This chapter aims to assess progress of the WB6 economies towards the green transition, focusing on the economy-environment nexus and evaluating the social and societal impacts of transitioning to a more environmentally sustainable economic model. It first analyses the pace at which WB6 economies are reducing carbon emissions by shifting away from fossil fuels, particularly within the energy and transportation sectors. The chapter then delves into the efficacy of policies aimed at adaptation and safeguarding fragile ecosystems and vulnerable communities. The final section addresses the economic and environmental hurdles stemming from the increasing demand for raw materials and linear supply chains within the region. Recommendations outline pathways for the region to advance towards becoming greener and more sustainable, all the while preserving economic competitiveness.
Western Balkans Competitiveness Outlook 2024: Regional Profile
6. Greening cluster
Abstract
Key findings
The WB6 economies have made some progress in developing regulations and policies to facilitate the green transition in recent years, gradually aligning with the developments outlined in the Green Agenda for the Western Balkans. Some key achievements include:
In acknowledgement of the increasing impact of climate change on their competitive landscapes, all WB6 economies have developed regulatory and policy frameworks setting targets for decarbonisation, aligning with the regional goal of achieving climate neutrality by 2050. These frameworks, in line with the COP28 agreement on phasing out fossil fuels, lay the groundwork for future actions, and prioritise sustainability and resilience.
While reliance on fossil fuels in key emitting sectors persists, the WB6 economies are actively expanding the adoption of renewable energy sources by implementing de-risking mechanisms and renewable support schemes. Efforts to enhance energy efficiency have also been strengthened.
Depollution initiatives are underway, with substantial investments earmarked for water supply and sanitation infrastructure across all WB6 economies in response to escalating water and soil pollution levels. The Western Balkans Soil Partnership has also made a regional commitment to safeguard soils from contaminants.
Amidst the current economic backdrop emphasising the risks of depending on globalised linear supply chains and low-cost virgin raw materials, the Western Balkans has witnessed a notable shift towards transitioning to a circular economy. Driven by whole-of-society initiatives, policy frameworks have been developed that provide clear guidance on priority sectors for maximising economic and environmental benefits, as well as fostering value creation in circular production and consumption.
Although progress has been made, the region needs to further enhance the implementation and impact of greening policies to ensure sustainable economic opportunities. Key challenges lie in the following areas:
While all WB6 economies have committed to achieving carbon neutrality, they are still in the early stages of addressing the socio-economic impact of decarbonisation on affected businesses, regions and populations. Notably, access to green finance and training for the private sector on compliance with increasing mitigation measures remains limited, particularly in response to the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM).
Despite recent policy improvements, the Western Balkans has seen limited initiatives to address air pollution, a crucial environmental and health concern, and there is a need to further improve air quality monitoring systems.
The protection and restoration of ecosystems, which is essential for ensuring the sustainable economic development of the region, is advancing at a slow pace. Overarching land-use management frameworks are lacking, hampering the effective planning, monitoring and use of land resources to maximise economic, social and environmental benefits. Moreover, economic activities such as tourism, mining and agriculture continue to threaten biodiversity conservation and ecosystem health.
The WB6 economies have witnessed a constant increase in waste generation per capita, and effective waste management remains a significant challenge throughout the region, placing substantial pressure on already strained resources, infrastructure and ecosystems. The recycling rate of municipal waste among the economies (8.5% on average) remains more than 20 percentage points below that of the EU, leading to increased resource depletion.
Introduction
Environmental pressures and the impacts of climate change present significant challenges for the WB6 economies, jeopardising their ability to achieve sustainable growth and hindering competitiveness. The region faces threats from diminishing natural resources and the erosion of crucial environmental services, posing risks to both economic and social well-being.
By endorsing the Green Agenda for the Western Balkans at the 2020 Sofia Summit, the region committed to achieving carbon neutrality by 2050 and aligning with key elements of the European Green Deal. In addition to carbon neutrality, these include unlocking the potential of the circular economy; combatting air, water and soil pollution; promoting sustainable food production and supply methods; and ensuring biodiversity protection and ecosystem restoration.
The pace at which WB6 economies transition away from the use of fossil fuels towards renewable energy sources in its power sector and low-carbon transportation systems will be pivotal in ensuring long-term energy security and maintaining competitiveness in a progressively decarbonising global economy. As the WB6 economies strive to achieve carbon neutrality, their ability to tackle the socio-economic impacts of decarbonisation on affected regions, industries and workers, ensuring a fair and inclusive transition, will indicate the region's preparedness for the future.
Moreover, the effectiveness of policies addressing adaptation and the protection of fragile ecosystems and vulnerable populations will determine the WB6's ability to withstand the adverse impacts of climate change and build equitable and resilient human-environment systems.
Addressing the region's economic and environmental challenges arising from the growing demand for raw materials and linear supply chains will be imperative to mitigate risks to economic stability and foster a more sustainable development path. The WB6 economies' low waste recycling rate and high resource intensity continue to impose significant burdens on the environment. Embracing the circular economy has emerged as a viable solution to address these pressing environmental concerns and will allow the economies to foster sustainable and resilient economic growth, and unlock new business opportunities.
Decarbonising economies
The Western Balkans stands out as one of the regions in Europe most severely impacted by the effects of climate change. Projections indicate that this trend is expected to persist, with estimates suggesting temperature increases ranging from 1.7 to 4.0°C by the end of the century (RCC, 2018[1]). The energy sector represents the main greenhouse gas (GHG) emitter in the region (48% of total emissions) due to its reliance on energy production from burning lignite, a form of coal characterised by its low calorific value and significant pollution levels. The region hosts some of the most polluting power plants in Europe, which are responsible for tens of thousands of premature deaths annually due to air pollution, in addition to emitting substantial quantities of GHGs that exacerbate climate change (JRC, 2022[2]). The region also heavily relies on oil for the transport sector, which is the second most emitting sector, accounting for 13% of total GHG emissions (Figure 6.1).
Figure 6.1. Total annual greenhouse gas emissions in the WB6 economies by economic sector (2005-20)
In metric tons of carbon dioxide (MtCO2) equivalent
Note: Data exclude land-use change and forestry emissions sources or sinks. No data for Kosovo.
Source: Climate Watch (2024[3]).
In line with the EU ambition to become climate neutral by 2050 and to support the implementation of the EU acquis, the WB6 economies have committed to achieving carbon neutrality by 2050 by endorsing the Green Agenda for the Western Balkans and its action plan. Decarbonisation, involving the reduction of GHGs across various sectors, demands substantial changes throughout the economy. This includes altering how energy is generated, transforming production and delivery methods of goods and services, and implementing new approaches to land management. Decarbonisation not only serves to achieve net-zero objectives, but it also presents opportunities for new green economic ventures.
Gearing up to combat climate change
Climate change mitigation policies and regulatory frameworks are pivotal in shaping climate action efforts in the Western Balkans. As the region grapples with the impacts of climate change, the development and implementation of robust policies to reduce GHGs and limit further environmental degradation and climate-related risks are essential. A strong regulatory framework also ensures accountability, transparency and enforcement mechanisms to advance progress towards climate goals. By aligning their policies with international standards and commitments, the economies of the Western Balkans can support private sector competitiveness, attract investment, foster innovation and enhance regional co-operation in tackling climate change challenges.
Climate change mitigation policies are gaining momentum, increasingly targeting greater emissions reductions
In line with international commitments, all WB6 economies except Bosnia and Herzegovina have established legal frameworks that enable regulatory mechanisms for low-carbon development and climate change resilience. Alongside Albania, Montenegro and Serbia, which already had a climate change legal framework in the Competitiveness Outlook (CO) assessment in 2021, Kosovo adopted its framework in 2024, while North Macedonia’s Law on Climate Change awaits adoption. These laws are pivotal in transposing relevant EU directives1 and establishing the necessary structures for monitoring, reporting and verifying GHGs.
Economy-wide targets for reducing GHG emissions until 2030 have been set in long-term climate change strategies in all economies, with projections until 2050 in most economies (Table 6.1). Climate change strategies provide a set of policies and measures spanning various sectors, each contributing to the overall achievement of national climate commitments. To ensure the mainstreaming of climate objectives across sectors, co-ordination among stakeholders responsible for climate change mitigation has been intensified in all economies, although there is a need to strengthen administrative capacities. Notable progress includes the re-establishment of National Climate Change Councils in Kosovo and Serbia, and the planned establishment of North Macedonia’s climate change co-ordination bodies upon adopting the Law on Climate Change.2
Table 6.1. Climate change strategies in the WB6 economies
Source: Inputs provided by government officials as part of CO 2024 assessment.
As Non-Annex I signatories3 to the UN Framework Convention on Climate Change (UNFCCC), and in line with recently adopted climate change strategies, all economies have increased their mitigation ambitions during the latest revision of their national climate pledges, also known as nationally determined contributions (NDCs) (Table 6.2). While Kosovo is not a party to the UNFCCC, it started to draft its voluntary NDCs in 2021 with the support of international partners.
Table 6.2. Emission reduction targets as part of nationally determined contributions (NDCs) in the WB6 economies
Note: Kosovo’s voluntary NDCs are yet to be adopted.
Source: Nationally Determined Contributions of respective WB6 economies; UNFCCC (2024[4]).
All WB6 economies are taking steps to address the critical decarbonisation of predominantly coal-based energy sectors alongside enhanced climate change strategies and revised NDCs. All have committed to implementing GHG emissions measurement, reporting and verification through National Energy and Climate Plans (NECPs) aligned with the Energy Community's 2030 targets. Albania and North Macedonia have adopted their NECPs within the deadline, which are to be updated following recommendations from the Energy Community, while others are drafting theirs with delays that could impede the concretisation of responses to the energy and climate crisis. NECPs are crucial for achieving 2030 decarbonisation goals in the region and include measures to develop adequate carbon pricing mechanisms to control emissions, alongside targets for renewables and energy efficiency. These efforts are key given limited economic instruments to discourage high-carbon behaviour and ongoing subsidies for coal-fired power. NECPs will also be a future vehicle to expand decarbonisation efforts to other emitting sectors such as transport and agriculture.
Implementation of planned mitigation measures is moving forward at a slow pace, impeding the region’s competitiveness
Despite recent policy improvements, the enforcement of broader mitigation measures has been limited across economies during the assessment period. However, efforts to enhance enforcement are anticipated in the upcoming period with the development of NDC implementation roadmaps that delineate responsibilities, timeframes and funding sources, and include monitoring and evaluation frameworks. For instance, the roadmap for Bosnia and Herzegovina includes identified investment needs for each sector, with the highest priority given to energy generation, buildings and transportation.4
Economic instruments and incentives to achieve GHG emissions targets remain scarce throughout the region. A carbon tax for large industrial polluters, feebate or excise taxes on individual fuels, or an Emissions Trading System (ETS) have yet to be introduced in most of the region to discourage high-carbon activities. However, most WB6 economies’ climate change strategies foresee continuous alignment with the EU ETS and consider the introduction of appropriate carbon pricing instruments over upcoming years. Montenegro is the only economy that introduced an ETS in 2020,5 with the first auction awarding emission credits and allocating collected funds announced in 2023. Nevertheless, there are identified issues with the conception of Montenegro’s ETS scheme, such as the slow reduction in the cap until 2030, lack of clear rules for the end of free allowances and insufficient fines for non-compliance. In addition to being a key instrument in achieving climate goals, introducing a carbon pricing mechanism in all economies will be crucial to cope with the impacts of the EU’s CBAM on high-carbon exports (Box 6.1).
Box 6.1. Carbon Border Adjustment Mechanism (CBAM)
What is the Carbon Border Adjustment Mechanism?
The EU’s adoption of the CBAM in April 2023 is a significant step to address rising carbon prices under the European Emissions Trading System (EU ETS). The CBAM imposes financial obligations on covered goods, encouraging non-EU producers to adopt greener processes. It acts as an import duty, impacting countries exporting significant quantities of CBAM-covered goods such as electricity, aluminium, iron and steel, hydrogen, cement, and fertilisers.
The CBAM is meant to stimulate trading partners' industry and energy sector transformations. Mitigating measures include emission reduction initiatives by exporting entities, governmental support through incentives or financial aid, and introducing carbon pricing mechanisms.
CBAM requirements
CBAM will apply in its definitive regime from 2026. Until then, affected exporters must measure their emissions and send data to the importers' clients inside the EU, who report every quarter. From 2026, EU importers will declare the emissions embedded in their imports and surrender the corresponding number of certificates yearly. If importers can prove that a carbon price has already been paid during the production of the imported goods, the corresponding amount can be deducted. Furthermore, if an economy's electricity market is integrated with the EU's, its electricity sector will be exempt from any CBAM obligations, contingent upon meeting additional criteria. These criteria include a legislative commitment to achieve climate neutrality by 2050, an ETS for electricity until 2030 with a price equivalent to that of the EU ETS, or ambitious renewable energy targets, all aligned with the Energy Community obligations.
Impact on the Western Balkans
In 2022, exports of CBAM products to the EU accounted for 22% of all Western Balkan exports to the EU, although varied considerably across economies. Montenegro and Bosnia and Herzegovina, which are predominantly reliant on coal and aluminium exports, face heightened exposure. Serbia and North Macedonia, which are both reliant on coal-based electricity and iron and steel exports, anticipate similar repercussions. Conversely, Kosovo and Albania, which have different export structures, anticipate lesser impacts.
Economies throughout the region remain underprepared for the CBAM, with limited efforts undertaken to organise training and prepare the private sector for adapting their operations to upcoming obligations, further creating trade barriers for exporters to the EU. Only Serbia, through its Chamber of Commerce and Industry, has taken initial steps by conducting sector-specific training sessions for industries affected by the CBAM. Additionally, FBiH has outlined plans for similar technical support in its Green Transition Programme (2024). Furthermore, the absence of comprehensive strategies to tackle climate and environmental risks, coupled with the lack of green taxonomies and disclosure requirements, compound the challenges faced by businesses in the region. As a result, businesses encounter difficulties in accessing green finance opportunities, limiting their ability to invest in sustainable initiatives and remain competitive in the global market. Notably, the introduction of disclosure requirements for large corporates and other economic agents is lacking, hindering transparent reporting on environmental impacts.
Green taxonomies, which serve as a key enabler for the establishment of a green loan and bond market, have yet to be developed in most economies. Nonetheless, interest in such a market exists. For instance, Serbia, as the first economy to issue sovereign green bonds in 2021, experienced high investor interest, leading to subsequent projects aimed at reducing GHG emissions by about 150 000 tCO2 (tonnes of CO2) per year (Government of the Republic of Serbia, 2024[9]). Similarly, North Macedonia’s inaugural green bond auction in 2023 saw demand surpass supply nearly threefold, indicating a growing interest in sustainable investments (Ministry of Finance North Macedonia, 2023[10]).
Transitioning to clean energy
Transitioning to clean energy6 is crucial for limiting climate change and reducing air pollution, which has long plagued the region due to its reliance on outdated coal-fired power plants. Embracing renewables addresses environmental concerns and positions the region for sustainable economic growth, attracting investment, stimulating job creation and fostering regional co-operation in achieving shared energy goals. Moreover, energy efficiency, or an economy’s “hidden fuel”, is a prerequisite for decarbonisation at the lowest possible cost. To undertake necessary energy efficiency investments, economies need competitive energy efficiency markets, a clear policy direction, strong legislation and modern building codes.
Reliance on fossil fuels remains high, and there are limited efforts to ensure a just and fair phase out
The energy sector accounts for most GHG emissions in the Western Balkans, with diversification low and dependence on fossil fuels (coal in particular) very high. In 2021, the region still relied on fossil fuels for more than 50% of its electricity production, although this differs significantly between economies: Albania did not rely on fossil fuels at all, whilst Kosovo almost exclusively sourced its electricity from fossil fuels (Figure 6.2).
Figure 6.2. Reliance on fossil fuels for electricity generation in the WB6 economies (2021)
In GWh and % of generated electricity
Source: Eurostat (2023[11]).
The subsidisation of coal-fired power generation across most of the region distorts the energy market by artificially increasing the economic viability of coal-fired generation and lowering energy prices, hence making economies more vulnerable to rising energy import prices. Subsidies to coal-fired generation between 2018 and 2022 amounted to more than EUR 400 million in the WB6 region, with Serbia and Bosnia and Herzegovina making up 90% of these subsidies (Energy Community, 2023[12]).
While phasing out fossil fuels and their subsidisation will be key to fulfilling the region’s aim of reducing carbon emissions and supporting the uptake of renewable energy and energy efficiency, it will bring about multifaceted impacts on both coal-dependent regions and populations. As phase out efforts will directly impact the estimated 138 000 jobs tied to coal mining and coal-based power generation in the region (Ruiz Castello et al., 2021[13]), ensuring adequate social protection policies, including labour market programmes to equip workforces and enhance skills for the green transition, will be of utmost importance (see Chapter 3: Skills). Some economies have adopted strategic documents to ensure that the benefits and associated costs of transitioning to a low-carbon economy are distributed equally across society, without exacerbating inequalities and economic downturns. In addition to Serbia’s 2019 Roadmap for a Just Transition, North Macedonia adopted the Roadmap for a Just Transition in 2023 and Bosnia and Herzegovina developed a draft Roadmap for the Transition of Coal-Rich Regions in 2023. These documents outline options for energy conversion, recommendations for retraining and labour mobility, and strategies for repurposing land previously used for mining and related facilities. In Bosnia and Herzegovina, four local self-government units will act as pilot areas for a just transition towards decarbonisation through identifying strategies to reduce emissions and promoting innovative technologies and practices.7
Renewable energy remains underutilised, but measures to promote its uptake and diversification are gaining momentum
While renewable energy capacity has increased across the WB6 region since the last assessment, diversification remains low compared to the EU. Wind has emerged as the EU's primary energy source, surpassing hydro and solar in recent years. The share of hydro remains the primary renewable energy source in the Western Balkans, although it has seen a decline in the EU since 2021 and now represents the smallest share of installed capacity among wind, solar and hydro (Figure 6.3).
The potential for non-hydro renewables, especially solar and wind, remains largely untapped in the Western Balkans. While the region is endowed with abundant technical potential8 for the deployment of these energy sources (Figure 6.4), the growth in their installed capacity has been continuing at a slow pace compared to the rate seen in EU member states, showing room for improvement in policies and incentives to accelerate their development. Underdeveloped electricity grid coverage and capacity are another challenge for integrating renewables into the energy system (see Chapter 2: Infrastructure and Connectivity).
To support this development, a general trend observed in renewable energy policies among WB6 economies is enhanced alignment with the EU’s Clean Energy Package, characterised by adopting laws to boost renewable energy sources (RES). New RES laws have been developed across the region, although Montenegro and North Macedonia are currently lagging behind in this regard. These laws have a stronger focus on competitive auctions for the procurement of additional RES capacities (Box 6.2).
Figure 6.3. Installed capacities of renewable energy by sources in the WB6 economies and the EU (2021)
In gigawatt-hours
Source: IRENA (2023[14]).
Figure 6.4. Electricity generation and technical potential for hydropower, wind and utility-scale solar in the power sector in the WB6 economies (2023)
In terajoules
Source: IRENA (2024[15]).
Box 6.2. Competitive auctions to promote the uptake and diversification of additional RES capacities
Following the implementation of essential regulations for the RES auction process, Serbia initiated its inaugural auctions for RES in June 2023, offering 50 MW of solar power and 400 MW of wind power. Serbia chose the Contract for Difference approach to secure these renewable energies. For wind energy, all 400 MW were auctioned off successfully, with winning bids falling between 64.5 EUR and 79.0 EUR per MWh. Additionally, four solar energy projects received allocations totalling 25.2 MW, with the successful bids ranging from 88.7 EUR to 98.8 EUR per MWh.
Albania has also successfully used competitive auctions: the third renewable energy auction, and the first dedicated to onshore wind, took place in 2023, with three bidders granted a total capacity of 222 MW. The winning bids were between 44.88 EUR and 74.95 EUR per MWh. Albania reached another important milestone in 2023 as the Karavasta PV project, with a capacity of 140 MW, became operational at the end of the year.
Sources: Energy Community (2023[12]); Balkan Green Energy News (2023[16]).
Feed in tariffs are increasingly being phased out or discontinued altogether in the Western Balkans. However, despite recognising the value of competitive mechanisms for renewable projects, some economies’ legal frameworks still underutilise these tools, thus not unlocking the full potential of a green transition. Throughout the WB6 a common challenge in the further update of RES generation capacities is the insufficient involvement of the private sector and the insufficient utilisation of existing RES potential that focuses on a diversified RES generation mix. Improving and streamlining licensing procedures could further accelerate the deployment of additional RES generation projects and support the WB6 to better diversify their RES portfolios, which currently display a strong overreliance on hydro.
Support for energy efficiency is reinforced throughout the region
The region’s energy productivity – one indicator of energy efficiency that measures economic output per unit of gross available energy in a specific area – remains about 20% lower than the EU average, with this gap persisting and having increased over the past decade (Figure 6.5). Between 2008 and 2020, energy productivity in the region increased but then plateaued and started a declining trend, likely due to economic contraction post-COVID-19 and Russia’s war of aggression against Ukraine.
Figure 6.5. Energy productivity in the WB6 economies and the EU (2008-21)
Gross domestic product (2010 EUR in PPP) per kilogram of oil equivalent consumption
Notes: No data for Kosovo in 2021. PPP: purchasing power parity.
Source: Eurostat (2024[17]).
The WB6 economies are increasingly implementing energy efficiency policies and tools to enhance energy efficiency, with new related laws in the drafting process or adopted. Support schemes for energy efficiency are being deployed across all economies, albeit with Bosnia and Herzegovina notably lagging in implementation efforts. There is consensus on the need to strengthen legal frameworks for energy efficiency, particularly by adopting additional secondary legislation, to fully align with the EU and Energy Community acquis and to ensure that commitments are implemented.
In this regard, a common trend is the focus on enhancing audit and certification schemes for the energy performance of buildings. Long-term building renovation strategies are also increasingly being drafted as a long-term strategic tool to enhance energy efficiency both in the private and public building sector. Serbia has already adopted such a strategy, and all other WB6 economies are working on draft versions. Kosovo successfully makes use of a dedicated energy efficiency fund as a financing vehicle to support investments in energy efficiency. Montenegro is implementing energy efficiency and environmental projects through an Eco Fund, and North Macedonia is preparing a dedicated energy efficiency fund. All the WB6 economies should consider establishing such funds, as sometimes institutional capacities and financing means for energy efficiency are limited.
Promoting low-carbon mobility
The transport sector in the Western Balkans is still heavily reliant on fossil fuels and lacks sustainable and innovative solutions. Transport represents the second largest source of GHG emissions and a significant source of local pollution. The promotion of a greener and more sustainable transport network, combined with cleaner fuels and higher fuel efficiency, can help reduce the environmental and health impacts of transport in the region.
The environmental sustainability of the transport sector is increasingly featuring in strategic plans, combined with on-the-ground measures
The WB6 economies are gradually implementing policies aimed at promoting the shift towards less carbon‑intensive and more environmentally sustainable transport systems, albeit at varying paces and with distinct focuses. Overall, the region is grappling with the challenge of reducing the environmental footprint of its transport sector, which significantly contributes to overall GHG emissions (Figure 6.6). While each economy has its unique policy framework for environmentally sustainable transport, there is evidence of increased alignment with the Smart and Sustainable Mobility Strategy for the Western Balkans, developed by the Transport Community in 2021 (Transport Community, 2024[18]).
Figure 6.6. Transport related greenhouse gas emissions in the WB6 economies, the EU and the OECD (2012-21)
2012 Index = 100
Sources: ITF Transport Related GHG Emissions questionnaire filled by respective economies; IEA (2023[19]).
Several economies have made significant strides in advancing their policy frameworks towards decarbonised transport. Albania’s Transport Sector Strategy 2023-30 and Kosovo’s Multimodal Transport Strategy 2023-30 are notable examples as they integrate sustainable transport considerations and establish specific emission reduction targets across different modes of transportation. Comprehensive policies to support the sustainability of the transport sector have yet to be adopted in Bosnia and Herzegovina and North Macedonia.
Measures aimed at promoting the adoption of low- and zero-emission vehicles have been implemented throughout the region. In Albania, FBiH, Montenegro and Serbia, incentives for electric vehicles are available, with plans to introduce them in Kosovo. Serbia also offers tax exemptions for electric and hybrid vehicles owners. Initiatives such as the deployment of charging infrastructure in Albania and North Macedonia, as well as Serbia’s issuance of a green bond9 for environmentally friendly transport projects, underline enhanced commitment to sustainable mobility. Investments in upgrading transport infrastructure, such as electrifying railway lines in Albania and modernising the ports of Durrës in Albania and Bar in Montenegro with a focus on clean energy, signify a regional trend towards greener transportation modes.
While there has been progress in implementing low-carbon mobility measures, it is often hindered by bureaucratic delays, inadequate funding and infrastructural constraints. The transposition of EU directives, such as the Alternative Fuel Infrastructure Directive, remains incomplete in some economies, affecting the deployment of alternative fuel infrastructure. Data collection on sustainable transport indicators faces hurdles, with inconsistencies in reporting and limited transparency posing challenges for monitoring progress effectively.
Despite these challenges, the region showcases pockets of innovation and collaboration. Initiatives such as the deployment of e-charging stations along the Trans-European Transport Network (TEN-T) corridors and regional projects funded by international organisations demonstrate a collective effort towards sustainable mobility.
Recommendations for decarbonising economies
Consider introducing carbon pricing alongside a set of supporting policies, including those protecting vulnerable populations. Carbon pricing can take two main forms: a carbon tax or an ETS. A carbon tax provides investment security for companies by offering a predefined price path and ensuring relatively predictable government revenues. Conversely, an ETS, with its emissions cap, provides greater precision and certainty in achieving specific emission reduction targets. While a carbon price can send a financial signal, it is only effective if low-carbon substitutes are available and affordable. In the case of electricity, additional policies will be needed to incentivise the adoption of renewables in the region. Potential impacts on vulnerable groups should also be assessed, in particular regarding retail electricity prices and coal phase out. Carbon pricing can be applied to the whole economy or only to the sectors covered by the CBAM. The latter will offset the CBAM fee, thereby alleviating the overall burden imposed by the mechanism. Additionally, it serves as a potent incentive for producers to actively reduce the emissions intensity of their products. Montenegro is the only economy in the Western Balkans to have implemented carbon pricing in 2020, and the challenges and subsequent lessons learned can offer valuable insights for other WB6 economies.
Prioritise comprehensive capacity building and financial support for the private sector to address new obligations related to climate change mitigation measures and the CBAM. This includes tailored assistance and guidance to ensure understanding and compliance with upcoming requirements, such as measuring emissions and collecting relevant data. Additionally, implementing targeted awareness campaigns and providing financial incentives and technical support for businesses to transition towards low-carbon and sustainable production methods and business models can bolster competitiveness and resilience in the face of evolving regulatory frameworks. Such support and incentives could be financed by revenues generated by the carbon tax or the auctioning of emissions allowances in the case of an ETS. The issuance of green bonds, which remain nascent in the region, could also help mobilise private capital towards climate change mitigation.
Ensure the efficacy of climate change mitigation efforts through collaborative multilateral co-operation. To bolster the design and implementation of climate change policies, inter‑institutional working groups in the Western Balkans should consider engaging in multilateral co‑operation opportunities. Joining platforms such as the OECD’s Inclusive Forum on Carbon Mitigation Approaches (IFCMA) would enable the WB6 to learn from global peers and gain insights into the effectiveness of various carbon mitigation approaches worldwide (Box 6.3).
Box 6.3. OECD Inclusive Forum on Carbon Mitigation Approaches (IFCMA)
What is the IFCMA?
The IFCMA, an initiative spearheaded by the OECD, is designed to enhance global efforts to reduce carbon emissions. It achieves this through fostering the exchange of data and information on different emission reduction approaches used by countries around the world. It facilitates learning among countries about different approaches and encourages inclusive dialogue to help countries work together more effectively.
Why is the IFCMA important?
Countries use a variety of policies to mitigate emissions, but grasping the comprehensive impact of these efforts can be challenging. The IFCMA provides a clear view of what different countries are doing and how effective their policies are so that countries can:
Learn from each other’s successes and challenges.
Develop more effective policies.
Work together more effectively to reduce global emissions.
What are the IFCMA’s key activities?
Taking stock of different carbon mitigation approaches: This involves collecting information on the policies that countries are using to reduce emissions.
Mapping policies to emissions: This entails determining which emissions reductions are attributable to different policies.
Estimating the effects of policies on emissions: This encompasses efforts to quantify the emissions reductions achieved by each policy.
Exploring methodologies for computing carbon intensity: This involves developing methods for measuring the carbon footprint of products and sectors.
Facilitating inclusive multilateral dialogue: This entails providing a platform for countries to discuss climate change issues in a non-confrontational setting.
With over 55 countries collaborating, the IFCMA’s Steering Group sets the agenda and ensures continuity. Recent activities include reporting to the G20 finance ministers and leaders on the work of the IFCMA, the publication of a paper on carbon intensity metrics, and high-level events at COP28.
Source: OECD (2024[20]).
Ensure diversification when expanding RES generation capacities. Diversification is crucial for enhancing energy security as it ensures a stable and reliable energy supply by spreading the risk across various energy sources, which can be particularly beneficial given the variable nature of some renewables such as solar and wind power. Diversification also stimulates technological innovation and economic development as investments can flow into a broader range of technologies and sectors, fostering competition and reducing costs. Focusing on diversification from the outset also reduces the risk that the potential of certain RES technologies is overlooked. The WB6 economies should ensure that their policy frameworks, permitting processes and investment incentives are conducive to the deployment of a varied mix of renewable energy sources to ensure that the overwhelming share of hydropower is gradually accompanied with increases in wind and solar capacity.
Increase financial resources for the implementation of energy efficiency projects. To make full use of the potential of energy efficiency, the public and private sector must have adequate financing means at their disposal. Particularly in the early stages of enhanced focus on climate change mitigation and energy efficiency, dedicated support programmes are crucial for allocating financial resources to priority areas, where success can showcase the advantages and long-term savings of investments into energy efficiency. In this regard, dedicated capacity building and awareness-raising campaigns should also be implemented to promote energy efficiency among consumers and develop the required expertise in the public and private sectors.
Prioritise the alignment and implementation of national policies with the Smart and Sustainable Mobility Strategy for the Western Balkans. To enhance the environmental sustainability of the transport sector, the WB6 economies must focus on measures such as accelerating the adoption of low- and zero-emission vehicles, expanding charging infrastructure, and upgrading transport infrastructure with a focus on clean energy sources. Additionally, addressing bureaucratic delays, securing adequate funding, and improving data collection and reporting mechanisms will be essential for effective policy implementation and the monitoring of progress towards decarbonisation goals. Collaboration with international organisations and leveraging technical assistance and funding opportunities can further support the region's transition towards greener transportation modes.
Strengthen regional collaboration to promote low-carbon mobility. The WB6 economies should enhance collaboration and knowledge sharing to leverage best practices and overcome shared challenges. Establishing regional working groups or fora focused on sustainable mobility can facilitate the exchange of experience, promote joint initiatives and foster a sense of collective responsibility towards achieving environmental goals. The region can accelerate progress towards sustainable transport solutions that benefit all stakeholders by pooling resources and expertise.
Protecting ecosystems and citizens’ well-being
Communities worldwide rely on intact ecosystems for their economic and social well-being. Diverse habitats provide indispensable resources and services such as clean air, water and food. Across the Western Balkans, marine, terrestrial and freshwater ecosystems are crucial for climate regulation and disaster mitigation. Forests and wetlands, for instance, act as natural carbon sinks and flood barriers. However, human-induced land-use changes, pollution and climate change are accelerating species extinction and habitat loss in the region. This disruption affects plants, animals and human settlements, leading to declining ecosystem services such as food and medicine, impacting citizens’ livelihoods.
The Western Balkans is one of Europe’s biodiversity hotspot regions and is renowned for its pristine landscapes and rich endemic flora and fauna; however, climate change continues to pose significant challenges in the region (IPCC, 2022[21]). The Western Balkans is more vulnerable and less equipped to address the impacts of climate change than the EU (Figure 6.7). Rising temperatures and more frequent extreme weather events in the future (floods and droughts in particular) would threaten vital ecosystems and human well-being, exacerbating land degradation and biodiversity loss and consequently impacting economic growth. Despite these challenges, current approaches to climate adaptation, nature conservation and disaster risk management often overlook integrating nature-based solutions. Except for air and freshwater quality, there appears to be a pervasive lack of awareness regarding the need for environmental protection, which is often perceived as costly and therefore clashes with other development goals in sectors such as infrastructure, energy, agriculture and tourism.
Figure 6.7. Notre Dame Global Adaptation Initiative (ND-GAIN) Country Index in the WB6 economies and the EU (2011-21)
Notes: The Notre Dame Global Adaptation Initiative (ND-GAIN) Index scores countries (0-100) on their climate vulnerability and readiness to adapt, with higher scores indicating better preparedness and resilience to climate change impacts. Data for Kosovo are not available.
Source: ND-GAIN (2024[22]).
Adapting to climate change
The Western Balkans is particularly vulnerable to climate change due to its geographical location, socio‑economic characteristics and existing environmental pressures. Some of the key vulnerabilities include water scarcity and drought, loss of biodiversity and related economic disruptions (such as agriculture, tourism and energy production). Water scarcity issues in North Macedonia and Serbia, though moderate according to the water exploitation index,10 highlight the importance of managing water resources effectively to prevent future stress and ensure sustainable water availability (EEA, 2023[23]).
Freshwater also represents an important energy generation source in the region, as almost 20% of energy production is derived from hydropower (Eurostat, 2023[24]). This is particularly relevant for Albania, as almost all of its electricity production is derived from hydropower, making it highly vulnerable to the changing climate and annual fluctuations in precipitation.
Climate change adaptation policies are gaining momentum across the region
While climate change adaptation considerations are covered to a lesser extent than mitigation measures in all WB6 economies’ climate change strategies, adaptation-specific frameworks are gaining momentum. Expect for North Macedonia, all revised NDCs (and the voluntary NDC for Kosovo) include specific adaptation measures for the most vulnerable sectors (Table 6.3). At the time of writing, Bosnia and Herzegovina and Serbia had adopted national adaptation plans/strategies, and all other economies were in the process of developing such a document with the support of the Green Climate Fund.
As adaptation policy frameworks have only recently emerged in the region, the implementation of measures remains limited. Serbia is a leader in this regard, having implemented adaptation measures since the 2014 floods. These efforts have been undertaken by a consortium of international organisations, such as the Making Cities Resilient 2030 programme, conducted in collaboration with the Ministry of Interior, which primarily focuses on awareness-raising and preparedness activities. Similarly, Montenegro has made significant progress in implementing adaptation measures, bolstered by capacity‑building initiatives and training sessions for policy makers during 2021-22 that covered topics such as resilient infrastructure, urban adaptation, and the risk of flash flooding and forest fires.
Table 6.3. Most vulnerable sectors targeted as part of adaptation measures in the WB6 economies’ NDCs
Notes: North Macedonia’s NDC does not include adaptation measures. Kosovo’s voluntary NDC is yet to be adopted.
Sources: Nationally Determined Contributions of respective WB6 economies; UNFCCC (2024[4]).
Vulnerability mapping has advanced, but ecosystem and community resilience to climate change remains constrained
To facilitate effective policy making and the implementation of climate change adaptation measures, Albania, Montenegro and Serbia have undertaken natural disaster risk assessments. These assessments play a crucial role in mapping vulnerabilities and provide valuable insights that inform targeted strategies for mitigating risks and enhancing resilience in the face of climate-related challenges. Significant progress is observable in almost all economies in evaluating flood risks, an increasingly occurring climate-related hazard in a highly exposed and vulnerable region. Moreover, regional co-operation on flood risks has also been enhanced with the Flood Risk Management Plan Updates, adopted in 2022 under the Montenegrin presidency of the International Commission for the Protection of the Danube River.
Progress on cross-institutional data collection has also commenced in all economies to further support the mapping of vulnerabilities, in alignment with the development of national adaptation plans (NAPs). The establishment of the Digital Climate Atlas of Serbia in 2022, which includes climate datasets and regional and local-level climate model projections, represents a good practice in this regard (Box 6.4).
Box 6.4. Digital Climate Atlas of Serbia
The Digital Climate Atlas of Serbia, inaugurated in October 2022, is an online and freely accessible platform utilising meteorological and geospatial data to offer insights into present and future climate changes. It is a significant advancement in climate data accessibility and analysis in Serbia.
The Atlas enables users, ranging from government bodies to the public, to access detailed climate information, promoting informed policy and decision-making processes. The tool is instrumental in understanding climate change impacts through easily interpretable data on temperature, precipitation and extreme weather events, at various administrative levels.
The Atlas supports climate adaptation strategies and vulnerability assessments, fostering resilience across vital areas such as agriculture, energy and infrastructure. Developed through a collaboration between the Ministry of Agriculture, the Ministry of Environmental Protection, the Faculty of Physics at Belgrade University and the United Nations Development Programme (UNDP) Serbia, and funded by the Green Climate Fund, it represents a strategic move towards standardised, data-based climate action planning.Top of Form
Workshops have been organised, with more planned, to enable interested parties, including scientists, business leaders and representatives of local governments, to become familiar with the Atlas so that they can use the data for planning climate change adaptation at either the local or national level.
Source: Ministry of Environmental Protection of the Republic of Serbia (2023[25]).
While most economies have laid the groundwork for adaptation, including the assessment of climate change risks, vulnerabilities and the identification of adaptation options, early warning capacities to assist communities in preparing for future risks remain limited. Only Albania, Montenegro and Serbia concretely plan to strengthen early warning measures. Emergency responses for climate change induced hazards are rarely defined, and compensation schemes are lacking for households, businesses and local governments. In Kosovo, some municipalities affected by the floods in 2023 are in the process of formulating emergency response plans, but they face challenges related to competencies and capacities. This underscores the need for further action to address gaps in hazard management and response mechanisms across the region.
The incorporation of strategies that encompass ecosystems and nature more expansively within climate change adaptation and disaster risk reduction measures remains insufficient and fragmented across all the WB6 economies. ADAPT (2019-2024), a regional project implemented by the International Union for Conservation of Nature, aims to enhance ecosystem and community resilience to climate change and environmental degradation through the application of nature-based solutions for disaster risk reduction.11 The key sectors identified for future interventions include agriculture, forestry and water resources.
Preserving landscapes and biodiversity
Protecting and restoring precious, fragile ecosystems is essential for ensuring the sustainable economic development of the region. Some critical economic sectors, including agriculture and tourism, are particularly sensitive to the disruption of ecosystem services. For centuries, farmers have used the region’s high natural potential for agricultural activities, which is one of the most important branches of the economy in the Western Balkans (contributing to around 10% of gross domestic product [GDP] and 25% of employment in the region). Nevertheless, pressures due to conversion of habitats, overexploitation of resources, increased pollution and climate change directly impact biodiversity.
Preservation of biodiversity and forestry resources has increased, but the management of protected areas needs to be scaled up
Post-2020 Biodiversity Global Framework objectives, which include halting biodiversity loss, promoting sustainable use and enhancing ecosystem services, are increasingly being integrated into revised biodiversity strategies and laws in the Western Balkans. Increased commitments to preserve forestry resources and combat illegal logging are also visible through policy and regulatory changes, despite few prevention and punitive measures implemented in the assessed period. Moreover, recently adopted agriculture policies and strategies incorporate sustainable resource management and food production as novel objectives, including measures for afforestation, combatting erosion, addressing illegal construction and enhancing food security. The Instrument for Pre-accession Assistance for Rural Development (IPARD) programmes12 also increasingly focus on sustainable farming practices to ensure landscape and biodiversity preservation. Nevertheless, the effective planning, regulation and use of land resources in a way that maximises economic, social and environmental benefits is hampered by the lack of overarching land-use management frameworks. North Macedonia and Serbia’s National Spatial Plans, once adopted, could serve as such guiding documents.
Despite increased monitoring mechanisms with additional management plans and conservation instruments, the management of protected areas remains weak across the region. While increasing, the share of protected areas is well below international targets in most economies (Figure 6.8). Only Albania has achieved the Aichi Target13 of 17% for protected terrestrial areas by 2020, and has committed strategic objectives to achieve the Kunming-Montreal Target14 of 30% in 2030. All economies with access to the sea have fallen short of the 10% target for marine areas (2.9% in Albania, 1.8% in Montenegro and 0% in Bosnia and Herzegovina15). Effective management of protected areas and prevention of illegal actions such as construction, hunting and logging must be addressed. Responsible institutions lack the capacity for proper management and monitoring, mainly relying on external financial and technical support.
Figure 6.8. Share of protected terrestrial areas in the WB6 economies (2019)
% of land territory
Notes: The data point for Kosovo is from the last available year, 2019. Aichi Biodiversity Target 11: Protect 17% of terrestrial and inland water area by 2020. Kumming-Montreal Global Diversity Framework’s Target 3: Protect 30% of terrestrial and marine areas by 2030.
Sources: For ALB, MNE, MKD and SRB, data from the quantitative questionnaires for the Competitiveness Outlook 2024. For BIH, EU and OECD: Protected Planet (2023[26]).
Economic activities continue to threaten biodiversity and ecosystems
Tourism, mining and agriculture are significant contributors to environmental degradation in the Western Balkans. From habitat destruction to pollution, these industries challenge biodiversity conservation and ecosystem health.
As tourism grows in the region, its impact on biodiversity and landscapes is becoming increasingly evident. High seasonality, concentration in coastal areas and the construction of associated infrastructure such as roads, hotels and resorts can disturb natural habitats and permanently change landscapes. Additionally, the rise in human activity linked to tourism, leading to pollution, waste production and habitat disturbance, could worsen environmental degradation if not properly controlled and managed sustainably. This holds particularly true for Albania and Montenegro, where tourism has rapidly grown over recent years, now representing 21.6% and 24.5% of GDP, respectively (WTTC, 2023[27]; 2023[28]). However, environmental considerations in tourism frameworks are advancing at a slow pace. Only Montenegro has fully integrated natural valorisation, sustainable resource management and sustainability considerations into its economic development framework, including its Tourism Development Strategy, Programme for Economic Reforms and Smart Specialisation Strategy. Kosovo has also taken steps by adopting a new Law on Tourism in 2022, focusing on the promotion and development of sustainable tourism.
Positive initiatives are underway to promote sustainability in tourism practices in the region. Albania has supported projects such as developing the Butrint National Park, designated as the first carbon‑free park, and offers tax incentives for agritourism structures.16 International partners have also provided support to Kosovo in developing the NaturKosovo project to promote tourism along the Via Dinarica. In Montenegro, the Blue Flag Programme encourages municipalities to maintain high environmental protection standards and ensure quality sanitary and safety conditions on beaches and marinas. Despite these efforts, comprehensive initiatives to monitor and address the environmental impact of tourism are lacking across the region. This is further compounded by insufficient resources in respective ministries, hindering effective responses to the challenges posed by tourism growth.
In recent years, mining activities in the Western Balkans have expanded significantly, driven by rising global demand for minerals and metals and supported by substantial foreign direct investments, which are facilitated by lower restrictions on procedures for issuing permits and concessions. However, this expansion raises concerns about environmental impacts on land-use management, including deforestation, water contamination, habitat destruction and threats to regional biodiversity. The lack of environmental impact assessments for many mining operations has worsened these environmental consequences. Such activities have led citizens in North Macedonia and Serbia to voice their discontent through protests against the government's rapid issuance of mining concessions. While mining plays a vital role in the economy, it is crucial to conduct exploration activities responsibly, considering key spatial planning principles and environmental concerns. In response to these challenges, the Ministry of Economy in North Macedonia is developing a new Strategy for Geological Research and Sustainable Use and Exploitation of Mineral Resources for 2025-2045.
Agriculture continues to play a crucial role in all WB6 economies, but also significantly impacts the region’s biodiversity and ecosystems. The expansion of agricultural land over the past decade in the WB6 economies such as Bosnia and Herzegovina, Kosovo, Montenegro and North Macedonia (Eurostat, 2023[29]) has often resulted in the fragmentation and loss of natural habitats, leading to the displacement and endangerment of endemic species. To date, the adoption of organic agriculture and polycropping practices remains low, despite their important role in protecting ecosystems and biodiversity by minimising chemical inputs, and preserving soil health, habitat diversity and water resources, while supporting wildlife and pollinators through sustainable land management practices. Although legislation exists in the WB6 economies regarding organic agriculture, it is still a very small proportion of overall farming: Montenegro leads the region with only 1.7% of agricultural land dedicated to organic farming, well below the EU average of 10% (Eurostat, 2023[30]).
Minimising pollution
Minimising pollution is paramount for safeguarding planetary health. Pollution not only degrades air, water and soil quality, it also poses significant risks to human health and wildlife. Pollution through fine particulate matter (PM2.5), wastewater and unsustainable agricultural practices in the Western Balkans are some of the many causes of increased biodiversity loss, environmental degradation, and heightened cost of public health. The air quality across the Western Balkans is among the lowest in the world, the status of waterbodies is largely unsatisfactory, and soil degradation is prevalent and extensive throughout the region (JRC, 2022[2]).
Exposure to air pollutants remains a major health threat in the region, despite recent policy improvements
While air quality in the Western Balkans has shown improvements over the past decade (Figure 6.9), annual average concentrations of PM2.5 remain on average almost four times higher than World Health Organization recommended levels of 5 µg/m3 (micrograms per cubic metre) (EEA, 2023[31]). This persistent issue is primarily attributed to significant pollution stemming from the energy and transportation sectors in the region. Nevertheless, since the CO assessment in 2021, efforts to address this issue have been made by revising frameworks aimed at enhancing air quality. Revised or new frameworks throughout the region’s economies focus on similar objectives, including clarifying institutional capacities and responsibilities to manage air quality better, raising awareness among citizens about improving air quality, and expanding air monitoring and reporting mechanisms.
Figure 6.9. Annual mean population exposure to PM2.5 air pollution in the WB6 economies, the EU and the OECD (2014-20)
In micrograms per cubic metre (μg/m3)
Notes: PM2.5 is fine particulate matter. Data for EU-28, OECD, Albania, Bosnia and Herzegovina, Montenegro, and North Macedonia are OECD estimates. Data for EU-28, OECD, and Serbia are only available until 2019. Data for Kosovo come from the Kosovo Environmental Protection Agency, only available until 2019.
Sources: OECD (2022[32]); for Kosovo: Kosovo Environmental Protection Agency (2020[33]).
Weak co-ordination between national and local government still hampers the tailored implementation of air quality frameworks across all levels of government. Improvements have only been achieved in Albania with the planned establishment of a National Commission for Clean Air, and in North Macedonia with training support provided to local governments. Despite being prescribed in air management legal frameworks, the development of local air quality plans has been delayed in Albania and Montenegro, but municipalities in other economies have adopted new plans. For example, Pristina is implementing its Air Quality Plan (2023-28), emphasising cleaner vehicles, public transport, walking, cycling, a low emission zone and cleaner heating.
Air pollution from industrial installations such as manufacturing, power generation and resource extraction also remains a significant issue in the region. Alignment with the EU’s Industrial Emissions Directive17 is incomplete across economies, with progress made in North Macedonia with the preparation of the Law on Industrial Emissions and in Serbia with the preparation of the revised draft Law on Integrated Pollution Prevention and Control (IPPC), both pending adoption. However, most economies lack legally binding emission limit values in environmental permits for industrial installations. Frameworks in Serbia and Bosnia and Herzegovina foresee the introduction of best available techniques (BATs) to decrease air pollutants and heavy metals from industrial processes. Developments to address air pollution from thermal power plants are also ongoing, notably the desulphurisation process at the Kostolac B thermal power plant in Serbia and the ecological reconstruction of the Pljevlja thermal power plant in Montenegro.
A network of air quality stations is in place in all economies, largely covering atmospheric pollutants in line with EU requirements (NOx, NMVOCs, Sox, NH3, PM2.5, PM10), with information promptly made available online. Nevertheless, continuous monitoring at major industrial installations is not guaranteed for all types of pollutants, monitoring stations rarely cover the whole territory of all economies and maintenance of measuring devices is often challenging.
Efforts are ongoing to reduce water pollution and preserve related ecosystems
Most economies of the Western Balkans have significant freshwater resources. In Albania and Bosnia and Herzegovina in particular the amount of freshwater is three times higher than the EU average of 3 037 m3 (World Bank, 2023[34]). Nevertheless, beyond issues of overexploitation and impacts of climate change, escalating pollution levels, particularly from untreated wastewater, exacerbate the already compromised water quality in the region.
Revised legal and policy frameworks in most WB6 economies put stronger emphasis on freshwater management preservation, particularly regarding reducing groundwater pollution and the restoration of degraded ecosystems. Advancements in adopting river basin management plans to safeguard water resources and related ecosystems at the local level have also been observed in Albania, Bosnia and Herzegovina, Montenegro and Serbia. However, the delayed development of river basin management plans in Kosovo and North Macedonia poses challenges for freshwater management, particularly for establishing water protection zones, which are necessary to address the cumulative and pollution impacts of economic activities and infrastructure, such as the development of hydropower plants, on freshwater resources.
Improvements in water quality are anticipated through ongoing and planned investments in water supply and sanitation infrastructure across all the WB6 economies, primarily financed by international partners. However, common challenges persist in the region, including limited human and financial resources for implementing water supply and sanitation measures, and inadequate water tariffs that fail to cover operating costs and necessary infrastructure upgrades. Efforts to tackle these challenges are underway through various initiatives, such as the reorganisation of water supply and sewerage services in Albania, Bosnia and Herzegovina and Serbia. In order to ensure water quantity and quality, these reforms seek to regulate competencies at local self-government and utilities levels, including regulating water supplies, setting water tariffs and facilitating contracts for the provision of water services.
Despite progress in strengthening freshwater frameworks and increasing investments in water infrastructure, there is an absence of systematic collection or compilation of water quality and quantity data from various institutions across the region, which impedes informed policy decisions regarding competitive uses of water and the trade-offs among sectors. Furthermore, monitoring to identify emerging contaminants is widely lacking across all economies. However, Montenegro and North Macedonia (as part of the National Environmental System managed by the Macedonian Information Centre and groundwater cadastre) plan to improve their water monitoring by establishing national water information systems.
Activities to safeguard soils from pollutants remain limited, despite the significant impact of industrial and agricultural activities
The Western Balkans must dedicate more effort to safeguarding soils from pollutants to maintain ecosystem health, agricultural productivity and human well-being. Limited progress has been achieved in enhancing food safety and quality in the region, with agricultural practices contributing to soil degradation and water pollution. While maximum residue levels have been defined in all economies (expect for the FBiH in Bosnia and Herzegovina), in line with EU regulations, the increasing use of pesticides and insecticides risks exacerbating soil and water pollution. The use of pesticides has been steadily rising in Albania, Bosnia and Herzegovina and Montenegro, contributing to a 10% increase in regional use over the past decade (FAO, 2023[35]). Moreover, Bosnia and Herzegovina, Montenegro and Serbia have increased their insecticide use, with both Bosnia and Herzegovina and Montenegro reaching record high levels of use in 2021 (FAO, 2023[35]). Nevertheless, some measures on sustainable food production and soil organic carbon will be integrated into a regional project under the Western Balkans Soil Partnership (Box 6.5). Establishing a regional soil map is also planned to strengthen data sharing on soil management at the regional level.
Box 6.5. Western Balkans Soil Partnership
The Western Balkans Soil Partnership, initiated under the Green Agenda for the Western Balkans and co‑ordinated by the Standing Working Group for Regional Rural Development (SWG RRD), was established in 2022 to address soil degradation by enhancing soil health, water retention and nutrient cycling, thereby reducing the need for chemical inputs and mitigating environmental contamination.
In the same year, the SWG RRD published the region's first integrated assessment on soil management, identifying critical gaps and offering strategic recommendations. This publication was one of several outcomes from the seven interim meetings conducted between 2022 and 2024. The group’s efforts also encompass administrative and technical preparations to establish functional sub-regional partnerships and initiate work on soil maps, specifically focusing on mapping contaminated sites.
This initiative remains committed to bringing together regional stakeholders to improve soil health, which is essential for agriculture, ecosystem services and climate adaptation.
Sources: RCC (2023[36]); SWG RRD (2024[37]).
Industrial risk management and measures to safeguard soils from industrial pollutants vary across economies, and there are gaps with EU legislation on risk management, environmental permitting and compliance. While no WB6 economy fully aligns with the EU Seveso-III Directive on preventing major industrial accidents, most economies have progressed by delineating specific obligations for industrial operators handling hazardous substances. A Pollutant Release and Transfer Register (PRTR) system, which aims to track the release and transfer of pollutants from industrial facilities into the environment, is currently operational in Albania, North Macedonia and Serbia, and is set to be established in all other economies with the support of an international project aimed at their development.18 Some progress has also been made in managing chemicals and their impact on soils, and in further aligning with the EU regulation on the registration, evaluation, authorisation and restriction of chemicals.
There has been little effort made to restore degraded land and ensure the systemic clean-up of industrial contaminated sites. Disposal facilities for hazardous waste remain minimal across the Western Balkans, and most industrial waste is illegally landfilled, posing significant threats to soil. Apart from a few ad hoc projects financed by international co-operation partners, efforts to clean up industrial sites remain limited. Most economies do not have a policy basis for systemic soil monitoring and cleaning, apart from Serbia, which has a Cadastre of Contaminated Sites Information System, and where the Serbian Environmental Protection Agency regularly collects soil monitoring data at the operational, post-operational and remediation stage to identify potential health risks.
Recommendations for protecting ecosystems and citizens’ well-being
Mainstream biodiversity considerations into relevant policy frameworks and elevate commitment to safeguarding natural heritage by significantly expanding the coverage of protected areas. A global vision for 2050 exists under the Convention on Biological Diversity, which WB6 economies can adopt or tailor to their national circumstances. The WB6 economies should ensure that biodiversity is mainstreamed across relevant strategies and programmes (e.g. national economic plans, climate change and low emission development strategies, tourism, and agriculture) and strengthen inter-institutional co-ordination by setting clear roles and responsibilities. In particular, biodiversity loss and climate change must be addressed together, considering that terrestrial ecosystems are natural carbon sinks that have an annual gross sequestration level equivalent to about 60% of global anthropogenic emissions, and that biodiversity also enhances climate change adaptation through nature-based solutions (IPBES, 2019[38]). Given the region’s vulnerability to climate-related hazards, investing in nature can be a crucial means to protect the population from threats such as floods, droughts and storms (OECD, 2021[39]). Most economies need to significantly expand the coverage of protected areas to ensure the effective enforcement of biodiversity measures. While established protected areas ensure the preservation of biodiversity, safeguard critical habitats, and support climate resilience, they fall short of international targets in most WB6 economies. Costa Rica's Payment for Environmental Services programme stands out as a successful model for expanding protected areas (Box 6.6).
Box 6.6. Costa Rica’s Payment for Environmental Services programme
Costa Rica's Payment for Environmental Services programme was introduced in 1997 as a pioneering initiative aimed at incentivising landowners through financial compensation to conserve and restore forests, protect watersheds and promote biodiversity conservation.
Through this initiative, landowners receive financial incentives for maintaining or restoring ecosystems on their land, effectively discouraging deforestation. This approach has expanded protected areas and fostered biodiversity conservation by creating biological corridors and engaging local communities in sustainable land management practices. The programme's success is attributed to a robust institutional framework, effective governance, and collaboration between the government, non-governmental organisations and communities.
Currently, Costa Rica has expanded its officially protected areas to cover 25% of land and 30% of marine areas, well above OECD averages.
Source: OECD (2023[40]).
Ensure the preservation of forestry resources by reducing illegal logging, notably by strengthening stakeholder collaboration. Taking inspiration from Indonesia's effective Illegal Logging Monitoring and Environmental Protection Programme, WB6 economies should prioritise empowering local communities through alternative livelihood opportunities, such as agroforestry, eco-tourism and non-timber forest products. This approach not only reduces dependence on logging but also fosters a sense of ownership and stewardship over forest resources. To implement its programme, the Indonesian government provided training, technical assistance and resources to support initiatives (JPIK, 2020[41]).
Develop an all-inclusive land-use policy framework and strengthen institutional co‑ordination between different ministries responsible for land-use issues related to climate, biodiversity and agriculture. This should take place 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; it therefore requires a whole-of-government approach to co-ordinate policies across all relevant stakeholders, which most WB6 economies currently lack. A comprehensive land-use framework should integrate the systematic use of Strategic Environmental Assessment (SEA) early in the planning process to ensure transparent, informed and sustainable decision making based on evidence and stakeholder involvement.
Adopt a comprehensive and integrated water management framework in light of the pressing challenges posed by water pollution and the impacts of climate change. An integrated framework will require enhanced collaboration among various government departments and agencies involved in water management, pollution control and climate resilience. In addressing the integration of climate change impacts into water management, entities could adopt a similar approach to the Netherlands’ Room for the River programme, a large-scale, integrated water management initiative aimed at mitigating flood risks and enhancing overall river management. The initiative involves creating additional space for the river to expand during floods, along with measures such as constructing floodplains, removing barriers and promoting sustainable land use to enhance overall water resilience. Moreover, it emphasises community involvement to create awareness, garner support, and incorporate local knowledge into the planning and implementation process (Rijkswaterstaat, 2024[42]).
Improve air quality by decreasing emissions from energy production and industrial processes. Air pollution remains a significant environmental concern in all the WB6 economies. While the problem is multifaceted, industrial activities and energy production (in particular metallurgy, mining, manufacturing and energy production from coal-fired power plants) are some of the main sources of pollution in the region, releasing large amounts of pollutants into the air. To ensure adequate pollution control measures in industries and powerplants, to reduce levels of harmful substances, and in addition to measures proposed to mitigate the effects of climate change, the WB6 economies could refer to the EU's Best Available Techniques Reference Documents to ensure effective enforcement and regulatory compliance (Box 6.7).
Box 6.7. EU’s Best Available Techniques Reference Documents
The EU's BREFs, or Best Available Techniques Reference Documents, are a series of guidance documents developed by the European Integrated Pollution Prevention and Control Bureau (EIPPCB). These documents provide detailed information on BATs in various industrial sectors to prevent or reduce emissions and the impact of industrial activities on the environment. BREFs are an integral part of EU efforts to regulate industrial emissions and ensure environmental protection.
Key points about EU BREF documents:
BATs: BATs represent the most effective and advanced methods and processes to achieve a high level of environmental protection. They consider the costs and benefits of different techniques for preventing or controlling emissions.
Sector-specific guidance: BREFs are sector-specific, covering industries such as energy, chemicals, metals and waste management. Each BREF focuses on a particular industrial sector and provides comprehensive information on the best practices within that sector.
Legal framework: BREFs are crucial in implementing the Industrial Emissions Directive (2010/75/EU), formerly the Integrated Pollution Prevention and Control (IPPC) Directive. This directive sets the legal framework for controlling industrial emissions across the EU.
Reviewing and updating: BREFs undergo regular reviews and updates to incorporate new technological advancements, changes in regulations and improvements in best practice. The process involves consultations with industry stakeholders, environmental non-governmental organisations and experts.
Source: European Commission (2024[43]).
Enhancing resource efficiency and circularity
Resource intensity, which measures the amount of resources needed to generate value added, remains notably high in the WB6 economies compared to OECD and EU member states (OECD, 2024[44]). Additionally, despite increasing waste generation across these economies in recent years, waste prevention and treatment practices, especially recycling efforts for municipal waste, have failed to keep pace. These trends negatively impact the long-term security of non-renewable resource supply, which is a concern for sustaining regional economic growth, and creates environmental pressures due to unsustainable production and consumption practices.
As outlined in the Green Agenda for the Western Balkans, and underscored by vulnerabilities exposed during the COVID-19 pandemic, the region must reduce its reliance on globalised linear supply chains and inexpensive virgin raw materials. Such a strategic shift is crucial for mitigating economic risks (e.g. production disruptions and revenue losses) and environmental degradation. The promotion of circularity and resource efficiency is, therefore, imperative to future-proofing regional economies. It is an approach that stands to enhance competitiveness and job creation, but also drive innovation, ensure resource supply security and foster equitable growth across the Western Balkans. Additionally, reducing the emissions intensity of goods is crucial for protecting exports to the EU from decreased competitiveness due to higher prices resulting from carbon levies under the EU’s CBAM.
Regionally, the potential for improved resource efficiency and the circular economy transition remains largely untapped. This could also be problematic for the green transition, as ensuring a sustainable supply of raw materials, particularly critical materials, is a fundamental requirement. Economies must diversify sources of both primary and secondary materials, improve resource productivity, and prolong material use to maximise the efficient use of domestically extracted resources and minimise waste generation. Resource productivity in the WB6 economies rose from 0.4 EUR/kg in 2013 to 0.59 EUR/kg in 2021 (Eurostat, 2023[45]), but was still more than three times below the EU average (2.27 EUR/kg) (Figure 6.10).
Figure 6.10. Resource productivity in the WB6 economies and the EU (2013-21)
EUR/kg
Note: No data available for Kosovo and no data for Bosnia and Herzegovina before 2015.
Source: Eurostat (2023[45]).
Laying the foundations for sustainable production and consumption
The Green Agenda for the Western Balkans highlights the necessity of pursuing economic development and new business opportunities within frameworks for sustainable production and consumption. A key pillar of this is the transition towards a circular economy, which will require policies focused on promoting circular design, production and consumption practices, as well as waste prevention, reuse and recycling.
The circular economy is gaining traction as a model for sustainable production and consumption
Driven by a combination of environmental concerns, economic demands, and aspirations for regional and EU integration, the adoption of strategic documents related to the circular economy is gaining momentum in the Western Balkans (Table 6.4). Serbia and Montenegro have paved the way by adopting circular economy roadmaps in 2020 and 2022, respectively, followed by the introduction of related programmes, strategies and action plans. Kosovo published its circular economy roadmap in 2023, and Albania and North Macedonia finalised their circular economy roadmaps in early 2024, with the support of the OECD. Bosnia and Herzegovina is currently preparing a similar document.
Although all WB6 economies have policies and legislation in place that are directly or indirectly related to the circular economy, frameworks for sustainable production and consumption are still in their nascent stages throughout the region. Alignment with EU directives and policies on the circular economy also remains limited, affecting the competitiveness of WB6 products and services within EU value chains. The focus in the region has primarily been on developing or updating waste management plans and programmes, and therefore addressing the end-of-life phase of products (see further details in the section Strengthening waste management and material recovery). This is consistent with the prevalent urgent need to address waste management more adequately across the region, as recycling rates remain low and extensive landfilling is the primary mode of waste treatment. However, to transition to a circular economy, the region will need to shift its focus from waste management to policies that also target more circular production and consumption.
Table 6.4. Circular economy strategic and policy documents in the WB6 economies
Box 6.8. Selecting priority areas for the circular economy
A review of international practice shows that countries follow customised methodologies to select specific priority areas for the circular economy. Albania and North Macedonia, for instance, developed their circular economy roadmaps in collaboration with and under the guidance of the OECD. The approach outlined in Figure 6.11 (example of North Macedonia) was adopted to define priority areas.
Figure 6.11. Approach for circular economy roadmaps, example of North Macedonia
Source: OECD (2024[46]).
The applied prioritisation methodology uses four criteria and their related indicators to help the selection of (potential) priority areas:
1. Economic importance: This involves a data-driven assessment, including indicators such as value added, employment, trade in sectors and industries, and position in the global value chain.
2. Policy relevance: Qualitative analysis determines if an area is included in national strategic documents and action plans. Consideration is also given to policy gaps identified in the area. Given that Albania and North Macedonia are EU candidates, the relevance to EU targets and obligations was also assessed for their roadmaps.
3. Circularity potential: Quantitative indicators such as material productivity or intensity, resource use, waste generation and recycling rates can be used to evaluate circularity potential. These indicators can be compared against peers, EU averages or specific targets to assess the potential for increasing circularity in specific areas.
4. Decarbonisation: This measures the level of greenhouse gas emissions in specific sectors/industries to identify those with the highest potential for emissions reduction.
A comprehensive diagnostic of the circular economy served as the primary source of data and information for the prioritisation exercises in Albania and North Macedonia. The OECD compiled a long list of potential priority areas and preliminary policy recommendations, which were discussed at stakeholder meetings in both economies. The working groups were then tasked with selecting three to five final priority areas.
Sources: OECD (2024[44]; 2024[46]).
The WB6 economies have varied approaches to circular economy policies, each tailored to their unique economic landscapes and priorities. Although methodologies for identifying priority areas vary across the WB6, they predominantly rely on comprehensive analyses of economic structures and challenges present within sectors, value chains and material or product life cycles. These analyses aim to pinpoint areas where transitioning to a circular economy would yield the greatest benefits, considering the economic importance of the area in terms of value creation, overall policy relevance and emissions reduction potential, as well as opportunities such as new product and labour markets. Box 6.8 describes the OECD’s prioritisation methodology applied when developing Albania’s and North Macedonia’s circular economy roadmaps.
Most WB6 economies prioritise the construction and food and agriculture sectors in their circular economy policies. These sectors tend to be associated with high consumption of natural resources, significant emissions and high levels of waste generation, yet also hold high economic relevance. Several circular economy policies also recognise the opportunity of integrating circular bioeconomy principles into agriculture restructuring, with the aim to future proof primary production, food processing and consumption sectors against various challenges (as outlined in the section, Economic activities continue to threaten biodiversity and ecosystems). Regional economies with smart specialisation strategies (S3), such as Montenegro, North Macedonia and Serbia,19 also acknowledge the importance of agriculture for research and innovation-driven economic growth, with links to the circular bioeconomy.
New measures are being put in place across different sectors and value chains to incentivise more circular production and consumption
The WB6 economies have started to adopt measures to advance circular economy policies and promote circular production and consumption. These measures include green public procurement (GPP), private sector engagement, financial and technical support, and multi-stakeholder collaborations.The OECD and the EU’s 2020 Circular Economy Action Plan identify GPP as a priority tool for promoting the circular economy. The use of GPP is mentioned in all strategic and policy documents identified in Table 6.4. For example, circular economy policy documents in Montenegro and Serbia entail objectives related to increasing the application of GPP to further the transition to a circular economy in different sectors. On average across all WB6 economies, public procurement accounted for about 8.9% of GDP in 2022 (European Commission, 2023[47]), and public procurement laws in the region already include provisions for environmental and climate-related criteria in GPP, making this a good avenue for increasing the supply of more environmentally friendly products and services. The use of GPP can have particular impact in the construction sector, a priority area in most WB6 economies. While this sector accounted for around 12.7% of gross value added and 400 000 jobs regionally in 2019 (WB6 CIF, 2021[48]), it also has a significant environmental impact: in 2020, manufacturing and construction accounted for around 6.4% of regional GHG emissions (Climate Watch, 2024[3]), and construction and demolition waste (CDW) are estimated to have comprised 5% of regional waste generation20 (Eurostat, 2023[49]). However, this is likely a significant underestimation of CDW due to underreporting and illegal dumping (Nadazdi, Naunovic and Ivanisevic, 2022[50]). The circular economy presents opportunities to significantly reduce CDW and GHG emissions in the sector, thereby contributing to the decarbonisation of the WB6 economies.
The WB6 economies recognise the crucial role of the private sector in driving the circular transition and have begun devising both technical and financial support measures through targeted business support programmes and financial incentives. For instance, Serbia has introduced specific criteria for allocating grants within existing support programmes to support the application of circular economy principles. Serbia also promotes collaboration between scientific research organisations and companies through dedicated financial support programmes for innovation and production optimisation. However, at the regional level, progress in offering green financial incentives to businesses, including for circular economy projects, has been uneven. The WB6 economies often rely on external funding from international development co‑operation partners and lack sufficient business guidance and advice (OECD, 2022[51]). While some economies have established green funds targeting SMEs – constituting the vast majority of businesses in the region – and offer reduced interest loans and grants for SME greening initiatives, these efforts remain relatively small-scale, and green criteria are rarely integrated into existing credit schemes (OECD, 2022[51]). Non-financial tools to support environmental practices have remained scarce even when financial support is offered.
Promisingly, information-based tools have been scaled up, and chambers of commerce actively engage not only in promoting circular economy principles among businesses, but also in enhancing stakeholder engagement and collaboration. Organised stakeholder platforms are emerging across the region, with the Chamber of Commerce and Industry of Serbia pioneering a Digital Platform for Circular Economy since 2021. The Chamber of Economy of Montenegro launched its own circular economy stakeholder platform in 2023 (Box 6.9). The involvement of stakeholders is a key pillar for initiating the transition to the circular economy as it brings together different decision makers from the government and non-governmental sectors. Collaborative efforts among these stakeholder groups facilitate the mapping of opportunities, raising awareness and putting more focus on critical areas for a circular transition. Multi-stakeholder partnerships streamline co-operation and guide the overall strategic direction, helping to secure funding, foster capacity building and facilitate knowledge exchange. Within such partnerships, sub-groups can also address sector-specific challenges relevant to priority areas.
Box 6.9. Circular Economy HUB Montenegro
In 2023, the Chamber of Economy of Montenegro established the Circular Economy HUB (CE HUB) as a unique focal point for circular initiatives and solutions. It is a digital open information platform intended to disseminate data and promote resource efficiency through circular value systems.
Mission and goal of the CE HUB
The CE HUB’s mission is to “strengthen the capacity of Montenegrin economy on the circular transition path and to promote systemic changes towards the creation of circular business models”. Its primary goal is the creation of a “framework for the integration of circular business models and practices based on identified priority areas in the Roadmap by establishing strong and continuous collaboration between institutional actors, business and academic community”.
Empowering exchange
The CE HUB offers comprehensive insights and resources on the focus areas of Montenegro’s circular economy roadmap. It provides valuable information and tools promoting circular practices across different key sectors, including manufacturing, the food system, tourism, the forest system and the built environment. Users can access case studies, reports and guidelines supporting Montenegro’s transition toward a circular and resource-efficient economy. The hub also organises webinars covering various topics. In December 2023, the CE HUB convened industry experts and thought leaders to discuss the impact of innovation in the circular economy.
Source: CE HUB (2024[52]).
Strengthening waste management and material recovery
Effective waste management is key to a circular economy as it can help conserve resources, reduce environmental impact, save energy, create economic opportunities and facilitate the closing of material loops. In the Western Balkans, rapid urbanisation, industrialisation and economic development have increased waste generation over the past two decades, placing substantial pressure on already strained resources, infrastructure and ecosystems. Nonetheless, progress has been made with revised waste management laws and strategies across economies that have led to strengthened waste treatment and collection practices (Figure 6.12). However, the share of the population covered by waste collection services varies, particularly in rural areas where it can be as low as 40%.
Figure 6.12. Population covered by waste collection services in the WB6 economies and the EU (2015, 2021)
% of total population
Note: No data available for BIH in 2015.
Sources: Respective Statistical Offices of WB6 economies; for Bosnia and Herzegovina, EEA (2021[53]).
Sustained improper waste management practices lead to environmental pollution in the region
In the Western Balkans, more than 83% of waste is disposed of in landfills, with only a small amount recycled (Figure 6.13). This disparity can be largely attributed to inadequate infrastructure for waste sorting, collection and recycling, limited financial resources at the local level, and a lack of public awareness and engagement. Despite a legal obligation to separate waste at its source, implementation of this obligation remains marginal, and there is no organised system for separate waste collection in place. Some small-scale pilot projects for waste separation at source have been initiated in municipalities across the region, but their effectiveness remains uncertain.
Illegal waste disposal in dumpsites or unsanitary landfills, where no fees are required, remains widespread across the region. For example, only one-third of landfilled waste in Bosnia and Herzegovina and one‑quarter in Serbia is treated in sanitary landfills. Additionally, the frequent open burning of waste worsens environmental pollution and disrupts the operation of existing sanitary landfills. While there are efforts to close and remediate dumpsites and illegal landfills in Kosovo, North Macedonia and Serbia, progress overall is slow. Despite this, Kosovo has seen a significant decrease of nearly half in the number of illegal landfills recorded across all municipalities from 2020 to 2022. Some progress on managing plastic waste is also planned at the regional level through a joint statement on combatting plastic pollution issued in 2023 and the development of a regional action plan for plastic waste.
In all WB6 economies, the collection of recyclable waste, though minimal, is predominantly carried out by the informal sector. However, there is a lack of proper equipment and training, leading to health and environmental hazards. Despite its prevalence, this activity is not systematically addressed across all WB6 economies, with no plans for formalisation, which hinders the adequate funding and functioning of legal waste management infrastructure and impedes its gradual improvement.
Figure 6.13. Municipal waste treatment in the WB6 economies, the EU and the OECD (2021)
% of municipal waste
Note: Data for BIH are from 2019, and data for the OECD are from 2020.
Sources: Respective Statistical Offices of WB6 economies; for Bosnia and Herzegovina, EEA (2022[54]); for OECD, OECD (2023[55]).
Efforts to increase recycling rates continue through extended producer responsibility schemes and new investments in waste treatment facilities
While recycling and recovery rates remain very low in the region, revised legal and policy frameworks are incrementally being implemented to ensure proper waste management.
Waste management infrastructure is being improved in some economies with the construction of new recycling plants and sanitary landfills in Albania and Serbia, and the establishment of composting facilities in Albania and Kosovo. Albania has also invested in new incineration plants. Nevertheless, the region will need to ensure that incineration does not come at the expense of recycling, and that policies are aligned with the EU acquis waste hierarchy principle, recycling targets and a circular model.
Extended producer responsibility (EPR) schemes, which aim to shift the burden of paying for product management costs from the public sector to producers and consumers, and which has been successful in increasing the collection, sorting and recycling rates of the products these schemes cover, are planned to be introduced or further implemented across the region. EPR schemes also offer an opportunity to integrate the informal waste sector into more formalised types of employment (Prevent Waste Alliance, 2024[56]). EPR schemes for different product groups are already established in Bosnia and Herzegovina, North Macedonia and Serbia, but further enforcement efforts are required to ensure their effectiveness; Kosovo and Albania’s revised waste laws include plans for the establishment of EPR schemes. Kosovo is also working on a business case for the introduction of a deposit refund system for bottles and cans to strengthen recycling activities.
While efforts are ongoing to implement waste management policies, the suboptimal availability and reliability of waste data remain a common challenge across the region. High-quality data are necessary to facilitate waste management planning, including the implementation of EPR schemes, and guide investments in necessary infrastructure. Nevertheless, the quantities of waste generated are often approximations that rely on factors such as the population of a municipality. While statistical surveys are conducted, their accuracy and response rates frequently fall short. Moreover, the absence of weighing equipment in many landfill sites contributes to uncertainty regarding data on the volume of waste treated at these sites. Advancements in this area have only been undertaken with the support of international co‑operation partners in Albania, where a weighing exercise was undertaken across all 61 municipalities from 2020 to 2022, and in Kosovo, where waste reporting has been digitalised.
Recommendations for enhancing resource efficiency and circularity
Strengthen collaboration among stakeholders and foster public and private partnerships to advance the transition to a circular economy. While Serbia and Montenegro have already introduced circular economy platforms, all other economies need to strengthen collaboration, information sharing and the exchange of good practices. Besides enabling collaboration and networking opportunities between the public and private sectors, such platforms may also facilitate synergies and knowledge sharing across the different parts of the value chain. Most OECD members have established national circular economy stakeholder platforms or hubs that serve as fora for information exchange, peer learning and multi-stakeholder co-operation, as well as a depository of information, data and other relevant material (see Box 6.10 for some examples).
Box 6.10. Examples of circular economy platforms/hubs
Circular Glasgow (United Kingdom): Hosted since 2015 by the Glasgow Chamber of Commerce, Zero Waste Scotland and Glasgow City Council, Circular Glasgow aims to build best practices and capacity on the circular economy across Glasgow businesses, helping them identify opportunities to support and implement circular ideas. This is done through workshops and events, including a series of knowledge-sharing business-to-business networking events; a circle assessment, a tool that helps businesses understand opportunities to become more circular; and the Circle Lab, an online hackathon event to find a circular solution to local challenges.
Turkey Circular Economy Platform: Established in 2020 by the Business Council for Sustainable Development of Türkiye, this platform aims to provide practical solutions, incentives, news and opportunities in the field of circular economy. It includes a knowledge hub, an e-commerce platform for industrial symbiosis (as part of Türkiye Materials Marketplace – established in 2016) and measurement tools, and offers training, financial opportunities and consultancy services for companies looking to accelerate their circular transition.
Sources: OECD (2021[57]); BCSD (2024[58]).
Mainstream greening into existing funding mechanisms to better support circularity and the greening of SMEs. To channel the full potential of the private sector in the transition to circular modes of production and consumption, WB6 economies must de-risk investments into circular and green projects and business models. Possible avenues for the government and national development banks include enlarging existing green funds, developing sustainability linked loans, and offering lower cost loans to SMEs by adapting existing credit guarantee schemes for green projects. Additionally, comprehensive training must be provided for both financial institutions and SMEs to enhance their understanding and capability to develop and implement circular economy projects.
Improve regulatory frameworks to provide incentives for circular production and consumption practices. This can be achieved by implementing eco-design requirements to enhance product durability and reparability, such as establishing minimum recycling content standards, and promoting green certification and environmental labelling. Additionally, fiscal incentives such as reduced or exempt VAT on repair services and food donations can motivate businesses and consumers to adopt sustainable practices. These measures will ensure that products entering the regional market adhere to EU regulatory standards, facilitating compliance and fostering a transition to a circular economy.
Ensure implementation of revised waste management strategies, with a focus on achieving higher recycling rates and on waste prevention. To improve recycling rates, the roll-out of EPR take-back schemes is advancing in the Western Balkans; however, full participation from both producers and consumers has not been realised. To help implement EPR schemes more effectively, WB6 economies could follow the guiding EPR principles laid out in Box 6.11.
Box 6.11. Guidance on implementing extended producer responsibility take-back schemes
OECD EPR Guidance
To effectively implement EPR take-back schemes to shift the end‑of-life management costs of products from the public sector to producers and consumers, and to increase the collection and recycling rates of these waste streams, economies should ensure the application of the following principles (a selection based on the OECD EPR Guidance):
Clear legal framework: The legislation needs to be clear on the definitions and responsibilities of all actors involved in EPR, with a legal framework for producer responsibility organisations to operate under. EPR targets need to be periodically reviewed.
Transparency: The governance of EPR systems needs to be transparent to provide more effective means for assessing the performance of the actors involved and holding them accountable for their activities. This will require collecting both technical and financial data and setting up registers of producers, the accreditation of producer responsibility organisations, and appropriate sanctions.
Sufficient existing waste management capacity: For EPRs to work effectively, adequate waste infrastructure needs to be in place across the country, including infrastructure for waste separation at source, collection and treatment (ideally recycling).
Administrative oversight capacity for better enforcement: There needs to be sufficient enforcement capacity to prevent unauthorised facilities and collection points from operation. This should also minimise free-riding and non-compliance.
Stakeholder engagement: Platforms for dialogue among stakeholders need to be established.
Prevent Waste Alliance EPR Toolbox
To facilitate the adoption of general good practices and OECD guidance on EPR, authorities and other relevant actors could use the EPR Toolbox developed by the Prevent Waste Alliance. This toolkit allows users to consult other international practices and participate in knowledge exchange to enhance the functioning of the domestic EPR system. The EPR Toolbox contains three modules that span the general aspects of an EPR, including the monitoring of financial flows, and also focuses on concrete actions such as the integration of the informal sector or the creation of a market for recycled plastics.
Sources: OECD (2016[59]); Prevent Waste Alliance (2024[56]); Tuscano et al. (2022[60]).
Improve the quality of waste data. The WB6 economies need to consolidate internal waste data and improve data sharing between all stakeholders. Particular attention needs to be paid to the quantities of waste generated across different waste streams, including industrial waste and CDW, as well as their classification as hazardous or non-hazardous, and the related recovery and recycling efforts. The current reporting methodology should be reviewed to enhance future waste management operations. This review should include definitions and surveying methods, breaks in time series, waste collection methods, and waste prevention measures. The city of Antwerp in Belgium and the Czech Republic can offer good practice examples of how to improve waste data collection and monitoring (Box 6.12).
Box 6.12. Managing waste data in Antwerp, Belgium, and in the Czech Republic
Waste dashboard in Antwerp, Belgium
Before 2016, the Waste Department of the City of Antwerp collected data using old-fashioned methods (handwritten notes, insufficient use of Excel, PDF, etc.), and standardised guidelines on collecting data did not exist. Fragmented internal data, limited access to waste data and limited data sharing between systems triggered the department’s introduction of a data warehouse. The objectives were to increase insight into waste management practices to drive and support policy decisions eventually, and to disclose waste management data to different stakeholders as automatically as possible to increase transparency.
To achieve these objectives, the Waste Department collected all types of data (real-time such as sensor data; and static, historical and geographical such as track and trace) and involved all relevant stakeholders (local policy makers, local administration, waste processing companies, citizens and researchers). New technologies, including geographical information system (GIS), were used to optimise systems and improve the visualisation and analysis of data. Approximately EUR 100 000 was spent consulting expert analysts and on software licences (which consist of a business intelligence tool and a dashboard creator).
Waste data from different sources are now automatically uploaded to the data warehouse. The warehouse delivers added value to Antwerp’s various stakeholders through increased transparency, time efficiency, cost efficiency, a reliable source for researchers, and synergies between different programmes. Policy makers can now use these data to allocate costs more accurately and introduce more targeted policy instruments towards sustainable waste management.
Data collection and processing for EPR schemes – Example of the Czech Republic
While certain technical requirements must be met, the first step towards ensuring transparency of EPR schemes is effective co-ordination and compliance with reporting obligations under applicable legislation. The Czech Republic’s electronic registry for waste is an exemplary model for a successful national waste information database. It employs two distinct systems, recently rated as the best European system for waste data management and evaluation by the European Topic Centre on Circular Economy and Resource Use. One handles the mandatory data reported by entities subject to relevant legal acts (Information System for Reporting Obligations), while the other manages the subsequent verification, processing and evaluation of the reported data (Information System for Waste Management). This streamlined process is further enhanced by extending verification authority to municipal and regional authorities, with the Environmental Information Agency functioning as the central data hub. By engaging an array of stakeholders, including the statistical office, the information system becomes a catalyst for developing and implementing evidence-based waste management policies.
Sources: Interreg Europe (2021[61]); Tuscano et al. (2022[60]); Prevent Waste Alliance (2024[56]).
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[48] WB6 CIF (2021), The Western Balkans Region – Key Indicators for Construction and Infrastructure, Western Balkans 6 Chamber Investment Forum, https://www.wb6cif.eu/wp-content/uploads/2021/09/WB6-CIF_Construction-and-Infrastructure_5.-9.-21-FIN-003.pdf (accessed on 6 March 2024).
[34] World Bank (2023), Renewable internal freshwater resources per capita (cubic meters), https://data.worldbank.org/indicator/ER.H2O.INTR.PC (accessed on 9 November 2023).
[8] World Bank (2023), “Testing resilience”, Western Balkans Regular Economic Report No.23, Vol. 23, https://documents1.worldbank.org/curated/en/099042023104012719/pdf/P179478085f70601a0aac3035c4560691ca.pdf.
[27] WTTC (2023), Albania, 2023 Annual Research: Key highlights, World Travel & Tourism Council, https://assets-global.website-files.com/6329bc97af73223b575983ac/647f1c7ecd1ff43efcda4c7b_EIR2023-Albania.pdf.
[28] WTTC (2023), Montenegro, 2023 Annual Research: Key highlights, World Travel & Tourism Council, https://assets-global.website-files.com/6329bc97af73223b575983ac/647f1fc6e4a6b1effb674603_EIR2023-Montenegro.pdf.
Notes
← 1. More information on these can be found at: https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/monitoring-reporting-and-verification-eu-ets-emissions_en.
← 2. The National Co-ordinating Council, the National Council for Sustainable Development and the Scientific Advisory Body.
← 3. Annex I countries in the context of the UNFCCC are often referred to as developed or industrialised nations, whereas Non-Annex I countries include a diverse group of nations, primarily developing countries, with varying levels of industrialisation and economic development. These countries are not bound by the same mandatory emission reduction targets as Annex I countries. Instead, they are encouraged to take voluntary actions to address climate change and may receive support, including financial assistance and technology transfer, from Annex I countries.
← 4. Key measures encompass various initiatives, such as evaluating the contributions of private sector endeavours, forecasting GHG emissions and removals, monitoring and evaluating NDCs, engaging in policy dialogues with the participation of all segments of society, and conducting training and capacity building activities.
← 5. Free emissions allowances were granted to three plants: Pljevlja coal plant, KAP aluminium plant and Tosčelik steel mill. Funds raised from the scheme are to be transferred into the Environmental Protection Fund and used for renewable energy sources (EUR 4.1 million), protection of the environment (EUR 2.67 million) and to promote innovation following the Smart Specialisation Strategy (EUR 1.1 million).
← 6. In this section, the clean energy transition refers mainly to energy supply and transformations, i.e. the generation of electricity and the necessary transformation of power systems to increase the use of renewable energy over fossil fuels for electricity production. It also examines how energy efficiency can reduce the overall demand for electricity and decrease fossil fuel consumption. It does not analyse the different uses of energy in sectors such as transport, buildings or industry.
← 7. The Sustainable Transition of Bosnia and Herzegovina programme was launched in 2023 and is implemented by the Stockholm Environment Institute (SEI), in collaboration with the Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina (MOFTER), the Swedish International Development Cooperation Agency (Sida) and four local self-government units: Banovići, Breza, Ugljevik and Živinice.
← 8. Technical potential reflects the capacity for deployment of a renewable energy source based on available natural resources (wind currents, solar exposure, hydrometeorology and water resources), as well as the topographic limits and technological constraints related to deploying such a technology (size of installations, land available for use, etc).
← 9. The funds raised from this bond are primarily dedicated to transport projects that prioritise environmentally friendly modes such as railways and inland waterways. The issuance of the green bond facilitated the acquisition of three trains and the reconstruction of 79.4 kilometres of railway
← 10. The water exploitation index is a measure used to assess the level of water use relative to the available water resources in a specific region or area, indicating the degree of pressure on water resources due to human activities such as agriculture, industry and domestic use. It helps policy makers and water resource managers understand and manage water scarcity and sustainability issues.
← 11. Its three main objectives include raising awareness and knowledge of nature-based disaster risk reduction solutions among decision makers, natural resource managers and local communities; integrating nature-based solutions and equitable climate-smart planning into adaptation and disaster reduction policy; and implementing and scaling up nature-based solutions for disaster risk reduction.
← 12. The instrument for pre-accession assistance (IPA) includes support for IPA rural development programmes (IPARD). IPARD focuses specifically on rural areas and agri-food sectors of countries in the process of joining the EU. The IPARD III programmes cover the 2021-27 period.
← 13. The Aichi Biodiversity Targets are a set of 20 goals set out by the Convention on Biological Diversity (CBD) to halt biodiversity loss by 2020. Specifically, Aichi Target 11 aims to conserve at least 17% of terrestrial and inland water areas by 2020 through effectively and equitably managed, ecologically representative, and well-connected systems of protected areas and other effective area-based conservation measures.
← 14. The Kunming-Montreal Target, also known as the Post-2020 Global Biodiversity Framework, builds upon the Aichi Biodiversity Targets. Specifically, it aims to ensure that by 2030, at least 30% of land and sea areas are conserved through effectively managed, ecologically representative, and well-connected systems of protected areas and other effective area-based conservation measures.
← 15. Bosnia and Herzegovina is a specific case as it only has access to the sea through a narrow strip of land near the town of Neum, which gives it a small coastline along the Adriatic Sea.
← 16. In particular, a reduced VAT rate of 6% applies to accommodation and catering services, as well as an exemption from the infrastructure levy for facilities that operate certified agritourism. In addition, certified agritourism structures benefit from a reduced profit tax rate of 5%. To date, around 50 establishments have received provisional and final certificates recognising their commitment to these standards.
← 17. Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (recast).
← 18. “Improvement of registers of discharge and transfer of polluting substances (PRTR) in the countries of the Western Balkans and the Republic of Moldova’’, implemented from 2021 to 2023 by the Umwelt Bundesamt (UBA), Germany's main environmental protection agency.
← 19. The three other economies, Albania, Bosnia and Herzegovina and Kosovo, are currently in the process of drafting their S3.
← 20. No data available for Albania and Kosovo.