which are expected to accelerate the circular transition by reducing waste production and increasing levels of reuse, recycling, and recovery of products. Since the law's adoption, North Macedonia has established seven EPR schemes and others are planned to be established in 2024. However, progress is currently tangible only in the packaging waste scheme, with a recycling rate of 40% observed in 2021. While the EU Single-Use Plastics Directive11 has not been transposed in North Macedonia, the government banned single-use packaging and plastics in public procurement as of 2020, acknowledging the challenges posed by plastic pollution in North Macedonia’s environment. In this regard, a rulebook on managing plastic packaging bags placed on the market was adopted in 2021 (MoEPP, 2021[10]). Although there have been positive strides in enhancing the waste management framework, there is a need for further efforts to improve data accuracy on waste generation and management. The current reliance on estimations, caused by the lack of weighing equipment at treatment facilities, hampers the effective implementation and monitoring of policies.

Sub-dimension 13.3: Protection of ecosystems

Renewable internal freshwater resources per capita in North Macedonia amounted to 2 606 m³ in 2020, slightly below the EU average (3 037 m³) (World Bank, 2023[11]). In 2020, North Macedonia's Water Exploitation Index12 was 2.9%, signifying the absence of significant water scarcity conditions. However, the index has shown notable fluctuations in recent years, peaking at nearly 66% in 2014, underscoring the economy's vulnerability to water stress and drought. In 2022, the majority of water was used by households (63%), followed by the industry sector (24%), mainly for cooling in electric power generation (MAKSTAT, 2023[12]). Anticipating the significant impact of climate change on freshwater management, with altered precipitation patterns and more frequent intense droughts, it is crucial to establish a robust framework to effectively address these challenges. North Macedonia’s legal framework was improved with new regulations overseeing water monitoring and the determination of protective zones and wastewater discharges,13 while the policy framework remains largely similar to that in 2021. The National Water Strategy (2012-42) remains the governing document for freshwater management, but its implementation remains limited, and there is no established monitoring mechanism in place. Furthermore, although three River Basin Management Plans were adopted in 2016,14 two of them have expired without revision, and the operationalisation of river basin councils has not taken place, hindering their effective enforcement. There is no official national water information system collecting data on water quality and quantity, impeding informed policy decisions about the competitive use of water and tradeoffs across sectors. However, water information is planned to be integrated within the framework of the National Environmental System managed by the Macedonian Information Centre. The system was enabled in 2022 and is progressing as planned for data entry at the time of writing. Moreover, the groundwater cadastre, which aims to better manage and report on groundwater resources, is in the final stage of development but has yet to be adopted at the time of writing.

Significant steps are being undertaken to strengthen the biodiversity and forestry framework in North Macedonia. The revised Law on Nature, foreseen to be adopted at the end of 2024, will further transpose EU Habitats and EU Birds Directives; its objective is to safeguard biological and landscape diversity, encompassing planning both within and outside protected areas. Moreover, the draft of the CITES Law regulating transboundary movement and trade with wild species, which is also planned for 2024, is in full accordance with the EU wildlife trade regime. The National Strategy for Nature Protection and its Action Plan (2017-27) and the National Biodiversity Strategy and Action Plan (2018-23) have been implemented in the assessed period. This implementation involved the designation of new protected areas and natural rarities accompanied by management plans (four for protected areas and ten for rarities) and the preparation of a National Red List for different species classes, among other activities conducted.15 Nevertheless, while the share of protected areas has increased from 11.8% to 13.9% between 2020 and 2023, the lack of sustainable financing and of administrative capacity to manage protected areas remains a challenge. Moreover, biodiversity’s conditions are not systemically monitored, with the last inventory dating from 1979, and the National Biodiversity Information System developed with the support of UNDP has yet to be operationalised.

In 2021, North Macedonia’s land area covered by forests was 39.7%, a figure close to the EU's 39.9% (World Bank, 2023[13]). This share has been rising in the past decade thanks to ongoing afforestation initiatives, influenced by North Macedonia’s commitment to restoring and afforesting 15 000 hectares of land as a key component of its revised Strategy for Sustainable Development of Forestry, in line with the objectives of the UN Decade for Ecosystem Restoration.16 The revised strategy is expected to be adopted in the second half of 2024, along with the revised Law on Forests, regulating forest planning, administration and management (including financing of forests). Reforms of the forestry framework are receiving support from an EU-funded project initiated in 2023.17 As part of this initiative, co-ordination among pertinent institutions and stakeholders has been reinforced through the creation of decision making and technical working groups focused on forestry. While the identification of forests with high natural values has been conducted in the initial phase of the project, an overarching forest inventory has yet to be conducted in order to ensure the protection of biological diversity.

North Macedonia still lacks an overarching land use management framework. Until 2020, spatial planning was governed by the Law on Spatial and Urban Planning and the Law on Implementation of the Spatial Plan. However, the enactment of the Law on Urban Planning in 2020, which excludes spatial planning, led to a legal void in this regard. Nonetheless, at the time of writing, the National Spatial Plan was in the process of preparation. A working group, comprising all relevant government and non‑government stakeholders,18 convened for the first time in 2022 to initiate its development. This plan will encompass separate spatial plans for regions, municipalities (including the city of Skopje), and areas of public interest for the state. Moreover, the revised National Strategy on Land Consolidation (2022-30), also under preparation and supported by an EU-funded project,19 will aim to foster greater efficiency and resilience in the agricultural sector. The long-term National Development Strategy (2024-44), in the development process at the time of writing, is also expected to include spatial planning and equal regional development considerations in its priorities (National Development Strategy, 2024[14]). Since the last assessment, no measures to combat soil erosion, restore degraded land, or limit urban sprawl into green areas have been conducted. Additionally, key indicators pertaining to land use management are not regularly collected, and there is a lack of georeferencing and harmonisation across government entities, including property tax and forest management.

Sub-dimension 13.4: Depollution

Air pollution remains one of the most pressing environmental challenges in North Macedonia, with annual average concentrations of fine particulate matter (PM_2.5) reaching 22.3 µg/m³ (microgrammes per cubic metre) in 2021, the highest share in the Western Balkans and more than four times higher than WHO‑recommended levels of 5 µg/m³ (EEA, 2023[15]). Air pollution is predominantly caused by the combustion of energy (mainly from lignite coal), industries, inadequately regulated vehicles, and the burning of outdoor waste and domestic heating. Promisingly, North Macedonia is strengthening its air quality policy framework to mitigate air pollution and associated health and environmental impacts through the development of the National Plan for the Protection of Ambient Air 2024-28. Furthermore, following the mid-2021 amendments to the Law on Ambient Air Quality, which outlines government competencies and local-level procedures for the preparation and adoption of air quality plans, several local air quality plans have been adopted. The plans are tailored to address specific local circumstances, targeting specific pollutants or sources of pollution through regulatory measures, public awareness campaigns, and targeted interventions, with the latest examples being the cities of Kumanovo in 2022 and Gostivar in 2023. Support for the design of such plans has been provided to local self-government units through several training courses.20 The Draft Law on Industrial Emissions, which has been developed but has yet to be adopted, will also regulate emissions from industrial facilities, including power plants, in line with relevant EU Directives. Municipalities have successfully undertaken efforts to implement measures aimed at enhancing air quality, such as campaigns to raise public awareness of air pollution21 and programmes proposing subsidies for energy efficiency and air filters.22 Moreover, the air quality-monitoring network has been modernised and four new monitoring stations have been installed.23 Obsolete measuring instruments have been replaced, and new PM2.5 instruments have been installed at each urban monitoring station.

Untreated sewage and wastewater stand out as primary contributors to water pollution in North Macedonia. Around 80% of North Macedonia’s population used a safely managed drinking water service in 2022; 80.8% was connected to piped sewers, and only 5% of domestic wastewater was safely treated (UN Water, 2023[16]). To address these challenges, the economy plans to upgrade its water supply and sanitation services, particularly with the adoption of the water management programme in 2023. The programme outlines plans for designing and constructing new public facilities for water supply, as well as maintaining and improving existing ones, with a focus on regulating watercourses. Additionally, there are plans for new investments in water infrastructure to address the absence of urban sewage treatment plants, which currently results in significant volumes of untreated wastewater being released into the environment. Specifically, agreements have been signed for the construction of wastewater treatment plants in the cities of Skopje and Tetovo, as well as sewerage networks in Kicevo and Bitola, with additional projects currently being developed.24 It is recommended that these investments facilitate the effective monitoring of discharged wastewater in municipal sewerage systems. Moreover, further efforts are needed to reduce shares of non-revenue water, which remain high (62%) with no concrete policies addressing this issue (Energy and Water Services Regulatory Commission of North Macedonia, 2023[17]). While there are existing limitations in institutional capacities to enforce new measures and address underlying challenges, the support provided as part of the UNECE-WHO Protocol on Water and Health, which North Macedonia ratified in 2023, can assist water authorities. This support includes enhancing capacity building by providing advice for regulatory adoption, facilitating cross‑country exchange, and offering technical assistance (UNECE, 2024[18]).

Moderate progress has been made in strengthening the industrial risk management framework in North Macedonia. The adoption of the Law on Industrial Emissions, which intends to regulate emissions from large combustion plants, waste incineration facilities, and installations using organic solvents, is pending. Additionally, there have been no advancements in integrated permitting. In the field of chemicals, North Macedonia has not established an official register of chemicals, and there is no mechanism in place to identify new chemical substances. Some strides have been made in aligning with the SEVESO III Directive25 in North Macedonia's Law on Environment, which was amended in 2022 to include provisions for emergency plans related to industrial accidents. These amendments also introduce new measures for soil protection, encompassing the identification and management of contaminated areas. The recently adopted National Plan for Waste Management (2021-31) and National Waste Prevention Plan (2022-28) also include measures to enhance the remediation of contaminated areas with hazardous waste and promote the use of safer alternatives. Noteworthy projects in this regard include the operationalisation of the wastewater treatment plant in Jegunovce26 and the cleanup of a toxic landfill site27 in Skopje. Despite these efforts, apart from ad hoc projects, there is a lack of systematic data collection on contaminated sites. This deficiency hampers the identification of potential health risks associated with such sites and impedes the implementation of systemic remediation measures.

Overview of implementation of Competitiveness Outlook 2021 recommendations

North Macedonia’s progress in implementing past CO recommendations has been moderate. Table 14.2 shows the economy’s progress in implementing past recommendations for environment policy.

Table 14.2. North Macedonia’s progress on past recommendations for environment policy

Competitiveness Outlook 2021 recommendations	Progress status	Level of progress
Involve all stakeholders in making the implementation of a circular economy a reality	North Macedonia has developed a roadmap for the circular economy with the support of the OECD. The Ministry of Economy has taken the lead and was supported by a working group consisting of stakeholders from all parts of society (relevant ministries, civil society organisations, academia and the private sector). The working group has been involved in all processes to develop the circular economy roadmap.	Strong
Improve the wastewater system	A large share of wastewater remains discharged without prior treatment. Most bigger cities still have no treatment plants, which is why wastewater is either discharged into sewer pits, septic tanks and cesspools or discharged directly into fields or streams. The lack of funding for the water supply and sanitation system has been addressed: agreements have been signed for the construction of wastewater treatment plants in Skopje and Tetovo, as well as sewerage networks in Kicevo and Bitola. Moreover, within the framework of IPA III, two large WWTP projects are proposed. It is further planned to conclude an agreement for a loan from the EIB in the amount of EUR 50 million for a water supply and sewerage network for all municipalities in North Macedonia so that smaller and rural municipalities can benefit from financial resources to improve services to their citizens.	Moderate

The way forward for environment policy

Despite taking important steps to strengthen its environment policy framework, in particular in the areas of climate change mitigation and circular economy, North Macedonia could consider the following improvements:

• Strengthen the climate change adaptation framework and ensure the capacity for its implementation. While progress has been achieved in developing the overarching climate change framework, there is a need to enhance the inclusion of adaptation measures compared to mitigation ones. To enhance community resilience and mitigate disaster impacts, North Macedonia should conduct a Disaster Risk Assessment, aligning with the Sendai Framework for Disaster Risk Reduction 2015-30 (UNDRR, 2015[19]). This assessment should analyse priority risk groups and evaluate the technical, administrative, and financial capacities of the state to respond to disasters. It should also serve as a catalyst for fortifying early warning systems, particularly for hydrometeorological hazards like floods, droughts, and forest fires, to which North Macedonia is particularly vulnerable. Special attention should also be given to improving climate risk data and projections to ensure an evidence-based approach to policy decisions.

• Focus on raising awareness of the circular economy and circular business models through communication campaigns and capacity-building programmes, including showcasing good practices and access-to-finance possibilities. North Macedonia should seize the momentum of its recent progress in developing a roadmap toward a circular economy by proactively enhancing stakeholder awareness, especially among businesses. Such activities could be conducted by the Agency for Promotion of Entrepreneurship of the Republic of North Macedonia (APPRM), which is responsible for the public provision of business support services, ranging from training, education initiatives, vouchers and co-financing to consulting services and tailored mentoring; or the Fund for Innovation and Technological Development (FITD), which introduced its own support mechanism for SMEs, providing both financial support and technical assistance. The Development Bank of North Macedonia, which already provides credit relief in the form of subsidised SME credit lines, including support from international co‑operation development partners, could also step up awareness campaigns on available access-to-finance opportunities. Moreover, the creation of an ecosystem of creators and innovations in communities, regions and at the national level could also be supported to promote education and capacity building on circular business models, particularly in the sectors of construction, biomass and food, textiles, and mining/metallurgy, chosen as key priorities for the transition to a circular economy in North Macedonia (OECD, 2024[5]).

• Improve water resource management by addressing high water losses from the water supply and sanitation system to effectively enhance resilience and manage present and future competitive uses for water. Water scarcity is an important challenge for North Macedonia and is likely to become more pressing as the impacts of climate change will alter the availability of and demand for water. Water service providers currently face competing pressures for water resources from households, industry, and agriculture, highlighting the importance of efficient water management practices to ensure adequate water availability for all sectors. In order to handle these competitive uses, North Macedonia will need to address the significant shares of non-revenue water from its systems (62%). In order to follow the EU Drinking Water Directive recast (2020), which addresses the issue of water leakage, North Macedonia needs to assess the leakage level nationwide and at least for drinking water suppliers serving more than 50 000 inhabitants (EUR-Lex, 2020[20]). Such assessment could be based on an internationally established index, such as the Infrastructure Leakage Index, based on water balance calculations (Table 14.3). Considering North Macedonia’s high non-revenue water levels, an action plan could also be developed to reduce losses. The action plan could follow good practice examples from training delivered by the International Water Association (International Water Association, 2024[21]) or the Roadmap to non-revenue water reduction and management developed by the Boosting Effectiveness of Water Operators’ Partnerships (BEWOP) initiative (BEWOP, 2023[22]).

• Adopt the National Spatial Plan as a guiding land use policy framework and strengthen institutional co-ordination among the different ministries responsible for land use issues related to climate, biodiversity, and agriculture, both horizontally (at the national level) and vertically (between different levels of government) to achieve a more holistic governance of land use. The land use nexus involves multiple issues and affects multiple actors from both the public and private sectors, and requires a whole-of-government approach to co-ordinate policies across all relevant stakeholders, which North Macedonia currently lacks. One good practice example that provides such co-ordination is the Austrian Conference on Spatial Planning (Box 14.2).

Table 14.3. Determining non-revenue water based on water balance calculations

System input volume	Authorised consumption	Billed authorised consumption	Billed metered consumption (including water exported)	Revenue water
			Billed unmetered consumption
		Unbilled authorised consumption	Unbilled metered consumption	Non-revenue water
			Unbilled unmetered consumption
	Water losses	Apparent losses (commercial losses)	Unauthorised consumption
			Metering inaccuracies
		Real losses (physical losses)	Leakage in transmission and/or distribution lines
			Leakage and overflows at utility’s storage tanks
			Leakage in service connections up to the measuring point

Source: BEWOP (2023[22]).

Box 14.2. Enhancing land use co-ordination with the Austrian Conference on Spatial Planning

The Austrian Conference on Spatial Planning (ÖROK, Österreichische Raumordnungskonferenz) is an organisation dedicated to co-ordinating spatial planning policies between the three levels of government in Austria (the national level, the states and the municipalities). Its decision-making body is chaired by the federal chancellor, and its members include all federal ministers, the heads of all federated states, and representatives of local government associations. Furthermore, business and labour organisations are represented in the body as consulting members. The work of the decision-making body is supported by a permanent secretariat with a staff of approximately 25-30.

One of the central tasks of the ÖROK is the preparation of the Austrian Spatial Development Concept (ÖREK, Österreichisches Raumentwicklungskonzept). The current Austrian Spatial Development Concept (“ÖREK 2030”) was published in 2021 and covers a planning period of around ten years. Guided by the key theme of “Need for Transformation”, it is a strategic instrument for overall spatial development in Austria. Beyond the preparation of the Spatial Development Concept, the ÖROK also monitors spatial development across Austria. It has developed an online tool that provides a mapping function of a variety of important indicators at the municipal and regional level and releases a report on the state of spatial development every three years.

The ÖROK is also the co-ordinating body for structural funds provided by the European Union. It manages the integration of structural funds into broader spatial strategies and was directly responsible for the programming work related to 1 of the 11 Thematic Objectives of the programming period 2014-20. The ÖROK also serves as National Contact Point within the framework of European Territorial Cooperation.

Sources: OECD (2017[23]); ÖROK (2024[24]).

References

[22] BEWOP (2023), Roadmap to Non‑revenue Water Reduction and Management - Guidelines, https://bewop.un-ihe.org/sites/bewop.un-ihe.org/files/01_non-revenue_water_reduction-1.0c.pdf (accessed on 1 March 2023).

[15] EEA (2023), North Macedonia – Air Pollution Country Fact Sheet, https://www.eea.europa.eu/themes/air/country-fact-sheets/2023-country-fact-sheets/north-macedonia-air-pollution (accessed on 4 February 2024).

[9] EEA (2021), Municipal Waste Management - Country Fact Sheet North Macedonia, EEA, Copenhagen, https://www.eea.europa.eu/themes/waste/waste-management/municipal-waste-management-country/north-macedonia-municipal-waste-factsheet-2021/.

[17] Energy and Water Services Regulatory Commission of North Macedonia (2023), 2022 Annual Report, https://www.erc.org.mk/odluki/2023.04.26_RKE%20GI%202022-FINAL%20ENG%20VERSION.pdf.

[20] EUR-Lex (2020), Directive (EU) 2020/2184 of the European Parliament and of the Council of 16 December 2020 on the Quality of Water Intended for Human Consumption (Recast), https://eur-lex.europa.eu/eli/dir/2020/2184/oj.

[1] Eurostat (2023), Enlargement Countries - Environment Statistics, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Enlargement_countries_-_environment_statistics&oldid=627524 (accessed on 7 June 2024).

[7] Eurostat (2023), “Treatment of Waste by Waste Category, Hazardousness and Waste Management”, https://ec.europa.eu/eurostat/databrowser/view/env_wastrt/default/table?lang=en (accessed on 7 June 2024).

[4] Eurostat (2022), Material Flow Accounts, https://ec.europa.eu/eurostat/databrowser/view/ENV_AC_MFA/default/table?lang=en (accessed on 1 March 2024).

[8] Eurostat (2021), Municipal Waste Statistics, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Municipal_waste_statistics (accessed on 7 June 2024).

[3] IMF (2024), Republic of North Macedonia: Selected Issues, https://www.imf.org/en/Publications/CR/Issues/2024/01/25/Republic-of-North-Macedonia-Selected-Issues-544117.

[21] International Water Association (2024), Assessing Non-Revenue Water Components, https://iwa-network.org/learn/assessing-non-revenue-water-components/ (accessed on 23 January 2024).

[12] MAKSTAT (2023), Public Water Supply and Public Sewage, 2022, https://www.stat.gov.mk/PrikaziSoopstenie_en.aspx?rbrtxt=139 (accessed on 17 January 2024).

[6] MAKSTAT (2022), “Municipal Waste”, https://www.stat.gov.mk/PrikaziSoopstenie_en.aspx?rbrtxt=80.

[25] Ministry of Finance (2022), Economic Reform Programme 2022-2024, https://neighbourhood-enlargement.ec.europa.eu/document/download/504cc56a-60a0-4f36-b7b7-1a2423e6fa59_en.

[10] MoEPP (2021), Rulebook on Managing Plastic Packaging Bags Placed on the Market, https://www.moepp.gov.mk/wp-content/uploads/2018/12/pravilnikza-kesi.pdf.

[14] National Development Strategy (2024), Thematic Baselines, https://www.nrs.mk/tematski-osnovi (accessed on 17 January 2024).

[5] OECD (2024), A Roadmap towards Circular Economy of North Macedonia, OECD Publishing, Paris, https://doi.org/10.1787/1973c88c-en.

[23] OECD (2017), The Governance of Land Use in OECD Countries: Policy Analysis and Recommendations, OECD Publishing, Paris, https://doi.org/10.1787/9789264268609-en.

[24] ÖROK (2024), “Austrian Conference on Spatial Planning - ÖROK”, https://www.oerok.gv.at/english-summary#:~:text=The%20Austrian%20Conference%20on%20Spatial,development%20at%20the%20national%20level (accessed on  2023).

[2] Republic of North Macedonia (2023), North Macedonia. National Inventory Report (NIR)., https://unfccc.int/documents/627668.

[16] UN Water (2023), SDG 6 Snapshot in North Macedonia, https://www.sdg6data.org/en/country-or-area/North%20Macedonia (accessed on 22 January 2024).

[19] UNDRR (2015), Sendai Framework for Disaster Risk Reduction, https://www.undrr.org/implementing-sendai-framework/what-sendai-framework#:~:text=The%20Sendai%20Framework%20focuses%20on,existing%20risk%20and%20increase%20resilience. (accessed on 23 January 2024).

[18] UNECE (2024), The Protocol on Water and Health Driving Action on Water, Sanitation, Hygiene and Health, https://unece.org/environment-policy/publications/protocol-water-and-health-driving-action-water-sanitation-hygiene#:~:text=The%20UNECE%2DWHO%2FEurope%20Protocol,and%20controlling%20water%2Drelated%20diseases. (accessed on 22 January 2024).

[13] World Bank (2023), Forest Area (% of Land Area) - North Macedonia, https://data.worldbank.org/indicator/AG.LND.FRST.ZS?locations=MK (accessed on 17 January 2024).

[11] World Bank (2023), Renewable Internal Freshwater Resources per capita (Cubic Meters) - North Macedonia, https://data.worldbank.org/indicator/ER.H2O.INTR.PC?locations=MK (accessed on 17 January 2024).

Notes

← 1.  The Nationally Determined Contribution is a climate Action Plan to cut emissions and adapt to climate impacts. Each Party to the Paris Agreement is required to establish an NDC and update it every five years.

← 2.  More information at https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/monitoring-reporting-and-verification-eu-ets-emissions_en.

← 3.  The National Energy and Climate Plans are plans outlining pathways towards achieving national 2030 energy and climate targets. They play a pivotal role in shaping the transition of the energy sector toward decarbonisation and sustainability (Ministry of Finance, 2022[25]).

← 4.  The Carbon Border Adjustment Mechanism is expected to become operational in 2026 and gradually apply to a selected number of goods with a high risk of carbon leakage (iron and steel, cement, fertiliser, aluminium, and electricity generation). As EU importers will buy carbon certificates corresponding to the carbon price that would have been paid had the goods been produced under the European Union’s carbon pricing rules, non-EU producers, such as North Macedonia, will be encouraged to green their processes and lower production-related emissions.

← 5.  North Macedonia launched negotiations to buy 3 million tonnes of lignite from Kosovo at the end of 2022. In this regard, the smaller coal power plant Oslomej was reactivated in 2021 after being dormant through 2020, and the Negotino fuel oil-fired power plant was reactivated after not being in use for 12 years.

← 6.  The Roadmap for a Just Transition is composed of four pillars: the path for clean energy (modernisation and development of the energy sector), the path for private investment and start-up support, the path for green and smart infrastructure, and the skills development path.

← 7.  The first working meeting of the co-ordinating body for the development of the new Spatial Plan was held in April 2022.

← 8.  The strategy includes four vertical priority areas: 1) smart agriculture and food with higher added value; 2) information and communications technologies (ICT); 3) electro-mechanical industry – industry 4.0; and 4) sustainable materials and smart buildings. Energy and tourism were also identified as horizontal priority domains. The transition to a green and circular economy is envisaged in all sectors, and in particular through: the reuse of agricultural waste to turn it into high added-value material; the application of new technological innovations in the electro-mechanical industry; more efficient use of natural resources in the production of construction materials and development of smart buildings, especially through their extraction and the development of innovative technologies enabling the production of construction materials from industrial waste; and developing the sustainable energy sector by using renewable energy sources, including biomass and biogas.

← 9.  “Supporting the industry for investments in the development of innovations for a circular and green economy and internationalisation of markets" is stated as one of the key goals of the Decision of the Government on Determining the Strategic Priorities of the Government in 2024.

← 10.  These include the Law on Management of Batteries and Accumulators and Waste from Batteries and Accumulators, the Law on Management of Electrical and Electronic Equipment and Waste from Electrical and Electronic Equipment (WEEE), the Law on Packaging and Packaging Waste Management, the Law on Additional Waste Flow Management and the Law on Extended Producer Responsibility (EPR).

← 11.  From 2021, single-use plastic plates, cutlery, straws, balloon sticks and cotton buds cannot be placed on the markets of the EU Member States. In addition, the same measure applies to cups, food and beverage containers made of expanded polystyrene, and all products made of oxo-degradable plastic.

← 12.  The Water Exploitation Index (WEI) in a country is the mean annual total demand for freshwater divided by the long-term average freshwater resources. An index of over 20% usually indicates water scarcity.

← 13.  Two regulations were adopted:

• In 2022, the Methodology for determining the parameters for measuring and monitoring the quality and quantity of all water bodies was adopted.

• The Decision on the determination of protective zones for the protection of waters for the "Rashche" water catchment facility, protection measures, conditions, method of establishing the protective zones and cartographic display was adopted in 2021; and the Decision on the determination of protective zones for the protection of the waters of the water basin “Studenčica” source, protection measures, conditions, the way of formation of the protective zones and a cartographic display was adopted in 2023.

← 14.  Water Monitoring Programme Vardar River Basin 2016-21, Strumica River Basin Management Plan 2016-27 and Prespa Lake Basin Management Plan 2016-21.

← 15.  Other activities conducted include the establishment of a concept for ecosystem services at the national level, the development of a National Reference List in accordance with the EU Habitats and Birds Directive, and the identification of 12 potential Natura 2000 areas, covering around 7% of national territory. Moreover, basic ecosystems and ecosystem services were mapped at the national level as part of the Nature Conservation Programme (2012-20) and developed as part of a project of the Swiss Agency for Development and Cooperation, with the intention to promote the sustainable use and management of biodiversity and forestry in North Macedonia.

← 16.  The United Nations Decade on Ecosystem Restoration is a global initiative aimed at preventing, halting, and reversing the degradation of ecosystems worldwide. The United Nations General Assembly declared 2021-30 as the UN Decade on Ecosystem Restoration with the goal of promoting and scaling up efforts to restore ecosystems such as forests, wetlands, and agricultural lands.

← 17.  “Support to Forestry Reforms in North Macedonia”, financed by the EU and implemented by the Ministry of Environment and Physical Planning.

← 18.  Key stakeholders involved in the development of the National Spatial Plan include the government of North Macedonia, which leads the policy of spatial development; planning regions; ministries in charge of separate departments that are subject to strategic planning; local self-government units and the City of Skopje; other relevant institutions that make their own contribution to the creation and implementation of strategic planning documents or provide an appropriate database; scientific educational institutions; and civil society organisations.

← 19.  ‘’Enhancing Land Consolidation in North Macedonia’’, co-funded by the Food and Agriculture Organization of the United Nations (FAO) and implemented in close co-operation with the Ministry of Agriculture, Forestry and Water Economy.

← 20.  For instance, the Macedonian Center for Climate Change organised a two-day training course in March 2022 as part of the project on "The impact of air pollution on human health" to present the recent amendments to the Law on Ambient Air Quality to the municipality of Bitola and discuss obligations for the preparation and implementation of air quality plans.

← 21.  Since January 2022, the MoEPP has been running the air quality campaign “Warm Recommendations”, which informs the public about correct firewood use during the heating season. Social media accounts have been created as part of the joint campaign on air quality between the Swedish Environmental Protection Agency, the Ministry of Environment and Spatial Planning, and the Embassy of Sweden in Skopje.

← 22.  More specifically, subsidies for inverters were awarded to citizens in Skopje through a public call. In the city of Strumica, street lightning is continuously becoming more energy-efficient. In the Centar municipality, window filters are installed in kindergartens to purify air by retaining high degrees of particulate matter.

← 23.  A total of four new monitoring stations have been procured and installed in Gevgelija (October 2020), Prilep (December 2021), Berovo (December 2021) and Ohrid (October 2022). There are now 21 monitoring stations.

← 24.  Within the framework of IPA III, large projects have been proposed: the construction of a wastewater treatment plant for Veles, one for Shtip and building a collector system for Vinica that will be connected to the existing wastewater treatment plant in Kočani. Furthermore, there is a planned European Investment Bank (EIB) loan of EUR 50 million designated for developing a water supply and sewerage network that spans all municipalities in North Macedonia. This initiative aims to provide smaller and rural municipalities with financial resources to enhance services for their residents.

← 25.  Directive 2012/18/EU of the European Parliament and of the Council of 4 July 2012 on the control of major-accident hazards involving dangerous substances.

← 26.  The plant will aim at addressing and remediating the health-damaging levels of chromium-6 in the water.

← 27.  The cleaning operation of landfills on OHIS factory premises in Skopje started in 2021 and is co‑ordinated jointly by the North Macedonian Government, the MoEPP, the United Nations Office for Project Services (UNOPS) and the United Nations Industrial Development Organization (UNIDO). The project for remediating lindane (Hexachlorocyclohexane, HCH) and lindane isomers is ongoing. So far, 957 tons of HCH waste were transported to France for incineration and 125 tons of contaminated soil have been exported to Germany for treatment.