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Internal CO2 pricing can help fund Balkan energy transition – NGO

Internal CO2 pricing can help fund Balkan energy transition – NGO

Date: December 5th 2022

Author: Maja Žuvela

Category: En.vision

Topic: Electricity , Coal , Energy policy , CO2 emissions , Economy , Ecology , En.vision

Domestic CO2 pricing schemes could help Western Balkan countries accrue at least EUR 2.8bn annually to help fund their decarbonisation, according to a report released by the NGO Bankwatch on Monday.

The report states that the region could generate this amount of revenue even with a moderate carbon price of EUR 50 per tonne, which is well below current EU carbon prices.

Bankwatch states that the Western Balkans exported 88 TWh of electricity, or nearly 13% of its output, to the EU between 2011 and 2020. Over 60% of this electricity was generated from coal and the report notes that Western Balkan countries would lose over EUR 500m annually to the EU budget if the Carbon Border Adjustment Mechanism (CBAM) enters into force in 2026, as those electricity exports would be taxed by the EU and not by Western Balkan governments themselves.

Countries with higher exports or emissions, or a higher percentage of fossil fuels in their power generation, such as Bosnia and Herzegovina (BiH) and Montenegro, would be hardest hit by CBAM. Besides electricity, iron, steel, cement, fertiliser and aluminium exports will also be taxed to cover the harmful emissions released in their production.

“Governments must take the initiative now if they want to use carbon pricing to fund the transition instead of letting the EU reap the revenues from CBAM,” says Bankwatch’s Pippa Gallop, one of the report’s co-authors.

Just Transition Fund

The report recommends that the EU increase the momentum of the energy transition, especially through the creation of a dedicated Just Transition Fund and by ensuring a stringent CBAM which it argues will persuade decision makers in the region to introduce their own carbon pricing and improve compliance with EU energy, competition and environmental legislation.

The report also states that the EU needs to ensure that the Energy Community Treaty is bolstered by including penalties.

Ioana Ciuta, another of the report’s co-authors, says that the economic reality of coal production under stricter environmental standards and with CO2 pricing should prompt the region to design transition plans that can be funded through the Just Transition Fund.

“Such a fund is crucial to help Western Balkan countries end their reliance on coal and address the social and economic impacts of such a change,” she adds.

To date only Montenegro has introduced a cap-and-trade scheme encompassing three large industrial facilities. However, this scheme is currently being revised as part of new climate change legislation.

In 2021, North Macedonia’s power utility ESM pledged to start counting its carbon costs by using EU ETS prices and taking them into account when making investment decisions. BiH’s largest power utility EPBiH has similarly started calculating carbon costs internally.

However, Bankwatch points out that while these are welcome first steps, they should in no way serve as a substitute for a binding, government-regulated carbon pricing scheme.



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