Western Balkans 6 Country Climate and Development Report

The Western Balkans 6 Country Climate and Development Report (CCDR) examines how the region can boost climate adaptation and reduce greenhouse gas emissions while continuing to deliver on broader development goals. This comprehensive report covers six economies of the Western Balkans: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia.

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Press Release

According to the CCDR:

• Adapting to climate change is urgent - an initial, comprehensive package of investments in the Western Balkans is estimated to reach US$37 billion. Frontloading investments within a 5-10-year period will cushion the effects of climate change-related shocks and stresses. Investing in adaptation brings the triple dividend of avoided losses, accelerated economic potential, and amplified social and environmental co-benefits - with returns estimated to be around US$4 for every US$1 invested.
• The Western Balkans can become climate-neutral by 2050 without compromising its growth potential. Achieving net zero, in line with the ambitions of the European Union, will require an investment of US$32 billion to transform the power system, and decarbonize the transport, buildings, and industrial sectors. Notably, 85% of this funding can be sourced from the private sector if countries develop enabling regulatory environments and incentivize private sector participation in the transition.
• Climate action in the Western Balkans will bring many benefits, far beyond the effects on climate. For instance, the net zero transition could decrease air pollution-related mortality by 15 percent by 2050, potentially saving thousands of lives. Early-warning systems yield extremely high benefits in terms of avoided mortality and hospitalization - hundreds or even thousands of times the implementation cost. Flood and water management, and nature-based solutions, can also benefit local economic development.
• The green transition will transform the skills requirements in a large range of occupations in the Western Balkans, affecting all sectors of the economy. In fact, one out of every six current workers in the region will need to upskill in their current jobs or retrain into alternative green jobs in the medium term.

Recommendations

The Western Balkans CCDR provides several policy recommendations facilitating the region's transition towards climate neutrality by 2050. These recommendations are categorized according to the 3 T's: Transversal, Transboundary, and Targeted policies.

Transversal Policies enable the government to coordinate efforts across different sectors. This approach helps to prevent policy duplication and ensures that agencies do not operate in isolation. To support the development of these policies, the governments in the Western Balkans could:

• Establish climate-focused agencies or commissions to coordinate climate action across governments in the region.
• Limit energy and transport fuel subsidies that hamper the development of cleaner technologies, while protecting the most vulnerable communities.
• Privatize state-owned enterprises (SOE) to enhance their financial performance and help align prices with the true costs, allowing further alignment with European Union energy markets.
• Develop green finance markets by issuing green bonds, social bonds, or similar debt instruments to expand investments in the green transition.
• Retrain the workforce for the green economy.
• Boost accountability in climate action to attract private investments and strengthen citizen awareness of climate change.

Climate hazards do not adhere to geopolitical boundaries, and many critical natural resources are shared across borders, including rivers and air. This highlights the importance of transboundary policies in addressing localized climate challenges. The Western Balkans can contribute to this effort by implementing the following Transboundary Policies to support climate action:

• Invest in regional early warning systems to monitor and forecast the likelihood of natural disasters in at-risk regions.
• Coordinate carbon pricing in the power and gas markets in the Western Balkans to promote cross-border energy flows, diversify the power mix, attract cleaner technology investments, and facilitate a smoother green transition.
• Increase economic integration by aligning energy, transport, and agricultural systems to make trade and investment more attractive.

Targeting specific sectors, communities or locations would ensure that adaptation and mitigation efforts are delivered in the most effective way. Key Targeted Policies recommended by the CCDR include:

• Implement disaster risk management systems and plans to prepare for climate hazards, ensuring peoples' safety and economic security.
• Transform the power sector to be clean, efficient, and flexible.
• Modernize the agricultural sector, improve the efficiency of irrigation systems, rehabilitate water distribution and drainage systems, implement climate-smart agricultural practices, and develop insurance schemes to ensure the resilience of the agricultural system to climate shocks.
• Remodel cities to better coordinate land and housing investments, to be greener while reducing climate risks, and to attract private capital.
• Ensure coal phaseout strategies are based on just transition principles so communities most affected are supported by appropriate reskilling support and economic diversification.
• Implement programs boosting energy efficiency and reduce seismic risks of buildings in the residential and industrial sectors.
• Decarbonize transport by better urban design and incentivizing walking, cycling, and public transport use.

The Western Balkans CCDR finds that investing in adapting to the effects of and mitigating climate change is both urgent and important. Such interventions will save lives, drive growth, and make the planet more livable.

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