The economies of the Western Balkans have set ambitious climate targets, aiming to reach carbon neutrality by 2050. To succeed, the region needs to transform its energy sector, which produces almost 50% of its electricity from coal, and encourage more efficient use of energy. Based on a detailed inventory of energy subsidies and support measures in the region, this report explores effective pathways for a green energy transition, integrating the economic and social perspectives.
Between 2018 and 2023, the economies of the region provided EUR 5.8 billion in transfers and credit to its energy sector, mostly to fossil fuels, sustaining lower electricity prices than found in other European economies. Allowing energy prices to better reflect costs and market conditions would reduce the need for direct subsidies, mitigate fiscal risks, foster competition, and free up financing for a green transition. Co-ordinated energy sector, fiscal and social protection reforms can help ensure that people are protected throughout the transition, and that firms, workers and consumers are able to adjust to it, so that Western Balkan economies can make the most of a greener future.
