Lack of carbon targets could limit access to EU funding in Western Bal

Lack of carbon targets could limit access to EU funding in Western Balkans

Date: May 27^th 2021

Topic: Electricity , Natural gas , Renewables , Coal , Energy policy , CO2 emissions , Energy Efficiency

Western Balkan countries could face problems accessing funds from the EU’s economic and investment plan for the region if they do not set clear greenhouse gas reduction targets, said Agora Energiewende on Thursday.

Without clear greenhouse gas reduction and renewable energy targets at a national and/or regional level, it will be challenging to link the Western Balkans investment plan to any credible decarbonisation action plan, said Sonja Risteska from Agora Energiewende in a webinar on Thursday.

North Macedonia is currently the only country in the region with a coal phase-out plan, while other countries in the region are intending to gradually reduce their coal use up to 2050, following the commitments they signed as part of the Sofia declaration.

As part of the economic and investment plan for the Western Balkans, the European Commission recently committed to mobilising up to EUR 9bn of funding for flagship investments in the areas of transport, energy, and the green and digital transition.

Although the plan puts a strong emphasis on decarbonisation and clean energy, it still envisages flagship investments in fossil natural gas. According to Risteska, this carries the risk of creating stranded gas assets amid the European Commission's aim to move very quickly to a net zero EU target.

Additionally, it is still unclear if the operational programmes to be financed through the plan will be directly linked to the new EU 2030/2050 climate targets.

The problem of financing the energy transition in the Western Balkan region was also the focus of much discussion at the recent SET Trebinje conference.

Faced with the prospect of the EU’s carbon border adjustment mechanism (CBAM) and the rising cost of CO₂ emissions, power utilities said that the region needs more understanding and help from the EU to phase out coal.

According to a study recently commissioned by Agora Energiewende, closing existing lignite plants by 2040 makes economic sense. This study also concluded that lignite generation would be more strongly impacted by the emission trading system than by the CBAM, while the latter would reduce incentives for export-oriented gas generation.