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EU investments aim to support green transition in Western Balkan countries, but criticism over project types and process remains
With the enlargement of the European Union to the Western Balkans finally back on the table, aligning legislation with EU law has become an urgent necessity for the region’s candidate countries. This includes adhering to the EU Climate Law, which commits member states to achieving full decarbonization by 2050. However, achieving significant emissions reductions in the Western Balkans remains a formidable task. In 2020, some hope emerged with the EU-backed introduction of the Western Balkans Green Agenda, a plan that mirrors the ambitious European Green Deal.
This vision includes the Economic and Investment Plan (EIP), a strategic framework that promises substantial EU investment in the region, of up to €9 billion from 2021 to 2027. These much-needed funds are essential to facilitate the green transition of the region and foster greater integration into the EU.
The first steps have been taken
Since the adoption of the EIP in October 2020, the EU has approved €1.8 billion of investments in the Western Balkans, a fifth of the funds overall pledged; these investments should mobilize a total of 5.6 billion euros. Such investments are essential. “Even though the Western Balkans clearly have the same finish line on climate neutrality as the EU, the starting line is unfortunately different,” says Selma Ahatovic-Lihic, senior communications officer at the Regional Cooperation Council. Investments are focused on 40 flagship projects, most of which concern the areas of sustainable transport and clean energy. They range from the construction of new roads to solar projects and the rehabilitation of a hydroelectric plant. Although the projects are broadly evenly distributed across the region, some differences stand out. For example, investments in Bosnia and Herzegovina only include sustainable transport projects.
Flagship investments approved 2020-2022 under the PEI. Source: WBIF .
The amount of funding shows that the main focus is on transportation. Most of the money is spent on sustainable transport, and similar amounts are invested in railways and roads. The disparity in investment is striking, with funding allocated to roads more than double that of clean energy.
Roads instead of railways
Even though the Economic and Investment Plan includes various projects intended to support sustainable transport, renewable energy, digitalization and private sector growth, it is questionable whether all these investments actually support the overarching objectives of the Green Agenda .
One area of contention concerns the emphasis on road construction in so-called sustainable transport projects. Samir Lemeš, activist from the Bosnian NGO Eko Forum, points out that “billions of euros have been invested in highways, while there has been practically no investment in railways”. Railways and waterways would be more sustainable modes of transport, while increased road traffic would exacerbate emissions. Although these new roads could improve regional connectivity, the same goal could have been achieved through railways, which emit fewer greenhouse gases. Additionally, building new roads does not address the main barrier to connectivity in the region: border control and associated long waiting times, as the main barrier to connectivity in the region. study for the European Parliament find.
Coal phase-out, but how?
A significant share of EU investment is also focused on increasing energy efficiency. This is a good measure to reduce emissions and air pollution, as buildings contribute significantly to emissions, especially those with inefficient heating systems.
To achieve significant reductions in emissions, energy sources for heating must shift to renewable alternatives to coal and wood. Even if some PEI projects do indeed focus on the development of renewable energies, one OECD report highlights the untapped potential of solar and wind energy in the Western Balkans. The current investment plan fails to fully utilize these resources, opting instead for controversial hydropower projects with negative environmental impacts. Stanislav Vučković, activist from the Serbian NGO Eco Straža, recognizes that “hydroelectricity is one of the solutions for a renewable energy source”, but at the same time warns that “we must be careful to minimize the damage caused to ecosystems and the environment.
The high costs of transitioning entire economies away from coal, including the socio-economic consequences of a phase-out, raise concerns that governments may be reluctant to move forward on this path. Selma Ahatovic-Lihic is concerned that “climate change is becoming increasingly costly, posing an additional burden on weak economies in the Western Balkans region, where energy poverty is a major problem. The economies of the Western Balkans cannot afford a new and costly ‘green attack’ on their economies.” EU investments in this area therefore become crucial to encourage and support the transition to renewable energy. So far, however, the amount of funding has been limited.
The current allocation of funds also fails to comprehensively address climate change and environmental damage. Although a few projects focus on waste and wastewater management, there is notable neglect of other vital environmental issues. Areas such as sustainable agriculture – despite its significant impact on the region’s exports and employment – currently remain excluded from the investment plan.
Good governance is necessary
As EIP projects are still in their infancy, it is not possible to accurately assess their impact. What is already clear is that their success depends on the institutional environment and capacity building. The weakness of institutions and the privileges granted to public enterprises pose significant challenges to the effectiveness of investments in this sector. In addition, deficiencies in the education system and depopulation must be addressed to foster a skilled workforce capable of driving economic development. “We lack not only the financing, but also the necessary infrastructure to support the implementation of the project,” says Stanislav Vučković. “We need opportunities for direct experience and exchange with EU countries. » According to the activist, “the main obstacle to a real green transition in Serbia is the Serbian regime supported by the EU”. Vučković, Eco Straža activist
Municipalities in the Western Balkans need to develop the necessary capacities. Carrying out comprehensive environmental impact analyzes is crucial to ensure that projects align well with the green transition. However, their effectiveness ultimately relies on the implementation phase, making good governance practices essential.
NGOs are also concerned about the lack of consultation with civil society during the planning process, highlighting the need for greater inclusion and transparency. Samir Lemeš criticizes that “the process is not transparent, there is not enough publicly available information and most of the funds are used by EU consultants.”
Putting the numbers into perspective
Overall, the amount of funds allocated to the Western Balkans through the EIP is relatively small compared to EU funds disbursed to neighboring countries such as Romania, Bulgaria, Croatia, Hungary and Greece. Indeed, Member States benefit from many more programs and funding opportunities – hence the interest of candidate countries in finally accessing the EU. According to Selma Ahatovic-Lihic, “the convergence gap between the Western Balkans and the EU remains enormous”.
The intersection of geopolitics adds another layer of complexity. The financial support provided by the EU through the EIP is part of existing IPA III funding, which is specifically intended to help countries on their journey towards EU membership. As a result, these investments are conditional, meaning the amount of funding received depends on the performance of each country.
On the other hand, for the EU to make a credible commitment to the Western Balkans, it also needs a clear perspective. “The date of Serbia’s accession to the EU has been postponed indefinitely, certainly by several decades,” says Vučković. “This is why any financial support from European institutions is viewed, to put it mildly, with a pinch of salt.”
While 8 of the 9 billion euros are grants, implying that they do not have to be repaid, 1 billion euros are guarantees through the Western Balkans Guarantee Mechanism. A guarantee means that the EU does not lend money directly, but guarantees that the debt will be repaid (at least in part) if the lender defaults. The EU hopes to mobilize 20 billion euros of investment over the next decade through its investments and subsidies in the region.
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