Reducing carbon intensity is a top priority for Bosnia and Herzegovina, which aims to cut greenhouse gas emissions by 41.2% by 2030 compared to 1990 levels. Energy market reform can help generate the conditions and free up the resources necessary for this transition. Currently low energy prices and related subsidies benefit better off households the most and hinder efficiency and an effective transition. This chapter provides an inventory of such measures and develops scenarios to analyse the impacts of energy market reform on prices, households, and the economy. It also analyses social transfers and how existing programmes could be enhanced to mitigate the negative social consequences of reform. Drawing on the analytical results and on peer-learning exchange with key stakeholders in Bosnia and Herzegovina, the chapter outlines five key policy recommendations for energy sector reform in Bosnia and Herzegovina: converge towards market prices, prepare the system for carbon pricing, promote the democratisation of energy production, address energy poverty and protect vulnerable consumers, and strengthen NECP implementation at all governance levels.
Energy Prices and Subsidies in the Western Balkans
Abstract
Reducing the carbon intensity of the energy sector is a top priority for Bosnia and Herzegovina, which aims to achieve an ambitious 41.2% reduction in greenhouse gas (GHG) emissions by 2030 compared with 1990 levels. The Integrated Energy and Climate Plan (NECP) will be a cornerstone of its decarbonisation effort. Despite these commitments, the economy remains heavily reliant on solid fossil fuels, which accounted for over 53% of electricity generation in 2023. The combination of coal-based electricity and hydroelectric power has enabled Bosnia and Herzegovina to meet domestic electricity needs while also exporting significant amounts of electricity, with net exports amounting to 4 231 GWh in 2023 and averaging 29.5% of domestic supply between 2018 and 2022. Electricity exports, which totalled around EUR 575 million in 2022, have played a vital role in sustaining Bosnia and Herzegovina’s domestic energy sector. However, environmental concerns and the approaching implementation of the EU Carbon Border Adjustment Mechanism (EU CBAM) – which is set to take effect in 2026 after the 2023-25 transitional period and which could impose significant costs on coal and electricity exports – highlight the urgent need for substantial investment in low- and zero-emission energy sources.
Reforming how the energy sector is currently supported, while minimising economic, fiscal and social disruption, is crucial for advancing Bosnia and Herzegovina’s decarbonisation goals. The existing energy system is characterised by regulated electricity prices, which are artificially low. This creates substantial indirect support for consumers. Total induced support to customers through regulated prices amounted to EUR 3.4 billion in the period 2018-23, the second-highest (after Serbia) in the Western Balkans region. Low prices also discourage investment in renewable energy and energy efficiency while undermining critical revenue streams needed for future development. To maintain low energy prices and support energy consumption, Bosnia and Herzegovina’s energy sector has also relied on subsidies and other support measures, which impose significant direct budgetary costs.
While energy sector reform focusing on prices and subsidies is politically challenging, it holds significant potential for transformative change in Bosnia and Herzegovina. Adjusting energy prices and reforming subsidies will have social implications, making it necessary to implement targeted social support measures such as cash transfers or energy vouchers, to mitigate negative impacts. At the same time, reform can foster a more competitive energy market, drive investments in diversification and energy efficiency, and create stronger incentives for sustainable energy practices. Reassessing subsidies could also free up vital resources for other priorities.
Future energy sector reforms in Bosnia and Herzegovina must account for the economy’s complex and decentralised governance structure. Energy, fiscal, and social protection policies in Bosnia and Herzegovina primarily fall under the jurisdiction of individual administrative authorities, including the two entities – the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS) – as well as the Brčko District, requiring tailored policy approaches. The majority of total induced support for consumers delivered through price regulation was concentrated in the FBiH. Trends indicate that the electricity sector is liberalising more rapidly in RS, which also implements fewer fiscal and credit support measures than the FBiH (as registered by the Inventory of Energy Subsidies and Support Measures in the Western Balkans presented in this report). These differences in the pace of subsidy reform and energy market liberalisation Bosnia and Herzegovina can serve as a valuable source of policy learning. Greater co-ordination and exchange of experiences between individual administrative authorities could help identify effective approaches, avoid common pitfalls, and support a more coherent energy transition across Bosnia and Herzegovina.
By combining an inventory of energy subsidies and support measures with household and macro-economic data analysis, the analysis in this chapter offers valuable insights to inform Bosnia and Herzegovina’s energy policy processes. The inventory offers a regional perspective on energy sector support, including price mechanisms. Macro- and micro-modelling then evaluate the economic and social impacts of price changes driven by energy reforms and external factors, providing a comprehensive assessment of their impacts on the economy and the population.
Inventory of energy subsidies and support measures for Bosnia and Herzegovina
Current support to the energy system in Bosnia and Herzegovina is costly:
Keeping energy prices low resulted in EUR 3.4 billion of induced support for consumers between 2018 and 2023. Price regulation generated the highest consumer support in the FBiH, totalling approximately EUR 2 billion. RS accounted for around EUR 1.2 billion and the Brčko District contributed an additional EUR 92 million.
The energy sector received EUR 95.3 million in fiscal support during the period 2018-23, with all of the schemes being concentrated in the FBiH and most of the support going to energy producers, especially to hydrocarbons.
Feed-in tariffs were effective in providing reliable revenue streams when domestic energy tariffs were higher than market tariffs, allowing for long-term project financing of key renewable energy production projects. When the energy crisis drove up market prices, selling at fixed prices resulted in an opportunity cost for renewable energy producers of around EUR 57 million in 2021-22.
Possible ways forward: Policy scenarios for inclusive energy sector finance reform in Bosnia and Herzegovina
Adjusting regulated electricity prices towards market-driven outcomes would significantly reduce the need for support in the electricity sector, thereby freeing up resources to fulfil investment needs. Prices for users of the universal service supplier (USS) are significantly lower than they would be under market circumstances. Prior to the energy crisis of 2021-22, they were 28% lower. On average, they were still almost half of market-consistent prices in 2023. Modelling results suggest that shifting regulated prices towards market-consistent levels would have relatively modest impacts on the productive side of the economy. A 70% upwards shift would lead to a 0.3% contraction of output. This reflects the ability of households and firms to substitute towards capital and other forms of energy. It is also linked to the fact that, despite a large share of electricity being traded under regulated terms (62% in 2023), this share is essentially halved (29%) when considering electricity as a production input.
Price adjustments would largely affect households in Bosnia and Herzegovina but could also generate funds that could be mobilised to compensate those in need. Despite the ability to shift to other sources of energy and consumption, household consumption would suffer from such large increases in electricity prices. A 70% price increase would drive a 2.3% fall in total household consumption, while also triggering a significant increase in the share of households at risk of energy poverty. Estimates suggest that fully compensating those at risk of poverty from such a price increase (70%) would necessitate up to EUR 44 million in transfers. As this accounts for only 13% of the total additional income that would be generated for the sector, a combined energy and social protection reform can pay for itself. Mobilising revenue in the energy sector for targeted support could be achieved by dividend distribution, given that the state owns the major utilities in Bosnia and Herzegovina.
New support mechanisms will be necessary to mitigate the impacts of price increases. Broad use of low electricity prices to transfer value to households in Bosnia and Herzegovina provides value to many who do not need it: the richest 20% receive 28% of the induced transfer, while the poorest 20% receive only 14%. Providing support through targeted transfers would be a more cost-effective solution. As they are too narrowly targeted and insufficiently generous, existing targeted income support programmes (e.g. permanent financial support) are not adequate to mitigate the wide impacts of price increases. Even for a 10% price increase, financial support would need to increase by 75% to compensate the poor. Moving to market-consistent prices would require more than a tenfold increase in financial support budgets to compensate the poor. Reforming existing energy subsidies can be a better starting point but they would need to be transformed to allow price signals to encourage energy efficiency and energy savings, while better targeting those in need.
Policy recommendations for the energy sector in Bosnia and Herzegovina
Bosnia and Herzegovina should gradually align electricity prices with market rates. To support the green transition, attract investment and ensure financial sustainability in the energy sector, Bosnia and Herzegovina needs to gradually align electricity prices with market rates, particularly for households. Between 2018 and 2023, households benefited from EUR 2.6 billion in regulated price support, accounting for 76% of all price-induced support. A gradual price increase – of around 8% annually – is recommended to allow for targeted protective measures for vulnerable consumers. Effective public communication is crucial to gaining acceptance for price adjustments. Drawing from international experiences, clear and transparent messaging on price increases and their benefits, as well as accompanying social support measures, will help ensure public buy-in and minimise resistance to reforms.
To secure energy supply, Bosnia and Herzegovina needs to enable decentralised renewable energy production. Strengthening decentralised energy production and grid modernisation are essential to expanding renewable energy access. Bosnia and Herzegovina has introduced legal provisions for prosumers and renewables auctions, but technical and regulatory barriers remain. These include outdated distribution grids ill-equipped to handle decentralised energy flows, complex and lengthy permitting procedures, capacity limitations for prosumers, and the absence of harmonised secondary legislation across entities. Investments in grid modernisation and smart technologies (e.g. dynamic pricing), coupled with clear distribution procedures, would support greater renewable energy integration. In parallel, promoting the development of renewable energy communities (RECs) can foster grid use in a decentralised manner and lead to greater and greener energy production.
To make sure that the energy transition is just and fair, Bosnia and Herzegovina will need to address energy poverty. Currently, 27.7% of households allocate more than 10% of their income to electricity and heating. Some estimates suggest that as many as 69% face energy poverty risks. The economy must define clear criteria for identifying energy-poor households and increase financial assistance through direct transfers, social tariffs and targeted energy efficiency programmes. Non-financial support, such as incentives for energy-efficient retrofits and expanding RECs, can further help reduce long-term energy costs for vulnerable groups.
As part of the just transition process, Bosnia and Herzegovina needs to prepare for carbon pricing and the effects of the EU CBAM. With the EU CBAM set to take effect in 2026, Bosnia and Herzegovina must take steps to mitigate its impacts on energy-intensive exports. Without carbon pricing measures, industries such as electricity and metals could face significant cost increases, threatening competitiveness. Establishing an emissions trading system (ETS), aligned with EU carbon pricing rules, will help reduce financial risks and ensure compliance. Additionally, targeted business support – such as temporary free allocation of emission units and reinvesting ETS revenues into decarbonisation efforts – will ease the transition for affected industries.
Finally, strengthening implementation of the NECP can support Bosnia and Herzegovina in attaining its climate objectives. The NECP will be central to Bosnia and Herzegovina’s decarbonisation strategy, but its success depends on improved governance, co-ordination and structured implementation timeline. At present, Bosnia and Herzegovina’s fragmented governance system creates regulatory inconsistencies among different entities, delaying policy execution. Strengthening intergovernmental co-ordination, investing in institutional capacity-building and setting clear implementation deadlines will improve efficiency. A well-defined timeline will also enhance investor confidence, optimise resource allocation and ensure compliance with international climate commitments, positioning Bosnia and Herzegovina for a smoother energy transition.
How to read this chapter
This chapter is structured into four sections. It begins by examining Bosnia and Herzegovina’s climate commitments and its energy system. It then analyses public support to the energy sector using the Inventory of Energy Subsidies and Support Measures for the Western Balkans. The third section develops reform scenarios, assessing the potential impact of energy reforms on prices, household budgets, employment, and fiscal space. The final section presents key policy recommendations for energy sector reform, based on the findings and outcomes of the peer-learning workshop held in Bosnia and Herzegovina.
Bosnia and Herzegovina has made substantial commitments on energy and climate
The NECP for Bosnia and Herzegovina will become the cornerstone of the economy’s decarbonisation efforts. The plan envisions the gradual decarbonisation of the energy sector, ensuring that citizens have safe, reliable and affordable energy while moving toward carbon neutrality by 2050. The document outlines a commitment to gradually phase out fossil fuels, transition to renewable energy sources and achieve a 41.2% reduction in GHG emissions compared with 1990 levels. It also includes the decommissioning of 410 megawatts (MW) of coal power plants (although no specific phase-out date is mentioned) and a commitment not to construct new coal power plants. The NECP also outlines the economy’s intention to implement the EU Emissions Trading System (EU ETS) to mitigate the financial impacts of the forthcoming carbon border tax (MOFTER, 2023[1]). Eliminating subsidies for electricity generated from fossil fuels is also included in the NECP as one of the priority measures.
The final draft of the NECP has been prepared and is currently awaiting adoption. The NECP will provide the necessary policies and measures for further decarbonisation and define the targets for 2030 with projections until 2050. The first draft was presented to the public and submitted to the Energy Community Secretariat (ECS) for review and feedback in June 2023. Finalisation of the documents was carried out in 2023 and 2024. The Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina cooperated in this process with the competent institutions of the entities and the Brčko District, and in accordance with the prescribed deadlines, the final draft of the document was submitted to the Energy Community Secretariat in June 2024. The final draft of the NECP was prepared on the basis of the recommendations of the Secretariat of the Energy Community, as well as comments from domestic institutions and the interested public. The NECP, together with the Strategic Environmental Impact Assessment, has been submitted to the competent entity Ministries and the Brčko District of Bosnia and Herzegovina for opinions and comments. In parallel with the preparation of the NECP, drafts of the entity Energy and Climate Plans for the period up to 2030 have been prepared. Following the preparation and adoption of the entity Energy and Climate Plans and the pertinent consultation process, the NECP will be submitted to the Council of Ministers of Bosnia and Herzegovina for adoption. Taking into account the governance structure of Bosnia and Herzegovina, the NECP will be modular and will reflect strategic framework commitments at the level of Bosnia and Herzegovina.
In 2018, Bosnia and Herzegovina adopted the Framework Energy Strategy 2035 as a key strategic document for its energy sector, serving also as a basis for the design of Bosnia and Herzegovina’s NECP. The strategy outlines priorities and goals related to clean technologies, energy efficiency and renewable energy. It also provides guidelines for the electricity sector, the coal sector, renewable energy sources, oil and petroleum products, natural gas, district heating, and energy efficiency. The Framework Energy Strategy identifies five key priorities: efficient use of resources; secure and affordable energy; energy efficiency; energy transition and environmental responsibility; and development and harmonisation of regulatory and institutional framework (OECD, 2022[2]). As part of its commitments under the strategy, Bosnia and Herzegovina pledged to achieve significant reductions in emissions from large combustion plants by 2028 (all compared with 2014 levels). These targets include a 95% reduction in sulphur dioxide (SO₂) emissions, a 67% reduction in nitrogen oxide (NOₓ) emissions, and an 88% reduction in dust emissions. Bosnia and Herzegovina also aimed to achieve a 40% share of renewable energy sources in gross final energy consumption by 2020, with sector-specific targets of 52.4% in the residential sector and 10% in the transport sector. By 2020, it reported a renewable energy share of 39.84% in gross final energy consumption, including 56.6% in heating and cooling. However, less than 1% of transport energy was from renewables and biofuels (MOFTER, 2018[3]).
The current energy mix in Bosnia and Herzegovina continues to be largely based on fossil fuels with important impacts on people and the environment
Bosnia and Herzegovina relies heavily on coal for electricity generation, primarily produced by outdated thermal power plants (TPPs). With more than half of its electricity coming from coal, it is one of the most coal-dependent economies in the Western Balkans (Figure 8.1 – Panel A). Its five TPPs have a combined installed capacity of 2 065 MW. Four plants are owned by state-owned electricity companies Elektroprivreda Republika Srpska (ERS) and Elektroprivreda Bosne i Hercegovine (EPBiH). ERS owns the Ugljevik and Gacko plants (combined capacity of 600 MW) while EPBiH operates the Tuzla and Kakanj plants (1 165 MW). The fifth plant, Stanari, located in RS, is owned by the UK-based EFT Group and is the only modern TPP in the economy. By the end of 2024, Bosnia and Herzegovina’s remaining coal plants will range in age from 36 to 58 years, reflecting the outdated nature of its energy infrastructure. With 68% of its electricity produced from coal between 2019 and 2023, RS relies more heavily on coal than the FBiH at 54% (Figure 8.1 – Panel B).
Hydropower is the leading source of renewable electricity generation in Bosnia and Herzegovina, while primary solid biofuels also play an important role. In 2023, hydropower plants (HPPs) accounted for 44% of total electricity generation in the FBiH and 38% in RS (Figure 8.1 – Panel B). Biofuels (such as fuelwood) play a smaller role in electricity generation but are important for heating and cooking. In 2022, primary solid biofuels (primarily fuelwood) accounted for 75% of the economy’s renewable energy supply and 18% of its total primary energy supply (TPES). Despite biomass being classified as a (traditional) renewable energy source under the 2009 EU Renewable Energy Directive (RED) (2009/28/EC), the use of outdated equipment (e.g. stoves and ovens) and inefficient practices (e.g. burning undried wood) make it a major contributor to emissions of particulate matter below 2.5 microns (PM2.5) in Bosnia and Herzegovina, driving high levels of air pollution (OECD, 2022[2]).
Source: A. SERC (2024[4]), Report on activities of the State Electricity Regulatory Commission 2023, https://www.derk.ba/en/godinji-izvjetaji-derk-a; B. FERK (2019[5]), Regulatorna komisija za energiju u Federaciji Bosne i Hercegovine-FERK, https://www.ferk.ba/; FERK (2024[6]), Izvještaj o radu FERK-a za 2023. Godinu, https://www.ferk.ba/; RERS Regulatorna komisija za energetiku Republike Srpske (2023[7]), https://reers.ba/; RERS (2019[8]), Izvještaj o radu Regulatorne komisije za energetiku Republike Srpske za 2018. Godinu, https://reers.ba/.
The current energy system in Bosnia and Herzegovina creates high levels of carbon dioxide (CO2) and other harmful emissions. Per capita, CO2 emissions in Bosnia and Herzegovina are 20% higher than the EU average and 43% higher than the Western Balkan average. Critically, they have increased by 13% since 2010. The CO2 emissions per unit of GDP are almost three times the EU average and 2.5 times the OECD average (World Bank, 2025[9]). Despite a National Emissions Reduction Plan (NERP), set in 2015 to meet EU pollution standards, Bosnia and Herzegovina consistently breaches these emission limits, particularly for SO2 and dust. Recent extensions of the lifetime (until 2028) of two highly polluting TPPs raises concerns about compliance with EU environmental and state aid regulations. For this reason, the ECS has initiated a dispute settlement procedure against Bosnia and Herzegovina (Ciuta, Gallop and Pehchevski, 2024[10]).
Plans for substantial wind and solar energy expansion are underway, but their current contributions to the energy mix remain minimal (Figure 8.1 – Panel B). Bosnia and Herzegovina holds the second-highest wind energy potential in the Western Balkan region, trailing only Serbia. Estimates suggest total wind potential of 2 000 MW, with 900 MW deemed technically and economically viable. (International Trade Administration, 2022[11]; IRENA, 2020[12]; JICA, 2010[13]; Foreign Investment Promotion Agency, 2015[14]). One primary challenge for wind and solar development is the lack of long-term acceptable Power Purchase Agreements (PPAs), which are essential for securing financing by providing investors with the financial certainty needed to commit to renewable energy projects. A second is the lack of transmission infrastructure and of interconnections with neighbouring economies. In recent years, FBiH has made material progress. With financing from the EBRD, EPBiH is advancing the development of the 50 MW Gračanica solar power plant, which is being built on a rehabilitated mine site formerly used for coal exploitation (EBRD, 2024[15]). while RS has been announcing new capacity plans, though these projects have not reached commissioning. In addition, FBiH is drafting a renewable energy auction plan to allocate (between 2025 and 2030) 240 MW for large wind and solar projects and to subsidise 61.2 MW of smaller renewable facilities (Spasic, 2024[16]).
Natural gas plays a minor role in Bosnia and Herzegovina’s energy mix, accounting for just 3% of the economy’s energy supply. Notably, this level is significantly less than in Serbia (14.9%) or North Macedonia (13.3%) (Eurostat, 2025[17]). Natural gas is almost entirely absent from electricity generation, accounting for just 0.03% of total electricity produced in 2022. Instead, it is primarily used by industry (47% of all natural gas consumption), households (28%) and heat generation (21%) (BHAS, 2024[18]). However, household consumption is constrained by the limited gas distribution network, which is developed in only a few major cities (Gallop et al., 2021[19]). Bosnia and Herzegovina relies entirely on imports of natural gas from Russia via the TurkStream pipeline, following a shift (in 2021) from a previous route through Hungary and Ukraine, which was also carrying the gas from Russia. With no domestic production or natural gas storage facilities, both entities in the economy remain dependent on long-term supply contracts with Gazprom, under which prices are adjusted quarterly (FENA, 2022[20]; SEE Energy News, 2022[21]; Sarajevo Times, 2023[22]). Plans for a new interconnector with Croatia, which would enable imports from the liquefied natural gas (LNG) terminal on Krk Island, have been stalled for more than a decade due to disagreements between the two entities (Wankiewicz, 2023[23]).
Bosnia and Herzegovina’s status as a major energy exporter could be challenged by the European Union’s implementation of the EU CBAM
Bosnia and Herzegovina is the largest net electricity exporter in the Western Balkan region, with net exports averaging 29.5% of domestic supply between 2018 and 2022 (Figure 8.2). In 2022, electricity exports totalled approximately EUR 575 million, accounting for 5.9% of total merchandise exports and 2.5% of GDP. However, the variability of hydropower often leads to significant fluctuations in electricity exports. In 2022, the economy generated 16 381 gigawatt hours (GWh) of electricity, exporting 6 856 GWh – primarily to Croatia, Montenegro and Serbia – while importing 3 828 GWh. Electricity was Bosnia and Herzegovina’s most exported product in 2022 (OEC, 2023[24]).
Net exports as % of domestic supply, 2019-23 average
Source: Calculations based on Eurostat (2025[17]), Complete energy balances, https://ec.europa.eu/eurostat/databrowser/view/nrg_bal_c/default/table?lang=en&category=nrg.nrg_quant.nrg_quanta.nrg_bal.
In the last decade, Bosnia and Herzegovina’s net energy exports showed a fluctuating but overall positive trend. The share declined to its lowest point in 2017, falling below 15%, but rebounded sharply in the following years, peaking at nearly 35% in 2021. Although there was a temporary decline in 2022, the trend recovered in 2023, with net exports again making up over 30% of domestic supply (Figure 8.3).
Net exports as a share of domestic supply
Source: Authors' elaboration based on BHAS (2025[25]), Energy Statistics, https://bhas.gov.ba/Calendar/Category?id=26&page=2&statGroup=26&tabId=0.
The EU CBAM, a carbon pricing system for imports designed to prevent carbon leakage, could further impact Bosnia and Herzegovina’s exports. Phased in between 2023 and 2026, the EU CBAM will charge for the carbon emissions of products entering the European Union. Due to its reliance on coal-fired power plants, particularly in electricity exports, this could increase costs for Bosnia and Herzegovina. A simulation using the World Bank’s Multi-Regional Input-Output MINDSET Model projects that the economy’s electricity exports could face the largest relative losses under EU CBAM, with a 15% reduction in output. The model shows that the energy-intensive basic metals industry would experience the second-largest losses (World Bank, 2024[26]).
Bosnia and Herzegovina is working to implement an ETS to mitigate EU CBAM-related costs, but the timeline is tight. In collaboration with the ECS, Bosnia and Herzegovina aims to establish carbon pricing in 2025 to avoid EU CBAM taxes. The International Monetary Fund (IMF) considers this target unlikely due to limited progress and the challenges of centralising competencies at the state level (IMF, 2024[27]).
Price regulation and export earnings underpin low electricity prices and current energy status in Bosnia and Herzegovina
Electricity prices charged to households in Bosnia and Herzegovina are low in international comparison. Household electricity prices are about three times lower than the EU average. As in other Western Balkan economies, electricity prices for businesses are higher than for households but are also low in comparison to average prices in the EU (Figure 8.4).
Electricity prices for medium-sized household and non-household consumers, first semester of 2024, EUR/kWh
Source: Eurostat (2025[28]), Electricity prices for non-household consumers - bi-annual data (from 2007 onwards), https://ec.europa.eu/eurostat/databrowser/view/nrg_pc_205/default/table?lang=en&category=nrg.nrg_price.nrg_pc; Eurostat (2025[29]), Electricity prices for household consumers - bi-annual data (from 2007 onwards), https://ec.europa.eu/eurostat/databrowser/view/nrg_pc_204/default/table?lang=en&category=nrg.nrg_price.nrg_pc.
Despite low prices, electricity bills are a burden for many households and energy poverty remains a reality
The cost of electricity for households, as a share of income, is relatively high, making price increases politically sensitive. In Bosnia and Herzegovina, an annual consumption of 5 000 kilowatt hours (kWh) costs, on average, 7.1% of GDP per capita, compared with 7.9% in the Western Balkans and just 4.5% in EU countries (both including taxes and levies) (Figure 8.5). This implies a higher cost burden on households in Bosnia and Herzegovina. As such, raising electricity prices would impose a significant social cost, which explains the strong political resistance to such measures.
Average price (including taxes) for 5 000 kWh for households (% of GDP per capita), 2024
Note: Price data is S1-2024, GDP data is for 2023 from WDI.
Source: Authors’ elaboration based on price data from Eurostat (2025[29]), Electricity prices for household consumers - bi-annual data (from 2007 onwards), https://ec.europa.eu/eurostat/databrowser/view/nrg_pc_204/default/table?lang=en&category=nrg.nrg_price.nrg_pc and GDP per capita data from World Bank (2025[9]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
Energy poverty remains a concern in Bosnia and Herzegovina. Analysis conducted as part of this project, utilising household budget survey data (BHAS, 2024[30]), reveals that 27.7% of households allocate more than 10% of their total expenditure to electricity and heating, a common metric for measuring energy poverty (see Chapter 4). Other studies report even higher figures for energy poverty. For instance, Muftić Dedović et al. (2025[31]) found that 96.5% of retiree households experience moderate to high levels of energy poverty. Groups more vulnerable to energy poverty include pensioners, low-income households, single-parent families and persons with disabilities. These households often live in older, inefficient buildings and rely on inadequate heating systems, such as coal or wood stoves, which are both expensive and harmful to health and the environment. Without the means to upgrade their homes or appliances, many are forced to limit energy use or face high energy bills, pushing them further into poverty.
A dedicated gender and energy analysis carried out as part of this project shows that different groups face distinct challenges in accessing and using energy. In Bosnia and Herzegovina, gender roles distinctly shape household energy-related tasks, with men typically handling procurement (e.g. wood, pellets) and structural investments (e.g. solar panels), while women manage administrative tasks and day-to-day energy-saving practices. Women face more barriers to accessing formal support but use child-related benefits more often, whereas men are better informed about energy efficiency subsidies (Box 8.1).
This project incorporates a gender perspective by examining how energy reforms are likely to impact men and women as consumers, workers and decision makers. To explore gender differences in energy consumption, access and responses to reforms, the study applied a qualitative research methodology, including focus group discussions and roundtables across the Western Balkans.
Specific to Bosnia and Herzegovina, based on seven focus groups (60 participants in total)1 conducted across Sarajevo, Banja Luka and Mostar, key findings reveal the significant role that gender plays in all three dimensions. Findings from the focus groups and desk research also provide a broader overview of gender’s role in shaping energy consumption, access to opportunities, decision making and energy poverty in Bosnia and Herzegovina. Key insights, as well as inputs from participants, include:
Men often shoulder the physically demanding tasks of acquiring and storing fuel, particularly solid fuels such as wood, due to the strength and effort these labour-intensive activities require.
Women tend to be more mindful of energy costs and take greater responsibility for managing daily household energy use.
Bosnia and Herzegovina was distinct among Western Balkan economies in that, across all focus groups, many participants (both men and women) identified saving money during the summer in advance for winter bills as their main coping strategy.
Women prioritise cutting other expenses to cover rising energy costs, focusing on avoiding heating and maintaining bill payments. For instance, women in Banja Luka and Sarajevo expressed that managing expenditures other than heating helps them cope with months in which heating expenditures are high. In contrast, men (as noted in Mostar) prioritise increasing income to handle energy price hikes, with saving money in advance as a secondary strategy.
Both men and women believe that women are more vulnerable in the cold and require more heating.
Men often focus on structural investments to improve energy efficiency, while women prioritise daily energy-saving measures, such as scheduling household tasks during cheaper electricity tariffs and reducing usage during peak tariff times.
“I can save money, my machine is always on when the electricity is cheap, and likewise I do the laundry and bathe on Sundays …” (Woman, Mostar)
While both men and women recognise the long-term benefits of greener energy, women tend to focus more on the immediate financial challenges and impacts on household budgets. In contrast, men emphasise the broader environmental benefits and the need for future investment, despite the higher initial costs.
"While green energy is good in theory, many families simply can’t afford to pay higher prices for their energy." (Woman, Sarajevo)
Women seem to have more access to social assistance. However, they frequently reported significant challenges in accessing formal support mechanisms due to administrative barriers and a lack of clear information. Men are generally more informed about subsidies related to upgrading houses and buildings and energy efficiency programmes, but they also often point to bureaucratic hurdles and insufficiency of support.
1. Participants were equally split between gender and by rural or urban residence. All were aged 18 or older, with about half falling between the ages of 25 and 55. Approximately half were employed full-time, while around 15% were self-employed, another 15% were unemployed, and the remainder were students or retirees.
To provide a basis for energy sector reform in Bosnia and Herzegovina and the Western Balkans, this report presents an Inventory of Energy Subsidies and Support Measures in the Western Balkans. The inventory aims to present evidence on the types and size of subsidies and support measures specific to the energy sectors of these economies. As such, it intends to raise awareness among policy makers in Bosnia and Herzegovina and in the region about the existing energy subsidies and support measures, and their potential impacts. This has been done by using an internationally recognised methodology to develop consistent and comprehensive descriptions of such schemes and provide robust estimates of their volumes. The systematic overview of energy subsidies and support measures is largely based on the OECD Inventory of Support Measures for Fossil Fuels (OECD, 2024[32]). Having an inventory of energy subsidies can also be a basis for reporting on Sustainable Development Goal (SDG) Indicator 12.c.1 “Amount of fossil-fuel subsidies per unit of GDP”, which sets a target to rationalise inefficient fossil fuel subsidies that encourage wasteful consumption.
Induced support to the energy sector in Bosnia and Herzegovina
Induced support for consumers: EUR 3.4 billion during 2018-23, most of it during the energy crisis
Provision of electricity at regulated tariffs set below market prices resulted in approximately EUR 3.4 billion in induced support to consumers between 2018 and 2023. This support is calculated as the difference between market prices – approximated using Hungarian Power Exchange (HUPX) prices1 – and the regulated tariffs in Bosnia and Herzegovina. The majority of this support (EUR 2.9 billion) was disbursed between 2021 and 2023, during the energy crisis (mirroring trends in other Western Balkan economies) (Figure 8.6 – Panel A). Within Bosnia and Herzegovina, most of the induced support benefited low-voltage (0.4 kV) customers, divided as EUR 2.6 billion for households and approximately EUR 636 million for small non-household consumers (Figure 8.6 – Panel B).
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
The electricity market in Bosnia and Herzegovina is partially regulated. Since 1 January 2015, all customers in Bosnia and Herzegovina have had the option to choose their electricity supplier on the market. Households and small non-household customers (0.4 kV) that do not select a market supplier may be served by the USS at regulated public supply prices, which are lower than market prices (SERC, 2024[4]). Across the economy, the majority of 0.4 kV customers (households and small non-household consumers) continue to opt for USS. In FBiH during the 2018-23 period, all 0.4 kV households were supplied under regulated prices. The share of regulated 0.4 kV non-household customers increased during the same period, including customers supplied by EPBiH and EP HZHB. Similarly, in RS, all 0.4 kV households are supplied by the public USS. However, unlike FBiH, the share of regulated 0.4 kV non-household customers in RS has steadily declined, dropping from 100% in 2018 to 36.6% in 2023.2 While most medium- and high-voltage customers operate in an unregulated market, the supplier of last resort (SLR) has in some cases supplied these customers. Procurement of energy to cover losses in the transmission system is managed and regulated at the national level by Independent System Operator in Bosnia and Herzegovina (ISO BIH) (Table 8.1).
Share of each market segment covered by regulated supply (%, annual)
Note: x not applicable (there was no SLR supply provided at the time).
Source: Authors’ elaboration based on the data collected by the energy regulators of Bosnia and Herzegovina.
Within Bosnia and Herzegovina, price regulation generated the highest induced support for consumers in the FBiH, amounting to approximately EUR 2 billion. Of this total, EUR 1.5 billion was provided through regulated electricity prices by EPBiH and around EUR 452 million by EP HZHB. In RS, price regulation generated induced support of approximately EUR 1.2 billion. The Brčko District accounted for an additional EUR 92 million (Figure 8.7).
2018-23 totals
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
Estimates of induced support based on average energy prices in the EU are similar to the baseline estimate. In the absence of alternative counterfactual prices, the average energy and supply price component in EU markets is used as the basis for an alternative reference price (see Chapter 3). Estimates of induced support over the period 2018-23 based on the alternative benchmark amount to EUR 2.9 billion in Bosnia and Herzegovina. The alternative estimate is 15% lower than the preferred baseline estimate but remains very sizeable. Induced support calculated using EU average prices is slightly higher than baseline estimates using HUPX-based reference prices in pre-crisis years, but lower in crisis years, reflecting the lower long-term volatility of the alternative reference price series (Figure 8.8). The series reflects the importance of wholesale markets and is indeed less volatile than HUPX DAM prices. The use of this series also has a number of limitations: first, it reflects not only wholesale markets but also price interventions across the EU, which makes it an imperfect candidate for a counterfactual market-based reference price; second, the available series from Eurostat does not allow the disaggregation of energy and supply prices.
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
Within the 0.4 kV customer segment, price differences have led to cross-subsidies. Across Bosnia and Herzegovina, non-household 0.4kV customers, such as small businesses, paid higher electricity prices than households during the period analysed. These price differences generated cross-subsidies amounting to EUR 140 million in 2018-23 (Figure 8.9 – Panel A). Most of the cross-subsidies (EUR 98.1 million) occurred in the FBiH, divided as EUR 76.5 million through electricity provided by EPBiH and EUR 21.6 million by EP HZHB (Figure 8.9 – Panel B).
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
Induced support for producers: Procurement of coal through favourable prices, feed-in tariffs, and feed-in premia have been key induced support mechanisms for electricity producers in Bosnia and Herzegovina
For coal-consuming utilities in the FBiH, procurement of coal at prices below market rates resulted in induced support amounting to EUR 54.2 million. Annually, EPBiH procured approximately 1.5 to 1.9 million tonnes (Mt) of coal for TE Kakanj and TE Tuzla, from seven dependent companies (owned mines) at prices ranging from BAM 50 to BAM 57 per tonne. These prices were adjusted yearly based on the coal’s calorific value, which varied depending on the quality provided by each supplier. The subsidy amount was calculated as the price gap between tender prices and prices from the dependent companies.
Feed-in tariffs support renewable energy producers in Bosnia and Herzegovina. Feed-in tariffs guarantee a purchase price for renewable generation projects, with aim to make them predicably profitable and thus encourage investment. As for other forms of induced support, the inventory calculates induced support through feed-in tariffs by comparing guaranteed prices and HUPX reference prices.
Until 2020, renewable energy producers in Bosnia and Herzegovina benefited from feed-in tariffs. Rising international energy prices in 2021-22 made the obligation to supply electricity at guaranteed domestic prices a significant opportunity cost for producers. Feed-in tariffs shielded privileged producers from market volatility while also preventing them from making windfall gains when prices were high. Over the period 2018-20, the feed-in tariffs generated positive induced support for producers of about EUR 70 million. The energy crisis shifted this dynamic, resulting in an opportunity cost of around EUR 57 million in 2021-23 for producers that remained in the system (Figure 8.10 – Panel A). Similar trends were observed across the Western Balkan region (Figure 8.10 – Panel B). The methodology used to calculate the induced support through feed-in tariffs explains why support is estimated to be negative.
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
Bosnia and Herzegovina has started to move away from feed-in tariffs to support renewable energy sources and toward more market-oriented support schemes. RS passed a 2022 law introducing auctions for market premiums, while FBIH adopted a similar law in 2023, with its first auction plan scheduled for 2025. These reforms mark a shift toward transparent, competitive mechanisms for supporting renewable energy. Due to their novelty, the inventory provides no estimates for the value of support for these schemes (Balkan Green Energy News, 2022[33]; Balkan Green Energy News, 2023[34]).
Fiscal support to the energy sector of Bosnia and Herzegovina
Bosnia and Herzegovina’s energy sector received EUR 95.3 million in fiscal support between 2018 and 2023 (Figure 8.11). All the fiscal support registered in the inventory of energy subsidies and support measures for Bosnia and Herzegovina was allotted in the FBiH and most was intended for petroleum products. Across the Western Balkan region more broadly, the level of fiscal support appears to correlate with energy export performance. Both Bosnia and Herzegovina and Montenegro, which have been significant energy exporters, provided relatively limited direct fiscal support in 2018-23.
Period totals
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
At EUR 48.7 million, public subsidies to energy companies were the highest form of fiscal support to producers in Bosnia and Herzegovina. Of this amount, EUR 33.3 million was to set up a special purpose transaction account to pay fees for establishing reserves of petroleum products. The Government of the FBiH, through the Federal Ministry of Energy, Mining and Industry, provided subsidies to Operator – Terminals of the Federation d.o.o. Sarajevo (OTF) to establish petroleum derivative reserves. The funds are used to purchase petroleum derivatives and to secure insurance, quality control, maintenance of storage facilities, and construction of new storage facilities as well as to cover the operating costs of OTF. These amounts were provided annually over the period 2018-23 at an average of approximately EUR 5.5 million. Other public grants included a financial transfer (EUR 10.3 million) from the Government of the FBiH to OTF’s subsidiary, NTF d.o.o. Ploče, for capital increase and support (EUR 5.2 million) to Energoinvest d.d. Sarajevo to pay for imports from Gazprom.
Another important form of induced support for producers in the FBiH includes uncollected taxes, social security contributions, concession fees, and other unpaid public revenues from state-owned coal mines (EUR 14.3 million). As these arrears represent unrealised budget revenues, they induce the government to borrow equivalent amounts from financial markets to balance its budget. The subsidy effect is calculated as the cost to the government of borrowing this amount, with actual costs determined using the yield on government bonds as the applicable rate for total arrears in a given year. The subsidy is calculated by applying the annual yield for government bonds to the outstanding concession fee arrears.
About EUR 106.7 million of intra-SOE transfers, in the form of write-offs, have been identified in Bosnia and Herzegovina, although they have not been included in the inventory. These are due to written-off debt of EPBIH to its subsidiary companies. Such transactions have not been included in the inventory to ensure comparability with other Western Balkan economies. If these transfers were considered, the total fiscal support in Bosnia and Herzegovina would more than double from EUR 95.3 million to EUR 201.7 million for the period 2018-22.
2018-23 totals
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
Support for consumers in Bosnia and Herzegovina amounted to approximately EUR 28 million over the period 2018-23. Of this, EUR 18 million was earmarked for support to vulnerable customers. This includes three programmes: reducing household electricity costs and promoting energy efficiency (EUR 9.2 million); subsidising electricity bills for socially vulnerable groups (EUR 7.8 million); and subsidising heating costs during the heating season (EUR 1 million). Another programme partially subsidised the natural gas price in the Sarajevo canton (EUR 7.9 million).
Understanding the distribution of financial support between fossil fuels and renewable energy in Bosnia and Herzegovina
Most of the induced support that arises through price regulation in Bosnia and Herzegovina is attributed to fossil fuels; in contrast, induced support from feed-in tariffs goes to renewables. Following the inventory methodology (see Chapter 3), support to production or consumption of electricity or heat is apportioned to fossil fuels and renewables on the basis of the production mix. Applying relevant shares of the domestic electricity mix to the induced support to consumers through price regulation shows that about EUR 2.1 billion went to fossil fuels and EUR 1.3 billion to renewables.
All induced support through feed-in tariffs goes to renewable energy, aiming to assist producers by guaranteeing a set price at which they can sell their electricity. When this guaranteed price exceeds the market price, the resulting support for producers is positive. Conversely, if the guaranteed price falls below the market price, this creates an opportunity cost for producers (Figure 8.13). Finally, procurement of coal at prices below market rates resulted in induced support for coal-consuming utilities in the FBiH, amounting to EUR 54.2 million (Figure 8.13).
2018-23 totals
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
Of total fiscal support of EUR 95.3 million, EUR 87.2 million can be allocated to fossil fuels. Of this amount, EUR 75.9 million was direct support: EUR 47.5 million for petroleum products; EUR 14.6 million for coal; and EUR 13.8 million for natural gas. The remaining amount (EUR 11.3 million) represents support for heating and electricity allocated to fossil fuels, calculated by applying the share of fossil fuels in Bosnia and Herzegovina’s electricity mix to the total support provided to heating and electricity. In contrast, support for renewable energy amounted to only EUR 8.2 million – less than one-tenth of the amount for fossil fuels. Direct fiscal support for renewables was passed through two key schemes: the Bitovnja wind farm project (EUR 1.1 million) and the environmental assessment of the Vlašić windfarm (EUR 300 000). Both were funded as grants by the Government of the FBiH. An additional EUR 6.8 million was allocated to renewable energy via schemes supporting heating and electricity (Figure 8.14).
2018-23 totals
Source: Authors’ elaboration based on the Inventory of Energy Subsidies and Support Measures in the Western Balkans.
Energy sector reform and the decarbonisation process in Bosnia and Herzegovina will need to balance energy security, economic efficiency, and the economic and social consequences of reform. Electricity prices in Bosnia and Herzegovina do not fully reflect production and supply costs. Moreover, the presence of low-price incumbents and the absence of an organised market are serious obstacles for the emergence of competitive suppliers in domestic wholesale and retail markets. Wholesale trade in Bosnia and Herzegovina is based on bilateral trade dominated by the three state-owned incumbent utilities (Energy Community Secretariat, 2024[35]), which makes the market less liquid and less transparent, making the entry of new actors riskier. Bosnia and Herzegovina’s draft NECP (MOFTER, 2024[36]) also recognises that the processes of decarbonisation and integration into regional energy markets will create upward pressures on prices.
This section draws on economic modelling to probe policy scenarios for the energy sector in Bosnia and Herzegovina, building on the Inventory of Energy Subsidies and Support Measures in the Western Balkans, presented in this chapter. The section starts with a description of the tools used; it then discusses the distributional impacts of low prices and moves on to examine policy scenarios.
Analysing the macro-economic impacts of potential energy sector reform in Bosnia and Herzegovina
Changes in energy markets could impact the economy widely. At the macro-economic level, changes in price regulation would trigger a transfer of value from consumers to the energy sector and to the state, through three means: increased tax receipts on energy consumption; increased tax receipts linked to increased profitability; and dividend payments linked to improved performance of SOEs. Different sectors and firms will be differentially impacted, depending on the energy intensity of their activities and their ability to shift energy consumption across sources of energy.
This report puts forward the use of macro-economic computable general equilibrium (CGE) modelling as a flexible tool to analyse impacts in individual economies across the Western Balkan region. This chapter relies on an instance of the POWER-CGE model developed for the case of Bosnia and Herzegovina, the BA-POWER-CGE mode. The model relies on a simplified version of the economy of Bosnia and Herzegovina and builds on a series of assumptions on the behaviour of various actors (see Chapter 4). It uses a 26-sector representation of the economy (at NACE section level). The baseline model reflects the dual nature of electricity markets in Bosnia and Herzegovina, with the market split into a fixed-price regulated segment (in which supply adjusts to meet posted demand) and an unregulated segment (in which prices adjust to clear the market). The regulated sector is in turn modelled as two separate “grids” serving respectively household and non-household regulated customers. This allows simulations to shift prices of each of the segments independently. The electricity supply to productive sectors comes from both regulated and deregulated markets. To determine the shares of electricity sourced by each productive sector at regulated prices, the shares of small firms (by employment) from official structural statistics were used, adjusted to match the share of electricity under regulated prices among non-household consumers (29% as of 2023) (BHAS, 2024[37]). Diverse technologies for electricity production are modelled as separate representative firms. The model is static, and the results are meant to represent new equilibrium situations after a policy or market shock has occurred.
To build a complete social accounting matrix for Bosnia and Herzegovina, the data for the CGE model were compiled using multiple sources. The usual starting point for such a dataset is input-output tables for the economy. As these are not available for Bosnia and Herzegovina, constructing the baseline dataset proceeded in two steps: first, gathering key flow variables from national and international sources and then using these to calibrate the split of regionally aggregated data from available global input-output data. Key economic indicators – including employee compensation, sector-level value added, gross fixed capital formation, and tax revenues – were sourced from the Agency of Statistics of Bosnia and Herzegovina (BHAS, 2024[18]). These were combined with energy balances from the same agency (BHAS, 2024[38]). Import and export data, categorised by sector, were sourced from the UN Comtrade Database (2024[39]). Additionally, the World Development Indicators (WDI) from the World Bank (2025[9]) provided data on net capital flows. IMF data were used for gross domestic savings and government deficit (IMF, 2024[40]). For capital stock values, data were drawn from the Penn World Tables (2024[41]). In parallel, all sectors were mapped and reconstructed to align with the NACE sectoral decomposition, ensuring compatibility across the model. These data were combined with the underlying database of the Global Trade Analysis Project (GTAP 11), which uses 2017 as the reference year (GTAP, 2023[42]). The GTAP database includes a global input-output matrix as well as social accounting matrixes for 160 regions (GTAP, 2023[42]). Since Bosnia and Herzegovina is included as part of a regional aggregate in the GTAP database, the social accounting matrix was built based on the national data gathered and this data was combined with the GTAP database to isolate Bosnia and Herzegovina from the regional aggregates to fill remaining data needs.
Distributional impacts of price regulation in Bosnia and Herzegovina
Analysing the distributional impacts of current price regulation and future reforms
Retail electricity prices for regulated firms and households in Bosnia and Herzegovina are relatively low and bound to increase under reform in the medium term. At present, low energy prices generate a transfer of value from the energy system to households and small firms. Given the prevalence of SOEs in the energy system in Bosnia and Herzegovina, taxpayers ultimately bear the cost. The distributional impacts of this implicit subsidy can be assessed through micro-simulation techniques, which also allow comparison of the impacts of low prices with those of key social protection instruments.
To analyse the effectiveness of social protection tools, this report relies on the Commitment to Equity (CEQ) framework. The CEQ framework provides a consistent analytical approach to assess the impacts of tax and transfer systems on inequality and poverty (see Chapter 5). The framework uses a micro-simulation model: individual taxes and transfers are calculated for each household in the sample and calibrated to aggregate administrative data3 or statistical estimates (Lustig, 2022[43]). In turn, these are used to define income concepts corresponding to different stages – from market to disposable and/or consumable income, depending on whether direct and indirect transfers are included. A key limitation of the approach for this exercise is that it does not rely on a model of demand – therefore it cannot account for example, for the fall in consumption of energy when prices increase.
Data for the distributional analysis in Bosnia and Herzegovina are based on the Household Budget Survey (HBS) for 2021/22 (BHAS, 2024[30]). Where available in the Western Balkan region, analysis was based on combining income data from the Survey on Income and Living Standards (SILC) with consumption data drawn from HBS surveys. However, SILC micro-data are not yet available for Bosnia and Herzegovina. The income data collected as part of HBS 2021/22 were deemed insufficient to apply the CEQ methodology in full. For this reason, distributional analysis is carried out with the tools and concepts of the CEQ methodology but relative to total consumption expenditure instead of income concepts.
Regulated prices in Bosnia and Herzegovina distribute benefits to many households that do not need them
As energy prices for all households have been kept low, the size of implicit subsidies has grown. Regulated tariffs were kept constant in the FBiH throughout the 2018-23 period. Following the request of regulated suppliers in the face of financial difficulties, they were increased in mid-2024. In RS, prices were increased on 1 January 2023 (after being kept constant since 2016), which coincided with the removal of seasonal price differences and the introduction of block tariffs for household customers. In contrast, in the Brčko District, where the electricity supplier (Komunalno Brčko) purchases electricity in the open wholesale market to supply its customers, prices increased significantly during the period. Notably, average prices for USS increased by 29% in 2022 (SERC, 2024[4]). In contrast to the maintenance of low prices, international market prices increased significantly in 2021-22, such that the gap between market-consistent prices and average domestic regulated prices increased during the period analysed.
Keeping regulated prices stable despite rising wholesale prices has shielded household consumers in Bosnia and Herzegovina from market movements. In turn, this generates a significant transfer of value from energy suppliers to household consumers (as document in the inventory presented in this chapter). Had retail prices followed the pace of wholesale and international prices, households would have faced much higher prices during the energy crisis of 2021-23. Indeed, the gap across customers connected at low voltage (0.4 kV) is estimated to be as high as 96% in 2023. Even before the energy crisis, the gap was significant: 40% for household consumers. This generated an implicit subsidy to electricity consumers. Analysis of this implicit subsidy also serves to examine the distributional impacts of potential future price increases.
Distributional incidence of a 40% electricity price increase in Bosnia and Herzegovina
Source: Vladisavljević and Žarković (forthcoming[44]), Bosnia and Herzegovina background paper, based on HBS 2021/22 (BHAS, 2024[30]).
Implicit electricity subsidies transfer significant value to better-off households. Households in Bosnia and Herzegovina rely on a combination of firewood and electricity for most of their energy needs (excluding transport), with firewood playing an important role for space heating. Central heating is relatively widespread but less than firewood: while 25% of households report consumption expenditure on wood in the HBS sample, only 11% report expenditure on central heating. Among those using wood, average expenditure (BAM 214 per month [/mo]) is more than twice that for central heating users (BAM 101/mo). As a consequence, electricity expenditure per capita increases more than proportionally among better-off households, leading to a situation in which the better-off households receive more value from price regulation than those in need. While the poor receive larger transfers relative to their total consumption expenditure, the corresponding subsidy contributes relatively little to the expenditure of households in the bottom decile (3.1% if a 40% price subsidy is considered, 5.4% if a 70% price subsidy).4 In absolute terms, the bottom two deciles command 14% of the value of the transfer effected through price regulation, while the top two deciles receive 28%.
Social assistance plays a limited role in Bosnia and Herzegovina
Targeted support would be a more efficient means of transferring financial resources to those in need than regulated prices. At present, however, targeted social assistance support plays a relatively limited role in Bosnia and Herzegovina. According to HBS data, only 0.8% of the population (10 500 households) receives permanent social assistance benefits (this is of the same order of magnitude as the number of beneficiaries in administrative records) (Žarković, Mustafa and Arandarenko, 2023[45]). Notably, this is far below the share of households at risk of poverty – 13.3% in HBS 2022 data. This reflects, in part, that social assistance in Bosnia and Herzegovina is largely based on categorical benefits for certain groups (such as war veterans and those living with disabilities) while financial last-resort income support is conditioned heavily on being unable to work (OECD, 2022[2]).
Bosnia and Herzegovina provides explicit energy subsidies to users, but data limitations prevent their analysis. According to HBS data, about 821 persons received subsidies for housing, heating and funerals. Administrative data suggest that many more receive electricity subsidies, with subsidy programmes delivered through public electricity companies reaching 70 000 users in FBIH alone. The substantial gap between the survey and administrative data does not allow for direct analysis of the programmes.
Relative size, poverty impact and progressivity of transfer programmes compared to 70% electricity price subsidy
Note: Progressivity is measured by the Kakwani index. A negative index indicates a regressive transfer (i.e. more unequal than the pre-transfer distribution), a larger positive index indicates a transfer that is more concentrated among those with lower incomes.
Source: Vladisavljević and Žarković (forthcoming[44]), Bosnia and Herzegovina background paper based on HBS 2021/22 data (BHAS, 2024[30]).
While permanent social assistance is targeted to the poorest in Bosnia and Herzegovina, it has very limited impacts. To assess the impacts of implicit subsidies across the distribution of living standards, their impacts were compared to those of social transfers (Figure 8.16). As data do not allow analysis across all programmes, it is limited to permanent social assistance. Permanent social assistance has very little impact on overall inequality, reducing it by 0.1 percentage points. While the transfers are progressive – i.e. concentrated on those in the bottom of the income distribution – according to the measure of progressivity used (the Kakwani index), their impacts are very small due to their small size. Indeed, such transfers represent about 0.1% of total household income (1.4% for the poorest decile). The analysis also shows very limited differences between entities in terms of relative impacts of permanent social assistance, although these results should be taken with caution as the number of observations is relatively small.
In contrast, implicit subsidies play a larger role in reducing inequality. As of 2023, regulated electricity prices were 70% below what they would have been under market conditions. In turn, energy expenditures represent 3% of total household consumption expenditure (and 5.4% among the poorest). Implicit electricity subsidies are nonetheless progressive in that they represent a larger transfer to poorer households relative to their total expenditure. As such, they contribute to a marginal reduction in inequality. As shown by their low progressivity, they do so with very low efficiency compared with targeted subsidies.
Energy poverty in Bosnia and Herzegovina requires specific attention
Energy poverty is prevalent in Bosnia and Herzegovina. On average, total energy costs represent about 7.4% of household expenditures, according to HBS 2021/22 data. For this report, the share of households who spend more than 10% of total expenditure on energy is used to identify the energy poor (Chapter 5). Some 27.7% of households are energy poor by that measure. The data provide only a limited picture of overall energy expenditure patterns across the income distribution due to the fact that, for certain energy sources (e.g. oil, gas and coal), only a small share of households report any consumption. Data show that households rely mainly on electricity (99.9% of households) and wood (24.5% of households) for energy consumption, with a sizeable contribution of central heating (10.5% of households). Remarkably, average wood consumption increases markedly with the standard of living, such that better-off households spend a much higher proportion of energy expenditure on wood while, on average, the poor rely much more on electricity.
Share of energy poor by expenditure poverty status (%)
Note: Poverty with respect to expenditure measured at the official poverty line (60% of median household expenditure per adult equivalent), energy poverty defined with respect to the threshold of 10% expenditures on energy out of total consumption expenditure.
Source: Vladisavljević and Žarković (forthcoming[44]) based on HBS 2021/22 data (BHAS, 2024[30]).
Energy poverty and poverty with respect to expenditure overlap only partially in Bosnia and Herzegovina. Available data find that 27.7% of households are energy poor, while 13.3% are in poverty (according to the official poverty line, set at 60% of median household expenditure per adult equivalent). Yet energy poverty among those with low absolute consumption stands at only 36.6% (Table 8.2). This is in contrast with findings for other Western Balkan economies, which show much higher shares of energy poor among the income poor (86% in Serbia; 54% in Montenegro). This reflects, in part, the limitations of the data and differences in definition (poverty in economies covered by EU-SILC is typically defined on the basis of income, which is more unequally distributed than consumption). It also implies that over one-quarter of non-poor households (over 285 000 households) are at risk of energy poverty. In Bosnia and Herzegovina, these households are unlikely to be targeted by means-tested programmes, even though they may require support to fulfil their energy consumption needs. Generalised energy subsidies are shown to be a very inefficient means to reach one-quarter of the population. Alternative forms of support should reflect the needs and specific vulnerabilities of these households.
Reforming interventions on electricity pricing in Bosnia and Herzegovina
Price regulation has shielded consumers from international price movements
Price regulation still plays a determinant role in electricity markets in Bosnia and Herzegovina. Markets are deregulated in Bosnia and Herzegovina, so that all customers can choose their electricity supplier. However, households and small non-household customers remain eligible for regulated-price supply from the USS, which is supplied by the incumbent SOEs: EPBiH and Elektroprivreda HZ HB in the FBiH; ERS in RS; and Komunalno Brčko in the Brčko District. Almost all household customers are supplied under regulated prices. The conditions for eligibility of non-household customers vary across the two entities, with the FBiH allowing larger customers to access USS than is the case in other entities. In RS, firms must consume less than 35 MWh annually and be small according to at least two of three criteria (fewer than 50 employees; annual income below BAM 2 million; or business assets below BAM 1 million) (Republika Srpska, 2020[46]). In the FBiH, firms must consume less than 50 MWh annually and be small according to two criteria (fewer than 50 employees; total annual income below BAM 8 million) (Federation of Bosnia and Herzegovina, 2023[47]).
The majority of electricity in Bosnia and Herzegovina is traded under regulated prices. In practice, most eligible customers choose to be supplied by the USS, which guarantees lower prices than the market. As of 2023, some 62% of electricity was served under regulated prices. In fact, as a result of multiple trends, the share of electricity supplied under regulated prices has increased over time. In the past, independent suppliers played an important role in supplying large consumers. Closure of the Aluminij aluminium smelter in Mostar (in 2019) and of the Jajce factory (in 2023) have led to significantly lower demand from high-volume, electricity-intensive sectors. In RS, the share of electricity under USS has fallen since the entry into force of the Electricity Law in 2020 as an increasing share of non-household customers have been served on commercial terms. In contrast, in the FBiH, as a result of increasing market prices, the share of non-household customers served on market terms (among low-voltage users) fell dramatically from 29% in 2018 to 1% in 2022 and 2023.
To assess the impact of price regulation in Bosnia and Herzegovina, this chapter calculates a series of market-consistent prices. These correspond to the situation in which electricity suppliers would procure electricity in the open market. In the absence of data from organised markets in Bosnia and Herzegovina, market-consistent prices include energy priced at international market prices (annual average HUPX day-ahead market prices). These are augmented by average network costs by market segment, as reported by Eurostat for household (Eurostat, 2024[48]) and non-household consumers (Eurostat, 2024[49]). In the absence of state-level data for network costs by voltage level, for non-household consumers, data are used for consumption bands IA and IB to approximate consumption at low voltage. To allow for operational costs and margins, market-consistent prices are augmented by a regional reference margin (11.5%), corresponding to the competitive margin for USS supply implemented in North Macedonia (taken as reference because it was set in a competitive auction process). Ratios for other Western Balkan economies are similar (e.g. 12.5% in Albania, including operational costs, financing costs and regulated margin).
Prices in Euro cents per kWh
Source: Calculations based on SERC annual reports and Eurostat data.
In contrast to the large increase in international prices, domestic retail prices in Bosnia and Herzegovina reacted slowly and significantly less to the energy crisis. Average electricity prices for households remained largely stable during the period, with a more notable increase in 2023 (when they increased by 6% relative to 2017 prices). Average prices for non-household, low-voltage customers increased more rapidly and had risen by 12% as of 2023, compared with 2017). Despite these increases, prices remained significantly below reference prices throughout the period. The average gap between average prices for both categories and reference prices were 103% over the whole period and 96% in 2023, with substantially larger gaps for households (111% in 2023) than for non-household customers (69% in 2023). Prices for high- and medium-voltage customers are largely market-determined, and showed much higher passthrough from international markets. High-voltage prices increased gradually to reach a level 95% higher than in 2017 by 2023. Medium-voltage prices also increased notably (74% for 35 kV customers and 60% for 10 kV customers compared with 2017) but did not reach the highs of international market prices.
Scenario 1: Market-consistent pricing
To examine the impacts of maintaining regulated electricity prices at low levels in Bosnia and Herzegovina, a series of scenarios examine the impacts linked to diverse upward adjustments of regulated prices. The scenarios assume the same increase in regulated prices for all customers. Retail prices are increased in intervals from 10% up to 70% (represented by scenarios “a” to “c”). For reference, the gap between market-consistent pricing and average low-voltage prices was 96% in 2023, up from 28% prior to the energy crisis. The simulations also present the increase in electricity sector revenues triggered by the increased prices. As price increases drive down demand in regulated segments, supply capacity is freed up, which is assumed to be sold at the annual average HUPX price (Table 8.3).
Simulated impact on the economy of an increase in regulated prices
Source: Authors’ calculations.
The CGE model predicts very modest contractionary impacts of regulated electricity price increases in Bosnia and Herzegovina. Households and regulated customers react strongly to increases in prices, with electricity demand declining from 4.8% (for a 10% increase) to 32.6% (for a 90% increase). However, as households shift consumption expenditure to other goods, including other energy goods, the overall impact on household consumption expenditure is significantly smaller, although it is still sizeable. This is in line with the fact that, at present, electricity expenditures are a relatively small part of total household consumption expenditure (3.7% on average according to HBS data). The model predicts a strong fiscal income response from the price increase through both indirect taxes (value-added tax [VAT] levied on final electricity consumption increases by 35% in Scenario 1d) and from direct taxes. In addition, on the producer side, the model predicts a strong substitution from energy to capital, with capital investment rising from 0.6% (in Scenario 1a) to 3.9% (in Scenario 1d), which sustains production despite rising input costs.
The upward shift in electricity pricing also prompts changes in the composition of output. The modest shift reflects, in part, the relatively small share of regulated electricity in productive sectors (in the model, this is calibrated at 36%, excluding electricity used in electricity production). Sectors in which a larger share of producers are small firms (such as accommodation and food services) are more affected by the readjustment than those with larger consumers. In addition, the model predicts that government consumption increases and contributes to dampening the contractionary impacts. This, in turn, implies increases in output for sectors that command public expenditure – including construction, education and public administration – at the expense of other productive sectors.
The upward adjustment in regulated prices would imply a significant increase in sector incomes. Given the modest predicted contraction in total economic activity, demand from businesses is only marginally affected. Therefore, suppliers gain on two fronts: they earn more from regulated customers and they can sell surplus on the market at higher prices. Even with small price increases, the gains are significant: with a 10% increase in regulated prices, the additional income would be EUR 60 million annually – i.e. of the same order of magnitude as net profits of the three incumbent suppliers in the very profitable year of 2021 (EUR 63.3 million).
A reform that narrows the gap in prices between households and non-household consumers contributes to mitigating the negative impacts of the price increase. Scenario 1e simulates a price increase that drives the price up by the gap between retail prices and market consistent prices as of 2023 (96%). This drives average regulated prices to 160 EUR/MWh, an admittedly high number that corresponds to buying all electricity in the open market. Despite the large tariff increase, the impact on output remains relatively muted, but the impact on households is sizeable (consumption falls by 3.37%). However, if the same shift is operated by laying a larger share of the burden on households so that households and non-household consumers face market consistent prices, the macroeconomic impact is lessened. Scenarios 1g and 1h serve to demonstrate that household price increases in fact are expansionary despite the fall in household demand. This is due in part to the increase in tax revenues, which the model assumes increase public spending proportionally. Scenarios 1i and 1j repeat the same simulation exercise with a lower price increase, which corresponds to the average gap between tariffs and market-consistent prices before the energy crisis (28%). This brings prices up to 106.4 EUR/MWh for the regulated sector. As in the case of the larger price increase, bringing household and non-household tariffs closer together causes the reform to be expansionary (output increases by 0.1%), and lessens the burden also on household consumption.
Source: Authors’ calculations.
Compensating those energy consumers most in need would require only fraction of the gains. Household data were used to estimate the income transfer to households needed to maintain the living standards of those at risk of poverty. According to HBS data, some 13.3% of the population was living under the poverty line in 2021/22, with their electricity expenditure constituting a higher share of expenditure than for the average household. However, since they also spend less in absolute terms, compensating them fully requires a less-than-proportional share of the additional income mobilised. In short, the income generated would be more than enough to compensate those at risk of poverty (Table 8.3).
The increase in regulated prices would also increase the share of households at risk of energy poverty. This analysis identifies the energy poor as those in households in which energy expenditures are more than 10% of total consumption expenditure. According to HBS data, 27.7% of the population was energy poor in 2021/22. Increased electricity prices would significantly increase the share of at-risk households, reaching 37.6% for a price increase of 40% and 46% for a price increase of 70% (before accounting for any decline in demand). Accordingly, fully compensating all those at risk of energy poverty would require larger transfers than compensating only those at risk of poverty. Notably, for all scenarios, the necessary compensation remains under half of additional income.
Compensating the poor through transfers would require a significant change to current cash benefit programmes. To compensate the poor for shifts in energy price, Bosnia and Herzegovina needs to significantly change how social assistance targets the poor. Due to the limitations of source data, the analysis below is limited to permanent financial assistance. Given the low coverage of permanent financial assistance, it is not an appropriate vehicle to compensate the poor for increases in energy prices. The compensation needs calculated as part of price shift scenarios are compared to the receipt of financial assistance by households. This exercise suggests that, in the 10% scenario, channelling the necessary EUR 6.2 million to income-poor households would require a 175% increase in permanent financial assistance. Compensating households at risk of energy poverty would require a much larger increase because they are a larger share of the population and because this share increases with price increases. It is unrealistic to expect such upscaling in a transfer programme while maintaining targeting efficiency. Bosnia and Herzegovina would need to rely on transfers akin to the recently implemented energy-specific transfers, or to align energy sector reform with a comprehensive reform of social protection instruments.
Scenario 2: Removing cross-subsidies
Cross-subsidies in electricity pricing remain prevalent in Bosnia and Herzegovina. While electricity prices charged to households are similar across most of the economy, business customers face markedly different prices depending on the supplier. Generally, household prices are lower than those for corporate customers. This is the case even when comparing average household prices (7.66 EUR cents/kWh) to prices charged by public suppliers for high-voltage customers (8.25 EUR cents/kWh), despite the latter facing much lower network charges and generally lower prices in the market. According to the State Electricity Regulatory Commission (SERC), cross-subsidies amount to 29.2% on average. They are lowest among KB customers and highest among ERS customers (SERC, 2024[4]).
Cross-subsidies generally favour households and contribute to a distorted electricity market. Current cross-subsidies have the effect of severely limiting supplier switching by households, as they are served at prices that make it difficult for new entrants into the market. The relative size of cross-subsidies can paradoxically positively impact the development of the market for non-household customers. For example, ERS non-household customers face higher regulated prices and are therefore more likely to remain in the open market – even in times of higher market prices. This in turn forces suppliers to charge at least cost-reflective prices to households.
Removing cross-subsidies would have expansionary impacts on the economy of Bosnia and Herzegovina. To analyse this scenario, the model simulates the convergence of regulated prices towards the average for low-voltage customers (8.4 EUR cents/kWh in 2023). This results in household prices rising by 9% while non-household regulated prices would decline by 17%. If demand were fixed, the result would be revenue-neutral. However, as residential electricity demand is typically less price-elastic than industrial electricity demand in the European Union (particularly in the long run), this scenario could lead to an increase in revenues for suppliers (Csereklyei, 2020[50]).
The model predicts a modest increase in economic output and employment from the readjustment of electricity prices. In Scenario 2, total economic output increases by 0.17% while household consumption increases by 0.06%, as firms eligible for regulated prices increase demand for electricity by 9.6%. Increased demand for goods results in equilibrium in the form of an 0.03% increase in total employment. However, unlike the case of outright price adjustment, this shift does not directly generate additional income that could be used to compensate some households for the price increase.
Changes relative to baseline
Source: Authors’ calculations.
Accelerating the deregulation of electricity markets in Bosnia and Herzegovina
Current electricity price regulation for non-household customers limits the prospect for domestic market development. Gradually excluding categories of users from USS, which is provided below market prices (and sometimes below cost), would help spur the emergence of additional suppliers – and therefore the development of the domestic retail market.
Reducing the share of electricity provided to businesses at regulated prices has a mild expansionary effect. Scenario 3 halves the share of electricity per sector that is procured at regulated prices. This results in a small increase in output. Beyond the aggregate effect, the impacts differ significantly across sectors, depending on their initial share of regulated electricity, which is calibrated in the model to the share of small enterprises in the sector. Sectors with higher shares of small firms, such as accommodation and food services suffer sizeable falls in output (2.2%), while sectors with lower shares of electricity from regulated markets at the starting point see their output increase, like manufacturing (0.9%). In the electricity market, the model predicts a large transfer of electricity from the regulated to the unregulated market, which increase by 14% in volume, which drives a fall in prices in the unregulated market.
Changes relative to baseline
Source: Authors’ calculations.
Unbundling of electricity producers plays an important role in implementing reforms. Scenarios 1, 2 and 3 are modelled as discretionary shifts in prices. However, the increase of passthrough from market prices to domestic prices can be achieved by fully unbundling USS provision activities and imposing that the USS procure a share of electricity in the open market.
Incomplete unbundling of the three incumbent power utilities in Bosnia and Herzegovina limits the prospects of reform. Due to lack of unbundling, distribution losses are not procured through market mechanisms but supplied by production branches of the vertically integrated firms which in turns impacts prices set for network services. There has been some progress with the legal and accounting unbundling of five distribution companies owned by ERS, but no progress has been made towards functional unbundling. Until unbundling is complete and the tasks of distribution operators are clearly specified, including their obligation to provide access to all suppliers without discrimination, the entry of alternative suppliers in retail markets, and thereby the functioning of a competitive market for electricity supply are very unlikely.
The macro-economic impacts of direct support measures in Bosnia and Herzegovina
Direct support measures to the energy sector are quantitatively small in Bosnia and Herzegovina. To examine their macro-economic impacts, Scenario 4 models three such transfers as shocks to the CGE model:
Removal of direct support (of EUR 0.9 million) to the gas supply sector, corresponding to the annual average of subsidies to Energoinvest d.d. Sarajevo (Scenario 4a).
Removal of indirect subsidies (worth EUR 2.4 million annually on average over 2018-23) to coal mines, in the form on arrears and missing payments in concession fees, taxes and contributions (Scenario 4b). These are modelled as direct transfers.
Removal of a direct transfer (worth EUR 1 million) to support wind electricity production (Scenario 4c).
Changes relative to baseline
Source: Authors’ calculations.
Given their relatively small size in macro-economic terms, direct transfer mechanisms in Bosnia and Herzegovina have modest macro-economic impacts. At the level of the economy as a whole, all three instances of direct transfers have only small impacts on GDP, of less than 1 basis point (Table 8.5). The impact of removing direct support to coal production is slightly expansionary, in contrast to that of removing direct support to the gas sector. This is driven, in part, by the larger size of the simulated shift, which allows for a larger fiscal response as government consumption increases in other sectors. It is also the consequence of the size of transfers relative to each of the sectors. Indeed, the transfers lead to more significant responses within the sector. As simulated, a EUR 0.9 million reverse transfer from the gas supply sector leads to a very significant contraction in value added (by 77%), in a sector which provides important inputs to other sectors in the economy. In contrast, the removal of direct support to coal is predicted to lead to a fall in output by the coal sector by 0.7%.
Increased energy efficiency has potential to boost resilience in Bosnia and Herzegovina
Energy efficiency can serve the dual purpose of facilitating decarbonisation and increasing the economy’s resilience to external shocks in energy markets. Energy efficiency is a key means to pursue decarbonisation in Bosnia and Herzegovina, as presented in its NECP (MOFTER, 2024[36]). To assess the importance of this factor, simulations compared the impacts of increases in international electricity prices of 125% and 280%. These parameters correspond to the levels of annual HUPX averages in 2021 and 2022 in relation to pre-energy crisis averages. The model is shocked with these price increases in two configurations: the baseline calibrated to 2017 Bosnia and Herzegovina and a version modified to increase energy efficiency in consumption of electricity by 10%.
Modelling results show that being a net electricity exporter is a major source of resilience for Bosnia and Herzegovina. Even at the baseline model, the direct impacts of international electricity price increases are relatively modest. Most of the adjustment is made through international trade in energy. While this does push up domestic prices, price increases are relatively modest (20.7% in the baseline) compared with those of international prices. In turn, impacts on productive sectors of the economy are rather muted.
The shift in prices does have impacts on the composition of output. More energy-intensive sectors suffer a more significant decline, given the impacts on domestic prices. Manufacturing output declines by almost 1% in the baseline case while extractive and supply sectors (coal, gas, and other extractive industries) suffer declines of almost 2% and construction contracts by over 2%. Since the model assumes regulated electricity prices are kept constant, less energy-intensive sectors and sectors with a larger share of firms in the regulated segment (such as food and hospitality) actually see their output increase.
Simulated shifts relative to baseline values for an increase in international electricity prices of 125% and 280%
Source: Authors’ calculations.
Improvements in energy efficiency would further increase the resilience of the economy to external shocks. Improved energy efficiency has the effect of reducing the impacts of such shocks by almost half in both output and household consumption in the face of an increase of 125% in international prices. A more energy efficient economy can better accommodate to the new market conditions, which lowers the impacts on both electricity markets and sector-level output changes. Impacts on energy-intensive sectors are also proportionally milder, which diminishes the intensity of the shock also on labour markets.
Reducing the carbon intensity of the energy sector, which implies diversifying renewable sources of electricity and moving towards a liberalised energy market, is a top priority for Bosnia and Herzegovina. Bosnia and Herzegovina has set an ambitious goal to achieve a 41.2% reduction in GHG emissions by 2030 compared with 1990 levels. The NECP will be a cornerstone of this decarbonisation effort. Despite these commitments, the economy remains heavily reliant on solid fossil fuels, which accounted for over 53% of electricity generation in 2023.
Reforming how the energy sector is currently supported, while minimising economic, fiscal and social disruption, is crucial for advancing Bosnia and Herzegovina’s decarbonisation goals. Current price regulation, which keeps electricity prices artificially low, provides significant indirect support to consumers while placing a financial burden on energy producers. Between 2018 and 2023, this price regulation resulted in EUR 3.6 billion in support. In parallel, these low prices deter investment in renewable energy and energy efficiency, while also depleting the revenue streams essential for future sector development.
This section presents key policy recommendations for the energy sector in Bosnia and Herzegovina. It draws on the analysis presented in previous sections and on the results of broad-based consultations in Bosnia and Herzegovina. The results of a Peer-Learning Workshop (held in Sarajevo in January 2025) are also presented and inform the policy orientations provided. As part of this workshop, specific priority policy actions were developed, which are highlighted in the relevant thematic areas (Box 8.3).
A peer-learning process was an integral part of the Just Transition in the Western Balkans project, complementing the data collection and analytical work underpinning this report. As part of this process, a series of workshops were organised with three overarching aims: a) identify key issues for a more inclusive and financially sustainable development of the energy sector at the regional and economy level; b) put forward suggestions for future policy actions at the economy level; and c) foster exchange of policy experiences. The process brought together key stakeholders from the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia) in the field of energy transition.
The workshop “From Analysis to Action: Scenarios for Inclusive Energy Sector Finance Reform” took place in Sarajevo on 29 January 2025 and was attend by 40 experts representing various perspectives, levels and entities, including government, civil society, academia, business, and municipalities in Bosnia and Herzegovina. Participants included representatives from: the Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina; the Federal Ministry of Commerce; the Federal Ministry of Energy, Mining and Industry; the Ministry of Industry, Energy and Mining of the Republika Srpska; the Federal Ministry of Physical Planning; the Ministry of Spatial Planning, Construction and Ecology of the Republika Srpska; the State Regulatory Commission for Electricity of Bosnia and Herzegovina; the Regulatory Commission for Energy in the Federation of Bosnia and Herzegovina (FERK); the Federal Hydrometeorological Institute; and the Agency for Gender Equality of Bosnia and Herzegovina. Also present were representatives from the Municipality of Banovići and the City of Živinice, in addition to representatives from public entities within the energy sector (including JP Elektroprivreda of Bosnia and Herzegovina, JSC Sarajevo, and JP Elektroprivreda HZHB D.D). Other participants represented: Stanari Mine and Thermal Power Plant Ltd.; the Foreign Trade Chamber of Bosnia and Herzegovina; the Chamber of Commerce of the Republika Srpska; and the Chamber of Commerce and Industry of Republika Srpska. Experts and representatives were also present from: academia (University of Sarajevo and University of Tuzla); energy experts; and civil society (within the areas of the energy sector, gender equality, energy poverty, and environmental protection).
The workshop began with a presentation of the preliminary findings of this project, followed by a presentation of key strategies and plans governing the energy sector in Bosnia and Herzegovina. The workshop subsequently transitioned into a plenary session during which participants identified and prioritised the most pressing issues for a more inclusive and financially sustainable energy sector in Bosnia and Herzegovina. These issues were grouped into key themes, which participants ranked based on urgency and importance. For the most prioritised themes, concrete policy actions were developed, with a strong focus on their implementation within Bosnia and Herzegovina’s political context related to production and investment, socio-economic issues, and policy and implementation (Table 8.7).
Outcome of Peer-Learning Workshop in Bosnia and Herzegovina
Source: OECD Peer-Learning Workshop in Bosnia and Herzegovina on 29 January 2025.
Converge towards market prices
Aligning domestic electricity prices with market prices, particularly for households, establishes a crucial foundation for the green transition in Bosnia and Herzegovina and enhances competitiveness. Market pricing plays a vital role in safeguarding energy supply security by ensuring that prices adequately reflect the costs incurred by producers, suppliers, and network operators. Higher electricity prices can generate higher revenue for energy enterprises, providing essential funds for future investments. Prices that more accurately reflect market dynamics would also support the financing of essential investments in network infrastructure and energy production. In turn, this shift could create opportunities to reduce prices for industrial consumers, thereby creating incentives for new investments. However, the transition must be gradual to soften the impacts on households and must be accompanied by clear, transparent communication to secure the necessary public support.
Gradually increase prices for households
Households in Bosnia and Herzegovina have been the primary beneficiaries of regulated electricity prices. Between 2018 and 2023, households received a total of EUR 2.6 billion in support through regulated prices, accounting for 76% of all such induced support. Although all customers in Bosnia and Herzegovina have the right to choose their electricity supplier on the open market, households (and small non-household customers) that do not opt for a market supplier can still be supplied by the USS at regulated public supply prices, which remain lower than market rates.
Bosnia and Herzegovina should implement a gradual, well-planned realignment of household electricity prices to ensure full cost recovery for suppliers without relying on cross-subsidies. A realistic target could be an annual price increase of 8%, allowing time to introduce targeted measures that protect vulnerable customers from the impacts of rising costs (Box 8.3, Policy Action 1). Within the current framework, such shift would largely be a political decision, allowing the utilities to initiate the process through requests to the respective regulatory authorities.
Communicate broadly the advantages of price increases
Communicating the advantages of potential energy price increases is essential to build public understanding and support for the necessary reform. Transparent communication helps explain how higher prices can drive investments in modern, efficient and sustainable energy systems, ultimately ensuring long-term energy security and boosting domestic competitiveness. This can be achieved through a broad public communication campaign. Such a campaign should be launched well ahead of implementing reforms and clearly explain the reform objectives. It should include information on the magnitude of prices changes as well as the social, economic and environmental benefits. It should also communicate the planned use of budgetary savings (e.g. on education, health, infrastructure and social protection) and outline mitigating measures (IMF, 2013[51]; IMF, 2013[52]).
Communication campaigns directed toward citizens have been successful in generating support for energy subsidy reforms in some economies. Ukraine initiated a natural gas subsidy reform in 2015, designed to address price disparities and improve energy sustainability. After the initial gas tariff increase, a survey revealed that 69% of respondents viewed the gas tariff increases as unjustified and were largely unaware of available assistance programmes. In response, an extensive communication campaign was launched to enhance the quality of reporting on energy reforms. This increased public awareness and enrolment in the available assistance programme (Housing and Utilities Subsidy Program) from 1.25 million to 5.5 million households (Worley, Pasquier and Canpolat, 2018[53]).
Achieving broad public acceptance and effective implementation of energy price adjustments requires a multi-faceted approach, including a strategic public information campaign. First, it is crucial to collect data and conduct surveys to assess public sentiment and understand concerns. This is critical to enabling policy makers to tailor communication strategies accordingly. Second, the campaign should ensure that diverse groups of stakeholders are engaged, including NGOs, statistical agencies, regulators, ministries, parliament and media. Third, regular stakeholder interactions, along with targeted media and educational campaigns, will foster transparency and build trust in the process, ultimately paving the way for a more efficient, sustainable and publicly supported energy market (Box 8.3).
Unbundling as a key step towards an open energy market through
Competition in electricity markets is very limited in Bosnia and Herzegovina. The wholesale market is dominated by bilateral trade among the three state-owned incumbent utilities. At present, compensation for losses in transmission and distribution is not procured competitively. Delays in the transposition of the EU acquis mean that the economy has made no progress in setting up organised day-ahead and intraday markets, which also limits the potential of regional market integration. Similarly, retail markets are primarily supplied by the incumbents and competition is very limited (Energy Community Secretariat, 2024[35]).
The incumbent power utilities should advance efforts to unbundle distribution and supply activities. Unbundling is key for the regulatory framework to set tariffs that correspond to full cost recovery in a transparent manner, including, for example, market-based purchases to cover distribution losses. Unbundling is also necessary for the emergence of more alternative retail suppliers across a range of market segments. With progress in unbundling, steps can also be taken to limit public service obligations for producers to supply regulated suppliers at below-market prices, thereby supporting convergence of prices towards market-determined prices. This would ensure that future price increases happen gradually, reflecting movements in wholesale markets and in supply and demand dynamics.
Prepare the system for carbon pricing
The EU CBAM, a carbon-pricing system for imports that aims to prevent carbon leakage, could significantly affect Bosnia and Herzegovina. Currently planned to take effect in 2026, the EU CBAM will impose charges based on the carbon emissions embedded in certain goods entering the European Union. This could raise costs for Bosnia and Herzegovina due to its heavy dependence on coal-fired power plants, potentially harming many businesses. According to a simulation using the World Bank’s Multi-Regional Input-Output MINDSET Model, Bosnia and Herzegovina’s electricity exports are expected to face the most substantial relative losses, with a projected 15% decline in output. The economy’s basic metals industry is also anticipated to incur considerable losses under this mechanism. Preparing and adopting relevant ETS legislation and providing targeted support for businesses will be crucial in this context.
Prepare and adopt ETS legislation
Adopting ETS legislation is crucial for Bosnia and Herzegovina in the context of the EU CBAM. Although the authorities in Bosnia and Herzegovina have started to prepare the legal framework for introducing a carbon tax in 2026, further actions are required. At present, for example, Bosnia and Herzegovina lacks the necessary legislative and institutional frameworks for monitoring, reporting, verification and accreditation of GHG emissions at the installation level. Moreover, in Bosnia and Herzegovina, Verification and Accreditation Regulation has not been transposed into the legislative frameworks on climate change of the Republika Srpska, the Federation of Bosnia and Herzegovina and the Brčko District (Energy Community Secretariat, 2024[35]).
Provide support to businesses that will be impacted by EU CBAM
With the introduction of the EU CBAM, it is essential to support businesses in Bosnia and Herzegovina to maintain their competitiveness in the EU market. One critical step is to establish a transparent and efficient system for the rational distribution of ETS funds. The system will need to ensure that revenues generated from carbon pricing are reinvested in decarbonisation efforts and energy efficiency improvements. Drawing from certain EU practices, the temporary free allocation of emission units could be considered to provide industries with a smoother transition while incentivising long-term investments in low-carbon technologies. Additionally, businesses should be supported through targeted financial and technical assistance, thereby leveraging international support mechanisms to modernise infrastructure and adopt cleaner production methods (Box 8.3, Policy Action 2).
Enable democratisation of energy production
By ensuring equitable, decentralised grid access and enabling the sharing of energy surpluses, Bosnia and Herzegovina can maximise the benefits of renewable energy for all. Bosnia and Herzegovina is gradually evolving its grid infrastructure to support the integration of renewables and the growth of prosumers (i.e. individuals or RECs that both produce and consume electricity). Both the FBiH and RS have adopted laws on renewable energy and efficient cogeneration, introducing provisions for prosumers and establishing renewable energy auctions to accelerate this transition (Balkan Green Energy News, 2023[34]; Republika Srpska, 2013[54]). This legislation aims to facilitate the participation of consumers in energy production, allowing them to contribute surplus electricity to the grid. To further promote decentralised grid access and enable the sharing of energy surpluses, it would be important to invest in grid modernisation and to promote development of RECs.
Invest in grid modernisation and promote development of renewable energy communities
To efficiently handle decentralised energy generation, the grid in Bosnia and Herzegovina requires modernisation. Despite legislative progress, the existing grid infrastructure exhibits limitations in accommodating decentralised, variable renewable energy sources. The existing grid was designed for traditional, centralised and predictable energy production, which creates challenges when integrating distributed generation from prosumers. Upgrading the grid and making it more flexible are essential for successful prosumer integration (Smart Balkans, 2024[55]). Bosnia and Herzegovina could develop comprehensive connection plans, establishing clear distribution procedures and encouraging adoption of digital technologies (e.g. dynamic pricing) to optimise energy use and enhance system efficiency. Targeted subsidies, provided through environmental funds in the FBiH and RS, could support pilot projects aimed at revitalising the energy network. Ministries, regulatory bodies such as Regulatory Commission for Energy in the Federation of Bosnia and Herzegovina (FERK) and REERS, DSOs, and TSOs must collaborate to create and enforce a robust legal and regulatory framework. Finally, independent assessments on network readiness, including impact evaluations and digitalisation support, are critical to ensuring a smooth transition (Box 8.3, Policy Action 3).
Addressing energy poverty and protecting vulnerable customers
Supporting energy-poor households is crucial to ensuring that the shift toward cleaner, more sustainable energy systems in Bosnia and Herzegovina is fair, inclusive and socially just. Analysis conducted as part of this project, utilising household budget survey data, reveals that 27.7% of households allocate more than 10% of their income to electricity and heating, meeting the definition of energy poverty. Some other estimates suggest that as many as 69% of households spend over 10% of their income on energy-related expenses (Hivziefendić, Tešanović and Agić, 2021[56]). Addressing energy poverty requires defining clear criteria to identify the energy poor, increasing financial support and putting in place non-financial mechanisms, including targeted energy efficiency measures and strengthened involvement of RECs.
Define clear criteria to identify energy poor
Defining clear and transparent criteria for identifying energy poverty is crucial for designing effective, targeted policies that protect vulnerable populations (Box 8.3, Policy Action 4). In Bosnia and Herzegovina – particularly in the context of implementing energy price reforms or introducing carbon pricing – it is essential to have defined energy poverty criteria to mitigate potential negative impacts on low-income households. At present, the economy lacks a standardised, nationwide definition of energy poverty. Existing measures primarily focus on providing financial assistance to the most vulnerable groups (such as low-income households and individuals with disabilities) to help cover electricity and gas expenses. However, these initiatives do not comprehensively address the broader spectrum of energy poverty, which encompasses factors such as energy-inefficient housing and the inability to afford adequate energy services (Hivziefendić, Tešanović and Agić, 2021[30]).
Increase financial support for the energy poor
Financial support to support the energy poor can take several forms, such as direct subsidies, social tariffs, energy efficiency programmes and targeted financial assistance. Currently, Bosnia and Herzegovina spends, on average, EUR 3 million per year. Examples of tailored support mechanisms that might be replicated can be found in several EU countries. Spain provides a means-tested “bono social” electricity discount to vulnerable consumers (European Commission, 2018[57]).
Providing non-financial support to the energy poor through targeted energy efficiency incentives and by promoting and supporting renewable energy communities
Beyond financial support, non-price targeted mechanisms to support the energy poor exist that Bosnia and Herzegovina could consider. First, the economy could strengthen incentives targeted towards energy poor for energy efficiency measures. This could help reduce energy consumption, leading to lower energy bills and a more sustainable energy system. Targeted incentives, such as France’s “chèque énergie”, aim to assist vulnerable households in overcoming financial barriers to upgrading their homes.
Promoting and supporting RECs can also play a significant role in addressing energy poverty. RECs contribute to more affordable, secure and sustainable energy access, particularly benefiting vulnerable households (Clear Air Task Force, 2024[58]; Koukoufikis et al., 2023[59]; European Energy Network, 2023[60]). Some of the benefits of RECs include:
Fostering local energy production and cost reduction: RECs produce energy from local renewable sources such as solar, wind or biomass. Generating energy locally reduces dependence on imported fuels and minimises transmission costs, resulting in lower energy bills for community members.
Creating shared benefits: Profits from energy generation can be reinvested into community projects or distributed as financial benefits to participants, helping reduce energy costs for energy-poor households.
Targeted support for vulnerable groups: RECs can implement socially oriented schemes, such as providing discounted energy rates for low-income members or reinvesting profits into retrofitting energy-inefficient homes.
Promoting the development of RECs can also encourage democratisation of energy production in decentralised ways. Bosnia and Herzegovina is in the early stages of developing RECs. The FBiH and RS have incorporated into their renewable energy laws provisions for self-consumption and energy communities. Despite these legislative efforts, practical establishment and operation of RECs remain nascent, including due to a lack of public awareness. A public information campaign should communicate the benefits of decentralised energy systems, emphasising opportunities for individual and community participation (Box 8.3). Upscaling initiatives such as the GIZ’s Community Action for Energy Transition in Bosnia and Herzegovina can be an important step in this direction (GIZ, n.d.[61]).
Reducing vulnerabilities by addressing gendered needs and barriers
Distinct gender roles and coping strategies that shape household energy management in Bosnia and Herzegovina should be taken into account at the policy level. Women, who primarily handle daily energy use and prioritise cost-saving measures such as reducing consumption and cutting other expenses, face particular vulnerability to rising energy prices and are more exposed to administrative barriers in accessing social assistance. Men, who often undertake physically demanding fuel acquisition and focus on structural energy efficiency investments, tend to be better informed about available subsidies and support schemes. Policy design should therefore include targeted outreach and simplified application processes, especially for women, ensuring that information on energy-related assistance is accessible and transparent. Programmes should balance immediate financial relief measures with long-term energy efficiency incentives, recognising women’s focus on daily cost management and men’s role in infrastructure upgrades.
Strengthen implementation of the NECP at all levels
The NECP for Bosnia and Herzegovina has progressed significantly and will be the cornerstone of the economy’s decarbonisation efforts. The plan envisions the gradual decarbonisation of the energy sector, ensuring that citizens have safe, reliable and affordable energy while moving toward carbon neutrality by 2050. To ensure its effective implementation, it would be important to address co-ordination across different levels of government, build capacities and establish clear timeline for implementation.
Ensure effective co-ordination across different levels of governance and build capacities
The governance structure of Bosnia and Herzegovina poses challenges to the implementation of its policy frameworks. Currently, each entity holds primary responsibility for policy areas, leading to differing laws and regulations across the FBiH, RS and Brčko District. Coming together around the objectives of effective public delivery and implementation in a context of good governance can lead to new opportunities for development and enable achievements across the strategic priorities.
Investing in the technical and administrative capacities of institutions responsible for energy and climate policy in Bosnia and Herzegovina is also essential. This involves training personnel, upgrading infrastructure and adopting modern technologies to facilitate the transition (Box 8.3, Policy Action 5).
Establish clear timeline for NECP measures
Establishing a clear timeline for implementing the NECP is crucial to ensuring the plan’s success and achieving energy transition goals (Box 8.3). A well-defined timeline provides structure, accountability and measurable benchmarks, thereby enabling policy makers, investors and other stakeholders to track progress and make necessary adjustments. Key elements to consider include:
Ensuring policy continuity and accountability: A detailed timeline ensures that energy and climate policies remain on track despite potential changes in government or administrative shifts.
Attracting investments and financial planning: Investors and international financial institutions are more likely to support projects that have a clear, predictable implementation schedule. A transparent timeline helps potential investors understand when certain regulatory, infrastructural or financial mechanisms will be in place, reducing uncertainty and investment risk.
Monitoring progress and performance: A timeline with interim milestones allows for regular monitoring and evaluation. Policy makers can use these benchmarks to assess whether the implementation is proceeding as planned, identify bottlenecks and adjust strategies, if necessary.
Compliance with international obligations: Bosnia and Herzegovina, as a contracting party to the Energy Community Treaty, must align its energy policies with EU standards, including climate targets for 2030 and beyond. A structured timeline ensures timely compliance with reporting requirements and obligations under regional and international frameworks.
Optimising resource allocation: Planning the implementation of NECP activities over a defined timeline helps optimise the use of financial, technical and human resources. It ensures that projects are prioritised based on their impact, feasibility and relevance to overarching goals.
Public engagement and awareness: A transparent implementation schedule helps communicate the plan’s objectives and expected outcomes to the public, fostering trust and encouraging participation. For instance, setting clear dates for introducing support schemes for vulnerable households or RECs can boost public support.
References
[34] Balkan Green Energy News (2023), “FBiH passes law to roll out prosumers, renewable energy auctions”, https://balkangreenenergynews.com/fbih-passes-law-to-roll-out-prosumers-renewable-energy-auctions/.
[33] Balkan Green Energy News (2022), “Republic of Srpska adopts new law on renewable energy sources”, https://balkangreenenergynews.com/republic-of-srpska-adopts-new-law-on-renewable-energy-sources/.
[25] BHAS (2025), Energy Statistics, Agency for Statistics of Bosnia and Herzegovina, Sarajevo, https://bhas.gov.ba/Calendar/Category?id=26&page=2&statGroup=26&tabId=0 (accessed on 27 May 2025).
[18] BHAS (2024), Datasets, Agency for Statistics of Bosnia and Herzegovina, Sarajevo, https://bhas.gov.ba/?lang=en (accessed on 20 January 2025).
[38] BHAS (2024), “Energy”, Agency for Statistics of Bosnia and Herzegovina, https://bhas.gov.ba/Calendar/Category/26.
[30] BHAS (2024), “Household Budget Survey 2021/22 (database)”, Agency for Statistics of Bosnia and Herzegovina, https://bhas.gov.ba/data/Publikacije/Bilteni/2024/CIS_01_2022_Y1_1_BS.pdf.
[37] BHAS (2024), Structural Business Statistics 2022, Agency for Statistics of Bosnia and Herzegovina, https://bhas.gov.ba/data/Publikacije/Bilteni/2024/SBS_00_2022_TB_1_EN.pdf.
[10] Ciuta, I., P. Gallop and D. Pehchevski (2024), Comply or Close: Six years of deadly legal breaches by Western Balkan coal plants, http://www.complyorclose.org.
[58] Clear Air Task Force (2024), Clean Energy from the Ground Up: Energy Communities in the European Union, https://www.catf.us/resource/clean-energy-ground-up-energy-communities-european-union/.
[50] Csereklyei, Z. (2020), “Price and income elasticities of residential and industrial electricity demand in the European Union”, Energy Policy, Vol. 137, p. 111079, https://doi.org/10.1016/j.enpol.2019.111079.
[15] EBRD (2024), EPBiH Gracanica SPP | We invest in changing lives, https://www.ebrd.com/home/work-with-us/projects/psd/53198.html (accessed on 9 April 2025).
[35] Energy Community Secretariat (2024), Bosnia and Herzegovina - Annual Implementation Report, https://www.energy-community.org/dam/jcr%3A3d066877-d597-41c7-8b31-f85ba5392ef0/IR2024_BosniaHerzegovina.pdf.
[57] European Commission (2018), Spain approves a new social discount rate on electricity, https://ec.europa.eu/social/BlobServlet?docId=19205&langId=en.
[60] European Energy Network (2023), Energy Poverty mitigation in Europe - Potential role for Renewable Energy Communities, https://enr-network.org/wp-content/uploads/EnR-Study_EnergyPoverty-2023-final.pdf.
[17] Eurostat (2025), “Complete energy balances”, https://ec.europa.eu/eurostat/databrowser/view/nrg_bal_c/default/table?lang=en&category=nrg.nrg_quant.nrg_quanta.nrg_bal (accessed on 30 April 2025).
[29] Eurostat (2025), “Electricity prices for household consumers - bi-annual data (from 2007 onwards)”, https://ec.europa.eu/eurostat/databrowser/view/nrg_pc_204/default/table?lang=en&category=nrg.nrg_price.nrg_pc (accessed on 30 April 2025).
[28] Eurostat (2025), “Electricity prices for non-household consumers - bi-annual data (from 2007 onwards)”, https://ec.europa.eu/eurostat/databrowser/view/nrg_pc_205/default/table?lang=en&category=nrg.nrg_price.nrg_pc (accessed on 30 April 2025).
[48] Eurostat (2024), “Electricity prices components for household consumers”, Energy statistics, https://doi.org/10.2908/NRG_PC_204_C.
[49] Eurostat (2024), “Electricity prices components for non-household consumers”, Energy statistics, https://doi.org/10.2908/NRG_PC_205_C.
[47] Federation of Bosnia and Herzegovina (2023), Zakon Električnoj Energiji Federacije Bosne i Hercegovine (Law on electricity of the Federation of Bosnia and Herzegovina), Official Gazette of the Federation of Bosnia and Herzegovina, Issue 60.
[20] FENA (2022), “FBiH Government decides to increase the price of natural gas by 21.7 percent”, Federalna novinska agencija, https://fena.ba/article/1263943/fbih-government-decides-to-increase-the-price-of-natural-gas-by-21-7-percent (accessed on 26 May 2023).
[6] FERK (2024), Izvještaj o radu FERK-a za 2023. godinu (FERK annual report for 2023), Energy regulatory comission of FBiH, https://www.ferk.ba/download_zaj/2024/FERK_Izvjestaj_2023_bs.pdf.
[5] FERK (2019), Regulatorna komisija za energiju u Federaciji Bosne i Hercegovine-FERK (Energy regulatory commission of FBiH), Energy regulatory commission of FBiH, http://www.ferk.ba.
[14] Foreign Investment Promotion Agency (2015), Energy Sector, http://www.fipa.gov.ba/publikacije_materijali/brosure/Energy%20sector.10.06.2015.pdf (accessed on 23 May 2023).
[19] Gallop, P. et al. (2021), The Political Economy of Energy Transition in Southeast Europe, The Friedrich-Ebert-Stiftung in Southeast Europe, Sarajevo.
[61] GIZ (n.d.), Implementing energy transition in municipalities, https://www.giz.de/en/worldwide/130470.html.
[42] GTAP (2023), “GTAP 11 Data Base”, Global Trade Analysis Project, https://www.gtap.agecon.purdue.edu/databases/v11/.
[56] Hivziefendić, J., M. Tešanović and D. Agić (2021), Fighting energy poverty in Bosnia and Herzegovina - the first step in the energy transition, RESET, Sustainable Energy Transition CENTER, https://reset.ba/attachments/article/60/Fighting%20Energy%20Poverty.pdf (accessed on 16 January 2025).
[27] IMF (2024), “Bosnia and Herzegovina: 2024 Article IV Consultation-Press Release; Staff Report”, IMF Country Report No. 24/175; 28 May, http://www.imf.org.
[40] IMF (2024), Government Finance Statistics, https://data.imf.org/?sk=a0867067-d23c-4ebc-ad23-d3b015045405&sId=1544448210372 (accessed on 17 May 2024).
[52] IMF (2013), Energy subsidy reform in Sub-Saharan Africa : experiences and lessons, International Monetary Fund, Washington, DC, https://www.imf.org/external/pubs/ft/dp/2013/afr1302.pdf (accessed on 27 June 2023).
[51] IMF (2013), Energy subsidy reform; Lessons and implications, International Monetary Fund, Washington, DC, https://www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Energy-Subsidy-Reform-Lessons-and-Implications-PP4741 (accessed on 5 June 2023).
[11] International Trade Administration (2022), Bosnia and Herzegovina - Energy, International Trade Administration, Department of Commerce, United States, https://www.trade.gov/country-commercial-guides/bosnia-and-herzegovina-energy (accessed on 24 April 2023).
[12] IRENA (2020), Renewable energy prospects for Central and South-Eastern Europe Energy Connectivity (CESEC), International Renewable Energy Agency, Abu Dhabi.
[13] JICA (2010), “Country Report: Bosnia and Herzegovina”, https://eneken.ieej.or.jp/data/3193.pdf (accessed on 11 May 2023).
[59] Koukoufikis, G. et al. (2023), Energy Communities and Energy Poverty, Publications Office of the European Union, https://publications.jrc.ec.europa.eu/repository/bitstream/JRC134832/JRC134832_01.pdf.
[43] Lustig, N. (ed.) (2022), Commitment to Equity Handbook: Estimating the impact of fiscal policy on inequality and poverty. Second edition., https://commitmentoequity.org/wp-content/uploads/2023/04/CEQ-Handbook-Volume-1-.pdf.
[36] MOFTER (2024), Integrated Energy and Climate Plan of Bosnia and Herzegovina for the period until 2030: final draft, Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina, Sarajevo.
[1] MOFTER (2023), Integrated energy and climate plan of Bosnia and Herzegovina (presentation), Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina, https://www.slideshare.net/AdmirSoftic/integrated-energy-and-climate-plan-of-bosnia-and-herzegovina-257613779 (accessed on 2 May 2023).
[3] MOFTER (2018), Framework Energy Strategy of Bosnia and Herzegovina until 2035, Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina, https://www.mvteo.gov.ba/data/Home/Dokumenti/Energetika/19042022_Framework_Energy_Strategy_of_BiH_until_2035_ENG_FINAL.pdf.
[31] Muftić Dedović, M. et al. (2025), “Energy Poverty in Bosnia and Herzegovina: Challenges, Solutions, and Policy Recommendations”, Energies, Vol. 18/1, https://doi.org/10.3390/en18010043.
[24] OEC (2023), Bosnia and Herzegovina (BIH) Exports, Imports, and Trade Partners | OEC - The Observatory of Economic Complexity, https://oec.world/en/profile/country/bih (accessed on 3 May 2023).
[32] OECD (2024), OECD Work on Support for Fossil Fuels, https://www.oecd.org/fossil-fuels/ (accessed on 12 May 2023).
[2] OECD (2022), Multi-dimensional Review of the Western Balkans: From Analysis to Action, OECD Development Pathways, OECD Publishing, Paris, https://doi.org/10.1787/8824c5db-en.
[41] Penn World Tables (2024), PWT 10.01 | Penn World Table | Groningen Growth and Development Centre | University of Groningen, https://www.rug.nl/ggdc/productivity/pwt/?lang=en (accessed on 17 October 2024).
[46] Republika Srpska (2020), Law on electricity, Official Gazette of Republika Srpska, Number 68, Banja Luka.
[54] Republika Srpska (2013), Law on Renewable Energy Sources and Efficient Cogeneration, https://vladars.rs/eng/vlada/ministries/MIEM/Documents/Law%20on%20Renewable%20Energy%20Sources%20and%20Efficient%20Co-generation%20of%20the%20Republic%20of%20Srpska_071627247.pdf.
[7] RERS (2023), RERS | Regulatorna komisija za energetiku Republike Srpske (website), Energy Regulatory Commission of Republika Srpska, https://reers.ba/ (accessed on 2 May 2023).
[8] RERS (2019), Izvještaj o radu Regulatorne komisije za energetiku Republike Srpske za 2018. godinu (Annual report of the Energy Regulatory Commission of Republika Srpska for 2018), Energy Regulatory Commission of Republika Srpska, https://reers.ba/wp-content/uploads/2019/11/Izvjestaj_RERS_2018_LAT_Final.pdf.
[22] Sarajevo Times (2023), “Possible Decrease of Gas Price in Bosnia and Herzegovina?”, Sarajevo Times, https://sarajevotimes.com/possible-decrease-of-gas-price-in-bosnia-and-herzegovina/ (accessed on 26 May 2023).
[21] SEE Energy News (2022), Bosnia and Herzegovina, Gas price in FBiH will increase by 23.3 %, https://serbia-energy.eu/bosnia-and-herzegovina-gas-price-in-fbih-will-increase-by-23-3/ (accessed on 26 May 2023).
[4] SERC (2024), SERC Annual report 2023, State Energy Regulatory Commission of Bosnia and Herzegovina, https://www.derk.ba/en/godinji-izvjetaji-derk-a/godinji-izvjetaj-2023.
[55] Smart Balkans (2024), The path to energy security: The role of smart grids and prosumers in Bosnia and Herzegovina, https://smartbalkansproject.org/smart-news/the-path-to-energy-security-the-role-of-smart-grids-and-prosumers-in-bosnia-and-herzegovina/.
[16] Spasic, V. (2024), Federation of BiH drafts 2025-2030 renewable energy auctions plan, https://balkangreenenergynews.com/federation-of-bih-drafts-2025-2030-renewable-energy-auctions-plan/ (accessed on 17 January 2025).
[39] UN Comtrade (2024), Database, https://comtradeplus.un.org/ (accessed on 4 December 2024).
[44] Vladisavljević, M. and J. Žarković (forthcoming), Bosnia and Herzegovina background report.
[23] Wankiewicz, P. (2023), Bosnia & Herzegovina: gas disputes along ethnic lines, Centre for Eastern Studies, https://www.osw.waw.pl/en/publikacje/analyses/2023-04-06/bosnia-herzegovina-gas-disputes-along-ethnic-lines (accessed on 25 May 2023).
[9] World Bank (2025), World Development Indicators | DataBank, https://databank.worldbank.org/source/world-development-indicators (accessed on 30 April 2025).
[26] World Bank (2024), Bosnia and Herzegovina - Country Economic Memorandum : Macroeconomics, Trade and Investment, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099020124082027528/p1786451605caa0c7190901416862909f68 (accessed on 18 September 2024).
[53] Worley, H., S. Pasquier and E. Canpolat (2018), Designing Communication Campaigns for Energy Subsidy Reform: (ESRAF) Good Practice Note 10, ESMAP Paper. World Bank, Washington, DC, https://www.esmap.org/esraf_designing_communication_campaigns_for_energy_subsidy_ (accessed on 25 September 2023).
[45] Žarković, J., A. Mustafa and M. Arandarenko (2023), “Minimum income in the Western Balkans: From socialism to the European Pillar of Social Rights”, Social Policy & Administration, Vol. 57/1, pp. 1-15, https://doi.org/10.1111/SPOL.12855.
← 1. Since regulated tariffs in Bosnia and Herzegovina include grid charges, HUPX average day-ahead prices are augmented by prevailing average grid (transmission and distribution) charges to serve as reference prices.
← 2. The introduction of the 2020 Electricity Law in Republika Srpska is the primary reason for the decrease in the number of non-household (0.4 kV) customers on regulated tariffs between 2018 and 2023. The law liberalised the retail market by granting freedom of supplier choice and phasing out regulated prices for commercial users, thereby forcing a migration to the open market.
← 3. Administrative data are used in particular to calibrate the size of social transfer programmes. It is often the case that the number of beneficiaries estimated form household surveys differs substantially from that contained in administrative records. This is particularly the case when programmes reach a relatively small share of the population and therefore a very small share of the sample, in which case sample estimates would be inaccurate. In such cases, the number of beneficiaries as documented in official reports is used to correct the data. Official reports on tax revenues are also used to check that the simulated taxes (e.g. VAT) are dimensioned appropriately.
← 4. The poverty rate at the official poverty line was 13.3% for households and 13.5% for individuals in the year of the survey (2022). The poverty line is set at 60% of median consumption expenditure per adult equivalent. The poor are largely found in the bottom two deciles of the consumption expenditure distribution.