The Western Balkans’ heavy reliance on coal-fired power could lead to a significant economic setback when the European Union’s new carbon border adjustment mechanism (CBAM) comes into effect next year. The eco-tariff will place a levy on carbon-intensive imports, making electricity exports from the region more costly.
Coal accounts for between 60% and 95% of power generation across the region, with 60% of electricity exports heading to the EU. With close economic ties to the bloc, countries like Bosnia and Herzegovina could face annual revenue losses exceeding €220 million ($231.99 million), according to CEE Bankwatch.
While some analysts see CBAM as an incentive for the Western Balkans to accelerate their green transition, a lack of renewable energy investment and continued government subsidies for aging coal plants have stalled progress. Many governments are now seeking delays or exemptions, but these would require substantial clean energy investments or carbon pricing reforms that are unlikely to be implemented in time.
Switching to renewables presents significant social and economic challenges. Agora Energiewende estimates the cost of the energy transition at around €40 billion, excluding support for approximately 30,000 coal workers. Unlike EU nations, which have access to a €17.5 billion Just Transition Fund, the Western Balkans lack dedicated financial support to cushion the economic impact.
The EU has allocated up to €9 billion for the region’s green and digital transition, along with €20 billion through the Western Balkan Guarantee Facility. However, experts argue that this funding is insufficient to drive a just transition. Ultimately, Western Balkan nations must take the lead in implementing energy reforms, as external support alone will not be enough.
