Green transition and smart specialisation in the Western Balkans.
Date: 2024-10-11
Institutions: Joint Research Centre
Subjects: EU environmental policy, EU research policy, Western Balkans, carbon neutrality, circular economy, digitisation, economic governance (EU), energy transition, enlargement of the Union, green economy, innovation, modernisation of industry, policymaking, regional development, regional integration, report, research and development, smart specialisation, social impact

ISSN 1831-9424 

Green transition and Smart Specialisation 
in the Western Balkans 

Radovanovic, N., Stevanovic Carapina, H. 

2024 

 EUR 31947 EN 

 
  
 
This document is a publication by the Joint Research Centre (JRC), the European Commission’s science and knowledge 
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JRC136482 

EUR 31947 EN 

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ISSN 1831-9424   doi:10.2760/370696  

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How to cite this report: European Commission, Joint Research Centre, Radovanovic, N. and Stevanovic Carapina, H., Green 
transition and Smart Specialisation in the Western Balkans, Publications Office of the European Union, Luxembourg, 2024, 
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Contents  

Abstract ...................................................................................................................................................................1 

Executive summary .................................................................................................................................................2 

1 

Introduction .......................................................................................................................................................4 

2  The EU policy related to green transition ..........................................................................................................5 

2.1  EU and sustainable development .............................................................................................................6 

2.2  EU Green Deal ...........................................................................................................................................9 

2.2.1   Decarbonisation and just transition ............................................................................................12 

2.2.1.1 

Coal regions .........................................................................................................................12 

2.2.1.2 

Carbon Border Adjustment Mechanism ..............................................................................14 

2.2.2 

2.2.3 

2.2.4 

2.2.5 

Clean industrial development and circular economy ..................................................................15 

Environmentally friendly food system .........................................................................................17 

A zero pollution for a toxic-free environment .............................................................................17 

Business and the EU Green Deal ..................................................................................................18 

2.2.6  Mainstreaming sustainability in EU policies ................................................................................18 

2.2.7 

2.2.8 

2.2.9 

European Innovation Scoreboard 2023 .......................................................................................18 

EU Eco-Innovation Index ..............................................................................................................25 

EU as the global leader in addressing climate change .................................................................27 

2.3  Transformational aspects of Smart Specialisation ..................................................................................28 

2.3.1  Monitoring and evaluation ..........................................................................................................29 

2.4  Green skills ..............................................................................................................................................30 

3  The Western Balkans outlook related to green transition ..............................................................................36 

3.1  Western Balkans’ sustainable development cycle ..................................................................................36 

3.2  Western Balkans economic performance ...............................................................................................38 

3.2.1  Overview ......................................................................................................................................38 

3.2.2 

3.2.3 

3.2.4 

Employment.................................................................................................................................40 

Trade and regional integration ....................................................................................................41 

SME in WB ...................................................................................................................................41 

3.2.4.1 

Conclusions for future work on greening SMEs ..................................................................42 

3.2.5 

3.2.6 

Status of environment and climate in the Western Balkans .......................................................42 

Alignment with the EU environment and climate acquis in the Western Balkans ......................43 

3.2.7  Western Balkans and SDGs ..........................................................................................................44 

3.3  Enlargement policy .................................................................................................................................47 

3.3.1  Membership status of the Western Balkan economies...............................................................48 

3.4  Green Agenda for the Western Balkans ..................................................................................................50 

3.4.1 

Decarbonisation and energy transition .......................................................................................58 

3.4.1.1 

Just transition ......................................................................................................................60 

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3.4.1.2 

CBAM ...................................................................................................................................62 

3.4.1.3 

Carbon pricing .....................................................................................................................63 

3.4.2 

3.4.3 

3.4.4 

3.4.5 

3.4.6 

Circular economy .........................................................................................................................64 

Depollution ..................................................................................................................................65 

Sustainable food systems ............................................................................................................67 

Protection and restoration of ecosystems...................................................................................68 

Green transition of Western Balkan economies ..........................................................................68 

3.4.6.1 

Indicators and progress towards GAWB .............................................................................69 

3.4.6.2 

Skills aspects for green transition in the Western Balkan economies .................................74 

3.5  Overview of the Western Balkans research and innovation performance in the EU programmes and 
initiatives .........................................................................................................................................................76 

3.6 

Innovation policy for SMEs .....................................................................................................................77 

3.7  Smart Specialisation in the Western Balkans ..........................................................................................77 

3.8  Regional cooperation ..............................................................................................................................83 

3.9  Smart Specialisation priorities and Green Agenda for the Western Balkans ..........................................86 

4  Conclusions and recommendations ................................................................................................................90 

4.1  Conclusions .............................................................................................................................................90 

4.2  Recommendations ..................................................................................................................................91 

Annexes .............................................................................................................................................................. 100 

References ......................................................................................................................................................... 105 

List of abbreviations and definitions .................................................................................................................. 109 

List of boxes ....................................................................................................................................................... 110 

List of figures ...................................................................................................................................................... 111 

List of tables ....................................................................................................................................................... 112 

ii 

 
 
 
 
 
 
 
Abstract 

The  Western  Balkan  region  is  in  an  advanced  stage  of  the  Smart  Specialisation  design  process,  with  several 
economies deeply involved in its implementation. The commitment of these economies to adopt an EU-style, 
transformational  innovation  policy  reflects  a  dedication  to  evidence-based  and  bottom-up  innovation 
policymaking. This approach aims to enhance regional competitiveness sustainably. The EU Green Deal and the 
associated Green Agenda for the Western Balkans represent templates for transformative change that should 
underpin innovation policies. Strong parallels between this green transition and Smart Specialisation emerge in 
shared elements such as sustainability, environmental priorities, societal challenges, and digitalisation. This study 
investigates  regional  research  and  innovation  capacities  for  the  green  transition  through  the  lens  of  Smart 
Specialisation in the Western Balkan region. It proposes policy actions to leverage these capacities within both 
national frameworks and collaborative initiatives. 

Authors 

Nikola Radovanovic, European Commission – Joint Research Centre, Spain 

Hristina Stevanovic Carapina, independent expert, Serbia 

1 

 
 
 
 
 
 
Executive summary 

The  Western  Balkan  region,  encompassing  Albania,  Bosnia  and  Herzegovina,  Kosovo*,  Montenegro,  North 
Macedonia and Serbia, spans approximately 208,000 km2 and is home to around 18 million people. The region’s 
primary economic activities are concentrated in weather and climate-related sectors like agriculture, forestry, 
tourism,  and  their  ancillary  services.  With  a  shared  objective  of  increasing  per  capita  income  while  reducing 
unemployment  rates,  these  economies,  aspiring  for  EU  accession,  are  committed  to  adhering  to  the  Paris 
Agreement  and  attaining  the  EU2020  and  EU2030  targets  for  reducing  Greenhouse  Gas  (GHG)  emissions, 
enhancing  energy  efficiency,  and  boosting  renewable  energy  production.  Vulnerable  to  climate  change  and 
significantly  impacted  by  global  warming,  the  Western  Balkan  economies  analyse  and  report  on  adaptation 
strategies while striving to prioritize mitigation measures in line with their limited human and financial resources. 
This scarcity underscores the need for renewed regional collaboration and development. 

Smart  Specialisation  is  a  relatively  recent  approach  gaining  traction  in  the  Western  Balkan  region,  where 
economies seek to formulate an effective policy mix to enhance their competitiveness in promising domains and 
strategically  allocate  resources  for  economic  transformation.  By  2018,  all  Western  Balkan  economies  have 
embarked  on  the  Smart  Specialisation  journey  under  the  technical  support  provided  by  the  European 
Commission’s Joint Research Centre. This support includes methodological guidance and assistance in aligning 
the  actions  in  accordance  with  the  Smart  Specialisation  design  and  implementation  frameworks  for  the  EU 
Enlargement and Neighbourhood Region, as well as with the local and regional contexts. 

The Smart Specialisation approach, by concentrating efforts on priority areas, has the potential to optimize public 
funding and investments. In the last seven years, the Western Balkan economies have recorded a remarkable 
progress in developing their first Smart Specialisation strategies and mobilising a wide array of stakeholders in a 
national and regional discussions for building a robust innovation policy that looks to use true strength that an 
economy demonstrates. On the basis of transparency and participation, the stakeholders from the region are, 
together with the policy makers, proposing policy measures and instruments for building competitiveness based 
on evident innovation potential of economies.  

One  of  the  crucial  steps  in  the  Smart  Specialisation  design  framework  represents  the  analysis  of  strategic 
mandate, which includes internal discussion on the role of Smart Specialisation strategy for general development 
and competitiveness, taking into account relationships with other related policies. As perceived by the Smart 
Specialisation  concept  itself,  the  findings  from  the  Smart  Specialisation  exercise  should  contribute  to  other 
policies, such as education, environmental, employment, industrial, regional and others. Within this scope, the 
priority areas and related actions in the Western Balkan economies should affect and be impacted by the drivers 
of green transition. Given the Western Balkan economies' commitment to key green transition drivers, including 
the SDGs, the European Green Deal, and the Green Agenda for the Western Balkans, it becomes imperative to 
enhance the implementation of objectives within these frameworks by leveraging Smart Specialisation. 

This study delves into the pivotal role of Smart Specialisation strategies in promoting environmentally focused 
activities and facilitating the green transition in the Western Balkan Region. It offers an extensive examination of 
the status of Smart Specialisation processes in the Western Balkans, alongside the implementation of the Green 
Agenda  for  the  Western  Balkans.  The  conclusions  drawn  are  supported  by  insights  gleaned  from  a  survey 
conducted among quadruple helix stakeholders across the region. 

The analysis demonstrates that the application of the Smart Specialisation concept in the Western Balkans has 
not fully encompassed an environmental focus, possibly missing alignment with recent policies and initiatives, 
such as the Green Deal.  Despite previous challenges, positive policy strides toward the green transition have 
emerged, primarily  propelled by the EU accession process. Anticipated strengthening of priorities concerning 
environmental protection in future Smart Specialisation policy documents in the region is expected. This shift 
will  have  implications  across  diverse  policy  domains  including  innovation,  industrial  growth,  environmental 
protection, education, employment, and beyond. Accordingly, this document outlines key challenges and offers 
recommendations for the seamless integration of the green transition into Smart Specialisation policies. 

Key areas requiring improvement include fostering inter-ministerial communication and collaboration, actively 
engaging local stakeholders, promoting Smart Specialisation as a tool to address environmental challenges, and 
fostering  the  development  of  knowledge  and  cross-sectoral  connections  between  these  approaches. 

*  This  designation  is  without  prejudice  to  positions  on  status,  and  is  in  line  with  UNSCR  1244/1999  and  the  ICJ  Opinion  on  the  Kosovo 

declaration of independence. 

2 

 
 
 
Furthermore,  there  is  a  critical  need  for  upskilling  and  reskilling  across  sectors,  particularly  within  corporate 
settings, to facilitate a just transition. Increasing public awareness and fostering a shift in mentalities are pivotal 
aspects of the green transition. It is essential to consider local, regional, national, and transnational dimensions 
concurrently. Redirecting existing budgets towards identified promising areas for the future is paramount for the 
success of green transformation. 

This  report  presents  comprehensive  recommendations  for  aligning  future  policy  processes  and  effectively 
utilizing Smart Specialisation in green transition initiatives within the Western Balkan region. 

3 

 
 
 
 
 
1 

Introduction 

Since  2017,  the  Western  Balkan  economies  and  Türkiye  have  initiated  their  individual  Smart  Specialisation 
strategy design processes, supported by the Joint Research Centre of the European Commission. Currently, the 
Western  Balkan  economies  are  at  various  stages  of  their  Smart  Specialisation  processes,  with  most  having 
identified priority areas, many of which directly or indirectly align with the green transition efforts linked to EU 
accession. This advancement in Smart Specialisation directed the economies to discuss, propose and launch a 
set  of  policy  measures  and  related  instruments  that  tackle  the  green  transition  topic  directly  or  indirectly. 
Moreover, the Western Balkan Agenda on Innovation, Research, Education, Culture, Youth, and Sport includes a 
thematic programme, the Green Agenda for the Western Balkans, aimed at implementing the EU Green Deal in 
the region. 

Smart Specialisation is effectively contributing to green transitions by promoting circular economy approaches, 
which are a recurring and impactful element in many cases (Harding et al, 2021). These initiatives demonstrate 
economic  and  environmental  benefits,  indicating  that  investment  in  green  innovation  is  financially  viable. 
Additionally,  skills  development  and  stakeholder  involvement  in  the  Entrepreneurial  Discovery  Process  and 
Smart  Specialisation  monitoring  and  evaluation  mechanisms  can  enhance  the  implementation  of  green 
interventions. 

The EU Green Deal's objective is to achieve net-zero greenhouse gas emissions by 2050, decoupling economic 
growth from resource use, and ensuring inclusive progress. The Green Agenda for the Western Balkans, endorsed 
by Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia during the Sofia Summit 
in November 2020, aligns with these climate targets. It was formally adopted on October 6th, 2020, and aims to 
establish stronger ties between climate actions, policy reforms, and EU approximation. Priority areas include 
reducing air pollutants and greenhouse gas emissions, intertwined with energy, transport, and health policies, 
among others. Digitalisation is proposed as a crucial facilitator in the dual green and digital transition concept 
across five pillars: 

1.  Transitioning to clean energy sources and climate protection. 

2.  Shifting towards a circular economy. 

3.  Depolluting air, water, and soil. 

4.  Developing sustainable agriculture and food systems. 

5.  Safeguarding biodiversity and ecosystems. 

The EU intends to support the Green Agenda's implementation through the Instrument for Pre-Accession (IPA 
III), utilizing mechanisms like the Western Balkans Investment Framework and the European Fund for Sustainable 
Development Plus (EFSD+). 

Focusing  on  implementation  alongside  technological  progress  and  innovation,  the  Commission  proposed  the 
Economic  and  Investment  Plan  (EIP)  with  €9  billion  in  grants  and  an  expected  €20  billion  in  guarantees.  By 
integrating  the  EIP  and  the  Green  Agenda  and  laying  out  implementation  roadmaps,  the  EU  emphasizes  its 
readiness to translate its commitments into action. 

The main research focus is on understanding the implementation of the green transition and Smart Specialisation 
strategies in the Western Balkan region. Key queries include determining the sources and influences of green 
transition directives, access to financial markets for green projects, future expertise requirements, educational 
restructuring, reskilling strategies for existing employees, education access for new green jobs, and academia 
adaptation. 

This study recognizes the role of Smart Specialisation strategies in advancing activities aligned with the Green 
Agenda for the Western Balkans across the economies in the region. 

4 

 
 
 
 
 
 
2  The EU policy related to green transition 

The climate change is upon us. The impacts of a changing climate are becoming more and more perceptible to 
all, leaving the real of science and entering everyone’s daily lives. The fight against the climate change is needed. 
The urgency to address climate change is increasingly evident as its effects become more tangible in our daily 
lives.  Combatting  climate  change  is  imperative  and  already  underway.  This  involves  urgent  actions  such  as 
reducing  greenhouse  gas  (GHG)  emissions,  primarily  by  transitioning  away  from  fossil  fuels.  There's  a  global 
consensus that within the next decade, crucial political decisions must be made to set us on the path toward 
achieving net-zero emissions by the mid-21st century. 

The impacts of climate change, environmental degradation, loss of biodiversity, and unsustainable resource use 
extend to various risks for human, animal, and ecosystem health. These risks encompass infectious and non-
communicable  diseases,  antimicrobial  resistance,  and  the  scarcity  of  water  resources.  Addressing  these 
challenges demands a collective effort on a global scale.  

The Paris Climate Agreement (Paris Agreement – PA)1  

At the UN Climate Change Conference (COP21) in Paris, on 12 December 2015, parties to the UNFCCC reached a 
landmark  agreement  to  combat  climate  change  and  to  accelerate  and  intensify  the  actions  and  investments 
needed for a sustainable low carbon future. The Paris Agreement  brought all nations into a common cause to 
undertake ambitious efforts to combat climate change and adapt to its effects, with enhanced support to assist 
developing countries to do so. The Paris Agreement is a legally binding international treaty on climate change, 
which was adopted by 196 parties and entered into force on 4 November 2016. 

The Paris Agreement's primary objective is to enhance the global response to the threat of climate change. It 
aims to limit the global temperature rise to well below 2 degrees Celsius above pre-industrial levels this century 
and  strives  for  efforts  to  cap  the  increase  at  1.5  degrees  Celsius.  Additionally,  the  agreement  focuses  on 
strengthening  countries'  capacity  to  address  climate  change  impacts  and  aligning  financial  flows  with  low 
greenhouse  gas  emissions  and  climate-resilient  pathways.  Achieving  these  ambitious  objectives  involves 
mobilizing appropriate financial resources, establishing new technology frameworks, and enhancing capacity-
building efforts. These measures aim to support actions by developing and vulnerable countries in alignment 
with their national objectives. 

All Paris Agreement signatories committed to their best efforts through "nationally determined contributions" 
(NDCs) and pledged to enhance these efforts over time. This includes the requirement for all parties to regularly 
report on their emissions and implementation efforts. The Paris Agreement became effective on November 4, 
2016, 30 days after meeting the "double threshold" criteria (ratification by 55 countries representing at least 
55% of global emissions). Since then, more countries have ratified the agreement, and the total number of Parties 
has reached 195 as of 2023. The PA, adopted through Decision 1/CP.21, addresses crucial areas necessary to 
combat climate change. Some of the key aspects of the Agreement are set out below: 

• 

• 

• 

• 

Long-term temperature goal (Art. 2) – reaffirms the goal of limiting global temperature increase to 
well below 2 degrees Celsius, while pursuing efforts to limit the increase to 1.5 degrees. 

Global peaking and 'climate neutrality' (Art. 4) –need to reach global peaking of greenhouse gas 
emissions (GHGs) as soon as possible, recognizing peaking will take longer for developing country 
Parties, to achieve a balance between anthropogenic emissions by sources and removals by sinks 
of GHGs in the second half of the century. 

Mitigation (Art. 4) – PA establishes binding commitments by all Parties to prepare, communicate 
and  maintain  a  nationally  determined  contribution  (NDC)  and  to  pursue  domestic  measures  to 
achieve  them.  Developed  countries  should  continue  to  take  the  lead  by  undertaking  absolute 
economy-wide  reduction  targets,  while  developing  countries  should  continue  enhancing  their 
mitigation efforts, and are encouraged to move toward economy-wide targets over time in the 
light of different national circumstances. 

Sinks and reservoirs (Art.5) – PA also encourages Parties to conserve and enhance, as appropriate, 
sinks and reservoirs of GHGs as referred to in Article 4, paragraph 1(d) of the Convention, including 
forests. 

1 https://unfccc.int/most-requested/key-aspects-of-the-paris-agreement 

5 

 
 
 
• 

• 

• 

• 

• 

• 

• 

• 

Voluntary  cooperation/Market-  and  non-market-based  approaches  (Art.  6)  –  PA  recognizes  the 
possibility  of  voluntary  cooperation  among  Parties  to  allow  for  higher  ambition  and  sets  out 
principles  –  including  environmental  integrity,  transparency,  and  robust  accounting  –  for  any 
cooperation that involves internationally transferal of mitigation outcomes 

Adaptation (Art. 7) – PA establishes a global goal on adaptation – of enhancing adaptive capacity, 
strengthening  resilience,  and  reducing  vulnerability  to  climate  change  in  the  context  of  the 
temperature goal of the Agreement. It aims to significantly strengthen national adaptation efforts, 
including  through  support  and  international  cooperation.  The  adaptation  efforts  of  developing 
countries should be recognized 

Loss and damage (Art. 8) – PA recognize the importance of averting, minimizing, and addressing 
loss and damage associated with the adverse effects of climate change, including extreme weather 
events and slow onset events, and the role of sustainable development in reducing the risk of loss 
and damage.  

Finance, technology, and capacity-building support (Art. 9, 10 and 11) – PA reaffirms the obligations 
of developed countries to support the efforts of developing country Parties to build clean, climate-
resilient futures, while for the first time encouraging voluntary contributions by other Parties. The 
agreement  also  provides  that  the  Financial  Mechanism  of  the  Convention,  including  the  Green 
Climate Fund (GCF), shall serve the Agreement. 

Climate  change  education,  training  as  well  as  public  awareness,  participation,  and  access  to 
information (Art 12) is also to be enhanced under the Agreement. 

Transparency  (Art.  13),  implementation  and  compliance  (Art.  15)  –  PA  relies  on  a  robust 
transparency  and  accounting  system  to  provide  clarity  on  action  and  support  by  Parties,  with 
flexibility  for  their  differing  capabilities  of  Parties.  In  addition  to  reporting  information  on 
mitigation,  adaptation  and support,  the  Agreement  requires  that  the  information submitted  by 
each Party undergoes international technical expert review. 

Global Stocktake (Art. 14) – A “global stocktake”, to take place in 2023 and every 5 years thereafter, 
will assess collective progress toward achieving the purpose of the Agreement in a comprehensive 
and facilitative manner. It will be based on the best available science and its long-term global goal. 
Its outcome will inform Parties in updating and enhancing their actions and support and enhancing 
international cooperation on climate action. 

Decision 1/CP.21 also sets out a number of measures to enhance action prior to 2020, including 
strengthening  the  technical  examination  process,  enhancement  of  provision  of  urgent  finance, 
technology  and  support  and  measures  to  strengthen  high-level  engagement.  The  decision  also 
welcomes  the  efforts  of  all  non-Party  stakeholders  to  address  and  respond  to  climate  change, 
including those of civil society, the private sector, financial institutions, cities and other subnational 
authorities. Parties also recognized the need to strengthen the knowledge, technologies, practices 
and efforts of local communities and indigenous peoples, as well as the important role of providing 
incentives through tools such as domestic policies and carbon pricing. 

2.1 

EU and sustainable development 

The  2030  Agenda  for  Sustainable  Development,  comprising  17  Sustainable  Development  Goals  (SDGs) 
established  by  the  United  Nations  (UN)  in  September  2015,  outlines  the  global  blueprint  for  sustainable 
development in this decade. The European Union (EU) is wholeheartedly dedicated to realising the 2030 Agenda, 
with the SDGs integrated into the European Commission's work program. In line with this commitment, the EU 
will present its inaugural Voluntary Review on the 2030 Agenda's implementation at the United Nations' (UN) 
High-Level Political Forum in July 2023. 

This summary chapter offers a statistical overview of the EU's progress towards the SDGs. As some indicators 
lack sufficient long-term data, the assessment in this chapter focuses on the most recent five-year period ('short-
term') based on EU SDG indicators. The subsequent figure illustrates the EU's advancement towards each of the 
17 goals during this short-term period, as per the selected indicators. Over this timeframe, the EU has made 
substantial  strides  in  ensuring  decent  work  and  economic  growth  (SDG  8),  reducing  poverty  (SDG  1),  and 
advancing  gender  equality  (SDG  5).  Additionally,  commendable  progress  has  been  observed  in  reducing 

6 

 
 
inequalities (SDG 10), ensuring quality education (SDG 4), enhancing peace and personal security, and bolstering 
access to justice and trust  in institutions (SDG 16). Noteworthy advancements have also been  made in  goals 
related to health and well-being (SDG 3) and innovation and infrastructure (SDG 9), despite challenges posed by 
the  COVID-19  pandemic.  Progress  towards  other  goals,  as  indicated  in  the  subsequent  figure,  has  been  less 
significant. 

This year's SDG monitoring report underscores the EU's robust advancements in numerous socioeconomic goals 
over  the  recent  five-year  data  period,  while  noting  less  favourable  trends  in  the  environmental  domain. 
Anticipated progress is expected in three specific goals —  climate action (SDG 13), life on land (SDG 15), and 
global partnerships (SDG 17). Notably, ambitious climate targets set by the EU for 2030 will necessitate increased 
efforts compared to past trends. The 'Fit for 55' package signifies the EU's commitment to implementing policies 
for achieving these targets. In the energy sector, the EU has established more ambitious 2030 targets, signalling 
projected advancements in energy efficiency and renewable energies. Despite an increase in terrestrial protected 
areas, further measures are imperative to reverse ecosystem degradation. The trend in partnerships for SDG 17 
partially mirrors cyclical effects, notably the rise in public debt due to the COVID-19 crisis. 

Figure 1. Overview of EU progress towards the SDGs (2015-2021) 

Source: Eurostat (2023). 

The Russian invasion of Ukraine in February 2022 impacted Europe as it was in the process of recovering from 
the economic disruptions caused by the COVID-19 pandemic. Earlier, due to the lockdown measures imposed by 
EU Member States to curb the spread of COVID-19, the EU’s economy (SDG 8) experienced a significant decline 
in real gross domestic product (GDP) per capita, plummeting by 5.7% in 2020 compared to 2019. However, by 
2021, many economic indicators had nearly returned to pre-pandemic levels. From the second quarter of 2021, 

7 

 
 
 
the EU's GDP showed continuous growth, resulting in a 3.3% increase in real GDP per capita in 2022 compared 
to 2021. 

Although overall industrial production (in value-added terms) (SDG 12) had notably declined in 2020 due to the 
pandemic, it has since experienced a substantial recovery and surpassed pre-pandemic levels by 2022, resulting 
in a 3.0% annual increase compared to the previous year. However, this resurgence was mainly driven by the 
manufacturing sector (see Figure 2).  

Figure 2. Production in industry, EU, 2019–2022 (volume index of production, 2015 = 100) 

Source: Eurostat. 

One of the most profound impacts of recent crises is the surge in the EU’s inflation rate since the beginning of 
2021, reaching a peak of 11.5% in October 2022, affecting the prices of most goods and services. The first quarter 
of 2022, marking the onset of the war in Ukraine, intensified this inflation, particularly for electricity, gas, solid 
fuels, and heat energy (SDG 7). The inflation rate continued to rise across all categories throughout 2022, hitting 
its highest point in October 2022, which coincided with the peak of the energy crisis in the EU. However, from 
October 2022 to March 2023, the rate has declined, registering values lower than those at the beginning of 2022 
but still significantly higher than pre-pandemic levels. 

Russia’s invasion of Ukraine and the resulting sanctions have significantly impacted international trade in goods, 
causing disruptions in the trade of oil, natural gas, and coal (SDG 7), both directly and indirectly. 

Figure 3. Quarterly greenhouse gas emissions, by economic activity, EU, 2015–2022 (million tonnes of CO2-equivalent)  

Greenhouse gas emissions have declined since the beginning of 2022. However, the recent  crises mentioned 
above  have  interfered  with  the  EU’s  ambition  to  tackle  the  climate  crisis.  The  COVID-19  pandemic  and  the 

Source: Eurostat. 

8 

 
 
 
 
associated lockdown measures led to a short-term improvement in certain indicators used to monitor climate 
change mitigation, such as energy use and greenhouse gas (GHG) emissions (SDG 7 and SDG 13). Simultaneously, 
there is evidence indicating environmental harm (SDG 12 and SDG 15) due to increased pollution from single-use 
plastics, including masks, gloves, and take-away food containers. 

Following  the  economic  revival  after  the  COVID-19  pandemic,  the  EU's  greenhouse  gas  (GHG)  emissions 
increased by 2% in the third quarter of 2022 compared to the same period in the previous year. However, relative 
to pre-pandemic levels, GHG emissions remained 4% below the level reported in the third quarter of 2019. The 
most  significant  increases  in  GHG  emissions  between  the  third  quarters  of  2021  and  2022  were  observed  in 
transportation and storage (9%), electricity and gas supply (5%), and services excluding transport and storage 
(4%). Conversely, GHG emissions from agriculture, manufacturing, and water supply declined slightly by around 
1% or less over the same period. Despite the economic rebound, the EU's overall GHG emissions have declined 
since the beginning of 2022, indicating that the EU has managed to continue the long-term downward trend in 
GHG emissions. 

2.2 

EU Green Deal  

The  European  Green  Deal2  lays  out  the  blueprint  for  transformative  change,  with  all  27  EU  Member  States 
committing to making the EU the first climate-neutral continent by 2050. To achieve this, they pledged to reduce 
emissions by at least 55% by 2030 compared to 1990 levels. This commitment aims to establish a Healthy Planet 
for All by ensuring improved monitoring, reporting, prevention, and remediation of air, water, soil, and consumer 
product pollution, among other aspects. 

Climate change and environmental degradation pose existential threats to Europe and the world. The European 
Green Deal aims to transform the EU into a modern, resource-efficient, and competitive economy by ensuring: 

•  Achieving no net emissions of greenhouse gases by 2050. 
•  Decoupling economic growth from resource use. 
• 
Ensuring no person and no place is left behind. 

Introduced  in  2019,  the  European  Green  Deal  (EGD)  forms  an  integral  part  of  the  European  Commission’s 
strategy to implement the United Nations’ 2030 Agenda and achieve the sustainable development goals. 

The primary objectives of the EGD are to attain a net carbon-neutral European Union by 2050 and to separate 
economic growth from resource use (see Fetting, 2020). The EGD serves as a comprehensive policy strategy, 
delineating  ambitions  and  goals  across  various  policy  sectors.  Its  implementation  involves  revising  existing 
regulations and standards over the coming years, alongside the development and enforcement of new laws and 
directives. The Green Deal encompasses eight key areas: 

1.  Enhancing the EU’s climate ambition for 2030 and 2050. 
2.  Providing clean, affordable, and secure energy. 
3.  Mobilizing industry for a clean and circular economy. 
4.  Constructing and renovating buildings with energy and resource efficiency. 
5.  Aspiring to a zero-pollution environment for toxic-free surroundings. 
6.  Preserving and regenerating ecosystems and biodiversity. 
7.  Adopting the Farm to Fork strategy: promoting a fair, healthy, and environmentally friendly food system. 
8.  Accelerating the transition to sustainable and intelligent mobility. 

The Green Deal outlines several initiatives that the Commission will progressively present in the upcoming years, 
with some expected in early 20203: 

• 

• 

Proposal for a Just Transition Mechanism, including the establishment of a Just Transition Fund within 
the next Multi-annual Financial Framework. 
Commission proposal to enshrine the objective of achieving climate neutrality by 2050 (‘climate law'), 
solidifying the EU's commitment to irreversible climate neutrality. 

2 https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en 
3 

European  Green  Deal:  Questions  &  Answers, 
https://ec.europa.eu/commission/presscorner/detail/en/IP_19_6691 

11  December 

Brussels, 

The 

2019, 

European 

Commission,  

9 

 
 
 
• 

Communication  outlining  the  Commission's  strategies  to  promote  biodiversity  domestically  and 
internationally, ahead of the crucial UN Convention on Biodiversity conference in Kunming (China) in 
November 2020. 

•  Action plan promoting a more circular economy that addresses sustainable products and complements 

• 

the new industrial policy strategy. 
The  Green  Deal  Communication  will  catalyse  efforts  across  various  economic  sectors,  intending  to 
develop and present interconnected initiatives due to their strong interlinkages. Key among these are: 
o  Proposals to increase the Union's greenhouse gas emissions reduction targets for 2030 ahead 

of the UNFCCC's Conference of the Parties (2020). 

o  Revisions to the Emissions Trading System for the EU's power sector and industrial installations, 
potentially extending emission trading to road transport, shipping, buildings' emissions, and 
revising Member States' targets for sectors beyond the ETS. 

o  A  strategy  for  clean  and  smart  mobility  announcing  measures  to  reduce  greenhouse  gas 
emissions  from  land,  waterborne,  and  air  transport.  This  includes  actions  on  cleaner  fuels, 
electrical charging infrastructure, taxation, road pricing, and promoting rail freight. 

o  A strategy to address chemicals, along with other initiatives targeting air and water pollution, 

aiming for a ‘Zero pollution ambition.' 

o  A  ‘Farm  to  Fork'  strategy  aimed  at  enhancing  the  sustainability  of  food  production  and 

o 

o 

distribution systems. 
Strategies and measures to mobilize sustainable public and private investments to green the 
economy. 
Specific actions within the European Green Deal will directly enhance public health and well-
being. Initiatives to combat pollution of air, water, and hazardous chemicals directly impact 
human health. 

Efforts to halt biodiversity loss will indirectly benefit by enhancing nature through ecosystem restoration, tree 
planting, and preserving carbon-rich ecosystems like peat bogs. On-farm actions to minimize pesticide volumes 
and risks will directly reduce public exposure to hazardous chemicals. Additionally, reinforcing efforts to adapt 
to climate change impacts, such as flooding or droughts, and embracing ‘green infrastructure' and nature-based 
solutions will enhance the built and natural environment's quality. 

10 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 4. The components of the European Green Deal 

Source: Implementing the European Green Deal: Handbook for Local and Regional Governments. 

11 

 
 
  
2.2.1   Decarbonisation and just transition 

The concept of just transition originated in the United States of America (USA) when trade unions advocated for 
government support to 'wartime workers at risk of losing their jobs as a result of disarmament' (Cahil & Allen, 
2020). Later, this concept extended to jobs affected by environmental regulations. In defending a just transition 
due to these regulations, the unions neither opposed environmental protection nor defended job maintenance 
at all costs. 

Climate  change  and  environmental  degradation  stand  as  significant  contemporary  challenges.  At  the  2018 
Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24), a green 
transition,  ensuring  a  just  transition  for  the  workforce  and  creating  decent  work,  was  deemed  crucial  for 
effective, inclusive, and climate-resilient development. Skills development remains pivotal in enabling this just 
transition. While the shift toward a greener future is underway, it necessitates a coordinated policy approach to 
ensure fairness and inclusivity. 

Decarbonisation, inherent in the concept of just transition, acknowledges that in transitioning to a low-carbon 
economy, 'the net impact of environmental policy measures will be positive,' yet 'job losses are likely in sectors, 
regions,  and  communities  heavily  reliant  on  fossil  fuel  resources,  especially  where  economic  diversification 
opportunities are limited.' 

To meet the Paris Agreement's goal of limiting the global temperature increase to well below 2ºC, achieving a 
balance between anthropogenic emissions and greenhouse gas removals by sinks in the latter half of this century 
is  imperative.  The  pathway  to  achieving  this  balance,  termed  carbon  neutrality,  demands  significant 
transformations  across  all  sectors  of  the  economy,  spanning  agriculture  to  waste  management,  particularly 
emphasizing shifts in energy production and consumption. This transformation will reshape how people heat 
their homes, travel, make purchasing choices, and even select food and beverages. 

2.2.1.1 

Coal regions 

The European coal sector currently employs nearly half a million people in direct and indirect activities. By 2030, 
an  estimated  loss  of  around  160,000  direct  jobs  is  anticipated.  Regional  development,  pivoting  around  a 
meticulously planned restructuring process where renewable energy assumes a  central role, is envisioned to 
create novel employment opportunities (Alves Dias et al, 2018). 

Historically,  coal  has  been  a  primary  fuel  in  the  European  economy,  constituting  16%  of  gross  inland  energy 
consumption in the EU and 24% of the power generation mix. While its usage varies among EU Member States, 
six countries still rely on coal for at least 20% of their energy demand. However, the role of coal is diminishing in 
line with the ongoing energy system transformation. 

The imperative to curtail greenhouse gas emissions has resulted in a growing share for renewables, accompanied 
by active discouragement of coal power generation through stringent post-2020 emission requirements, high 
CO2  emission  allowance  prices,  and  probable  restrictions  on  coal  eligibility  for  future  capacity  remuneration 
mechanisms. Yet, the potential adverse impacts of the ongoing contraction of the coal sector on employment 
and  regional  economies  hosting  hard  coal  and  lignite  mining  activities  and  coal-fired  power  plants  are  often 
overlooked.  Urgent  measures  are  thus  warranted  to  foster  alternative  business  prospects,  sustaining  or 
augmenting regional employment and bolstering economic growth. 

Most coal-fired plants in Europe were commissioned over 30 years ago, averaging 35 years old, with an estimated 
efficiency of 35%, considerably lower than current state-of-the-art standards. The initial wave of power plant 
retirements projected during 2020-2025, driven by competitiveness in a carbon-constrained world, could lead to 
the loss of 15,000 direct jobs in power plants. Coal mines are already shuttering due to lack of competitiveness, 
with an estimated 109,000 mining jobs at high risk. 

The decline in coal-related activities will also impact other sectors. The European iron and steel industry heavily 
relies on domestic coking coal, meeting 37% of its needs. Hard coal mines capable of producing this type of coal 
could potentially continue operation solely for this sector if coking coal prices support mining operations. 

Mining equipment manufacturers will also feel the effect. Research shows that innovation and manufacturing in 
mining are directly linked to mining activities, employing over 100,000 individuals in coal-producing countries. 

12 

 
 
 
The retirement of coal assets should coincide with a well-planned and gradual industrial restructuring process to 
aid redundant coal workers. New business prospects can be built upon the industrial legacy of affected regions, 
fostering competitive industries and services. Collaboration among companies, regulators, investors, land-use 
planners,  and  local  communities  is  crucial  to  identify  sustainable  uses  and  maximize  socio-economic 
development. 

Though new employment opportunities should span all sectors, the energy sector can continue to drive regional 
development.  Transitioning  to  wind  or  solar  parks  could offer  reemployment  opportunities  for  coal  workers, 
leveraging their electrical and mechanical skills, experience in challenging conditions, and sophisticated safety 
expertise,  highly  valued  in  wind  and  solar  energy  industries.  Furthermore,  repurposing  closed  mines  for 
geothermal  energy  or  hydropower  applications  could  offer  jobs  and  socio-economic  benefits  to  post-mining 
communities. 

The transition toward inclusive and low-carbon economies must be just and fair, maximizing opportunities for 
economic prosperity, social justice, rights, and social protection for all, leaving no one behind (UNFCCC, 2016). 

The International Labour Organization (ILO) has been engaged in the concept of just transition for many years. 
As part of this endeavour, the ILO has published the 'Guidelines for a Just Transition towards Environmentally 
Sustainable Economies and Societies for All.' According to the ILO (refer to ILO, 2015; ILO, 2018), a just transition 
is defined as a shift from a fossil-fuel-dependent economy to a green economy. This transition should not only 
diminish our environmental impact but also rectify existing socioeconomic disparities and prevent the creation 
of new ones. The guidelines outline nine crucial policy areas aimed at simultaneously addressing environmental, 
economic, and social sustainability to ensure a fair transition for all: 

1.  Macroeconomic and growth policies. 

2. 

Industrial and sectoral policies. 

3.  Enterprise policies. 

4.  Skills development. 

5.  Occupational safety and health. 

6.  Social protection. 

7.  Active labour market policies. 

8.  Rights. 

9.  Social dialogue and tripartism. 

The International Energy Agency (IEA) has released an updated edition of its Net Zero Roadmap, highlighting the 
urgent  need  for  continued  rapid  growth  in  renewable  energy,  the  phase-out  of  fossil  fuels,  and  global 
cooperation to aid developing countries in their transition to clean energy. 

The  2023  report4  revises  the  IEA's  original  Roadmap  published  in  2021,  taking  into  account  the  significant 
expansion of clean energy technologies, augmented investment in fossil fuels, and the unprecedented levels of 
global emissions in recent years. The IEA asserts that a departure from current energy and fossil fuel policies is 
imperative to restrict warming to 1.5 degrees Celsius. 

Electric vehicle sales and the augmentation of solar power capacity are currently progressing toward achieving 
net-zero  objectives.  Together,  these  technologies  contribute  to  one-third  of  the  overall  emissions  reductions 
required  by  2030.  Technological  advancements  have  played  a  crucial  role  in  driving  this  growth,  fostering 
affordability in electric vehicles and solar power. 

The IEA urges advanced economies to accelerate their net-zero targets, thereby affording developing economies 
more  time  to  catch  up  in  the  transition  to  clean  energy.  Increased  investment  in  emerging  and  developing 
economies stands as a critical component in this transition. 

Through  global  collaboration,  the  phase-out  of  fossil  fuels  coupled  with  the  amplification  of  clean  energy 
initiatives  could  lead  to  a  25%  reduction  in  fossil  fuel  demand  by  2030,  accounting  for  a  35%  decrease  in 
emissions  from  the  all-time  high  recorded  in  2022.  Along  this  trajectory,  fossil  fuel  demand  is  projected  to 

4 Net Zero Roadmap A Global Pathway to Keep the 1.5 °C Goal in Reach 2023 Update; International Energy Agency Website: www.iea.org 

13 

 
 
 
plummet  by  80%  by  2050,  rendering  new  oil,  gas,  and  coal  projects  unnecessary  to  meet  global  energy 
requirements. 

2.2.1.2 

Carbon Border Adjustment Mechanism 

The Carbon Border Adjustment Mechanism (CBAM)5 is a European regulation imposing reporting obligations and 
a carbon tax on EU imports of specific goods, aimed at curbing carbon emissions. On May 17, 2023, the CBAM 
(Regulation [EU] No. 2023/956) came into force. It serves as a pivotal element of the EU’s ‘Fit for 55’ climate 
strategy,  designed  to  complement  the  EU  Emissions  Trading  System  (EU  ETS).  Its  primary  goal  is  to  ensure 
uniform emission costs for both imported goods and those produced within the EU, countering the challenge of 
'Carbon Leakage' arising from the EU's stringent climate policy standards on a global scale. 

Initially, CBAM will exclusively apply to imports of goods and intermediate products with notably high carbon 
intensity, posing a significant risk of carbon leakage. These encompass cement, iron, steel, aluminum, fertilizers, 
and hydrogen. The objective is to establish equitable conditions for European and foreign  producers of CO2-
intensive raw materials, preventing the relocation of production to third countries. 

The CBAM Regulation officially commenced on May 17, 2023. It will be rolled out in phases, starting on October 
1, 2023, and expected to be fully effective by January 1, 2026. CBAM Certificates will become mandatory in 2026. 
The clearer requirements and timeline for CBAM enable companies to proceed with their preparations for its 
implementation. 

Box 1. Production with CBAM requirement 

CBAM will initially apply to imports into the EU of the following goods, and processed products of those goods, 
as listed in Annex I of CBAM: (a) cement, (b) electricity, (c) fertilizers (including, for example, ammonia), (d) cast 
iron,  iron,  and  steel,  (e)  aluminium  and  (f)  chemicals  (although  for  now  only  hydrogen  is  listed  in  the  latter 
category). 

To meet the upcoming reporting requirements, companies should take proactive steps, including: 

•  Reviewing  and  adjusting  existing  agreements  with  suppliers  to  gather  all  pertinent  CBAM-related 

information, enhancing transparency across supply chains. 

• 

Transferring the reporting obligation to transportation companies when necessary and mitigating risks 
contractually (e.g., concerning inaccurate or delayed reporting). 

•  Organising access to the CBAM registry/portal. 

•  Reviewing, finalizing, and submitting quarterly reports. 

• 

Establishing and integrating business processes to ensure compliance with CBAM regulations. 

The  CBAM  will  encompass  both  direct  and  indirect  emissions  embedded  in  imported  goods,  excluding  those 
covered by indirect cost compensation schemes under the EU ETS. In these instances, only direct emissions will 
be considered. 

Table 1. Direct and indirect emissions  

Sector   

Iron and steel   

Aluminium  

Hydrogen  

Greenhouse gas 

Carbon dioxide 

Carbon dioxide and perfluorocarbons 

Carbon dioxide 

5 Document 32023R0956: Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon 

border adjustment mechanism (Text with EEA relevance) 

14 

 
 
 
 
 
Fertilisers  

Electricity  

Cement  

Source: Authors. 

Carbon dioxide and nitrous oxide 

Carbon dioxide 

 Carbon dioxide 

The European Green Deal (EGD) outlines ambitious targets for 2030, aiming to reduce emissions by at least 55 
percent and achieve net zero emissions by 2050. Central to this plan is the role of carbon pricing, coupled with 
the  phase-out  of  environmentally  harmful  subsidies.  The  EGD  includes  several  strategies:  strengthening  and 
expanding the Emissions Trading System (ETS), reforming the Energy Tax Directive to incentivize fuel switching, 
and  introducing  a  Carbon  Border  Adjustment  Mechanism  (CBAM).  The  CBAM  will  impose  a  fee  on  covered 
emissions-intensive  imports  (such  as  iron  and  steel,  cement,  fertilizers,  aluminum,  electricity,  hydrogen,  and 
selected articles of iron or steel), incorporating the carbon content (direct and embedded CO2, N2O, and PFC 
emissions). This initiative sends a clear message to trading partners about the potential financial risks associated 
with a fossil fuel-centric economic model. 

The CBAM is pivotal in the EU's efforts to level the playing field for domestic industries subjected to increasingly 
stringent  carbon  pricing.  By  extending  the  carbon  pricing  signal  to  imported  carbon-intensive  products,  the 
CBAM aims to diminish the risk of carbon leakage—preventing the relocation of carbon-intensive production to 
countries outside the carbon pricing framework. 

Importers handling materials covered by the CBAM will be required to report the embedded emissions of their 
products. Starting in 2026, the CBAM fee will be gradually introduced (reaching average EU ETS allowance price 
levels by 2034), while simultaneously phasing out the free allocation of allowances to EU ETS entities over the 
same period. 

Box 2. Just transition and the SDGs 

The just transition is an integral part of Agenda 2030, and directly contributes to the achievement of most of the 
SDG Goals. Notably, a well-managed green transition:  

• creates decent work and economic growth (SDG 8), contributing to lowering poverty (SDG 1).  

• mitigates climate change pressure (SDG13) and reduces pollution and ecosystem degradation (SDG 
14 and 15). 

• locks in research and development programmes that produce important innovations (SDG 9). 

•  produces  income  opportunities  in  rural  areas,  reducing  migration  pressure  on  urban  centres  (SDG 
11). 

• has numerous spillover effects on good health and well-being (SDG3) from better air quality.  

• promotes participatory decision-making that en-hances equality (SDG10) and gender parity (SDG 5). 

2.2.2  Clean industrial development and circular economy 

The  circular  economy6  represents  a  model  of  production  and  consumption  that  emphasizes  sharing,  leasing, 
reusing, repairing, refurbishing, and recycling existing materials and products for as long as possible, thereby 
extending the life cycle of products. 

Practically, it involves minimizing waste. When a product reaches the end of its life, efforts are made to retain its 
materials within the economy through recycling, allowing these materials to be reused productively, generating 
further value in the process. 

6Europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits#: 

~:text=The%20circu 

15 

 
 
 
 
 
 
 
 
 
 
 
This stands in contrast to the traditional linear economic model, which follows a take-make-consume-throw away 
pattern. This linear model heavily relies on abundant quantities of inexpensive, easily accessible materials and 
energy. 

Transitioning  to  a  climate-neutral  and  circular  economy  necessitates  the  full  engagement  of  the  industry. 
Although the EU’s industry has initiated this shift, it still contributes to 20% of the EU’s greenhouse gas emissions. 
Its reliance on a largely linear model entails continuous extraction, trade, and processing of new materials into 
goods,  leading  to  eventual  disposal  as  waste  or  emissions.  Currently,  only  12%  of  the  materials  used  by  the 
industry come from recycling processes. 

The  waste  hierarchy  forms  the  fundamental  principle  of  EU  waste  policies  (Art.  4  of  the  Waste  Framework 
Directive), prioritizing waste prevention as the highest goal, followed by preparing for reuse, recycling, and other 
recovery methods, and finally disposal as the least favourable option. Advancing towards a circular economy in 
the EU involves efforts to enhance resource efficiency, reduce waste generation, and treat waste as a valuable 
resource. Figure 5 provides an overview of key EU policy objectives and targets related to waste and resources, 
outlining their binding force. 

Figure 5. Overview of selected EU policy objectives and targets related to waste and resources 

16 

 
 
 
Source: EEA, 2020. 

The EU Industrial Strategy, unveiled in March 2020, focuses on three core priorities: 

• 

Ensuring global competitiveness and maintaining a level playing field. 

•  Achieving climate neutrality by 2050. 

• 

Shaping Europe’s digital future. 

Concerning climate change mitigation and adaptation, the strategy aims to decarbonize most economic sectors 
while supporting sustainable and smart mobility industries. It envisions establishing a clean hydrogen alliance 
followed by alliances focused on low-carbon industries and others. 

This  transition  presents  an  opportunity  to  expand  sustainable,  job-intensive  economic  activities.  The  global 
market shows significant potential for low-emission technologies, sustainable products, and services. The circular 
economy also offers considerable prospects for new activities and employment opportunities. However, the pace 
of transformation remains slow, lacking widespread and uniform progress. 

The  Action  Plan  on  Circular  Economy  explicitly  targets  decoupling  economic  growth  from  resource  use.  The 
Commission estimates that implementing circular economy principles could boost GDP by an additional 0.5% 
and generate up to 700,000 jobs. The plan includes proposals to regulate product design to enhance durability, 
reusability, repairability, and upgradeability. Additionally, the Commission plans to introduce a ban on destroying 
unsold durable goods. The plan covers regulations on packaging, batteries,  construction, buildings, food, and 
specific actions to reduce waste. 

The circular economy action plan introduces a ‘sustainable products’ policy, promoting circular design across all 
products  based  on  shared  methodology  and  principles.  It  prioritizes  reducing  and  reusing  materials  before 
recycling,  encouraging new business  models, and setting minimum requirements to prevent  environmentally 
harmful  products  from  entering  the  EU  market.  There’s  also  a  focus  on  strengthening  extended  producer 
responsibility. While guiding the transition across all sectors, specific emphasis is placed on resource-intensive 
sectors like textiles, construction, electronics, and plastics. 

The EU has yet to establish quantitative targets for resource usage or improvements in resource productivity, 
although  some  member  states  have  included  national  targets  in  their  strategies.  Recent  policies  increasingly 
address resource use security, particularly concerning access to critical raw materials. 

2.2.3 

Environmentally friendly food system 

The Farm to Fork (F2F) Strategy7 was published on May 20, 2020, comprising several strategies, directives, and 
action plans that the Commission is set to develop between 2020 and 2023. It will be financed through various 
mechanisms, including the Regional Development Fund and Invest EU. 

The  primary  objective  of  the  strategy  is  to  establish European  food  systems  that  are equitable,  healthy,  and 
environmentally  sustainable. A sustainable food system is expected, among other goals, to have a  neutral or 
positive environmental impact, contribute to climate change mitigation and adaptation, reverse biodiversity loss, 
and ensure public health and nutrition. 

All EU policies are expected to play a role in preserving and restoring Europe’s natural capital. The Farm to Fork 
Strategy, outlined in section 2.1.6, will specifically address the use of pesticides and fertilizers in agriculture. 

2.2.4  A zero pollution for a toxic-free environment 

Creating a toxic-free environment requires more action to prevent pollution from being generated as well as 
measures to clean and remedy it. To protect Europe’s citizens and ecosystems, the EU needs to better monitor, 
report, prevent and remedy pollution from air, water, soil, and consumer products. To achieve this, the EU and 
Member States will need to look more systematically at all policies and regulations. To address these interlinked 
challenges, the Commission adopted in 2021 a zero-pollution action plan for air, water and soil8. 

7 https://food.ec.europa.eu/horizontal-topics/farm-fork-strategy_en 
8https://environment.ec.europa.eu/strategy/zero-pollution-action-plan_en 

17 

 
 
 
2.2.5  Business and the EU Green Deal 

The transition outlined in the European Green Deal presents an opportunity for businesses to modernize and 
enhance their competitiveness. With support from investment and innovation programs within the Multi-annual 
Financial  Framework,  industries  will  be  encouraged  to  develop  cutting-edge,  environmentally  friendly 
technologies and sustainable solutions. The European Green Deal, along with its subsequent actions, outlines a 
strategy that offers predictability and a regulatory framework to unlock investments, prevent stranded assets, 
and incentivize innovation. The Commission's efforts to mobilize sustainable private finance will further cater to 
the investment needs of these industries. Moreover, transitioning to a more circular economy and expanding 
the secondary raw materials market should reduce industries' reliance on critical raw materials. 

Promoting new collaborations with industries and investing in strategic value chains are essential endeavours. 

Digital technologies serve as critical enablers for achieving the sustainability goals set forth in the Green Deal 
across various sectors. The Commission will explore measures to ensure that digital technologies such as artificial 
intelligence, 5G, cloud and edge computing, and the Internet of Things can accelerate and maximize the impact 
of policies addressing climate change and environmental protection. Digitalization also offers new opportunities 
for  remotely  monitoring  air  and  water  pollution,  as  well  as  optimizing  the  utilization  of  energy  and  natural 
resources. Simultaneously, Europe requires a digital sector that prioritizes sustainability. The Commission will 
consider  measures  to  enhance  the  energy  efficiency  and  circular  economy  performance  of  the  sector  itself, 
encompassing broadband networks, data centers, and ICT devices. 

2.2.6  Mainstreaming sustainability in EU policies 

To fulfil the ambitions outlined in the European Green Deal, significant investment needs exist: 

•  A Sustainable Europe Investment Plan. 

•  A target of 25% of the budget for climate mainstreaming across all EU programs. 

•  A contribution of at least 30% of the Invest EU Fund to combat climate change. 

• 

• 

Establishment of a Just Transition Mechanism, including a Just Transition Fund, to ensure no one is left 
behind. 

Exploration of additional sources that could be mobilized and innovative methods to do so as part of 
the Sustainable Europe Investment Plan. 

•  A crucial role of the private sector in financing the green transition, necessitating long-term signals to 

direct financial and capital flows towards green investment and prevent stranded assets. 

•  Recognition of the pivotal role national budgets play in the transition. 

•  Well-designed  tax  reforms  capable  of  boosting  economic  growth  and  resilience  to  climate  shocks, 

contributing to a fairer society and facilitating a just transition. 

•  Mobilization of research and encouragement of innovation; New technologies, sustainable solutions, 

and disruptive innovation are pivotal in achieving the objectives of the European Green Deal. 

•  Utilization of the full spectrum of instruments available under the Horizon Europe program to support 

the necessary research and innovation efforts. 

•  Activation of education and training: Schools, training institutions, and universities are well-positioned 
to  engage  with  pupils,  parents,  and  the  broader  community  regarding  the  changes  essential  for  a 
successful transition. 

• 

Proactive  re-skilling  and  upskilling  are  vital  to  harness  the  benefits  of  the  ecological  transition.  The 
proposed European Social Fund+ will play a significant role in helping Europe’s workforce acquire the 
necessary skills to transition from declining sectors to growing sectors and adapt to new processes. 

2.2.7 

European Innovation Scoreboard 2023 

Research  and  development  (R&D),  innovation,  sustainable  industries,  and  infrastructures  are  crucial  for 
achieving the SDGs. Monitoring SDG 9 in the EU context focuses on elements like R&D intensity and personnel, 

18 

 
 
patent applications, air emissions intensity of industry, and modal splits in passenger and freight transport. Over 
the five-year period assessed in this study, the EU has made significant progress in many of these indicators. 
However, there have also been recent unfavourable trends, particularly concerning the use of environmentally 
friendly modes in freight and passenger transport. 

The European Innovation Scoreboard 2023 affirms Europe’s dedication to innovation. Innovation performance 
in Europe has increased by about 8.5% between 2016 and 2023 (Figure 6). During this period, the innovation 
performance of most EU Member States has improved, indicating that the EU provides a conducive environment 
for innovation. Nonetheless, an innovation divide persists, as countries with less robust innovation systems are 
progressing at a slower pace than the EU average. 

Within  this  context,  the  New  European  Innovation  Agenda,  adopted  in  July  2022  and  currently  being 
implemented, aims to position Europe as a leader in the new wave of deep tech innovation and start-ups. 

Horizon  Europe,  the  European  Framework  Programme  for  Research  and  Innovation,  is  designed  to  promote 
excellence-based Research and Innovation and support top-quality researchers and innovators to realise the EU’s 
objectives.  Cross-border  cooperation  on  technology  development  in  European  Partnerships  with  industry, 
including  Clean  Hydrogen,  Clean  Steel,  Processes4Planet,  Innovative  Health  Initiative,  and  Key  Digital 
Technologies, is crucial to supporting innovative technologies for climate-neutrality, independence from fossil 
fuels, and circularity. 

19 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20 

 
 
 
 
Figure 6. Performance of EU Member States’ innovation systems 

Source: European Innovation Scoreboard 2023. 

21 

 
 
 
 
Table 2. Framework for achieving results 

FRAMEWORK CONDITIONS  

INNOVATION ACTIVITIES 

INVESTMENTS 

IMPACTS 

Human resources 

Innovators 

Finance and support 

Employment impacts 

1.1.1 New doctorate graduates (in 
STEM)  
1.1.2 Population aged 25-34 with 
tertiary education  
1.1.3 Lifelong learning 

3.1.1 SMEs with product innovations  
3.1.2 SMEs with business process 
innovations 

2.1.1 R&D expenditure in the public 
sector  
2.1.2 Venture capital expenditures  
2.1.3 Direct government funding and 
government tax support for business 
R&D 

4.1.1 Employment in knowledge-
intensive activities  
4.1.2 Employment in innovative 
enterprises 

Attractive research systems 

Linkages 

Firm investments 

Sales impacts 

1.2.1 International scientific co-
publications  
1.2.2 Top 10% most cited publications 
1.2.3 Foreign doctorate students 

3.2.1 Innovative SMEs collaborating 
with others  
3.2.2 Public-private co-publications 
3.2.3 Job-to-job mobility of Human 
Resources in Science & Technology 

2.2.1 R&D expenditure in the business 
sector  
2.2.2 Non-R&D innovation expenditures  
2.2.3 Innovation expenditures per 
person employed in innovation-active 
enterprises 

4.2.1 Medium and high-tech product 
exports  
4.2.2 Knowledge-intensive services 
exports  
4.2.3 Sales of product innovations 

Digitalisation 

Intellectual assets 

Use of information technologies 

Environmental sustainability 

1.3.1 Broadband penetration  
1.3.2 Individuals who have above basic 
overall digital skills 

3.3.1 PCT patent applications  
3.3.2 Trademark applications  
3.3.3 Design applications 

2.3.1 Enterprises providing training to 
develop or upgrade ICT skills of their 
personnel  
2.3.2 Employed ICT specialists 

4.3.1 Resource productivity 
4.3.2 Air emissions by fine particulates 
PM2.5 in Industry  
4.3.3 Development of environment-
related technologies 

Source: European Innovation Scoreboard 2023 Methodology Report. 

22 

 
 
 
 
 
 
 
Figure 7. Map showing the performance of European countries’ innovation systems 

Source: European Commission.

23 

 
 
 
The  EIS  2023  distinguishes  between  four  main  types  of  activities  –  Framework  conditions,  Investments, 
Innovation activities, and Impacts – with 12 innovation dimensions, capturing in total 32 indicators. Each main 
group includes an equal number of indicators and has an equal weight in the average performance score, or the 
Summary  Innovation  Index  (SII).  Within  each  group  every  indicator  has  the  same  weight.  Indicators  that  are 
included in the measurement framework are presented in the Table 2. 

Table 3. Indicator measuring progress towards SDG 9 

Source: EIS, 2023. 

24 

 
 
 
2.2.8 

EU Eco-Innovation Index 

A climate-neutral circular economy is the overarching objective enshrined in European Green Deal’s vision for 
the future European economy. Hence, the monitoring and measurement  of the progress with regard to eco-
innovation (see Al-Ajlani et al., 2022) is crucial in order to ensure that Europe is moving towards such a vision. 

The Eco-Innovation Index is based on five thematic areas: 

1. 

2. 

3. 

4. 

5. 

Eco-innovation inputs, which includes financial and human capital investment in eco-innovative 
activities; 

Eco-innovation activities, which defines the extent to which companies in a given country are active in 
eco-innovation; 

Eco-innovation outputs, which measures the output of eco-innovation activities concerning the 
number of patents and academic literature; 

Resource efficiency outcomes, which pinpoint a country’s efficiency of resources and GHG emission 
intensity and 

Socio-economic outcomes, which aims to measure the positive societal as well as economic outcomes 
of eco-innovation. 

The environmental innovation performance of EU Member States is measured by the summary Eco-Innovation 
Index, which is a composite indicator obtained by taking an unweighted average of the 12 indicators included in 
the measurement framework.9  

Figure 8 shows the scores of this summary index relative to the performance of the EU in 2013 for all EU Member 
States in 2022. The 27 EU Member States are divided in three equally sized performance groups, where the top-
9 countries belong to the eco-Innovation leaders, the 10th to 18th ranked countries belong to the average eco-
Innovation performers, and the 19th to 27th ranked countries belong to the group of countries catching-up with 
Eco-Innovation. 

9 https://ec.europa.eu/environment/ecoap/indicators/index_en 

25 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 8. Performance of eco-innovation systems in 2022, 2021 and 2013 

Note: Coloured columns show countries' performance in 2022, using the most recent data for 12 indicators, relative to that of the EU in 2013. The horizontal hyphens show performance in 
2021. For all years, the same methodology has been used. The dashed lines show the threshold values between the performance groups, where the threshold values of top 33.3% percentile 
and 66.7% percentile have been adjusted upward to reflect the performance increase of the EU between 2013 and 2022. 

Source: Al-Ajlani et al., 2022.

26 

 
 
 
 
Figure 9. EU performance change 

Note: normalised scores in 2022 (blue coloured bars) and 2021 (dark blue bars) relative to those in 2013 
Source: Al-Ajlani et al. (2022) 

The change in Eco-innovation indicators on the EU level in 2021 and 2022 relative to 2013 is summarised in the 
Figure  9.  Over  the  last  10  years,  the  largest  noticeable  improvement  is  with  respect  to  two  indicators:  eco-
innovation related publications and GHG emission productivity. 

Advancing eco-innovation is an objective shared among various European initiatives and policies. Establishing 
the link between the Eco-Innovation Index and relevant indices is vital to understanding the overall performance 
of EU Member States. 

2.2.9 

EU as the global leader in addressing climate change 

The global challenges of climate change and environmental degradation require a global response. The EU will 
continue to promote and implement ambitious environment, climate and energy policies across the world. The 
EU  will  continue  to  ensure  that  the  Paris  Agreement  remains  the  indispensable  multilateral  framework  for 
tackling climate change.  

In  parallel,  the  EU  will  step  up  bilateral  engagement  with  partner  countries  and,  where  necessary,  establish 
innovative forms of engagement. The EU will put emphasis on supporting its immediate neighbours. The EU will 
use its diplomatic and financial tools to ensure that green alliances are part of its relations with Africa and other 
partner countries and regions, particularly in Latin America, the Caribbean, Asia, and the Pacific. 

27 

 
 
 
The  EU’s  international  cooperation  and  partnership  policy  should  continue  to  help  channel  both  public  and 
private funds to achieve the transition. 

Box 3. Green Deal 

The European Green Deal is not a single strategy that provides the solution for Europe’s many environmental 
and climate related challenges. Rather, it presents a collection of targets, intentions and objectives that will be 
implemented over the next ten years. It provides the overarching framework for the necessary green transition. 

The European Innovation Scoreboard (EIS) and the Eco-Innovation Index share a common goal of measuring 
innovation. The EIS is an annual index that provides a comparative assessment of the research and innovation 
performance of EU Member States and selected third countries, and the relative strengths and weaknesses of 
their research and innovation systems. 

The two indices also have one common thematic area that they measure: environmental sustainability. The EIS 
uses  three  indicators  to  measure  environmental  sustainability:  1)  resource  productivity,  2)  development  of 
environment-related  technologies,  and  3)  air  emissions  by  fine  particulates  (PM2.5).  The  first  and second  of 
these indicators are also included in the Eco-Innovation measurement framework. 

2.3 

Transformational aspects of Smart Specialisation  

Smart specialisation (RIS3) approach, based on the Entrepreneurial Discovery Process (EDP) and the selection of 
a  limited  number of thematic priorities, allows policy makers to  address emerging opportunities and market 
developments in a coherent manner, while avoiding duplication and fragmentation of efforts (Radovanovic and 
Bole, 2024; Perianez-Forte and Wilson, 2021; Marinelli and Perianez-Forte, 2017; Kyriakou et al, 2016; Gianelle 
et al, 2016; Foray, 2015; Foray and Goenaga, 2013; Foray and Rainoldi, 2013; Foray et al., 2009; Kelchtermans 
et al, 2021). The Smart Specialisation strategy may take the form of, or be included in, a national or regional 
research and innovation (R&I) strategic policy framework. The adoption of national and/or regional Research & 
Innovation Smart Specialisation Strategies (RIS3) was a formal requirement (the so-called ex-ante conditionality) 
for allocating R&I budgets from the European Structural and Investment Funds (ESI Funds). 

The RIS3 approach is relevant to all three priorities of Europe 2020 i.e. smart, sustainable and inclusive growth. 
The Smart Specialisation strategy is about defining existing specialities and developing new ones, and involves 
all forms of innovation (not only high-tech). It represents an inclusive, bottom-up approach adding users and 
civil society to innovation ecosystem while being ‘evolution- driven’ by the entrepreneurial discovery process. 

Box 4. Definitions of RIS3 

National/regional research and innovation strategies for smart specialisation (RIS3) are integrated, place-based 
economic transformation agendas that do five important things: 

- They focus policy support and investments on key national/regional priorities, challenges and needs 
for knowledge-based development, including ICT-related measures. 
- They build on each country's/region’s strengths, competitive advantages and potential for 
excellence. 
- They support technological as well as practice-based innovation and aim to stimulate private sector 
investment. 
- They get stakeholders fully involved and encourage innovation and experimentation. 
- They are evidence-based and include sound monitoring and evaluation systems. 

The key element for the successful design and implementation of the strategy is the entrepreneurial discovery 
process (EDP), which in fact represents a continuous public-private dialogue among four helices of the modern 
innovation  society  (so-called  quadruple-helix),  consisting  of  academia,  industry,  government  sector  and  civil 
society. 

Smart  Specialisation  strategies  addressing  the  SDGs  aim  to  mobilise  research  and  innovation  to  respond  to 
localised sustainability challenges (Miedzinski et al., 2022). The initial development of Smart Specialisation was 
mainly  focused  on  fostering  industrial  transformation  and  enhancing  regional  competitiveness.  The  new 
directionality towards sustainability raises the ambition for innovation to respond to societal challenges and 
foster systemic changes in key societal systems, such as energy, food, mobility or housing.  

28 

 
 
 
 
 
 
 
 
 
 
Embedding the SDGs into Smart Specialisation strategies requires an explicit focus on ‘transformative change’, 
as in the “third frame” of innovation policy (Schot and Steinmueller, 2018). Transformative innovation policy 
involves  the  explicit  mobilisation  of  science,  technology,  and  innovation  to  tackle  societal  challenges  of 
sustainability. 

Box 5. Smart Specialisation 

It is important to emphasise that Smart Specialisation is not a finished concept but subject to continuous debate, 
criticism  and  evaluation,  both  in  academic  and  policy  circles.  Adding  a  sustainability  aspect  to  the  Smart 
Specialisation concept has considerable implications for substantive and procedural elements of the approach. 
A fundamental challenge is responding to the transformative ambition of the Agenda 2030 and the SDGs. 

2.3.1  Monitoring and evaluation 

Challenges for S3 monitoring and evaluation arise from the distinctive elements of these strategies, especially 
the  novelty  of  the  S3  approach  concerning  the  entrepreneurial  discovery  process.  The  Smart  Specialisation 
strategy is an example of a complex innovation strategy in which instruments derived from different theoretical 
logics coexist, while a wide range of regional stakeholders from the quadruple helix of government, business, 
research, and civil society are involved. This implies that the monitoring and evaluation process are required to 
embrace and meet the needs of broader groups in society, on which policies can have varied impacts (Hegyi and 
Prota, 2021). 

Recognising the increasing complexity associated with innovation policies makes apparent the need for system-
wide evaluation exercises that measure the effectiveness of the overall strategy. This means taking into account 
changes in behaviour of actors that have not been supported by policy measures included in the strategy, not 
only changes in behaviour in the target groups of the various interventions but also the presence of multiple 
operating and interacting interventions, which create difficulties identifying the effects of one intervention over 
another. 

The Entrepreneurial Discovery Process, with its experimental nature, adds further complexity. As well-known, 
the EDP is not just a process referring to the identification of investment priorities in research and innovation 
(priority  areas)  and  exploring  new  techno-economic  opportunities  through  stakeholders'  engagement;  it  is a 
social and political process where issues such as power, vested interests of different groups, etc., need to be 
taken into account. In addition, conceptually, the EDP has evolved from being an element of the design phase 
of a smart strategy into a continuous activity (Radovanovic and Bole, 2024). In terms of evaluation methodology, 
this  entails  moving  from  traditional  approaches  towards  participatory  approaches  in  which  the  focus  is  on 
supporting  the  learning  capacity  of  the  system  by  strengthening  feedback  loops  and  improving  access  to 
information. 

Other  challenges  for  evaluation  relate  to  uncertainty  in  the  nature  and  timing  of  impacts  arising  from 
interventions and the necessity to pay particular attention to context, as economic and innovation systems differ 
over time and space. 

Finally, since policymakers need accurate and real-time input to assess socio-economic problems and propose 
effective strategies for tackling them, evaluation should occur concurrently alongside program development and 
implementation. A sound S3 monitoring system 'acts as an early warning mechanism signalling critical aspects 
of  policy  implementation'  that  provides  inputs  for  S3  evaluation.  This  requires  a  monitoring  and  evaluation 
(M&E)  system  in  place  that  collects  and  manages  accurate,  complete,  and  relevant  data,  driving  data-  and 
evidence-driven decision-making. 

While  supporting  the  re-examination  or  validation  of  earlier  policy  decisions  and  advancements  regarding 
strategic  objectives,  the  M&E  framework  enables  policymakers  to  make  better-informed  decisions  when 
determining the impact and effectiveness of a policy program (OECD, 2009). Hence, in line with the European 
Commission’s  Smart  Specialisation  implementation  guide,  monitoring  and  evaluating  the  implementation  of 
innovation  policies  contribute  to  minimizing  duplication  and  fragmentation  of  efforts  while  providing  policy 
evaluators a basis for comparison and benchmarking of policies and policymakers a basis for preparing for the 
next programming period (Gianelle et al., 2016). 

29 

 
 
 
2.4  Green skills 

The transition to a low-carbon, resource-efficient economy requires systemic changes that will result not only in 
new products and services but also in changes in production processes and business models. This greening of 
the economy will inevitably change the skills required and the tasks involved in many existing occupations. 

According  to  the  UNIDO  definition10,  green  skills  encompass  the  knowledge,  abilities,  values,  and  attitudes 
needed to live in, develop, and support  a sustainable and resource-efficient  society. The Green General Skill 
index identifies four groups of work tasks crucial for green occupations: 

• 

• 

Engineering and Technical Skills: Hard skills involving competences related to the design, construction, 
and  assessment  of  technology,  typically  mastered  by  engineers  and  technicians.  This  expertise  is 
essential  for  eco-buildings,  renewable  energy  design,  and  energy-saving  research  and  development 
(R&D) projects. 

Science Skills: Competences stemming from broad knowledge essential to innovation activities, such 
as physics and biology. These skills are in high demand in value chains and the utility sector, providing 
basic amenities like water, sewage services, and electricity. 

•  Operation Management Skills: Know-how related to changes in organisational structure required to 
support  green  activities  and  an  integrated  view  of  the  firm  through  life-cycle  management,  lean 
production, and cooperation with external actors, including customers. These skills are crucial for roles 
like sales engineers, climate change analysts, sustainability specialists, chief sustainability officers, and 
transportation planners. 

•  Monitoring  Skills:  Technical  and  legal  aspects  of  business  activities,  assessing  the  observance  of 
technical criteria and legal standards. Examples include environmental compliance inspectors, nuclear 
monitoring technicians, emergency management directors, and legal assistants. 

In addition to these skills, various soft skills are considered increasingly important, not only for green skills but 
also for "skills of the future," including design thinking, creativity, adaptability, resilience and empathy. 

Climate  action  is  already providing  jobs  and  opportunities  for  the  future.  The  transition  to  a  climate-neutral 
economy will lead to fundamental changes in various sectors, creating new jobs while redefining others. 

There is a need to: 

• 

Promote and support green employment; 

•  Address the skilling and reskilling of workers; and 

•  Anticipate changes in the workplaces of the future. 

The European Commission officially launched the Pact for Skills on November 10, 2020, a shared engagement 
model for skills development in Europe. The Climate Pact will continue the EU’s work, actively supporting labour 
organisations, educational bodies, and public authorities in helping individuals seeking employment in the green 
economy through activities such as: 

• 

• 

• 

• 

• 

Encouraging  businesses  and  organisations  to  participate  in  the  Pact  for  Skills  for  up-  and  re-skilling 
workers. 

Spreading good practices and success stories from European programs. 

Facilitating access to the European Social Fund, enabling training for five million people in green jobs 
and the green recovery. 

Collaborating  with  Erasmus+  and  other  programs  providing  opportunities  for  developing  forward-
looking skills and partnership projects. 

Encouraging stakeholders, local authorities, and communities to utilize the Just Transition Mechanism 
for promoting re-skilling, active inclusion of workers, jobseekers, and creating new local jobs in targeted 
regions. 

10 https://www.unido.org/stories/what-are-green-skills 

30 

 
 
 
• 

Providing  support  programs  for  higher  education  institutions  developing  and  teaching  courses  on 
environmental and climate impacts. 

Companies,  workers,  national,  regional,  and  local  authorities,  social  partners,  cross-industry  and  sectoral 
organisations, education and training providers, chambers of commerce, and employment services all play a key 
role. 

Climate change and environmental degradation are among the greatest challenges of our times. At the 2018 
Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24), a green 
transition that is also a just transition for the workforce and the creation of decent work were declared crucial 
to  effective,  inclusive,  and  climate-resilient  development.  Skills  development  is  a  cornerstone  of  that  just 
transition. The availability of the right skills paves the way for a productive green transformation and decent job 
creation. Skills development also serves as a buffer against the effects of transitory disruptions. The transition 
to a greener future is happening, but it requires a coordinated policy approach to make it just and inclusive. 

The International Labour Organization has mobilized the efforts of three departments to produce the Study Skills 
for a Greener Future.11 The right skills for jobs are an essential prerequisite for the transition to environmentally 
sustainable and socially inclusive economies. 

The ILO has produced estimates of the impact that the transition to energy sustainability by 2030 will have on 
employment. The extension of this analysis shows that almost 25 million jobs will be created and nearly 7 million 
lost globally. Of the latter, 5 million can be reclaimed through labour reallocation  – that is, 5 million workers 
who lose their jobs because of contraction in specific industries will be able to find jobs in the same occupation 
in another industry within the same country. This means that between 1 and 2 million workers are likely to be 
in occupations where jobs will be lost without equivalent vacancies arising in other industries and will require 
reskilling into other occupations. Massive investment will be needed to train workers in the skills required for 
close to 20 million new jobs (see figure 11). 

Figure 10. Occupations most in demand across industries in a global energy sustainability scenario, 2030 

Note: Difference in employment between the sustainable energy scenario (the 2C scenario) and the business-as-usual 
scenario (the 6C scenario) of the International Energy Agency (IEA) by 2030. Detailed information on the methodology is 
described in ILO, 2018a, pp. 39, 170-172). 

Source: ILO calculations based on EXIOBASE v3 and national labour force surveys. 

11 Skills for a greener future: A global view based on 32 country studies International Labour Office  – Geneva:  ILO, 2019 ISBN 978-92-2-

031439-5 (print) ISBN 978-92-2-031440-1 (web pdf) 

31 

 
 
 
 
The ILO also estimates that, in working towards a circular economy, a net total of between 7 and 8 million new 
jobs will be created by 2030, as compared to a business-as-usual scenario. The extension of these estimates 
shows  that  in  the  circular  economy  scenario,  nearly  78  million  jobs  will  be  created  and  almost  71  million 
destroyed. Of those workers whose jobs are destroyed, a large proportion – nearly 49 million – will find vacancies 
in the same occupation in other industries within the same country, through reallocation. 

As for the remainder, close to 29 million jobs will be created without reallocation, and a little under 22 million 
will be destroyed without vacancies in the same occupation opening in other industries. Figure 12 shows the 20 
occupations  that  will  figure  most  prominently  in  job  destruction  and  reallocation  in  the  circular  economy 
scenario. 

Even  workers  in  the  jobs  that  are  expected  to  disappear  with  no  equivalent  vacancies  in  other  industries  – 
possibly over 1 per cent of the global workforce – may well be able to use their skills in growing industries with 
some  additional  training.  There  is  a  set  of  core  and  technical  skills  that  are  potentially  transferable,  within 
occupations, from declining to growing industries; but retraining will be needed to enable workers to acquire 
new skills for use in the latter. 

Figure 11. Occupations most susceptible to job destruction and reallocation across industries in a global circular economy 
scenario, 2030 

Note: The figure shows difference in employment between the scenario of a sustained 5% annual increase in recycling 
rates for plastics, glass, pulp, metals and minerals across countries and related services, and a business-as-usual scenario 
(the 6C scenario). Detailed information on the methodology is described in ILO, 2018a, pp. 39, 162-170). 

Source: ILO calculations based on EXIOBASE v3 and national labour force surveys. 

Box 6. New skills 

However, the transition to environmentally sustainable and inclusive economies and societies cannot take place 
if the skills demanded by new jobs are not available in the labor market. The transition is therefore conditional 
on investment in training to develop skills to meet new requirements and avoid skills mismatches. 

Forward-looking skills strategies are necessary to train young people and reskill the current workforce to meet 
the skills needs of the new jobs generated in the transition process in expanding sectors. 

Green transition needs a new approach for workers' skills: 

1.  The growth in demand for skills for green jobs continues to be driven by environmental change, 

government policy, technology and markets. The changing environment, policies and regulations, 
green technology and innovation, green productivity, and green markets are all stimulating demand 
for skills for green jobs, both directly and indirectly through supply chains. Green technologies 

32 

 
 
 
continue to advance, linked to growth in consumer markets for green products and services in high-
income countries (HICs) and increasingly in low-income countries (LICs) too, as technologies become 
more affordable and efficient, and owing to technological diffusion through global trade and 
investment as well as growing awareness about issues of climate change vulnerability and the need 
for adaptive measures. 

2.  Skills gaps and shortages are increasing, posing a challenge to the green transition. The most 

widespread effect of the green transition on employment is the need to reskill or upskill within 
existing occupations. New and emerging green occupations are rarer and tend to emerge at higher 
skill levels. Low-skilled occupations tend to require limited adaptation to greener work processes such 
as simply greater environmental awareness. 

Table 4. Changes in skills required, by skill level of occupation 

Source: “Skills for green jobs” country reports, ILO, 2018. 

Jobs in the transition to more sustainable economies require both technical (specific to  each occupation) and 
core (soft) skills. Although data are scarce, there are enough examples to suggest that gaps in and shortages of 
both kinds of skills are likely to be widespread, especially in low-income countries, and that these may constitute 
a constraint on the transition to an environmentally sustainable economy. Developing countries are especially 
challenged by a lack of professionals and a shortage of university graduates in general, especially those trained 
in science, technology, engineering, and mathematics (STEM) skills. 

Even in high-income countries, including those with well-developed skills anticipation systems, a lack of both 
technical and transferable core skills remains a significant cause of recruitment problems for employers. 

To seize the momentum, countries will need to integrate forward-looking skills strategies into their climate and 
environmental policies. 

The transition to an environmentally sustainable and low-carbon economy will generate many new jobs, cause 
some job losses, and alter the skills composition of most jobs. Skills development strategies will need to support 
displaced workers while enabling the green transition and encouraging job generation. 

The Guidelines for a just transition towards environmentally sustainable economies and societies for all highlight 
the importance of inclusive skills development policies. Skills development is an important pillar in a just and 
inclusive transition, but other measures will be equally important. 

33 

 
 
 
Table 5. Main core skills required for green jobs, by skill level of occupation 

Source: “Skills for green jobs” country reports, ILO, 2018. 

Coordination  with  macroeconomic,  sustainable  investment,  industrial,  and  enterprise  policies,  including 
incentives for knowledge transfer and technology diffusion, will be essential in enabling businesses to implement 
greener  and  resource-efficient  production  practices,  align  the  supply  of  skills  with  growing  demand,  and 
facilitate  the  efficient  reallocation  of  workers  to  newly  created  green  jobs.  The  ILO  Human  Resources 
Development  Recommendation  (ILO,  2004)  recognizes  that  education,  training,  and  lifelong  learning  are  of 
fundamental importance and should form an integral part of, and be consistent with, comprehensive economic, 
fiscal, social, and labour market policies. Action planning on skills development will have to be integrated with 
key climate and environmental policies and regulations, including NDCs, to ensure that skills needs are met and 
climate commitments are implemented. Furthermore, skills policies and training measures will need to adopt a 
longer-term and systematic approach to skills development in the context of greening. 

The new jobs created in the environmentally sustainable economy will require somewhat higher qualifications 
and new sets of skills. Upskilling and reskilling workers, especially those most  affected by the transition, will 
mean  implementing  lifelong  learning  strategies  rather  than  front-loading  qualifications  that  are  expected  to 
suffice for an entire career. The green transition will not be a single force claiming a massive adjustment of the 
current and potential workforce. Automation, demographic change, global trade, and other megatrends will also 
have substantial impacts. Multiple changes will require multiple transitions managed throughout careers. Access 
to  skills  training,  raising  environmental  awareness  and  climate  literacy  for  current  workers,  even  those  not 
affected by job displacement, will be essential for the implementation of greener ways of production and service 
delivery. 

The Global Commission on the Future of Work has stressed the importance of investment in people’s capabilities 
and universal entitlements to lifelong learning (ILO, 2019). It has also underlined the need to step up investments 
in  labour market institutions to support people through future work transitions. Other systemic elements of 
lifelong learning  will need to  include innovative and diverse ways of financing, combining private and public 
contributions,  and  allowing  individuals  to  access  funding  and  gain  recognition  for  their  learning  outcomes, 

34 

 
 
 
whether attained formally or informally. Social dialogue will remain part and parcel of the provision of learning 
and skills for a just transition and sustainable development. 

35 

 
 
3  The Western Balkans outlook related to green transition 

The  Western  Balkans  (WB)  region  consists  of  six  economies  (Albania,  Bosnia  and  Herzegovina,  Kosovo*, 
Montenegro,  Serbia,  and  North  Macedonia),  covering  an  area  of  about  208,000  km2  with  a  population  of 
approximately 18 million. The region spans the low-altitude Pannonia valley to the north, hilly and mountainous 
regions  towards  the  central-south  and  west,  and  the  coastal  area  of  the  Adriatic  Sea.  The  spatial  climate 
variability, ranging from coastal subtropical to temperate continental with high mountains in between, results 
in a rich diversity of vegetation cover, considered a natural treasure of the region. The population is primarily 
engaged in weather and climate-related sectors such as agriculture, forestry, tourism, and supporting services. 
All economies share the common goal of increasing per capita income while reducing unemployment rates. As 
candidates and potential candidates for EU accession, they are committed to respecting the Paris Agreement 
and  achieving  EU2020  and  EU2030  goals  in  greenhouse  gas  (GHG)  emission  reduction,  increased  energy 
efficiency, and energy production from renewable sources. Faced with the significant impact of global warming 
and vulnerability to climate change, the WB economies analyse and report on adaptation options, emphasizing 
the  optimal  selection  and  prioritization  of  measures  in  line  with  mitigation  strategies.  The  challenge  of 
addressing  climate  change  issues  within  each  economy  is  hindered  by  the  shortage  of  human  and  financial 
resources,  necessitating  the  renewal  and  development  of  regional  collaboration  (Vukovic  and  Vujadinovic 
Mandic, 2018). 

The EU and the  Western Balkans share a  common culture and history, with closely interlinked societies and 
economies. Albania, Montenegro, North Macedonia, and Serbia are candidate countries for EU membership, 
while Bosnia-Herzegovina and Kosovo are potential candidates. The EU provides financial assistance in various 
areas to support progress towards membership, coupled with aid for meeting EU standards across all sectors. 

3.1  Western Balkans’ sustainable development cycle 

Similar to natural cycles, human activities must be coordinated by artificially created cycles aligned with nature 
to sustain survival. Efforts to restore the natural balance and sustainability of human development have led to 
the establishment of a global sustainable development cycle (SDC) that must be supported by regionally created 
gear wheels or regional SDCs. The chart (Figure 13) illustrates a simplified workflow or "cycle" of the functioning 
mechanism required for ensuring human livelihood quality and sustainable development in the Western Balkans 
(WB) region. 

36 

 
 
 
Figure 12. WB Sustainable development cycle  

Source: Vukovic and Vujadinovic Mandic (2018). 

The foundation of the WB SDC is information provided by the economies, mainly through their climate change 
policy  framework.  The  main  branches  of  assessments  performed  by  the  economies  include  climate  change 
(climatological parameters and indices) and impacts on human health, economic sectors, and the environment 
reflected through various indicators (Vukovic and Vujadinovic Mandic, 2018). Horizontal connections between 
activities  related  to  these  branches  are  complex  but  crucial  within  economies'  self-assessment.  All  branches 
systematically trace climate change impacts from the bottom up. The link between environment and climate 
change, marked with a dashed line, has a significant global impact due to natural processes triggered by global 
warming, leading to increased climate change signals. Economies' self-assessment must align with regional and 
global strategies, emphasizing the need for regional collaboration to address the challenges posed by climate 
change. 

The common needs identified in the WB region include a lack of human resources to address climate change 
issues and high vulnerability, necessitating coordinated regional efforts to ensure sustainable development and 
improve life quality. A regional approach, driven by the implementation of the SEE 2020 Strategy, should involve 
an integrated analysis of present and future climate change impacts for the entire region, ensuring compatibility 
with the Intergovernmental Panel on Climate Change 5th Assessment Report (IPCC AR5). The SEE 2020 Strategy 
outlined in this document reflects the determination of all the governments in South East Europe to embrace 

37 

 
 
 
the  bold  policy  approaches  required  to  attain  the  levels  of  socioeconomic  growth  necessary  to  improve  the 
prosperity of all its citizens and to facilitate eventual integration with the European Union (EU). The Strategy 
pursues a holistic pattern of development for the region and seeks to stimulate the key long-term drivers of 
growth such as innovation, skills and the integration of trade. 

The Western Balkan economies provided data, analysis and proposed measures related to climate change issues, 
adaptation and mitigation, with distinguished similarities which include, inter alia:  

•  Undoubtedly proving and recognising that climate and, consequently, living environment and economic 
practice (except the introduction of new technologies) are no longer static or slowly evolving, but rather 
characterised by significant trend of change;  

•  High motivation to meet the requirements related to EU accession;  

•  Highlighting  the  priority  and  necessity  of  integration  of  climate  change  aspects  in  existing 

environmental and other relevant policies;  

• 

Introduce climate change in education and raise awareness; coordinate the inter-disciplinary and cross-
sectorial collaboration through representative body (for example national committee), which consists 
of  parties  from  academia,  government  bodies,  private  sector  and  civil  society  and  is  under  the 
responsibility of ministry of environment or other ministries with environmental obligations;  

•  Besides  other  obstacles,  all  economies  outlined  a  lack  of  sufficient  human  resources  as  significant 

problem to comprehend the wide range of activities and commitments under the UNFCCC. 

3.2  Western Balkans economic performance 

3.2.1  Overview  

The resilience of the six economies of the Western Balkans has been tested over the last three years (World 
Bank, 2023). Growth in these economies started strong in early 2022 but moderated toward year-end. Major 
shocks, such as electricity and heating outages, had a less severe impact than expected. Inflation surged to a 
two-decade high in 2022 in almost all economies, with elevated price pressures continuing into early 2023. 

38 

 
 
Table 6. Table Western Balkan outlook 2020-25 

Note: e = estimate, f = forecast. 
Source: National statistical offices; ministries of finance, central banks; World Bank staff estimates. 

Higher food and energy prices have disproportionately affected low-income households, resulting in a slower 
pace of poverty reduction in 2022 despite universal government support. 

Box 7. Outlook for WB 

The outlook for the Western Balkans remains subdued and uncertainty remains high (World Bank, 2023). In the 
short  term,  growth  outcomes  are  expected  to  be  driven  by  economic  performance  in  the  EU,  the  course  of 
energy and food prices, and the fight against inflation. 

In  the  medium  term,  the  Western  Balkans  continues  to  have  a  positive  outlook,  but  reforms  are  needed  to 
rebuild buffers, accelerate the green transition and to address key structural challenges. The ongoing energy 
crisis  has  highlighted  the  need  to  accelerate  the  green  transition  across  Europe,  including  in  the  Western 
Balkans. The key starting point in this regard is to accelerate the move toward carbon pricing and to increase 
the use of environmental fiscal measures that incentivize households and firms to shift toward lower carbon 
intensity with respect to economic activity. 

Further, as governments across the region look toward rebuilding their fiscal buffers, there are high returns to 
no-regret  reforms  that  would  boost  productivity  over  the  medium  term,  such  as  accelerating  regional 
integration,  increasing  levels  of  market  competition,  attracting  higher  quality  investments,  and  addressing 
barriers  that  limit  labour  force  participation  (especially  among  women).  Finally,  securing  alternative  energy 
resources, including through the acceleration of investment in renewables, needs to be a priority ahead of the 
next winter. 

39 

 
 
 
 
The  economic  performance  of  the  Western  Balkan  economies  reflects  synchronization  with  the  EU,  which, 
having avoided a recession in the last quarter, is estimated to have grown at 3.7 percent in 2022, despite the 
effect  of  rising  energy  and  food  prices  on  consumption  and  investment  and  the  weather-induced  impact  on 
agriculture and energy production due to a  particularly dry year. Overall growth for the year came in at 2.1 
percent in North Macedonia, 2.3 percent in Serbia, 3.5 percent in Kosovo, 4.0 percent in Bosnia and Herzegovina, 
4.8 percent in Albania, and 6.1 in Montenegro. 

Figure 13. Real GDP growth slowed in 2022 

Source: National statistical offices; IMF; World Bank staff. 

Investments in the Western Balkans have remained resilient. The service sector leads the growth recovery, while 
industrial activity lags, except in Kosovo. Construction has driven growth in Albania, while industrial production 
contracted across the region in 2022, except in Kosovo and Serbia, where it bounced back in the last quarter. 
Unfavourable weather negatively impacted electricity production and agriculture, with Albania and Montenegro 
particularly affected by energy shocks. Investments in energy efficiency are crucial to mitigate the impact of such 
shocks  on  firms'  profits.  The  agricultural  sector  faced  challenges  due  to  unfavourable  weather  conditions, 
affecting agricultural production in Serbia and leading to modest growth of 0.13% in Albania. The agricultural 
sector in Albania accounts for almost 18% of GDP, more than double the average share for other Western Balkan 
economies. 

3.2.2 

Employment 

Despite experiencing initial employment growth, job creation weakened across all Western Balkan economies 
in the second half of 2022. While employment increased in early 2022 in all economies (except North Macedonia, 
due  to  the  adjustment  to  the  new  census-informed  sample),  by  year-end,  the  situation  had  reversed.  In 
December 2022, employment dropped in all economies except Albania and Montenegro compared to the end 
of  2021.  Overall,  annual  employment  in  the  Western  Balkans  contracted  by  over  1  percent  by  year-end, 
equivalent to a net loss of 72,000 jobs. The largest annual drop was observed in North Macedonia, followed by 
Serbia and Kosovo. However, employment levels across all economies, except North Macedonia, are still above 
pre-crisis levels (World Bank, 2023). 

Wage pressures increased by the end of 2022 due to the inflation surge, despite a slowdown in employment. In 
Montenegro, the average net monthly wage increased by 18.7 percent in real terms in 2022, attributed to a 
reduction in labour taxes and an increase in the minimum wage. In Albania, a nominal wage rise of 10.8 percent 
by December 2022 (or 3.4 percent in real terms) reflected increased labour demand by the private sector. The 
average  wage  in  Serbia  increased  by  13.8  percent  in  nominal  terms  or  1.7  percent  in  real  terms,  reflecting 
shortages of skills in the service sectors, whereas public sector wages increased by 7.3 percent. Led by a rise in 
the minimum wage and demand for workers in accommodation and recreation services, manufacturing, and the 
retail  trade,  nominal  wages  in  North  Macedonia  increased  by  11  percent  in  2022.  Yet,  double-digit  inflation 
meant that real net wages declined. In Bosnia and Herzegovina, nominal wage growth was 14.2 percent, and it 

40 

 
 
 
was broad-based, with the highest increase in services and the least in the public sector. However, in real terms, 
wages declined by 0.5 percent in December. 

3.2.3 

Trade and regional integration 

Trade facilitation and regional integration are crucial for the economic growth and competitiveness of the WB 
economies,  which  currently  face  challenges  due  to  fragmentation  and  being small  economies.  The  Common 
Regional Market initiative12, covering the four freedoms (digital, investment, innovation, and industry policy), is 
an essential step towards integrating these economies with each other and with the EU economy. Recent efforts 
have focused on improving trade facilitation, upgrading transport and connectivity infrastructure, and leveraging 
deep trade agreements within the region and with the EU. 

World Bank research (2023) quantifies the economic and social benefits of regional economic integration in the 
Western  Balkans  using  a  general  equilibrium  model.  It  assesses  the  impacts  of  trade  facilitation  reforms, 
accession to the EU, and new infrastructure. The region's economic integration is essential for fully integrating 
with the EU, which is already the largest trading partner, with over 70 percent of exports from the region going 
to  EU  member  states.  The  EU  is  also  the  biggest  source  of  foreign  direct  investment  (FDI)  in  the  region, 
accounting for around 70 percent of total FDI and offering access to a market of more than 500 million high-
income consumers. 

3.2.4 

SME in WB 

Small  and  medium-sized  enterprises  (SMEs)  contribute  to  the  economic  performance  and  sustainable  and 
inclusive development of societies. SMEs in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, the Republic 
of North Macedonia, Serbia, and Turkey (the seven pre-EU accession economies, note that Turkey ids not in 
scope of this Study) account for almost three quarters of private-sector employment and generate around 60% 
private-sector value added (OECD, 2022a). 

Hit hard by the pandemic, the SME sector bounced back quickly. About half of enterprises in the Western Balkans 
had to suspend their business activity temporarily due to COVID-19. Nevertheless, the number of SMEs per 1000 
inhabitants rose by 13% over the last couple of years. Governments expanded their range of advisory services 
and  training  (including  on  digitalization)  to  help  SMEs  weather  the  crisis.  Newly  introduced  or  further 
strengthened credit guarantee funds eased lending, while tax measures and debt moratoria relieved the debt 
burden. 

SMEs have increasingly  adopted digital tools. Successive pandemic lockdowns accelerated firms’ adoption of 
digital technologies, including by SMEs, which increasingly integrated online sales channels. Governments in the 
region implemented programs that supported SME digitalization, including e-commerce. Nevertheless, SMEs in 
the  region  lag  their  EU  peers  when  adopting  more  advanced  digital  transformation  technologies  (e.g.,  cloud 
computing services, AI, big data). 

Progress  was  made  in  SMEs’  greening  through  new  financial  incentives.  Since  2019,  financial  incentives  for 
greening  available  to  SMEs  have  multiplied,  albeit  unevenly  across  the  region.  During  the  same  period,  the 
average regional share of SMEs offering green products or services increased by 5 percentage points to 25%, 
approaching the EU average of 32%. Most SMEs took at least one action to become more resource-efficient, 
often minimizing waste or saving energy or water. 

While the role of green funds in supporting SME greening efforts has grown through dedicated programs and 
credit  lines,  they  remain  dependent  on  external  financial  support.  Environmental  aspects  have  rarely  been 
included in post-COVID recovery programs, pointing to a lost opportunity to enhance SMEs' greening. 

While SMEs are receiving more support to help grow exports and shift to higher value-added activities, a more 
systematic approach is needed. However, the provided support often takes the form of ad hoc educational and 
training activities rather than being integrated into a broader systematic approach. The focus is on enhancing 
the business environment to offer opportunities for self-employment and start-ups. The Western Balkan region 
faces  high  levels  of  long-term  unemployment  and  youth  not  in  employment  or  education,  and  low  rates  of 
employment  for  youth  (15-to-24-year-olds),  women,  and  low-skilled  workers.  At  34%,  the  average  youth 
unemployment rate in the region was double the EU-27 rate (17%) in 2020. 

12 https://www.rcc.int/pages/143/common-regional-market 

41 

 
 
 
3.2.4.1 

Conclusions for future work on greening SMEs 

According to the OECD (2022a, 2022b), the following actions are important in this field: 

• 

Ensure a level playing field for SMEs. All enterprises should compete under the same market conditions. 
Governments  must  improve  the  business  environment:  strengthening  the  rule  of  law,  fostering 
transparency  of  business  operations,  ensuring  regulatory  stability,  combatting  corruption  and 
improving the overall quality of public governance. 

• 

• 

• 

• 

• 

Expand  SME  data  collection  and  ensure  regular  evaluations.  SME-specific  data  collection  and  co-
ordination of the collection process should be improved, especially for interdisciplinary areas such as 
greening, digitalisation or access to finance.  

Boost  digital  transformation  efforts  and  adopt  user.  Driven  approaches  to  service  delivery- 
Governments  should  adopt  a  wider  framework  for  the  digital  transformation  of  society  at  large, 
involving a variety of stakeholders. 

Reinforce the SME greening momentum for sustainable development. Governments need to step up 
existing efforts for implementation and cross-sectoral policy co-ordination, while scaling up incentives 
and instruments for SME greening. Energy-price volatility and uncertainty, induced by recent external 
shocks, can generate specific challenges for the growth and survival of SMEs. At the same time, SMEs 
can be a source of innovative solutions to address these challenges. 

Boost entrepreneurial skills to help SMEs grow and contribute to social cohesion. Domestic SMEs are 
more likely to remain in low-value added sectors and create lower-paid jobs than are large enterprises. 
Government support for entrepreneurial learning and the development of enterprise skills is vital to 
help SMEs overcome potential financial and other barriers.  

Increase  SME  competitiveness  through  regional  co-operation.  Expanded  regional  co-operation 
represents a unique opportunity for Western Balkan economies to scale up and boost growth by making 
the  most  of  intensified  economic  integration.  Through  resource-  and  knowledge-sharing  networks, 
together  with  an  enhanced  regional  trade,  they  are  more  likely  to  increase  their  productivity  and 
competitiveness. Strengthened economic integration will also result in greater resilience to external 
shocks. 

3.2.5 

Status of environment and climate in the Western Balkans 

The  Western  Balkan  region  is  highly  diverse  in  terms  of  its  ecosystems,  ethnic  groups,  religions,  cultures, 
economies,  and  geographies,  which  include  four  of  Europe‘s  bio-geographical  areas:  Mediterranean,  Central 
European,  Alpine,  and  Pannonic.  Several  factors  have  contributed  to  environmental  degradation  in  the  WB 
region, including economic growth, industrial development, and modern consumption patterns. These factors 
are compounded by socio-economic challenges such as weak or recovering economies with limited budgets for 
addressing environmental protection issues, insufficient environmental regulation or implementation, limited 
public participation, poverty, limited access to cleaner technology and environmental information, and political 
tensions. These challenges have led to the pollution of soil, air, and water in the region. 

Key  environmental  challenges  on  the  regional  level  in  the  Western  Balkans  include  threats  to  biodiversity, 
climate  change  mitigation  and  adaptation,  degradation  of  water  resources,  high  levels  of  air  pollution, 
unsustainable  infrastructure  development,  contamination  of  soil  and  water,  trends  towards  more  intensive 
farming  in  agriculture,  poorly  enforced  waste  and  recycling  legislation,  and  concerns  related  to  mining  and 
potential transboundary risks. 

Despite significant improvements in the alignment of climate and greenhouse gas (GHG) emissions monitoring 
and reporting legislation and progress in air and water pollution areas in the last two years, the implementation 
of the EU acquis is still lagging in the WB. The overall air quality situation in the WB is still critical, with an often-
upward  pollution  trend,  despite  decreases  in  PM10  and  PM2.5  concentrations  in  certain  areas.  Due  to  its 
dominant impact on mortality, PM2.5 is considered the main pollutant to target in the WB. The energy sector, 
particularly coal-fuelled power plants, is the major source of SO2 and CO2 emissions and an important source 
of other pollutants, offering a concrete opportunity for co-benefits between air quality and climate policies. 

42 

 
 
 
The increase in intensity and frequency of summer heatwaves in the latest decades is an indicator of climate 
change in the WB and emphasizes the need to design appropriate adaptation plans to cope with it. The status 
of water bodies in the WB can generally be assessed as unsatisfactory, with a significant percentage failing to 
reach good status in both chemical (45%) and ecological (54%) assessments. Soil degradation, mainly through 
erosion  and  pollution,  is  prevalent  throughout  the  WB  region.  A  recent  study  by  the  Regional  Cooperation 
Council reports an alarming increase in temperature in the region, with an observed temperature increase of 
1.2  degrees  Celsius  soon,  destined  to  warm  further  by  1.7  –  4C  and  even  exceeding  5C  by  the  end  of  the 
century, depending on global efforts in greenhouse gas (GHG) emission reduction. 

This would entail that most areas of the region will move from a Mediterranean climate to a sub-tropical, i.e. 
such as the one in present-day Middle East and North Africa. This type of climate is characterized by hot summers 
and  mild  drier  winters.  Extreme  weather  types,  such  as:  1)  increase  of  heat  waves,  dry  days,  and  extreme 
precipitation;  2)  more  pronounced  rotation  of  severe  drought  and heavy  rains,  with  appearance  of  extreme 
storms  in  summer  that  most  likely  cause  flash  floods;  and  3)  severe  high  winds  and  hail  damage,  are  also 
expected to become more frequent.  

The Western Balkans are particularly vulnerable to climate change due to a relatively high percentage of the 
population  employed  in  weather  and  climate-related  sectors,  such  as  agriculture,  forestry,  and  tourism, 
compared to Western and North Europe. The EU integration process is currently the main political driver of 
change in the region, also in the environment sector. The EU enlargement process provides opportunities for 
improving the environment in different ways but also entails a great challenge for the candidates and potential 
candidate countries. 

3.2.6  Alignment with the EU environment and climate acquis in the Western Balkans 

The level of alignment is expressed as a percentage of the target legislation according to the Energy Community 
methodology.  The  overall  environmental  performance  in  the  WB  ranges  between  44%  and  75%,  indicating 
considerable progress in climate legislation alignment. In 2019, the advancement in this sector was 21% - 31%, 
while the latest values are in the range of 47% - 76% (Belis et al., 2022). 

43 

 
 
 
 
 
Figure 14. Alignment with the EU environment and climate acquis in WB (%), updated on 11/2021 (EnCS, 2021) 

3.2.7  Western Balkans and SDGs 

Source: EnCS, 2021. 

The 2030 Agenda for Sustainable Development includes 17 global Sustainable Development Goals (SDGs) and 
169 targets. This agenda aims to eradicate poverty, leave no one behind, and shift the world onto a sustainable 
and resilient path (European Environment Agency, 2020). 

44 

 
 
 
 
Figure 15. SDGs with an environmental dimension 

Source: EEA compilation based on SOER 2020 (SOER 2020, p.58, 2019). 

The report on SDGs and the environment in Europe by the EEA made up-to-date cross-country analysis into the 
focus and prioritisation of environmental action across Europe. It shows both the convergences and divergences 
towards  environmental  sustainability  in  Europe.  The  geographical  scope  of  this  publication  includes  33  EEA 
member  countries  and  6  cooperating  economies.  It  is  useful  for  non-EU  countries  to  compare  their  SDG 
processes against those of EU Member States as well for the EC to gain insights into environmental actions across 
Europe. 

Accession  to  the  EU  is  Albania’s  overarching  priority  and  its  most  important  strategic  ambition  is  to  moved 
towards achieving the SDGs. Albania’s baseline report (published in 2018) underscores that the national strategic 
policy  framework  is  most  harmonised  with  the  SDG  targets  in  SDG  3  (good  health  and  well-being);  SDG  7 
(affordable and clean energy); SDG 8 (good jobs and economic growth); and SDG 9 (industry, innovation, and 
infrastructure),  while  the  least  harmonisation  is  with  SDG  14  (life  below  water).  Albania  submitted  a  VNR 
(Voluntary National Report) to the UN in 2018. 

Bosnia and Herzegovina’s SDG action is based on the elaboration and adoption of its SDG Framework. Under 
the  auspices  of  the  SDG  Framework  in  B&H  sub-group,  which  comprises  representatives  from  relevant  B&H 
institutions,  at  the  entity  and  Brčko  District  level,  extensive  work  has  been  carried  out  to  design  the  SDG 
Framework. Bosnia and Herzegovina clusters its SDG implementation into the ‘5ps’: people, prosperity, planet, 
peace,  partnership.  Under  the  ‘planet’  cluster,  it  aims  to  achieve  protection  from  degradation,  changes  in 
consumption and production patterns, the sustainable management of natural resources and urgent action on 
climate change through implementation of SDGs 6 protection and sustainable use of water resources to ensure 
that  drinking  water  is  accessible,  SDG  12  better  use  of  environmental  principles  in  business  operations  and 
respect for the principle of energy efficiency, SDG 13 combat the impacts of climate change on the country, SDG 
14  ballast  waters  from  maritime  transport  and  SDG  15  sustainable  management  of  forests,  combatting 
desertification,  halting  and  reversing  land  degradation  and  halting  biodiversity  loss.  Bosnia  and  Herzegovina 
submitted a VNR to the UN in 2019. 

45 

 
 
 
As  Kosovo  is  not  a  member  of  the  UN,  SDG  actions  are  done  mainly  through  the  process  of  European 
integrations.  Nevertheless,  the  UN  Kosovo  Team  (UNKT)  has  set  up  the  management  structures  in  Kosovar 
institutions that will facilitate SDG integration into a key strategic planning process guided by the UN Common 
Development Plan (CDP). Key challenges regarding SDG actions with an environmental dimension in Kosovo are 
the lack of specific strategies and programmes as well as a lack of finance and institutional capacities. 

Based  on  the  assessment  of the  state  of  national  resources  in  the  four-dimensional  concept  (human,  social, 
natural and economic resources), as well as analysis of key unsustainable trends and the need for sustainable 
development by 2030, Montenegro adopted a ‘DPSIR’ approach (i.e. driver, pressure, state, impact, response) 
and identified priority areas and strategic goals to advance SDG action. By participating in international dialogue 
on the SDGs and Agenda 2030, Montenegro expressed its full commitment to the priority issues of sustainable 
development,  such  as:  the  introduction  of  a  green  economy,  strengthening  the  efficiency  of  use  of  natural 
resources (SDGs 2, 3, 6, 7); climate change (SDG 13); conservation of sensitive ecosystems and coastal areas 
(SDGs  14,  15);  and  sustainable  production  and  consumption  (SDG  12).  In  addition  to  the  SDG  indicators 
developed  by  the  UN,  Montenegro’s  NSSD  2030  includes  selected  national  indicators,  indicators  of  relevant 
international organisations and cumulative indicators from the programme activities of the UN Development 
Programme in Montenegro. Montenegro submitted a VNR to the UN in 2016. 

North  Macedonia’s  Partnership  for  Sustainable  Development  UN  Strategy  positions  environmental 
sustainability as one of four priority areas. The strategy sets out that, by 2020, individuals, the private sector and 
state institutions will base their actions on the principles of sustainable development, and communities will be 
more resilient to disasters and environmental risks. Under the partnership, this prioritisation will involve nine 
SDGs (SDGs 2, 3, 6, 7, 11, 12, 13, 14 and 15), reflecting the importance of environmental protection and resilience 
as  per  the  2030  Agenda  (UN,  2016).  All  resident  UN  agencies,  together  with  the  UNECE,  will  support  North 
Macedonia to adapt the SDGs to local conditions and to establish a system for tracking progress. Similarly, all 
UN  agencies  will  support  its  alignment  with  EU  standards  and  legislation,  including  through  peer-to-peer 
exchanges with EU Member States. 

Serbia has long been striving to integrate environmental protection and conservation objectives into several 
sectoral policies. The overall  goal of all these activities is to support  sustainable growth in Serbia, which  will 
encourage innovation and competitiveness, protect the environment and health while ensuring that no one is 
left behind. Achieving the SDGs in Serbia is indivisible from the process of its accession to the EU. Set out in the 
National Plan for Adoption of the EU Acquis from 2018 to 2021, special attention is paid to harmonisation with 
the  EU  acquis,  international  standards,  and  implementation  of  agreements  on  six  priority  areas,  including 
agriculture, environmental protection, and climate change as well as energy and industry. In discussions and the 
overall  prioritisation  process  of  the  EU  Instrument  for  Pre-accession  Assistance  (IPA)  2019  and  2020 
programming, the key areas identified for support in the coming years are environmental protection and climate 
change. Furthermore, there is a special focus on continuing investments in infrastructure for processing waste 
as well as those in the reconstruction and modernisation of public facilities as part of efforts to improve energy 
efficiency (SDGs 2, 6, 7, 9, 12 and 13). In addition, Serbia considers the preservation of biodiversity (SDG 15) as 
the most important SDGs with an environmental dimension as it poses an obligation towards both the present 
and future generations. The country also recognises that the circular economy plays a major role in supporting 
SDG action, particularly on SDGs 9, 11, 12 and 13. Serbia submitted a VNR to the UN in 2019. 

To providing country-level ranking and information for all 39 countries, the SDSN SDG Index for all UN member 
states is used as a reference as it provides the broadest country coverage.  Based on  this index,  the  top  10  
countries    in    terms    of    progress  to  achieve  the  SDGs  are  all  Eionet  countries.  In  addition,  Eionet  countries 
represent 20 of the top 25 globally. 

46 

 
 
Figure 16. Ranking of Eionet countries on SDG Index 2019 with an environmental dimension 

Source: EEA compilation based on 2019 SDG Index from SDSN and the Bertelsmann Stiftung Foundation. 

3.3 

Enlargement policy 

Enlargement is the process whereby states join the European Union, after they have fulfilled a set of political 
and economic conditions. The EU is committed to the European perspective of the Western Balkans, has close 
links with the Western Balkans partners and cooperates with them in several important areas. 13 The EU also 
provides substantial assistance and financial support to the region. 

At the EU-Western Balkans Summit held in 2003 in Thessaloniki, the EU reaffirmed that the future of the Western 
Balkans is within the EU. The Council (under the General Affairs Council configuration) establishes and supervises 
the EU enlargement process and the accession negotiations. The Council’s latest conclusions on enlargement 
were approved on 13 December 2022. In line with the general framework of the Copenhagen political criteria, 

13 https://www.consilium.europa.eu/en/policies/enlargement/#Balkans 

47 

 
 
 
 
the Council stressed the need - in accordance with the 2006 renewed consensus on enlargement – for fair and 
rigorous conditionality and the principle of own merits. 

3.3.1  Membership status of the Western Balkan economies 

The Western Balkan economies are in different stages of the EU accession process. Most of them have the EU 
candidate status, while two are potential EU candidates. This section reviews the status of each of them. 

•  Albania  

In  2009,  Albania  submitted  its  formal  application  for  the  EU  membership.  In  October  2012,  the  European 
Commission recommended that Albania be granted the EU candidate status, which was awarded to the country 
in  June  2014.  In  its  June  2018  Conclusions,  the  EU  Council  outlined  the  path  towards  initiating  accession 
negotiations in June 2019. The Commission reaffirmed the recommendation to commence accession talks in the 
Enlargement  Package  adopted  in  May  2019.  In  July  2022,  the  Intergovernmental  Conference  on  accession 
negotiations was held with Albania. The Commission initiated the screening process. 

The latest Progress Report, from 2022, indicates that Albania has made significant strides in meeting economic 
criteria,  demonstrating  good  progress  and  moderate  preparedness  for  developing  a  functioning  market 
economy. However, inflation exceeded the target. Increased digitalization of public services, improved financial 
inclusion,  and  strengthened  labor  inspections  have  positively  impacted  the  business  environment  and 
formalization of the economy. Despite these advancements, the informal economy remains substantial. Albania 
has made some progress and is moderately prepared to address competitive pressure and market forces within 
the EU. 

Advancements in energy and transport infrastructure, digitalisation and education have been noted, but there 
is  still  a  deficiency  in  entrepreneurial  and  technological  know-how.  Investment  needs  persist  in  human  and 
physical capital, skills development, and education, with low research and development spending. 

Albania has achieved a moderate level of preparation in various areas related to competitiveness and inclusive 
growth,  including  digital  transformation,  media,  taxation,  economic  and  monetary  policy,  enterprise  and 
industrial policy, as well as education and culture. While there is some level of preparation in social policy and 
employment, research and innovation, and progress in education, the adoption of the new National Strategy for 
Education and Action Plan 2021-2026, progress has been limited in the realm of economic and monetary policy. 

•  Bosnia and Herzegovina 

Bosnia and Herzegovina – along with other Western Balkans economies – was identified as a potential candidate 
for the EU membership in June 2003. The Stabilisation and Association Agreement (SAA) has been ratified and 
entered into force on 1 June 2015. Bosnia and Herzegovina applied for the EU membership in February 2016, 
while in June 2022 the European Council expressed its readiness to grant the status of a candidate country to 
Bosnia and Herzegovina.   

Figure 17. Administrative structure of Bosnia and Herzegovina

Source: Galic and Hollanders (2022). 

Regarding economic criteria, Bosnia and Herzegovina is in the early stages of establishing a functioning market 
economy. Cooperation and coordination of economic policymaking at the state level and among the entities 
have further deteriorated, leading to a fragmented internal market. The country's Economic Reform Programme 
lacks sufficient credible, nationwide measures to address major structural economic challenges, including the 

48 

 
 
 
business  environment,  the  informal  economy,  public  enterprises,  the  green  and  digital  transitions,  and 
unemployment.  Overall,  the  country's  economic  performance  remains  below  its  potential  due  to  political 
stalemate, an overly short-term orientation, and a lack of focus on policy measures to foster growth. 

Bosnia and Herzegovina is still in the early stages in terms of its capacity to cope with competitive pressure and 
market forces in the EU, with no significant progress made in this area. The quality of education remains low, 
and insufficient action has been taken to improve transport and energy infrastructure. 

Bosnia and Herzegovina is at an early stage or has some level of preparation in its ability to fulfill the obligations 
of EU membership. The country needs to significantly enhance alignment with the EU acquis, implement and 
enforce necessary legislation, and make progress on various EU acquis chapters. Limited  to no progress was 
made on different EU acquis chapters during the reporting period. 

The country needs to implement additional protocols to the Central European Free Trade Agreement (CEFTA) 
on trade facilitation and trade in services and swiftly adopt the additional protocol on dispute settlement. Bosnia 
and  Herzegovina  continues  to  actively  participate  in  regional  cooperation  and  maintain  good  neighborly 
relations. 

•  Montenegro 

In 2008, Montenegro applied for the EU membership. In December 2011, the EU Council launched the accession 
process  with  a  view  to  opening  negotiations  in  June  2012.  After  eight  years  of  negotiations,  all  33  screened 
chapters have been opened, with three provisionally closed. 

On  the  economic  criteria,  Montenegro  has  made  good  progress  and  is  moderately  prepared  to  develop  a 
functioning market economy. Following a sharp recession in 2020, the economy rebounded strongly in 2021 and 
maintained  steady  growth  in  the  first  half  of  2022.  Inflation  increased  significantly  due  to  surging  global 
commodity prices. The government adopted the 'Europe Now' fiscal reform program to support post-pandemic 
recovery and provided stimulus measures to ease the burden on households from rising energy and food prices. 

Montenegro has made some progress and is moderately prepared to cope with competitive pressure and market 
forces within the EU. Efforts to improve innovation capacities and initiate a green and digital transition have 
been made in the last two governments. However, the education system still faces challenges due to a chronic 
shortage of science, technology, engineering, and mathematics (STEM) graduates. 

On good neighborly relations and regional cooperation, Montenegro generally maintains good bilateral relations 
with  other  enlargement  economies  and  neighboring  EU  Member  States.  The  country  actively  participates  in 
regional cooperation. 

Regarding  Montenegro's  ability  to  assume  EU  membership  obligations,  the  country  continues  to  work  on 
alignment with the EU acquis in many areas, but overall progress is limited. 

•  North Macedonia 

In  2003,  North  Macedonia  was  identified  as  a  potential  candidate  for  EU  membership.  Its  Stabilization  and 
Association Agreement, the first  in the region, has been in force since 2004.  The country applied for  the  EU 
membership in March 2004. In July 2022, the Intergovernmental Conference on accession negotiations was held 
with  North  Macedonia,  and  the  screening  process  began.  On  July  19,  2022,  the  first  Intergovernmental 
Conference on accession negotiations took place following the approval of the Negotiating Framework by the 
Council. 

On  the  economic  criteria,  North  Macedonia  has  made  some  progress  and  has  achieved  a  good  level  of 
preparation  for  developing  a functioning  market  economy.  The  government  implemented  fiscal  measures  in 
early  2022  to  counter  the  negative  impact  of  rising  food  and  energy  prices,  although  there  is  room  for 
improvement in targeting these measures. 

There  was  further  progress  in  improving  vocational  education  and  training,  but  significant  skills  shortages 
persist. Gaps in transport and energy infrastructure, low investment and innovation spending, and the need for 
a broader offering of public e-services are hindering the country's growth potential. 

In terms of competitiveness and inclusive growth, North Macedonia is moderately prepared in most areas but 
needs additional efforts, particularly in digital transformation and media, as well as education and culture. 

49 

 
 
 
On the Green Agenda and sustainable connectivity, North Macedonia has achieved a good level of preparation 
in trans-European networks, with some progress in environment  and climate change. Substantial efforts are 
needed in energy, transport  policy, and trans-European networks, urging accelerated implementation of the 
Economic and Investment Plan and the Green Agenda for the Western Balkans. 

• 

Kosovo 

Kosovo is the potential EU candidate. In 2008, the EU expressed its willingness to assist Kosovo's economic and 
political development through a clear European perspective. The EU contributes to stability in Kosovo through 
the EULEX rule of law mission and a Special Representative. 

Kosovo has made some progress on economic criteria and is at an early stage in developing a functioning market 
economy. Limited progress has been made in coping with competitive pressure and market forces in the EU. 
Challenges include improving the quality of education, addressing skill gaps in the labor market, and addressing 
concerns about the coal-based, outdated, and unreliable energy supply. 

Kosovo  has  made  some  progress  in  competitiveness  and  inclusive  growth,  with  additional  efforts  needed  in 
areas such as digital transformation and media, as well as education and culture. Limited  progress has been 
made in research. 

On the Green Agenda for the Western Balkans and sustainable connectivity, Kosovo has made some progress in 
transport and limited progress in energy, environment, and climate change. In resources and agriculture, Kosovo 
has  made  some  progress  in  food  safety,  veterinary  policy,  and  phytosanitary  policy  but  limited  progress  in 
agriculture. 

Overall,  Kosovo  needs  to  improve  administrative  capacity  and  coordination  across  all  sectors  for  effective 
implementation of the EU acquis. 

• 

Serbia 

Serbia is the EU candidate country. In 2008, a European partnership for Serbia was adopted, outlining priorities 
for the country's EU membership application, and in 2009, Serbia formally applied. On January 21, 2014, the 1st 
Intergovernmental Conference took place, signaling the formal start of Serbia's accession negotiations. So far, 
22  out  of  35  chapters  have  been  opened,  including  all  chapters  under  cluster  1  on  the fundamentals  of  the 
process and cluster 4 on the Green agenda and sustainable connectivity, with two provisionally closed. 

On  the  economic  criteria,  Serbia  is  between  a  good  and moderate  level  of  preparation  and  has  made  some 
progress in developing a functioning market economy. 

Regarding Serbia's ability to assume EU membership obligations, the country continues work on alignment with 
the EU acquis in many areas, particularly in company law, intellectual property rights, research and innovation, 
and financial control. 

The competitiveness and inclusive growth cluster is closely linked to Serbia's Economic Reform Programme, with 
progress  made  in  several  areas.  Efforts  include  steps  towards  establishing  the  Youth  Guarantee  scheme, 
improvements  in  the  budget  process,  action  plans  for  the  strategy  on  state  ownership  and  management  of 
business entities, development of the startup ecosystem, and steps towards compliance of the quality assurance 
system in higher education with ENQA recommendations. 

3.4 

Green Agenda for the Western Balkans 

The European Green Deal, approved in 2020, set the new path that also needed to involve the six Western Balkan 
economies. By  signing the Sofia Declaration on the Green  Agenda  for the Western Balkans in October 2020, 
leaders from the WB region recognised the importance of the European Green Deal (EGD), which is the EU’s 
new growth strategy towards a modern, climate neutral, resource-efficient, and competitive economy. For this 
acknowledgement  to  materialise  in  practice,  the  leaders  of  the  Western  Balkans  economies  also  agreed  to 
incorporate elements of the EGD into all interrelated sectors and policies, based on the European Commission’s 
Guidelines, with the common goal of developing carbon-neutral and sustainable economies in the region. 

50 

 
 
The European Commission working document14 outlines in more detail the actions related to the Green Agenda 
for the Western Balkans (GAWB) included in the Communication on an Economic and Investment Plan for the 
Western Balkans adopted by the European Commission. It further details the five pillars of the Green Agenda:  

1.  climate action, including decarbonisation, energy, and mobility, 
2.  circular economy, addressing waste, recycling, sustainable production, and efficient use of resources, 
3.  biodiversity, aiming to protect and restore the natural wealth of the region,  
4. 
5.  sustainable food systems and rural areas.  

fighting pollution of air, water, and soil, and  

Digitalisation will be a key enabler for the above five pillars in line with the concept of the dual green and digital 
transition. 

One of the important elements in the Sofia Declaration relates to the Economic and Investment Plan, designed 
for long-term support toward green and sustainable economy that would bring the region closer to the European 
market. With the population of almost 18 million, the Western Balkan region is an important market for the EU 
and  a  transit  area  for  European  and  international  goods,  with  qualified  workforce  and  economy  ready  for 
investments.  For  these  reasons  the  Western  Balkan  economies  have  a  key  role  in  the  global  value  chains 
supplying the EU. 

The Green Agenda includes important objectives that are clearly inter-related, representing an ambitious and 
complex agenda for the Western Balkan governments.  

The  legislative  framework  regarding  the  most  important  issues  has  been  prepared  and  adopted,  but  most 
economies have not yet implemented the necessary reforms. According to prevalent assessments (e.g., by the 
European  Commission,  the  Energy  Community  Secretariat,  the  European  Bank  for  Reconstruction  and 
Development, the OECD and the World Bank), the Western Balkans are today at the very beginning of their green 
transition. Although governments have adopted specific laws that provide the legal and regulatory frameworks 
regarding energy and climate, these frame works are incomplete, while some of the legislation is outdated (Table 
7). Moreover, many of these laws have not yet been implemented and enforced (Aspen Institute, 2023). 

14 COM(2020) 641 

51 

 
 
 
 
 
 
 
Table 7. Western Balkans’ strategic and legislative frameworks on energy and climate 

Note: green colour denotes approved and valid document, black – valid document that requires revision, blue – draft 
document, not yet approved, red – expired document. 
Source: Adapted from OECD, Multi-dimensional review of the Western Balkans. From analysis to action, April 2021, section 
14.2. 

The figure below shows how the process has evolved from its inception in 2014 in Berlin (i.e. the Berlin 
Process): 

52 

 
 
 
 
Figure 18. Process for implementation green deal in the Western Balkans 

53 

 
 
 
Source: European Union, 2021. 

54 

 
 
The European Commission with the Economic and Investment Plan proposes the mobilization of 9 billion euros, 
funds through the IPA III programme for the 2021-2027 period to support the economic convergence with the 
EU by increasing national competition, inclusive growth and green and digital transition. In addition to these 
grants, the plan also creates a guarantee facility for the Western Balkans that could support investments of up 
to 20 billion euros in total. The Economic and Investment Plan for the Western Balkans focuses on investment 
in 6 (six) key areas:  

1.  Sustainable transport;  
2.  Production of energy; 
3.  Environment and climate ; 
4.  Digital transformationa; 
5.  Private sector; 
6.  Human capital.  

The implementation plan for the Western Balkan economies is focused on five pillars15: 

1.  Decarbonization: Climate, energy and mobility, commitment to achieve together with the EU a carbon 
neutral continent by 2050 through the adoption of strict climate policies and reforms in the energy and 
transportation sector. This flagship will particularly focus on: 

o  Harmonisation  of  national  legislation  on  climate  change  with  the  EU  regulations  and 

development of integrated national energy and climate plans. 

o  Decoupling  of  economic  growth  and  resource  consumption  that  would  lead  to  greater 

resistance of economy to climate change and would decrease the risk of disasters. 

o  Preparations to introduce the Emission Trading Scheme (ETS) and carbon pricing, which means 
that the polluters who surpass the permitted quantities of CO2 emissions will have to pay. 
o  Reviewing  and  revising,  where  necessary,  all  relevant  legislation  to  support  progressive 

decarbonisation of the energy sector. 

o  Preparing an assessment of the socio-economic impact of decarbonisation at the individual 

economy and regional level. 

o  Giving advantage to energy efficiency and improving it in all sectors, with a particular focus on 

o 
o 

energy renovation of buildings. 
Increasing the percentage of renewable energy sources and reducing energy poverty. 
Increasing  the  share  of  renewable  energy  sources  and  provide  the  necessary  investment 
conditions. 

o  Any  increase  of  biomass  combustion  must  be  done  with  due  consideration  to  air  pollution 

impacts. 

o  Decreasing and gradually phasing out coal subsidies, strictly respecting state aid rules. 
o  Ensuring participation in the Coal Regions in Transition initiative for the Western Balkans. 
o  Developing programmes for addressing energy poverty and financing schemes for household 

renovation and providing basic standards of living. 
Supporting smart infrastructure, digitalisation of all types of transport, defining new corridors 
in rail transport and introducing new alternative fuels (hydrogen). 
Supporting development of smart transport infrastructure, promoting fostering of innovative 
technologies  (such  as  paperless  transport,  artificial  intelligence,  multimodal  passengers 
ticketing, mobility as a service, border/boundary crossing applications). 
Increasing regional cooperation in the area of alternative fuels infrastructure development. 

o 

o 

o 

2.  Circular economy, that is to say moving from linear consumption of resources, to their recycling and 

reuse and creating minimum or zero waste. The actions should focus on: 
Improving sustainability of primary production of raw materials. 

o 
o  Applying  an  industrial  ecosystem  approach  to  attain  environmentally  sustainable  balanced 

economic recovery. 

o  Developing circular economy strategies looking at the entire lifecycle of products.  
o  Making  further  progress  in  the  construction  and  maintenance  of  waste  management 

infrastructure for cities and regions. 

15Regional cooperation council ; Action Plan For The Implementation Of The Sofia Declaration On The Green Agenda For The Western Balkans 

2021-2030, Sarajevo, 04th October 2021 

55 

 
 
 
o  Designing and implementing consumer-targeted initiatives to raise awareness of citizens on 

waste prevention, separate collection and sustainable consumption. 

o  Concluding  and  implementing  a  regional  agreement  on  the  prevention  of  plastic  pollution, 

o 

including specifically addressing the priority issue of marine litter.  
Further 
transformation agendas for sustainability. 

implementing  Smart  Specialisation  Strategies,  place-based, 

innovation-led 

o  Within  this  pillar,  each  country  should  develop  a  strategy  for  circular  economy  that  would 
cover the entire life cycle of a product. This means that waste production should be prevented 
and if there is waste, technologically advanced waste management should be used, it should 
be recycled, reused and remanufactured. 

Figure 19. The circular economy model16  

Source: European Parliament Research Service. 

3.  Reducing pollution of air, water and soil will be one of the flagships that all WB economies will have to 
achieve. As one of the most polluted regions in Europe, the expenses of the healthcare system are far 
greater than those in the EU and this requires work. The figure below shows the cost of pollution impact 
on health. 

16 

  https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-
benefits 

56 

 
 
 
 
Figure 20. Cost of pollution impact on health in the Western Balkans in 2016 (in millions EUR) 

As per the Action Plan for Implementation of the Green Agenda, it will be necessary in all WB economies to: 

Source: Regional Cooperation Council 

o 

o 

Finalise  the  process  of  ratification  of  the  Convention  on  long-range  transboundary  air 
pollution. 
Support modelling to establish economy-wide emission reduction commitments for the five 
main  pollutants  covered  by  the  NEC  Directive  and  the  Gothenburg  Protocol  under  the 
Convention on Long-range Transboundary Air Pollution. 

o  Develop and implement a Strategy on air quality and use the best available technologies in line 

with the Industrial Emissions Directive. 
o  Establish a system for monitoring air quality. 
o  Construct the necessary infrastructure for waste water treatment. 
o 

Implement relevant EU water-related acquis (Water Framework Directive, Urban Waste Water 
Treatment Directive and Nitrates Directive). 
Integrate  soil  protection  in  other  laws  and  regulations  as  well  establish  a  regional  soil 
partnership. 

o 

4.  Sustainable  food  production  and  farming  is  the  fourth  important  pillar  that  the  EU  believes  requires 
serious improvement in the Western Balkan economies, having in mind that this sector contributes around 
10% of the gross domestic product (GDP), while in some economies the percentage of workforce in this 
sector is up to 20%. Even though this region is rich in resources, there are major structural problems in 
farming so the following activities are envisaged: 

o  Harmonisation  of  the  farming  sector  and  food  production  with  EU  standards  on  food 

o 

protection and safety, animal health and prevention of diseases. 
Strengthening of sanitation controls in the whole food chain and improve the traceability and 
labelling of food products. 

o  Promotion of environmentally-friendly (zero pollution) and organic farming and reduction of 

synthetic chemical products used in food production. 

o  Cooperation with scientific, education, business and agricultural holdings to facilitate transfer 

to innovative and environmentally friendly technologies and farming methods. 

o  Raising awareness about sustainable food production and promote organic production. 
o  Reducing use of chemical products in food production such as pesticides, veterinary drugs and 

fertilizers. 

o  Reducing waste along roads and rivers and modernising the sector. 

5.  Biodiversity – protection and restoration of ecosystems in the Western Balkan economies should also be 
harmonised with the EU legislation. Having in mind that the region is rich in endemic species of animals 
and environments, it must be preserved and restored with the following activities: 

57 

 
 
 
  
o 

Supporting  the  region  to  develop  and  implement  a  plan  for  biodiversity  until  2030  for  the 
Western  Balkans.  Developing  and  implementing  the  Western  Balkans  2030  Biodiversity 
Strategic Plan.  

o  Developing the Western Balkans Biodiversity Report.  
o 
o 

Supporting the development and implementation of a plan for forest restoration. 
Strengthening  the  mechanisms  for  regional  cooperation  for  biodiversity  conservation  and 
preservation and inclusion of the United Nations Rio Convention. 
Setting up the Western Balkans Biodiversity Information Hub to improve knowledge exchange 
and availability of information. 

o 

o  Putting in place the Biodiversity Monitoring and Evaluation Framework.  
o  Developing Green Infrastructures and ecosystem connectivity. 

The implementation of the Agenda will be challenging for Western Balkan policy makers, given that the Western 
Balkans stands far behind the EU in terms of environmental progress. The policies needed to achieve the Agenda 
and the main points of the Agenda itself are summarised in the Table below. As can be seen, most of the policies 
relate to the agricultural sector, although some relate to energy, transport, sewerage and manufacturing. 

Table 8. Policies related to fulfilling the Green Agenda in the Western Balkans 

Source: Jovanovic and Vujanovic (2023) 

The implementation of all activities envisaged with the Green Agenda and the Action Plan will require excellent 
financial  management,  good  communication  with  financial  institutions  and  donors,  as  well  as  impeccable 
transparency in spending for greater mutual trust among all stakeholders. 

3.4.1  Decarbonisation and energy transition 

According to the International Energy Agency, the transition toward a low-carbon, environmentally sustainable 
economy has begun in the Western Balkan economies, but progress has been slow and not without setbacks.  

Despite  recent  progress  green  energy  transition  based  on  wind  and  solar  capacity  additions,  as  well  as  the 
increased availability of renewable energy finance, the primary source of energy in the Western Balkans – except 
for Albania – is still domestic lignite and coal (64 percent of electricity in the  Western Balkans was produced 
from lignite and coal in 2020 and 47 percent of gross available energy in 2020, down from 49 percent in 2015). 
The Western Balkans’ coal-heavy energy mix, coupled with low levels of energy efficiency, results in high levels 
of air pollution.  

58 

 
 
 
A quadruple energy crisis has hit  the Western Balkan economies hard in the past  year, stalling progress and 
investment  in  key  strategic  areas  but  also  highlighting  the  need  for  more  diversified  energy  sources  and 
strengthened cross-border interconnections. In addition to high prices of electricity imports, quadruple energy 
crisis refers also to the parallel occurrence of a  series of technical problems at coal power plants and mines 
(primarily  in  Kosovo,  North  Macedonia,  and  Serbia),  unfavorable  conditions  for  hydropower  production 
(impacting all Western Balkan economies but mostly Albania), and an increase in biomass prices in all economies.  

The negative consequences of high fossil fuel dependency, high energy intensity and outdated technology use 
in the Western Balkan are clearly visible beyond the direct economic impacts.  

Figure 21. Western Balkans’ energy mix: Gross available energy by product, 2015 and 2020 

Note: Gross available energy is defined as the overall supply of energy for all activities on the territory of the country. Note 
that for derived products (electricity), the chart shows only stock changes and international trade, as the original primary 
form of supply is accounted for in the form of the respective primary product. 

Source: Eurostat. 

On the supply side, aging coal power plants and the use of biomass cause significant air pollution. Similarly, on 
the demand side, poor energy efficiency in buildings and heating also contributes to poor air quality. All Western 
Balkan economies have failed to comply with air pollution limits set in their National Emission Reduction Plans 
(NERPs) where applicable, also due to a lack of enforcement of pollution limits outlined in those plans. A majority 
of  the  Western  Balkan  economies'  power  fleet  is  over  40  years  old,  with  few  plants  scheduled  for 
decommissioning and new plants in the pipeline. Specifically, legal limit values for sulfur dioxide (SO2) from coal 
power plants are frequently breached. Coal combustion is the second-largest source of PM 2.5 emissions in the 
region22. In 2019, annual mortality rates due to PM2.523 air pollution in the Western Balkans were more than 
double the EU-27 average, with mortality rates in Bosnia and Herzegovina 140 percent above those in the EU-
27 average. 

This includes phasing out coal subsidies, market-based renewables support, and Just Transition work for coal 
regions in the Western Balkans.17 The Sofia Declaration also specifically calls for “continued alignment with the 
EU  Emissions  Trading  Scheme,”  as  well  as  working  toward  “introducing  other  carbon  pricing  instruments  to 
promote decarbonization in the region.” Through the Energy Community, the Western Balkan economies have 
furthermore committed to reforming electricity and gas markets, providing common rules for an internal power 
market,  as  well  as  cross-border  cooperation.  They  also  committed  to  diversifying  their  energy  sources  with 
renewables and energy efficiency targets, as well as working on more open and fairer retail markets. 

In Western Balkan economies, energy production via renewable sources is close to or even higher than the EU 
average. However, Serbia, North Macedonia, and Kosovo rely heavily on coal, and hence they will face greater 
challenges to reach the decarbonization goal. In the wake of the energy crisis stemming from the cut  of the 
supply of Russian gas to Europe, the energy transition is gaining importance. In view of all these factors, the 
decarbonization goal in the Western Balkans can be achieved only by strong  public investment in renewable 
energy,  as  well  as  government  support  for  private  initiatives  in  the  same  direction,  through  appropriate 
industrial policy measures. 

17 https://balkangreenenergynews.com/heres-what-western-balkans-committed-to-in-sofia-declaration-on-green-agenda/ 

59 

 
 
 
 
3.4.1.1 

Just transition  

Coal is the backbone of the energy systems in the region. Kosovo, Serbia, and Bosnia and Herzegovina are among 
the world’s top ten economies in terms of the share of coal in their  electricity production, at 95 percent, 67 
percent,  and  65  percent,  respectively.  North  Macedonia  (51  percent)  and  Montenegro  (41  percent)  have 
relatively more balanced energy mixes, while Albania  uses no coal in its domestic electricity generation (see 
Figure 21). In 2017, the 18 gigawatts of installed electrical capacity in the region were almost evenly divided 
between  coal-fired  TPPs  and  hydropower  plants.  At  present,  however,  coal  accounts  for  70  percent  of  the 
electricity produced in the Western Balkans.18 

To address the challenges local societies face because of the transition away from fossil fuels, the EU introduced 
the Just Transition Mechanism, aimed at mobilizing more than EUR 100 billion in the 2021 to 2027 budget period. 
It consists of three pillars: a Public Loan Facility (via the European Investment Bank), the Invest EU instrument 
to support investments of the private sector, and the Just Transition Fund (JTF). 19 

Furthermore, the transition is even harder for the Western Balkan economies than for the EU Member States 
because of their weaker financial situation and the very high dependence of most economies in the Western 
Balkans on coal, as well as more pronounced coal-related air pollution levels, which significantly exceed legal 
limits.  According  to  the  latest  reports,  all  the  Western  Balkan  economies  that  use  coal  have  failed  either  to 
comply with the air pollution limits set by their National Emission Reduction Plans (NERPs), emitting much higher 
quantities of pollutants, or, in the case of Montenegro, to close the country’s only coal plant after the expiration 
of its limited lifetime derogation. In fact, it was found that in 2020, the 18 coal power plants in the Western 
Balkan economies emitted 2.5 times higher quantities of SO2 than the 221 coal power plants in the EU combined. 
This, in turn, causes thousands of air-pollution-related deaths in the Western Balkans economies as well as in 
many other countries in the EU. 

According to the European Commission, a  total of 138,000 jobs are linked to coal in the six Western Balkan 
economies and Ukraine: 89,500 in the mining industry and 48,500 in coal-based TPPs. Phasing out coal in line 
with EU policies could lead to the loss of 0.4 percent of all jobs in Montenegro, 0.5 percent in North Macedonia, 
0.6 percent in Serbia, 1.3 percent in Bosnia and Herzegovina, and 1.4 percent in Kosovo. In the latter two cases, 
coal accounts for a higher percentage of employment than in coal-dependent Poland, where the share stands 
at 0.7 percent. 

Job losses because of decarbonization call for national just transition plans. A just transition incorporates the 
“leave no one behind” principle of the agenda 2030, and is one of the preconditions to achieve the clean energy 
and  decarbonization  objectives  of  the  GAWB  in  a  sustainable  and  socially  fair  manner.  Just  transition  is 
integrated into the Paris Agreement which points to “the imperatives of a just transition of the workforce and 
the creation of decent work and quality jobs in accordance with nationally defined development priorities.” It 
should  provide  new  employment  and  decent  work  as  well  as  social  safety  nets  for  affected  workers, 
communities, and regions (Aspen Institute, 2021). 

In 2021, the EU  Commission launched the Secretariat of a new  initiative for coal regions in transition in the 
Western Balkans and Ukraine.20 The Secretariat of a new initiative to help coal regions in the Western Balkans 
and  Ukraine  transition  away  from  coal  towards  a  carbon-neutral  economy  has  been  launched  by  the  EC. 
Mirroring the successful EU Initiative for coal regions in transition, the newly established secretariat will deliver 
support to coal regions in Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia and Ukraine. 
Seventeen  regions  with  significant  coal  mining  activities  and  coal-based  energy  production  will  be  the  key 
beneficiaries.  The  initiative’s  secretariat  will  provide  direct  support  for  its  implementation  and  ensure 
collaboration across the diversity of institutions and actors that the initiative will engage. 

The new initiative builds on the experiences of the initiative for coal regions in the EU, which has connected 
stakeholders, provided technical assistance, and developed support materials for affected regions since 2017. 
These activities focus on the EU’s just transition efforts, which aim to alleviate socioeconomic consequences of 

18 https://carnegieeurope.eu/2023/10/09/green-transition-and-western-balkans-pub-90730 
19 The Green Tank and CEE Bankwatch Network (2021), A Just Transition Fund for the Western Balkan countries. Copyright © The Green 

Tank, 2021 https://thegreentank.gr/ 

20https://commission.europa.eu/news/commission-launches-secretariat-new-initiative-coal-regions-transition-western-balkans-and-

ukraine-2021-02-15_en 

60 

 
 
 
 
transition, while promoting the development of new, future-oriented economic activities. The two initiatives 
will benefit from manifold synergies and support each other’s implementation. 

An initial screening has identified at least 17 regions with significant coal mining activities and coal-based energy 
production that are eligible to participate in the initiative. Their participation in the activities of the initiative is 
voluntary, and while 17 regions have been identified, it will remain at their discretion to actively engage. 

Moreover,  the  initiative  is  open  to  any  region  with  coal  mining  activities  and  possibly  coal  use  for  energy 
purposes in the WB six economies covered by the initiative. Regions with no ongoing coal mining activities but 
with a significant reliance on coal for energy production (like electricity, heat) would also be considered eligible 
for this initiative on a case-by-case basis. 

Table 9. Coal Regions in the Western Balkans  

REGION  

ECONOMY  

Tuzla canton, Srednjobosanski canton, Zeničko-
Dobojski canton, Ugljevik region, Gacko region 

Bosnia and Herzegovina 

Prishtina  

Pljevlja Region  

Kosovo  

Montenegro  

Bitola region, Kičevo region 

North Macedonia  

Kostolac region, Kolubara region, Obrenovac region, 
Pomoravlje region 

Serbia  

The initiative will provide an open platform allowing region-wide, multi-stakeholder dialogue. It will create a 
space  for  sharing  experiences,  knowledge  and  best  practices  on  transition-related  issues  and  encourage  ties 
between coal regions in the Western  Balkans and Ukraine and their EU counterparts through coal region-to-
region exchanges. 

A just transition should be based on social dialogue at all levels to make sure that the energy transition and 
decarbonization burden is shared in a fair way. Carrying out a just transition is complex, involving, among 
others,  energy,  economic,  social,  environmental,  and  education  policies  and  requires  cross-sectoral 
cooperation and long-term planning on the national and regional level. 

Box 8. Just transition 

To  successfully  implement  the  Green  Agenda  for  the  Western  Balkans  (GAWB)  and  achieve  the  goals  of 
decarbonization,  fostering  broad  societal  consensus  becomes  imperative.  The  active  involvement  of  diverse 
stakeholders  is  the  initial  prerequisite  for  ensuring  a  fair  and  comprehensive  transition.  Key  participants 
encompass various entities such as line ministries responsible for energy, climate, environment, employment, 
education,  social  policies,  finance,  and  economic  development.  Additionally,  engagement  from 
local 
governments,  trade  unions,  energy  companies,  the  business  sector,  civil  society,  academia,  and  local 
communities is crucial. 

This  collaborative  approach  is  particularly  pivotal  when  addressing  the  decarbonization  component  of  the 
GAWB.  The  decarbonization  objective  necessitates  profound  structural  changes  across  all  sectors  of  the 
economy, ranging from energy and agriculture to  transport, construction, urban planning, and virtually every 
facet in between. 

Furthermore,  it  is  essential  to  underscore  the  significance  of  active  participation  from  these  stakeholders  in 
order to create a harmonious and inclusive process. Their input and collaboration will not only contribute to the 
successful  implementation  of  the  GAWB  but  also  help  navigate  the  complex  challenges  associated  with  the 
required  transformations.  This  collaborative  effort  ensures  that  the  transition  is  not  only  effective  but  also 
considers the diverse perspectives, needs, and concerns of all parties involved. 

61 

 
 
3.4.1.2 

CBAM  

The  Carbon  Border  Adjustment  Mechanism  (CBAM)  is  a  carbon  tariff  on  carbon  intensive  products,  such  as 
cement and some electricity, imported by the European Union. Legislated as part of the European Green Deal 
(EU Regulation 2023/956), it takes effect in 2026, with reporting starting in 2023. 

The CBAM proposal from December 2022 encouraged third countries to introduce carbon pricing, as the amount 
of CBAM certificates to be surrendered for a given product would be corrected for any carbon price paid in the 
country of origin (Article 9). Full CBAM exemptions would apply to countries linking to the EU ETS, while partial 
CBAM exemptions could apply to third countries that integrate with the EU through electricity market coupling 
– a process that the Western Balkan economies are going through with the support of the Energy Community.  

The  CBAM’s  impact  on  third  countries  that  do  not  qualify  for  exemption  or  join  the  EU  by  the  time  CBAM 
becomes effective depends on their exposure and ability to adapt. Exposure can be measured as share of GDP 
from trade in CBAM goods with the EU and carbon intensity. Ability to adapt depends on characteristics such as 
export diversity, pace of decarbonization, and capacities for Measurement, Reporting and Verification, among 
other aspects. 

This gradual implementation provides time and opportunity for  the Western Balkan economies to adapt and 
prepare for the CBAM. The CBAM aims to incentivize coordinated climate action in trading partner countries, 
including the Western Balkan economies. 

Figure 22. Share of exports exposed to CBAM by sector and economy, 2018-2022 

Note: Kosovo data only includes EX1 exports. Total exposure is therefore underestimated in the chart. 
Source: COMTRADE, WDI and Kosovo Agency of Statistics. 

Given that the EU is the main trading partner of the Western Balkan economies, and the carbon-intensive modes 
of production in the region, the CBAM represents a tangible transition risk for these economies. 

Despite  the  Western  Balkan  economies’  high  vulnerability  and  exposure  to  the  CBAM  compared  to  other 
countries,  the  expected  aggregate  macroeconomic  impact  for  these  economies  is  small  as  economies  are 
expected to adjust quickly by reallocating production capacities to other products. While the CBAM may drive 
some  emissions  reductions  in  exposed  countries,  domestic  policies  are  needed  to  drive  transformative 
decarbonization and keep up with the EU acquis. 

62 

 
 
 
The  CBAM  incentivizes  regional  efforts  for  completing  electricity  market  integration  and  coupling  with  the 
European electricity market. Western Balkans’ transmission networks are strongly interconnected and removing 
barriers  to  leverage  these  connections  can  be  a  next  step.  In  addition,  most  Western Balkan  economies  are 
working on activities to fulfil the preconditions for market coupling. 

The European Commission's Guidance for the implementation of the Carbon Border Adjustment  Mechanism 
(CBAM) for operators outside the EU, including the Western Balkans (EC, 2023), was formulated in August 2023. 
Although  not  legally  binding,  this  document  specifically  outlines  the  requirements  for  operators  managing 
installations  that  produce  CBAM  goods  outside  of  the  EU.  This  guidance  is  particularly  relevant  during  the 
transitional period, spanning from October 1, 2023, to December 31, 2025. Throughout this period, CBAM is 
applied without imposing a financial obligation on importers; instead, it serves solely for the purpose of data 
collection. 

In tandem with the global shift towards a more sustainable future, the Western Balkans 6 Chamber Investment 
Forum  (WB6  CIF)  has  played  a  crucial  role  in  assisting  businesses  in  navigating  the  intricacies  of  the  Carbon 
Border Adjustment Mechanism (CBAM). The WB6 CIF, a collaborative initiative involving chambers of commerce 
and industry from Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro, and Serbia, has 
taken significant strides in this direction. 

On  September  6,  2023,  the  WB6  CIF,  in  collaboration  with  the  European  Commission  (specifically,  the 
Directorate-General for Neighbourhood and Enlargement Negotiations (DG NEAR) and the Directorate-General 
for  Taxation  and  Customs  Union  (DG  TAXUD)),  hosted  an  online  event.  The  event,  titled  "Carbon  Border 
Adjustment  Mechanism:  What  Changes  for  Western  Balkans  Companies?,"  served  as  a  platform  for 
disseminating  valuable  insights  and  information  regarding  the  implications  of  CBAM  for  businesses  in  the 
Western Balkans. This collaborative effort underscores the commitment to ensuring a smooth transition and 
effective understanding of CBAM-related changes among companies in the region. 

3.4.1.3 

Carbon pricing  

There  is  a  widespread  consensus  that  the  adoption  of  carbon  pricing  mechanisms  will  yield  numerous 
advantages for the Western Balkan economies as they undergo a transition towards greener and more resilient 
growth. Carbon pricing assumes a pivotal role in facilitating a sustainable shift and can effectively address energy 
security  risks.  By  enabling  swift,  cost-effective  emissions  reductions,  it  not  only  fosters  environmental 
responsibility but also generates government revenue. This revenue can be strategically allocated to policies 
that  enhance  productivity  or  alleviate  distortionary  taxes.  Moreover,  embracing  carbon  pricing  diminishes 
exposure to the Carbon Border Adjustment Mechanism (CBAM) and underscores preparedness for EU accession. 

Substantial  strides  have  been  taken  in  establishing  robust  Monitoring,  Reporting,  and  Verification  (MRV) 
frameworks  for  carbon  pricing  systems,  facilitated  through  national  legislation  and  Energy  Community 
proposals. Notably, Albania, Bosnia and Herzegovina, Montenegro, and Serbia have enacted MRV legislation 
specifically  targeting  greenhouse  gas  (GHG)  emissions.  Across  all  Western  Balkan  economies,  there  is  a 
commitment to reporting electricity production emissions and CO2 intensity through the Energy Community. 

In a significant development, the Ministerial Council of the Energy Community, in December 2022, adopted the 
MRV regulation. Member states are mandated to transpose this regulation, along with the requisite institutional 
framework, by the end of 2023, with full implementation anticipated by 2026. This collective effort is indicative 
of  the  region's  commitment  to  aligning  with  international  standards  and  embracing  effective  measures  to 
address climate challenges. 

The following acts within the Energy Community Decarbonization Roadmap 2021, were originally foreseen for 
adoption in 202221: 

•  MRR  regulation  (Commission  Implementing  Regulation  (EU)  2018/2066  on  the  monitoring  and 
reporting  of  greenhouse  gas  emissions  amended  by  Commission  Implementing  Regulation  (EU) 
2020/2085); 

•  AVR  regulation  (Regulation  (EU)  2018/2067  on  the  verification  of  data  and  on  the  accreditation  of 

verifiers amended by Commission Implementing Regulation (EU) 2020/2084); 

21 see https://www.energy-community.org/ 

63 

 
 
 
•  Accreditation Regulation (Regulation (EC) No 765/2008 of the European Parliament and of the Council 
of 9 July 2008 setting out the requirements for accreditation and market surveillance relating to the 
marketing of products). 

To date, half of the Western Balkan economies are actively contemplating the implementation of carbon pricing 
systems,  and  Montenegro  has  taken  a  proactive  step  by  introducing  an  Emission  Trading  System  (ETS). 
Montenegro  stands  out  as  the  most  advanced,  having  implemented  an  ETS  since  2020  that  covers both the 
power and industrial sectors. The auctioned allowances within this system adhere to a minimum price of EUR 
24,  and  the  generated  revenues  are  channeled  into  the  "Eco  Fund,"  dedicated  to  supporting  environmental 
protection initiatives. Bosnia and Herzegovina is currently exploring various design options for a national carbon 
pricing system, while Serbia and North Macedonia have initiated their first impact assessments. 

While carbon pricing can elevate the costs associated with emissions-intensive generation, fostering a shift away 
from  coal,  it  is  essential  to  recognize  that  additional  policies  are  imperative  to  incentivize  the  widespread 
adoption of renewables in the region. Furthermore, the potential acceleration of coal-phase-out through carbon 
pricing could have repercussions on vulnerable communities. Initiatives such as the "Initiative for Coal Regions 
in Transition in the Western Balkans and Ukraine" have commenced work to address employment and social 
challenges stemming from the shift away from coal, historically the primary employment sector in the Western 
Balkan region. 

Collaboration  at  the  regional  level  on  carbon  pricing  through  the  Energy  Community  holds  promise  for 
expediting the adoption of carbon pricing mechanisms in the Western Balkan economies and achieving efficiency 
gains. 

The introduction of the Carbon Border Adjustment Mechanism (CBAM) serves as an incentive for regional efforts 
to complete electricity market integration and strengthen ties with the European electricity market. Given the 
robust  interconnectedness  of  Western  Balkans'  transmission  networks,  removing  barriers  to  leverage  these 
connections stands out as a crucial next step. Moreover, most economies in the Western Balkans are actively 
engaged in fulfilling the prerequisites for market coupling. 

3.4.2  Circular economy  

Five pillars stand central to any successful circular economy22: 

1.  Reuse, reduce, recycle; 
2.  Energy efficiency; 
3.  Closed circle; 
4.  System thinking; 
5.  Social inclusiveness. 

A common objective includes keeping products, equipment, and infrastructure in use for as long as possible, 
which improves the overall productivity of these resources. According to the Ellen MacArthur Foundation23, all 
‘waste’ should become a ‘source’ for another process: either a by-product or recovered resource for another 
industrial process or as regenerative resources for nature (e.g., compost). 

In the Western Balkans, the progress  of aligning with the  waste management legislation, including recycling, 
plastics, chemicals, eco-design and other circular economy (CE) related provisions is rather slow and limited, 
while full enforcement of existing legal and policy frameworks represents an even bigger challenge (RCC, 2021). 

While  societies  and  economies  across  the  world  have  been  adopting  structural  changes  to  reduce  their 
environmental impact and prevent the catastrophic consequences of accelerated resource consumption, in the 
WB, CE is frequently confused with waste management and recycling – which is only the final stage of a product’s 
life cycle. The prevention of pollution and waste throughout all stages of a product’s life cycle are still out of 
focus for many regional actors.  

The  concept  of  a  circular  economy  (CE)  remains  relatively  new  to  the  Western  Balkan  region,  making  it  still 
somewhat  abstract  for  many  citizens  and  business  owners  in  the  area.  Unlocking  the  region's  potential  for 
transitioning  towards  a  circular  economy  requires  a  strategic  approach  that  involves  mainstreaming  CE 

22 Circular economy in the Western Balkan Region, Balkan Forum, 2021, www.thebalkanforum.org. 
23 https://www.ellenmacarthurfoundation.org/. 

64 

 
 
 
objectives into various policy areas and integrating CE practices across all sectors and levels. Simultaneously, 
there is a crucial need to raise general awareness about the concept and the multitude of benefits it can bring. 

Circular  economy,  by  combining  linear  economic  benefits  with  sustainable  concepts,  stands  out  for  its  eco-
effectiveness  in  the  production  of  goods.  The  key  elements  facilitating  the  shift  from  a  linear  to  a  circular 
economy  encompass  enhanced  waste  prevention,  management,  and  recycling,  investments  in  renewable 
energy  sources,  biodiversity  protection,  sustainable  water  resource  extraction  and  cycling,  responsible 
consumption, and the extension of product utility within environmental ecosystems. 

Despite  the  potential,  the  Western  Balkan  economies  currently  exhibit  a  low  level  of  resource  productivity, 
measured  at  EUR  0.35/kg,  which  is  six  times  lower  than  the  EU  average  (Jovanovic  and  Vujanovic,  2023). 
Recycling rates are notably low, with only 3% of waste being recycled, in stark contrast to the EU's 44%. Even 
within this figure, Albania contributes significantly, with an 18% recycling rate, while other economies practically 
lack recycling infrastructure (refer to Figure 15). This underscores the  necessity for government  intervention 
through targeted industrial policies that support recycling companies, particularly those employing innovative 
technologies. 

Another challenge is the lack of valid data in local languages pertaining to the circular economy in the Western 
Balkan economies. This not only complicates information dissemination but also suggests that circular economy 
initiatives and projects in the region may not align with EU-defined standards. Waste mismanagement further 
impedes the adoption of a circular economy model, with insufficient and inadequate infrastructure in the waste 
sector posing a significant challenge. 

In conclusion, while the circular economy concept is recognized in the Western Balkans, its full integration and 
development for citizens, consumers, companies, producers, and reproducers is still an ongoing process that 
requires concerted efforts. 

A set of financial and non-financial incentives should be implemented to facilitate the transition to a CE (Aspen 
Institute, 2023): 

Support the creation of new value; 

• 
•  Mitigate investment risks; 
• 

Enhance the competitiveness of CE supply chains. 

3.4.3  Depollution  

Depollution, which is one of the biggest issues in the Western Balkans where air pollution is among the highest 
in Europe, owing to emissions from older coal plants inherited from the communist era, as well as heavy reliance 
on private transportation. 

The figure 23 shows that Western Balkan economies are far more polluted than the EU-27 member states. Only 
Poland and Bulgaria have levels of air pollution close to those of some less polluted Western Balkan economies, 
such as Montenegro and Albania. Pollution is particularly problematic for Serbia, Bosnia and Herzegovina, and 
North Macedonia, which have average concentrations of PM2.5 particles twice as high as the level in Austria, 
for example. Although Montenegro is defined as an ecological state in its  constitution, it also has a very high 
level of air pollution. 

65 

 
 
Figure 23. Air pollution as measured by concentration of fine particulate matter (PM2.5), mean annual exposure 
(micrograms per cubic metre), 2016 

Note: The data show concentrations of fine particulate matter (PM2.5). The higher the values, the greater the level of 
pollution. The last pillar to the right represents North Macedonia (MK). Data for Kosovo are not available. 
Source: World Health Organization. 

River  pollution  has  also been  a  significant  issue  in  the  Western  Balkans,  owing  to  inadequate  sewerage  and 
wastewater treatment systems. Finally, soil degradation is a serious environmental issue, especially in Serbia 
and Montenegro, where around 20% of soil is at risk. 

These issues related to depollution clearly call for industrial policies aimed at a transformation of the energy 
sectors  in  the  Western  Balkan  economies,  improvement  of  public  transportation  systems,  enhancement  of 
waste management, investment in wastewater treatment plants for the reuse of water in agriculture and urban 
wastewater collection, and support for sustainable agricultural and food production. 

66 

 
 
 
 
 
 
 
 
Figure 24. Years of life lost per 100,000 inhabitants attributable to exposure to pollution in 2016 

Source: European Environment Agency, 2020. 

The predominant use of coal in most Western Balkan  economies, coupled with low energy efficiency, have a 
negative impact on the environment, pollution, and climate change. There is abundant evidence that the levels 
of pollution in the Western Balkans are alarming. 

3.4.4 

Sustainable food systems 

The fourth pillar of the Green Agenda places a spotlight on sustainable food systems and rural areas, urging the 
implementation of agricultural-related policies to align food-processing establishments with EU standards. The 
proposed measures aim to enhance sanitary controls, encourage environmentally friendly and organic farming, 
deploy eco-friendly technologies, and reduce waste in rural areas. Achieving these goals necessitates industrial 
policy measures tailored to the agriculture and food sectors, building upon the strategies outlined earlier in this 
note. 

Agriculture holds significant importance in the entire Western Balkan region, contributing approximately 10% 
to  the  GDP  (Zupanic  et  al,  2021).  In  the  Republic  of  Serbia,  the  total  gross  value  of  agricultural  production 
reached  5.5  billion  USD  in  2019.  In  Albania,  agriculture  serves  as  the  foundation  for  social  well-being  and 
unemployment protection. Meanwhile, in Bosnia and Herzegovina, one-fifth of the population is employed in 
the agricultural sector. Montenegro boasts a noteworthy 8% share of the agriculture sector in its GDP, and in 
the Republic of North Macedonia, agriculture accounts for 13% of the GDP. Almost half of the Western Balkans' 
territory is dedicated to agriculture, with 19% designated as pasture, 29% as arable land, and 18–58% of the 
workforce connected to this sector. 

Organisations from the Western Balkans have actively engaged in international collaborations in the agri-food 
sector, both within the region and with EU Member States. The University of Belgrade, University of Novi Sad, 
University of Niš, University of Kragujevac, and Ss. Cyril and Methodius University of Skopje stand out as the top 
five organisations in terms of publications and R&D activities in the agri-food domain (Radovanovic et al, 2024). 
A notable illustration of the region's potential is the Biosens Institute from the University of Novi Sad, focusing 
on  sustainable  solutions  in  agriculture.  Biosens  coordinates  various  projects  addressing  biosystem  and 
environmental challenges, contributing to the digitalization of the agricultural and food sector  – for instance, 
the Antares project financed by the EU Horizon Europe programme24). 

Despite  the  abundance  of  natural  resources,  agri-food  systems  in  all  Western  Balkan  economies  encounter 
numerous  challenges.  The  agricultural  sector,  a  pivotal  player  in  food  production  and safety,  simultaneously 

24 https://antaresproject.eu/ 

67 

 
 
 
 
shoulders  responsibilities  for  environmental  protection,  climate  change  mitigation,  and  gas  emissions. 
Additionally, agriculture faces threats from various factors linked to climate change, such as storms, erosion, 
and landslides stemming from climate variability and extreme weather events. Given the significance of forestry 
alongside  agriculture,  Western  Balkan  economies  are  categorized  as  being  of  medium  to  high  sensitivity  to 
climate change. 

3.4.5  Protection and restoration of ecosystems 

The entire Balkan Peninsula stands out as a biodiversity hotspot, characterized by its unique climate, landscapes, 
and habitats of European significance. The region boasts extensive forest cover, numerous free-flowing rivers, 
and  encompasses  three  biogeographic  regions:  Continental,  Alpine,  and  Mediterranean,  fostering  a  diverse 
array of habitats. 

In  accordance  with  the  UN  Convention  on  Biological  Diversity  and  its  Aichi  targets,  a  minimum  of  17%  of 
terrestrial and inland water, and 10% of coastal and marine areas were expected to be protected by 2020. The 
European Commission has formally embraced the 30x30 target, aiming to safeguard 30% of its territory by 2030, 
as  part  of  the  EU  Biodiversity  Strategy  to  2030.  Additionally,  one-third  of  these  protected  areas  should  be 
designated as "strictly protected." However, the Western Balkan region lags behind in achieving these goals, 
with percentages of protected areas hardly approaching the 20% mark. Some economies, such as Bosnia and 
Herzegovina,  have  less  than  5%  of  their  territory  under  protection  (Aspen  Institute,  2021).  The  current 
percentages of protected areas in the Western Balkan economies are as follows: Albania 18.59%, Bosnia and 
Herzegovina 3.63%, Kosovo* 11.5%, Montenegro 14%, North Macedonia 8.96%, and Serbia 7.74%. 

Addressing  this  pillar  necessitates  comprehensive  action  plans,  including  efforts  to  enhance  knowledge  on 
biodiversity,  engage  in  forest  landscape  restoration,  strengthen  regional  cooperation,  and  foster  closer 
collaboration with international organisations and the EU. While these aspects may initially appear beyond the 
scope of industrial policy, they are poised to benefit from measures designed to ensure sustainable agricultural 
production, promote responsible tourism, and encourage renewable energy production. 

3.4.6  Green transition of Western Balkan economies  

Available indicators on various aspects of the green transition are not very encouraging.  

Figure 25. EBRD scores on green quality of a sustainable market economy, 2021 

Note: Scores range from 1 to 10, where 10 represents a synthetic frontier corresponding to the standards of a sustainable 
market economy. 
Source: Aspen Institute, 2023, based on the EBRD data. 

68 

 
 
 
 
A synthetic indicator, developed by the European Bank for Reconstruction and Development (EBRD), gauges the 
green  quality  of  a  sustainable  market  economy  using  a  range  of  quantitative  and  qualitative  indicators.  This 
indicator reveals that the Western Balkan economies currently trail the eleven EU member states in Central 
Eastern Europe in terms of the green quality of a sustainable market economy (see Figure 25). 

The situation becomes even more concerning when considering the carbon intensity of GDP (CO2 emissions per 
unit of GDP). In this aspect, most Western Balkan economies exhibit ratios several times higher than the EU 
average. Once again, Albania stands out as an exception, thanks to its reliance on hydropower. Additionally, the 
carbon intensity of electricity production in the Western Balkans surpassed more than three times that of the 
EU-27 average in 2020. While the Western Balkan economies are not part of the EU Emissions Trading System 
(EU ETS), initial steps in this direction have been initiated. 

Examining carbon dioxide emissions (in metric tons) per capita, only Bosnia and Herzegovina and Serbia had 
slightly higher emissions in 2019 than the European Union average. In contrast, Montenegro, North Macedonia, 
and particularly Albania boasted among the lowest emissions, reflecting lower levels of industrial activity per 
capita (refer to Figure 26). World Bank data on the sectoral structure of carbon dioxide emissions underscores 
that  in  the  Western  Balkans,  emissions  are  predominantly  generated  in  the  electricity  and  heating  sector,  a 
relatively  higher  proportion  compared  to  most  EU  member  states.  The  sole  exception  is  Albania,  where  the 
transport sector is the primary contributor to emissions. 

Figure 26. Carbon Dioxide Emissions (metric tons per capita), 2019 

Note: No data for Kosovo available. 
Source: Aspen Institute, 2023, based on the World Bank data. 

3.4.6.1 

Indicators and progress towards GAWB  

The Action Plan is organised to mirror the seven components of the Sofia Declaration (Climate Action, Energy, 
Transport,  Circular  Economy,  Pollution,  Sustainable  Agriculture,  and  Nature  and  Biodiversity  Protection), 
grouped into five pillars. It  encompasses measures to fulfill the  58 commitments (objectives) outlined in the 
Sofia Declaration, providing an overview of the primary regional coordinators and other relevant organisations 
contributing to specific objectives. For  each measure, an indicative timeframe for implementation is defined 
through consultations with regional coordinators and Western Balkan authorities. 

Ensuring  the  smooth  implementation  of  the  Sofia  Declaration  requires  continuous  monitoring  of  key 
parameters.  This  monitoring  will  occur  in  regular  cycles  based  on  predefined  indicators  (provided  below), 
enabling the tracking of progress, level of achievements, or the identification of impediments and delays. These 
indicators serve as valuable tools for identifying and analyzing reasons for any slowdown or stagnation in the 
implementation process. 

69 

 
 
 
 
The monitoring system will also facilitate the design of corrective actions to overcome challenges and ensure 
the uninterrupted continuation of activities. Both qualitative and quantitative indicators within the monitoring 
system are selected based on their relevance to the Sofia Declaration's implementation and the availability of 
data  through  annual  monitoring  cycles.  In  collaboration  with  regional  organisations  and  the  European 
Commission, the Regional Cooperation Council intends to establish a reporting mechanism comprising an annual 
narrative report and an annual indicators overview. 

The narrative report will be collaboratively developed with all partners responsible for relevant policy areas and 
other stakeholders engaged in implementing the Sofia Declaration. Therefore, the narrative section will offer a 
comprehensive overview of progress in all seven components of the Sofia Declaration. It will be supplemented 
with  additional  chapters,  including  perspectives  from  NGOs,  local  self-government,  donors,  the  business 
community, and youth. The report will be concise yet substantive, providing a succinct overview of activities and 
results compared against the established objectives. 

70 

 
 
Table 10. GAWB indicators 

71 

 
 
 
72 

 
 
 
Source: RCC, 2021. 

As  regards  Green  Agenda  and  sustainable  connectivity,  Albania25  is  moderately  prepared  on  energy, 
environment,  and  climate  change.  Limited  progress  was  made  in  further  aligning  the  EU  acquis  on  water 
management,  chemicals,  and  environmental  crime.  The  impact  of  strategic  investments  on  biodiversity  and 
nature protection requires attention. This cluster and the reforms concerned have significant links to Albania’s 
Economic Reform Programme, the Commission’s Economic and Investment Plan and the Green Agenda for the 
Western Balkans endorsed by Albania in December 2020. Albania has some level of preparation in most areas 
linked  to  resources,  agriculture,  and  cohesion,  namely  agriculture  and  rural  development,  food  safety,  and 
financial  and  budgetary  provisions.  It  is  moderately  prepared  as  regards  regional  policy  and  coordination  of 
structural instruments. Albania has made some progress in agriculture and rural development. 

Bosnia  and  Herzegovina26  made  some  or  limited  progress  in  the  green  agenda  and  sustainable  connectivity 
cluster, where the country is at an early stage on energy, environment, and climate change. The country has a 
certain  level  of  preparation  in  the  areas  of  transport  and of  trans-European  networks.  However,  Bosnia  and 
Herzegovina  made  no  progress  in  the  areas  of  resources,  agriculture,  and  cohesion  (agriculture  and  rural 
development,  food  safety  etc.),  where  preparation  is  mostly  at an  early  stage.  The  country  must  step  up  its 
efforts to prepare and adopt a post-2021 countrywide strategy for rural development, align its legislation on 
food safety, veterinary and phytosanitary policy and strengthen its administrative capacities. 

The  green  agenda  and  sustainable  connectivity  cluster  is  at  the  heart  of  the  Green  Agenda  for  the  Western 
Balkans and closely linked to Montenegro’s27 economic reform programme and the Commission’s Economic and 
Investment  Plan.  All  four  related  chapters  of  the  country’s  EU  accession  process  are  open,  with  closing 
benchmarks that remain to be fulfilled in each chapter. Some progress was achieved on creating a functioning 
day-ahead energy market and on preparing for membership of the Paris Memorandum of Understanding on 
Port State Control. There was limited progress on the review and implementation of the transport development 
strategy; on water management and by improved climate change reporting. 

Concerning the cluster 4 on the Green Agenda and sustainable connectivity, North Macedonia28 has achieved a 
good level of preparation in trans-European networks. Some progress was made in the areas of environment 
and climate change. Substantial efforts are needed in the areas where limited progress was made such as in 
energy, transport policy and trans-European networks. The country needs to accelerate the implementation of 
the Economic and Investment Plan and of the Green Agenda for the Western Balkans over the upcoming period. 

Kosovo29 is at an early stage of preparation on environment and climate change topics. Kosovo made limited 
progress, notably on environmental reporting and air quality monitoring. Kosovo needs to increase its political 
commitment to address environmental degradation and climate change challenges and substantially improve 
the implementation of its legislation, to align it with the Green Agenda for the Western Balkans’ goals. Most of 
the recommendations from the previous report are still pending. As regards horizontal issues, Kosovo needs to 
adopt  revised  strategies,  action  plans  and  legislation  to  ensure  their  coherence  with  the  Green  Agenda 
objectives  and  ensure  their  implementation.  The  adoption  of  the  Strategy  for Environmental  Protection  and 
Sustainable  Development  2022-2030  is  delayed.  The  implementation  of  the  current  strategic  framework  is 

25 COM SWD(2022) 332 final - Albania 2022 Report 
26 COM SWD(2022) 336 final – Bosnia and Herzegovina 2022 Report 
27 COM SWD(2022) 335 final – Montenegro 2022 Report 
28 COM SWD(2022) 337 final – North Macedonia 2022 Report 
29 COM SWD(2022) 334 final – Kosovo* 2022 Report 

73 

 
 
 
 
challenged  by  the  lack  of  funding  and  administrative  capacity,  and  heavy  reliance  on  international  donors. 
Kosovo still needs to align its environmental protection with the environmental liability directive. Even though 
the environmental inspections legislation has been redrafted, it is not yet adopted and the enforcement capacity 
is still missing. Kosovo also needs to amend and implement  the laws on environmental and strategic impact 
assessment. Inter-institutional coordination and civil society involvement needs to be enhanced. Kosovo needs 
to take over raising awareness responsibilities from the international community and civil society organisations. 

The  Green  agenda  and  sustainable  connectivity  cluster  is  closely  linked  to  Serbia’s30  Economic  Reform 
Programme and the Commission’s Economic and Investment  Plan. The  cluster and all related chapters were 
opened in December 2021, after Serbia had fulfilled the remaining requirements, namely the adoption of action 
plans on oil stocks and on gas unbundling. Limited progress was achieved overall with the exception of Trans-
European networks, where Serbia advanced on upgrading its infrastructure, with works starting on the Serbia-
Bulgaria gas interconnector, a strategically highly important project for Serbia and Europe.  

3.4.6.2 

Skills aspects for green transition in the Western Balkan economies 

According to the definitions by the United Nations Environment Programme (UNEP) and the International Labour 
Organisation (ILO), "green jobs" are characterized by their environmental sustainability and social fairness. These 
jobs play a crucial role in driving the economy towards decarbonization, efficient resource and energy use, and 
biodiversity  protection.  Additionally,  they  ensure  safe  work  environments,  social  protection,  and  equitable 
income, aligning with the Sustainable Development Goals. 

The necessity of specific skills for green jobs is paramount. Green skills encompass technical knowledge and 
abilities essential for effectively applying green technologies and processes in a professional setting. These skills, 
integrating various knowledge, values, and attitudes, support environmentally sustainable decision-making both 
at work and in daily life. They are particularly significant for the younger generation, who have the potential to 
influence ecological transitions over a longer term. 

Research highlights the need for new skills at every level and across the spectrum for the green transition. This 
includes education from a young age to advanced professional levels. Training in areas such as Green Public 
Procurement (GPP) is also vital for public authorities. Equally important is the reskilling of workers vulnerable to 
job losses due to decarbonization efforts, ensuring their transition to new roles in the evolving green economy. 

Addressing the employment  challenges associated with the decarbonization of the energy sector is a  critical 
aspect in the Western Balkans, where phasing out coal and fossil fuel subsidies is expected to result in job losses 
and social challenges (OECD, 2022a). In five of the six Western Balkan economies (excluding Albania which does 
not have coal production), the coal industry employs over 30,000 people. A majority of these workers, over two-
thirds, are employed in open-pit coal mining, with the remainder in power plants. Although representing a small 
fraction of the total 14.5 million people living in these economies, mining and thermal power plants (TPPs) have 
long been dominant employment sources in regions reliant on coal. The ripple effect also extends to many small 
companies in these areas that are directly dependent on these industries, such as through supply chain links to 
coalmines and TPPs. A significant portion of coal-related employment, almost half, is in Serbia's Kolubara and 
Kostolac regions, with about 16,500 workers, followed by Bosnia and Herzegovina. 

The coal and traditional power sectors are already experiencing a decline in jobs. For example, in Serbia, the 
Kolubara mining basin saw a reduction of more than 3,000 jobs between 2017 and 2019; in the Kostolac mining 
area, job numbers decreased from 2,000 in 2009 to around 1,500 in 2019, despite the opening of new mines 
and increased production capacity. In Montenegro, the number of mineworkers has almost halved, from 1,200 
in 2010 to 670 in 2019. 

Combining  re-skilling  programs  with  financial  compensation  for  coal  workers  has  proven  effective  in  other 
countries  dealing  with  similar  transitions.  These  programs  often  yield  better  long-term  results  than  simple 
financial  payments.  Potential  job  and  training  categories  that  correspond  to  the  skills  of  former  miners  and 
workers include thermal retrofitting in the buildings sector, as well as other relevant jobs in construction and 
manufacturing. 

The transition to renewable energy and energy efficiency offers new employment opportunities. Investments in 
these sectors are generally  more labor-intensive compared to the oil and gas sector  and are usually located 
closer  to  consumers.  This  presents  an  opportunity  to  create  new  jobs  in  current  mining  regions.  The  “Just 

30 COM SWD(2022) 338 final – Serbia 2022 Report 

74 

 
 
 
Transition  Plans”  developed by  WWF’s  Regions  Beyond  Coal  initiative  for  countries  like  Greece,  Poland,  and 
Bulgaria,  which  include  roadmaps  for  transforming  coal  regions  and  creating  new,  sustainable  employment 
opportunities, could serve as a model for the Western Balkan economies. 

The “Initiative for Coal Regions in Transition in the Western Balkans and Ukraine,” launched in December 2020, 
is designed to support these economies in managing the social challenges and job losses resulting from coal 
phase-out and mine closures. This initiative aims to provide technical and financial support to coal regions in EU 
neighboring economies, facilitating an open platform for region-wide dialogue and sharing best  practices on 
transition-related issues. 

Education is a key component in this transition, affecting behaviors towards the environment from an early age 
and reskilling workers from transition industries. The curricula need to include competences and skills essential 
for the green  economy. For successful implementation, the Green Agenda  for the Western Balkans must  be 
reflected in education system reforms, ensuring people are prepared for tomorrow's labor market and society. 
With  proper  information  and  education,  the  youth  can  significantly  contribute  to  the  Green  Agenda’s 
implementation. The European Green Deal should also be integrated into various components of the Erasmus+ 
program, available in the region. 

The green transition requires significant changes in mentality and behavior, in addition to new technological 
solutions,  to  stimulate  both  demand  and  supply.  Raising  public  awareness  and  involvement  is  crucial  for 
achieving  a  credible  vision  for  the  low-carbon  transition  in  the  Western  Balkans.  Economy-wide  and  local 
communication campaigns targeting specific groups on issues like the benefits of heat pumps over fuel wood 
are  necessary.  Key  target  groups  include  low-income  households,  youth,  and  women.  Additionally,  energy, 
climate,  and  environment  issues  should  be  more  present  in  the  media.  Informing  citizens  and  organisations 
about  the  specific  costs  of  pollution  and  benefits  of  clean  energy  transitions  is  vital.  For  instance,  educating 
parents and caregivers about the impacts of air pollution on children’s health and development is important, as 
is informing public officials about the necessity and benefits of biodiversity and healthy ecosystems. Cities and 
municipalities should be made aware of the economic costs of not adapting to climate change. 

Improving teacher training on energy, climate, and environmental education and incorporating these topics into 
school  curricula  are  essential  steps.  Continuous  and  regular  training  for  teachers  is  necessary  to  keep  them 
informed  about  the  latest  technological  and  scientific  developments.  At  present,  continuous  professional 
development (CPD) for teachers is limited in many Western Balkan economies. 

The Western Balkans need more human capital with skills and expertise required for investment in renewables. 
To  build  such  capacity,  appropriate  curricula  on  renewable  energy  at  technical,  vocational,  and  tertiary 
institutions are  needed.  There  is  a  shortage  of  skilled  workers  for  the  installation,  maintenance,  and  quality 
assurance of solar panels and wind power. 

Enhancing  energy  efficiency  in  Western  Balkan  economies  requires  effective  strategies  for  energy  efficiency 
improvements, the mobilization of sufficient financial resources, and the development of less carbon-intensive 
heating systems. Comprehensive and widely accepted strategies for energy efficiency improvements, especially 
in the building sector, are needed. Additionally, there is a need for better incentives and frameworks to mobilize 
financing  for  energy  efficiency  improvements  in  buildings,  including  energy  efficiency  funds  endowed  with 
sufficient  financial resources. The  expansion of modernized district  heating systems could replace inefficient 
heating  devices.  Improving  energy  efficiency  standards  and  skills  in  the  Western  Balkan  economies  is  also 
necessary. 

Energy  efficiency  standards  for  equipment  and  buildings  can  enhance  energy  efficiency.  Up-to-date  energy 
efficiency standards for heating and cooling systems could prevent the proliferation of inefficient devices in the 
Western  Balkans.  However,  standards  can  only  be  implemented  where  the  necessary  expertise  is  available. 
Policy  and  training  options  must  focus  on  overcoming  shortages  in  technical  expertise  related  to  energy 
efficiency improvements and skilled professionals, such as energy auditors and managers. While some progress 
has been made in capacity-building programs for energy auditors and managers, these need to be broadened 
and carried out in a sustained manner. For further reading on the related development of new skills, Baldassarre 
and Saveyn (2023) is a recommended source. 

75 

 
 
Overview of the Western Balkans research and innovation performance in the EU 

3.5 
programmes and initiatives 
The  innovation  performance  of  11  European  countries,  which  are  not  EU  Member  States  (including  WB 
economies),  has  been  assessed  using  the  same  methodology  and  presented  in  the  European  Innovation 
Scoreboard 2023. The performance groups for all European countries are shown on a map in Figure 27. 

Figure 27. Performance groups: innovation performance per dimension 

Source: European Innovation Scoreboard, 2023. 

Albania (AL), Bosnia and Herzegovina (BA), Montenegro (ME), North Macedonia (MK), Serbia (RS), Türkiye (TR), 
and Ukraine (UA) are classified as Emerging Innovators. Among these, three countries demonstrate the highest 
performance across all economies in at least one indicator: Albania excels in Sales of Innovative Products and 
Environment-Related Technologies, Bosnia and Herzegovina in Environment-Related Technologies, and Serbia 
in Non-R&D Innovation Expenditures. 

Since 2016, the performance of three countries - North Macedonia, Norway, and Serbia - has improved faster 
than the EU average (8.5 percentage points). Meanwhile, for five countries (Montenegro, Albania, Iceland, the 
United Kingdom, and Türkiye), performance has increased significantly, albeit at a rate below the EU average. In 
contrast,  Bosnia  and  Herzegovina,  Switzerland,  and  Ukraine  have  seen  a  decrease  in  performance.  Between 
2022 and 2023, almost all 11 countries experienced a decline in key indicators such as Population with Tertiary 
Education, SMEs with Business Process Innovations, Employment in Innovative Enterprises, Sales of Innovative 
Products, and Resource Productivity. 

Research and Innovation (R&I) funding comes from various sources, including national funding, EU Framework 
Programmes  like  Horizon  2020  and  Horizon  Europe,  and  Pre-accession  IPA  funds.  The  latter  two,  being 
substantial support from the European Commission (EC), aim to develop standards in the enlargement region 
comparable to those enjoyed by EU citizens. However, national funding programs for research and innovation 
are beyond the scope of this document. 

The  full  association  of  the  Western  Balkans  (WB)  with  the  EU  Framework  Programmes  for  Research  and 
Innovation has been a successful driver of systematic changes in the WB, stimulating progress in developing new 
mechanisms, infrastructures, and legislation to improve resource use efficiency. Association with the Framework 
Programmes involves 49 European Partnerships in the first Horizon Europe Strategic Plan and 37 Partnerships 
Biennial Monitoring Report (Damjanovic and Windischbaur, 2023). 

76 

 
 
 
3.6 

Innovation policy for SMEs 

Globalisation,  technological  development,  and  expanding  markets  have  been  significant  catalysts  for  firm 
innovation over the past decade. Increasingly, SMEs are recognised for their pivotal role in shaping innovation- 
and  knowledge-based  economies.  There's  also  a  clear  connection  between  firm  innovation  and  economic 
output; innovative practices and activities enable firms to grow and enhance productivity, even if only a small 
fraction reach the global technological frontier. 

SMEs are crucial in achieving the net-zero goal for greenhouse gas emissions (GHG), accounting for 50% of global 
emissions and 63% in the EU. Environmental concerns are particularly relevant for SMEs, which face the impacts 
of environmental degradation and are subject to the volatility and uncertainty of energy prices, posing distinct 
challenges  for  their  survival  and  growth.  Crucially,  SMEs  can  be  instrumental  in  innovating  and  developing 
technologies to tackle these challenges. New green markets, such as those arising from the circular economy, 
also offer fresh business opportunities for SMEs. 

In recent years, the greening of SMEs has gained momentum in the region (OECD, 2022b). A growing number of 
SMEs in the Western Balkans and Turkey are offering green products or services. For instance, 36% of North 
Macedonia’s SMEs provide such products or services, surpassing the proportion in the EU. Additionally, many 
SMEs  have  adopted  at  least  one  measure  to  enhance  resource  efficiency,  such  as  minimizing  waste,  or 
conserving  energy  or  water.  While  Western  Balkan  economies  generally  lag  behind  the  EU  average  in  this 
respect,  Turkish  SMEs  excel  in  saving  materials,  water,  and  energy,  and  in  waste  reduction,  reflecting  the 
government’s  commitment  to  SME  greening.  Most  SMEs  in  these  regions  have  implemented  at  least  one 
strategy to become more resource-efficient. 

Figure 28. Resource efficiency measures undertaken by SMEs (2021) 

Note: Data for Bosnia and Herzegovina and Kosovo are not available. 
Source: European Commission (2022), Eurobarometer: SMEs, Resource Efficiency and Green Markets. 

3.7 

Smart Specialisation in the Western Balkans  

Smart Specialisation is the EU answer to the need of such place-based territorial innovation policies. This policy 
approach  is  implemented  in  all  EU  Member  States,  and  is  gaining  increasing  worldwide  appreciation.  It 

77 

 
 
 
 
advocates focusing public investment  in research, development, and innovation activities on a few, carefully 
chosen country-specific priority domains, where the impact can be the greatest. Close to 200 regions in EU have 
so far developed their Smart Specialisation strategies (RIS3). Recent study by Gianelle et al. (2020) showed that 
Smart Specialisation are implemented in a variety of ways, with some common characteristics which were used 
to  develop  a  framework  for  the  design  of  RIS3  in  the  EU  Enlargement  and  Neighbourhood  region  aiming  at 
supporting  national  policy  makers  in  developing  a  strategy  that  would  meet  the  standards  of  EU  innovation 
policies. By 2018, all Western Balkan economies launched their respective Smart Specialisation processes.  

During the EU Western-Balkan Summit on October 6, 2021, the European Union and the six economies of the 
Western  Balkan  region  have  agreed  to  strengthen  their  cooperation  on  several  areas  including  research, 
innovation,  and  education,  also  to  emphasize  the  intention  of  these  economies  of  a  long-term  goal  of  EU 
membership.  The  agreement  aims  at  promoting  scientific  excellence  and  education  reform  in  the  Western 
Balkan economies also helping to prevent  “brain drain” of researchers out  of this region (Radovanovic et  al, 
2023).  

Smart Specialisation is one of the flagship initiatives of the Western Balkan Agenda on Research, Innovation, 
Education,  Culture,  Youth  and  Sport  (European  Commission,  2021).  It  is  also  included  in  other  EU  policy 
documents regarding the region, such as the 2021 Communication on EU Enlargement Policy and the Economic 
and Investment Plan for the Western Balkans. 

Having in mind all characteristics of the S3 concept, it is fair to conclude that the concept provides a new policy 
approach to the six Western Balkan economies. As such, S3 holds considerable potential to help them enhance 
the  innovative  potential  of  their  private  sectors  and  to  do  so  in  a  collective  way  built  on  public-private 
cooperation (Radovanovic and Benner, 2019). 

In addition to the support provided to EU regions for the design and implementation of Smart Specialisation 
strategies over the last years, the JRC of the European Commission has been providing guidance and assistance 
to the EU Enlargement  and Neighbourhood countries for the development  of  Smart  Specialisation strategies 
since 2013, through its Smart Specialisation Platform (S3P). Since 2019, this support was strenghtened through 
a  project  targeted  on  providing  direct  support  to  the  EU  Enlargement  and  Neighbourhood  Region,  jointly 
managed by the JRC and DG NEAR. All six Western Balkan economies are currently in the process of preparing, 
adopting or implementing RIS3 with the support of the JRC. While Montenegro was the first Western Balkan 
economy to adopt its RIS3 in June 2019, the S3 process is also finalised in Serbia in 2020. Other economies are 
deeply  engaged  in  process  of  S3  development.  Based  on  available  documents,  the  tables  10  and  11  below 
summarise the current strategic framework and emerging S3 priorities in the Western Balkan economies.   

1. 

Albania 

Albania joined the JRC Smart  Specialisation Platform  in 2017  and has since been developing  the strategy for 
Smart Specialisation with the support of the European Commission (EC) and following the JRC's methodological 
framework for Smart Specialisation in the EU Enlargement and Neighbourhood Region. The quantitative analysis 
was completed in 2021 and it was followed by a qualitative analysis which refined the quantitative mapping's 
results, leading to the identification of five preliminary priority domains for the Smart Specialisation Strategy 
(Fabbri  et  al,  2022):  Agriculture,  Fisheries,  and  Aquaculture;  Manufacturing;  Energy,  Accommodation,  and 
Support Service Activities; Information and Communication; Administrative and Support Service Activities. 

Based on EDP findings, three vertical priorities are being identified and the country is currently focussing on: 

•  Renewable Energy and Natural Resources;  
•  Healthy and Sustainable Food Chain;  
• 

Sustainable and Diversified Tourism 

The draft of the Smart Specialisation strategy of Albania is currently being prepared according to these priorities. 

•  Bosnia and Herzegovina 

The initial effort to prepare a Smart Specialisation (S3) strategy in Bosnia and Herzegovina (BiH) commenced in 
2020, initiated by the Council of Ministers. This followed the formation of a working group and the appointment 
of the Directorate for Economic Planning  (DEP) as the coordinator for the S3 process. By  drafting the Smart 
Specialisation Strategy Map, BiH has aligned with the EU's initiative that emphasizes a new approach to overall 

78 

 
 
 
economic development at both regional and national levels. The S3 of BiH considers the country's governance 
structure, encompassing the state level, the two entities of the Federation of Bosnia and Herzegovina (FBiH) 
with its ten cantons, Republika Srpska (RS), and the Brcko District. The study (Galic and Hollanders, 2022) was 
conducted  to  identify  potential  priority  domains  for  smart  specialisation  in  BiH,  based  on  an  analysis  of 
economic, innovation, scientific, and technological data, and adhering to the methodology developed by the 
Joint Research Centre (JRC) of the European Commission (EC). 

A list of potential priority areas investigated through quantitative mapping and in the qualitative analysis phase 
(Fabbri, Pucar and Galic, 2024) includes: 

ICT; 

• 
•  Metal and Electrical Industry; 
• 
• 
•  Wood Industry; 
• 

Tourism Industry. 

Production and Processing of Plastics; 
Production and Processing of Food and Beverages / Food industry; 

After the completion of the mapping phase, Bosnia and Herzegovina  will launch of its EDP exercise currently 
under preparation. 

•  Kosovo 

The  Smart  Specialisation  process  in  Kosovo  started  in  2018  when  it  registered  in  the  Smart  Specialisation 
Platform. The Smart Specialisation team was established in 2020 and the process is coordinated by the Office 
for Strategic Planning under the Prime Minister’s Office. Since then, Kosovo has been implementing a roadmap 
for the definition of a National Strategy for Smart Specialisation, with the assistance of the EC and according to 
the JRC methodological framework for Smart Specialisation in the EU Enlargement and Neighbourhood region. 
The quantitative mapping, coordinated by the national authorities and supported by the JRC started in October 
2020 and was finalized in August 2021. The qualitative mapping started in November 2021 and was finalised in 
May 2022 (Hollanders and Rexhebeqaj, 2023).  

The qualitative analysis confirmed five areas with the greatest potential: 

•  Wood processing; 
• 
Food processing; 
•  Green energy; 
• 
• 

ICT; 
Creative industries.  

The  report  emphasised  the  importance  of  the  automation  of  processes,  digitalisation,  new  digital  frontiers 
(artificial  intelligence,  IoT  sensors,  and  machine  learning),  and  energy  transition  (use  of  renewable  sources). 
Kosovo finalised its EDP phase in 2023. The draft of the Smart Specialisation strategy of Kosovo is currently being 
prepared. 

•  Montenegro 

Montenegro launched its Smart Specialisation process in 2017 and formed a team to oversee the process and 
coordinate  the  tasks  for  the strategy  development.  Montenegro  adopted  its  Smart  Specialisation  strategy  in 
2019 and received conditionally positive assessment by the European Commission services. Implementation of 
the S3 of Montenegro is under the Council for Innovation and Smart Specialisation, which was established in 
August 2019. 

Pursuant to the strategic development vision of Montenegro, through the application of S3 methodology and 
conducting of the EDP, four priority areas have been defined. By investments, as well as through development 
of  innovative  and  research  potential  in  the  selected  priority  areas,  new  opportunities  will  be  created  for 
entrepreneurial activities and development of a knowledge-based economy. 

The identified priorities are the following:  

• 
• 
• 

Energy and sustainable environment; 
Sustainable agriculture and food value chain;  
Sustainable and health tourism; 

79 

 
 
• 

ICT. 

The priority area of ICT is also seen as a horizontal priority providing business and technological support to other 
priority areas. 

•  North Macedonia 

The Smart Specialisation (S3) process in North Macedonia started in March 2018, when the letter of commitment 
from the country's government on starting the development of the National Research and Innovation Strategy 
for Smart Specialisation reached the Joint Research Centre. The process is led by the Smart Specialisation team 
of North Macedonia and jointly coordinated by the Ministry of Economy and Ministry of Science and Education. 
The quantitative analysis within the mapping of the economic, innovation and scientific potential was conducted 
in 2019 and revealed several sectors with strong potential. The following priority areas were confirmed after the 
qualitative analysis (Radovanovic et al, 2022) and the EDP which was completed in 2022: 

• 
• 
• 
• 

Smart Agriculture and Food with Higher Added-Value; 
Information and Communication Technologies (ICT) Sector; 
Electro-Mechanical Industry - Industry 4.0; 
Sustainable Materials and Smart Buildings. 

The work on the finalisation on the strategy was intense ever since and the Smart  Specialisation strategy of 
North Macedonia was adopted late in 2023. It is currently pending the assessment by the European Commission 
services. 

• 

Serbia 

Serbia registered on the Smart Specialisation (S3) platform in 2015. The Smart Specialisation process in Serbia 
started in 2017, with the Ministry of Education, Science and Technological Development taking charge of the 
coordination  of  the  process  by  establishing  an  Inter-ministerial  working  group  for  the  development  of  the 
Research and Innovation Strategy for Smart Specialisation (RIS3). Under the guidance and support by the JRC 
and  by  following  the  JRC  methodological  framework  for  smart  specialisation  in  the  EU  enlargement  and 
neighbourhood countries, Serbia identified the following priority areas in the mapping stage (Radovanovic et al, 
2021), which were later confirmed during the stakeholder dialogue within the EDP: 

• 
• 
• 
• 

Food for future; 
ICT, 
Future machines and manufacturing systems;  
Creative industries. 

Serbia finalised the adoption process of its Smart Specialisation framework documents including the action plan 
in April 2021. The action plan was revised in 2023 and the documentation is currently being assessed by the 
European Commission services. 

80 

 
 
 
Table 11. Policy documents for innovation in the Western Balkans relevant to Smart Specialisation 

Albania  

Bosnia nad Herzegovina 

Kosovo 

Montenegro 

North Macedonia  

Serbia  

National Strategy on 
Development and 
Integration II (2015-2020) 

Strategy of Science 
Development in Bosnia and 
Herzegovina (2017-2022 

National Strategy for 
Science, Technology and 
Innovation (2017-2022) 

Strategy on the 
Development of Business 
and Investments (2014-
2020) 

Cross-Sectoral Strategy on 
Rural and Agriculture 
Development (2014-2020) 

Cross-Sectoral Strategy on 
the "Digital Agenda of 
Albania" (2015-2020) 

 National Fisheries Strategy 
(2016-2021) 

National Health Strategy 
(2016-2020) 

National Strategy on the 
Sustainable Development of 
Tourism (2018-2022) 

Cross-Sectoral Strategy on 
Decentralisation and Local 
Governance (2015-2020) 

Sectoral Policy for Electronic 
Communications in Bosnia 
and Herzegovina (2017-
2021) 

Policy for the Development 
if the Information Society in 
Bosnia and Herzegovina 
(2017-2021) 

Action Plan for the 
Development and 
Implementation of the 
Qualifications Framework in 
Bosnia and Herzegovina 
(2014-2020) 

Priorities for Higher 
Education Development in 
Bosnia and Herzegovina 
(2016-2026) 

Strategy of Scientific and 
Technological Development 
of the Republic of Srpska 
"Knowledge for 
Development" (2017-2021) 

National Development 
Strategy (2016-2021) 

Industrial Policy of 
Montenegro (by 2020) 

Strategy for Innovation and 
Entrepreneurship (2019-
2023) 

Kosovo Education Strategic 
Plan (2017-2021) 

Kosovo Information 
Technology Strategy (2014-
2020) 

Kosovo Digital Agenda 
(2012-2020) 

Energy Strategy of the 
Republic of Kosovo (2017-
2016) 

National Research 
Programme of Kosovo 
(2010-2015) 

The National Renewable 
Energy Action plan for use 
of Renewable Energy 
Sources (by 2020) 

Fisheries Strategy of 
Montenegro (2015-2020) 

Master Plan of the 
Development of Health 
System of Montenegro 
(2015-2020) 

Strategy for the 
Development of Agriculture 
and Rural Areas (2015-2020) 

Strategy of Innovation 
Activity (2016-2020) 

National Roadmap for 
European Research Area 
(2016) 

Montenegro Development 
Directions (2015-2018) 

Energy Policy of 
Montenegro (by 2030) 

Industrial Strategy of the 
Republic of North 
Macedonia 2018-2027 

Competitiveness Strategy 
(2016-2020) 

National Small and Medium-
Sized Enterprises Strategy 
(2018-2023) 

Economic Reform 
Programme (2019-2021) 

The Economic Growth Plan 

Fiscal Strategy of the 
Republic of North 
Macedonia (2019-2021) 

National Strategy of 
Innovation (2012-2020) and 
eight regional strategies for 
innovation 

Entrepreneurial Learning 
Strategy of the Republic of 
North Macedonia 2014-
2020 

National Strategy for 
Sustainable Development 
(from 2008) 

Strategy and Policy of the 
Industrial Development of 
the Republic of Serbia 
(2011-2020) 

Strategy of Development of 
ICT Industry (2017-2020) 

Strategy for the 
Development of SMEs, 
Entrepreneurship and 
Competitiveness (2015-
2020) 

Strategy of Science and 
Technological Development 
of Serbia "Research for 
Innovation" (2016-2020) 

Strategy for the 
Development of Education 
in Serbia (until 2020) 

National Employment 
Strategy (2011-2020) 

Fiscal Strategy (for 2017 
with projections for 2018 
and 2019 

Economic Reform 
Programme (2017-2019) 

Source: Radovanovic and Benner (2019). 

81 

 
 
 
 
 
 
Table 12. Smart Specisalisation priorities identified/under investigation in the Western Balkans 

Note: For ME, Mk and RS – proirities coming from adopted S3; for XK – priorities coming from EDP; for AL – proirities coming from mapping; for BA – priorities coming from quantitative 
analysis. Colours in text indicate identical or similar (potential) priority areas across the Western Balkan economies (same colour for identical/similar priority areas). 

Source: Authors. 

82 

 
 
 
 
The  Western  Balkan  economies  are  carrying  out  the  Smart  Specialisation  process  by  following  the  Smart 
Specialisation  framework  for  the  EU  Enlargement  and  Neighbourhood  Region,  with  the  support  of  the  Joint 
Research Centre. One of the crucial stages of the process is to identify priority areas for intervention, where the 
policy instruments and measures for Smart Specialisation should be targeted at.  

Box 9. Mutual S3 priorities across the Western Balkan region 

Even in different stages of S3 development, it has been observed that some of the priority areas identified in 
their respective Smart Specialisation efforts are mutual to the entire region ( see table 11). The priorities areas 
are identified as follows: 

• All WB economies - sustainable agriculture (food processing) and ICT; 

• Montenegro, Albania, Kosovo - energy; 

• Serbia, Kosovo, North Macedonia, Albania - manufacturing, metal processing industry; 

• Montenegro, Bosnia and Hercegovina – tourism. 

It is foreseen that the identification of such priority areas revealed that not only common priority areas are being 
identified, but also particular strengths and challenges that the economies are facing for using their full potential 
are likely to be similar (Radovanovic et al, 2023). As these Smart Specialisation processes were coordinated at 
the national level, it was important to share such strengths and challenges, as well as main characteristics and 
drivers of the identified priority areas for the benefit of the entire region. Due to the continuity of the Smart 
Specialisation  exercise,  monitoring  and  evaluation  are  of  utmost  importance  (for  relevant  information,  see 
chapter 2.3.1). 

3.8 

Regional cooperation 

In  the  last  period,  the  Western  Balkan  region  demonstrated  increased  efforts  for  regional  cooperation  in 
domains of economic and innovation potential. There have been several initiatives to augment the cooperation 
efforts aiming at broader development of regional competitiveness and increasing the opportunities for better 
economic integration of the entire region into the EU common market. 

• 

Economic and Investment Plan for the Western Balkans31 

The Economic and Investment Plan for the Western Balkans  focuses on progression and collaboration in  the 
region. This ambitious plan includes ten investment flagships, each designed to support the region by sustained 
economic recovery, ecological and digital advancement, and strengthened regional bonds within the Western 
Balkans and with the European Union. Central to this transformative vision is a series of infrastructure projects. 
These projects, earmarked for immediate funding, should bring new investments across the region. The effects 
of these developments are manifold: enhanced trade routes, bolstered connectivity, and a revitalized economic 
landscape. Such comprehensive infrastructure development not only paves the way for individual nation growth 
but  brings  the  Western  Balkan  countries  closer.  By 
intertwining  infrastructure  development,  digital 
transformation,  environmental  sustainability,  private  sector  enhancement,  human  capital  development,  and 
sustainable transport, the plan lays a foundation for a Western Balkans that is not only economically resilient 
and competitive but also interconnected and unified in its path to growth and EU integration. 

Among the important elements of this plan are digitalisation, the formation of the Common Regional Market, 
and the emphasis on clean energy and environmental sustainability. Integration of the EU’s digital strategy with 
the Western Balkan region will provide technological upgrade, but also enable the region to align itself with the 
global  digital  evolution  and  open  new  possibilities  for  regional  collaboration  in  technological  innovation  and 
digital  infrastructure  development.  Concerning  the  efforts  in  the  area  of  clean  energy  and  environmental 
sustainability, the shift from fossil fuels and antiquated infrastructure to greener, efficient systems do not only 
stand as an environmental imperative but also provide opportunities for regional cooperation. Collective efforts 
in this direction align with the broader European Green Deal, underscoring the region's commitment to a shared 
vision of a greener future. 

The plan recognises the vital role of the private sector in  regional economic integration and socio-economic 
development, as well as the importance of the human capital development. Enhancing access to financing and 

31 https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1811  

83 

 
 
 
business  support,  coupled  with  initiatives  to  strengthen  public-private  partnerships,  is  poised  to  enhance 
regional economies. Emphasizing inclusivity and fairness, it aims to ensure that the  benefits of recovery and 
growth  are  shared  equitably.  Strengthening  the  labor  market,  enhancing  workforce  training,  and  promoting 
sectors like education, health, and culture represent not just individual objectives for the economies but also 
opportunities for regional collaboration and shared growth. 

• 

Common Regional Market (CRM) 

The  Common  Regional  Market  (CRM)  Action  Plan  for  2021-2024  represents  a  significant  initiative  aimed  at 
bolstering economic integration and cooperation among the Western Balkan economies. This plan is envisaged 
as a catalyst for deeper regional economic integration, serving as a stepping stone towards the integration of 
these economies into the European Union (EU) Single Market.32 The CRM initiative focuses on four key areas: 

1.  Regional Trade Area: This involves the free movement of goods, services, capital, and people. It includes 
measures  like  Green  Lanes  for  faster  goods  movement,  mutual  recognition  of  standards  and 
qualifications, and liberalization of trade in services. The aim is to align rules and regulations with the 
core  principles  governing  the  EU  Internal  Market,  thereby  promoting  growth  and  employment 
opportunities in the region. 

2.  Regional Investment Area: This area is focused on aligning investment policies with EU standards and 
promoting the region to foreign investors. Efforts will be made to increase the attractiveness of the 
region  for  Foreign  Direct  Investment  (FDI),  leveraging  the  market  size  and  regional  production 
networks. 

3.  Regional Digital Area: Integration into the pan-European digital market is a key goal, emphasizing the 
importance of broadband internet access, reduction of roaming charges, and development of digital 
skills. This initiative seeks to harness the potential of the digital economy, facilitating trade and making 
the market more accessible and competitive. 

4.  Regional Industrial and Innovation Area: This area targets the transformation of the industrial sector 
and  shaping  value  chains. 
involves  supporting  start-ups,  fostering  green  and  women 
entrepreneurship, and integrating the regional supply chains into European and global networks. The 
focus is on driving economic growth and job creation through a productivity-based, export-oriented 
growth model. 

It 

Additionally, the plan emphasizes the importance of governance coordination and monitoring for the successful 
implementation of the CRM Action Plan. By closely aligning with EU standards and fostering areas such as trade, 
investment, digital economy, and industrial innovation, the WB6 economies aspire to strengthen their economic 
base,  increase  regional  resilience,  and  accelerate  integration  into  the  European  market.  The  successful 
implementation of this plan is expected to have a transformative effect on the region, contributing to sustainable 
growth and development. 

•  New Growth Plan for the Western Balkans 

The New Growth Plan for the Western Balkans, an initiative unveiled in November 2023, marks a pivotal step in 
the region's journey towards socio-economic convergence with the European Union (EU) and an acceleration of 
EU reforms. This comprehensive plan, enriched with a €6 billion Reform and Growth Facility, is a testament to 
the  EU's  commitment  to  the  Western  Balkans,  fostering  deeper  integration  and  supporting  fundamental 
reforms. 

Central to the plan is the vision of enhancing the Western Balkans' economic integration with the EU's Single 
Market. This ambitious goal aims to bring the region closer to the EU, offering tangible benefits to its citizens 
even before formal accession. This integration covers a wide array of sectors, ranging from the free movement 
of goods and services to energy market integration, thereby facilitating a smoother transition for the Western 
Balkans into the EU economic landscape. 

Another critical aspect of the plan is the development of the mentioned Common Regional Market within the 
Western Balkans itself. By nurturing this unified market, the plan sets in motion a series of collaborative efforts, 
encouraging these nations to harmonise their economic policies and standards. This harmonisation is not an end 
in  itself  but  a  means  to  a  more  integrated  and  prosperous  regional  economy,  attracting  investments  and 

32 https://www.wb6cif.eu/2020/11/11/summit-in-sofia-declarations-on-common-regional-market-and-green-agenda/  

84 

 
 
 
fostering trade within the Western Balkans. The implementation of this market is expected to significantly boost 
the regional GDP, adding an estimated 10% over time.  

The plan also places a strong emphasis on accelerating fundamental reforms across the Western Balkans. Each 
partner in the region is tasked with preparing a detailed Reform Agenda, outlining priority reforms segmented 
into specific milestones. The Western Balkan economies’ efforts in adopting EU regulations and practices should 
bring the economies closer, fostering a spirit of cooperation and mutual growth. The fulfillment of these reforms, 
deemed "payment conditions," is key to unlocking financial support from the new Growth Plan. These reforms 
are pivotal not  only in enhancing economic growth and attracting foreign investment  but  also in reinforcing 
regional stability and moving the Western Balkans closer to EU membership. Financial support underpins the 
entire Growth Plan, with the EU proposing a new financing instrument - a mix of €2 billion in grants and €4 billion 
in  concessional  loans.  A  significant  portion  of  this  funding  is  allocated  to  investments  through  the  Western 
Balkans  Investment  Framework  (WBIF),  with  the  rest  tied  to  the  successful  implementation  of  the  Reform 
Agendas by the Western Balkan governments. The spirit of collaboration is further bolstered by investments 
through  the  Western  Balkans  Investment  Framework,  which  supports  projects  of  regional  significance.  This 
approach encourages countries within the Western Balkans to engage in projects that benefit the region as a 
whole, promoting cooperation on critical issues like infrastructure, energy, and environmental protection. 

•  Regional collaboration events and initiatives by the Joint Research Centre 

Within its support to the Western Balkan economies in pursuing their Smart Specialisation strategies, the JRC 
launched  an  initiative  of  promoting  regional  collaboration  through  a  series  of  actions.  It  organised  several 
regional  conferences  with  the  objective  of  sharing  the  experiences  from  the  advancements  in  Smart 
Specialisation  and  discussing  how  to  overcome  different  challenges  that  the  economies  were  facing.  Such 
conferences were organised both in the EU Member States (i.e. Sofia in 2018 and Bucharest in 2019) and in 
regional economies (Podgorica in 2019, Belgrade in 2019 and Skopje in 2022). These events brought together a 
wide array of stakeholders and policy-makers from both EU and the Western Balkans, including well-renowned 
experts in the field of innovation and innovation policy. The findings from these conferences, as judged by the 
Western  Balkan  economies  themselves,  provided  very  important  solutions  for  process  of  developing  Smart 
Specialisation strategies in the region. 

In 2021, the JRC also launched a series of targeted thematic workshops on common priority areas in the Western 
Balkans. The first such workshop was held in 2021 on the topic of agri-food, where the stakeholders from the 
entire region discussed the achievements in identifying strengths of this priority area and challenges that the 
implementation of this domain might face. The second workshop from this series was organised in 2022 on the 
topic of ICT and with the same objective – to discuss the opportunities for further advancing policy actions in 
this common domain and share the experiences. However, the main goal was to assess the opportunities for 
regional collaboration in these domains by revealing the strenghts in respective value chains, niches in which 
the  economies  excel,  main  players  in  economies  in  the  domains  and  bringing  them  together  to  discuss  the 
potential for collaboration. This initiative proved to be very successful, producing reports with the conclusions 
and recommendations for the economies how to advance their own as well as regional competitiveness in these 
common Smart Specialisation priority domains. 

In addition to these reports, the JRC published several ‘horizontal’ studies with the aim of helping the Western 
Balkan  economies  to  identify  potential  challenges  and  evidence-based  strengths  within  their  economic 
landscapes. It is worth noting the ‘Analysis of value chains in the Western Balkans’ from 2022 and the upcoming 
‘Smart Specialisation in the Western Balkans: potential for knowledge-based cooperation’, among others. Also, 
in late 2023, the JRC launched an interactive web platform that reveals main stakeholders in the priority areas 
in  the  entire  EU  Enlargement  and  Neighbourhood  Region,  including  the  Western  Balkans,  focusing  on  their 
activities on patenting, publishing scientific papers and project involvement, highlighting collaborations in these 
actions. All these products and services of the JRC are available at the web platform “Knowledge Hub for Smart 
Specialisation in the EU Enlargement and Neighbourhood” hosted by the JRC.33 

•  Activities of the Regional Cooperation Council 

The Regional Cooperation Council34 serves regional cooperation and European and Euro-Atlantic integration of 
South  East  Europe  to  spark  development  in  the  region.  RCC  is  an  all-inclusive,  regionally  owned  and  led 

33 https://s3platform.jrc.ec.europa.eu/knowlegde-hub 
34 https://www.rcc.int/ 

85 

 
 
 
cooperation framework. Within the framework of the general political guidelines set by the South-East European 
Cooperation  Process  (SEECP),  the  RCC  works  to  develop  and  maintain  a  political  climate  of  dialogue, 
reconciliation, tolerance, and openness towards cooperation, with a view to enabling the implementation of 
regional programmes aimed at economic and social development to the benefit of the people in the region. 

The RCC has been working towards the integration of South East European (SEE) economies, with a focus on 
enhancing  regional  cooperation  for  the  benefit  of  its  citizens.  The  Annual  Report  for  2022-2023  not  only 
highlights the challenges faced in the past year but also delineates the notable achievements and outlines our 
objectives  for  the  forthcoming  period.  The  RCC's  efforts  have  been  multifaceted,  encompassing  support  for 
investment  policy  reforms,  fostering  innovation,  promoting  economic  inclusion,  empowering  women,  and 
advancing the digital agenda to implement the Common Regional Market, among other initiatives. 

Given  that  the  Western  Balkan  region  trails  behind  the  European  Union  in  terms  of  employment  rates, 
innovation and entrepreneurship have been earmarked as top priorities. In this regard, the Western Balkans 
Innovation & Research Platform has been operationalized, rapidly emerging as a pivotal regional coordination 
mechanism for innovators and researchers. 

The events of the past twelve months have underscored the pressing need for increased energy security. A viable 
pathway  to  this  objective  is  through  the  diversification  of  energy  sources  and  substantial  investment  in 
renewable  energy.  Hence,  the  RCC  is  intensifying  its  efforts  to  coordinate  the  implementation  of  the  Green 
Agenda for the Western Balkans (GAWB). 

•  Balkan barometer35 

Balkan  Barometer  is  an  annual  survey  of  public  opinion  and  business  sentiments  in  six  Western  Balkans 
economies,  commissioned  by  the  Regional  Cooperation  Council  (RCC).  It  is  examining  aspirations  and 
expectations  on  life  and  work,  prevalent  socio-economic  and  political  trends  &  regional  and  European 
integration.  Balkan  Barometer  is  conducted  each  year  by  an  independent  agency  among  more  than  6,000 
citizens and 1,200 companies throughout the region. Some interesting results of research (relevant to this study) 
conducted in 202336 are as follows: 

76% of people believe regional cooperation is good for their economy; 

- 
-  Drop of the EU support in the region: 59% (or 3% less than in 2021); 
- 

69% of people agree that what brings the Western Balkans citizens together is more important than 
what separates them; 
1 in 5 of Western Balkans citizens associate the Balkans with hope or cooperation; 
depopulation: 44% of people are considering living abroad (5% more that in 2022); 
71% young people are considering leaving their home country; 
27% of Western Balkan citizens say corruption is the biggest problem; 
27% of Western Balkan citizens do not trust political parties; 
71% of Western Balkan businesses see EU membership as a good thing; 
74% of Western Balkan businesses perceive regional cooperation important for their business; 
13% of Western Balkan businesses predominantly use renewable energy, while 37% did not take any 
steps to reduce the environmental impact their businesses make; 
70% of businesses in the region do not see climate change as a problem. 

- 
- 
- 
- 
- 
- 
- 
- 

- 

3.9 

Smart Specialisation priorities and Green Agenda for the Western Balkans 

The Green Agenda for the Western Balkans can greatly benefit from Smart Specialisation Strategies, which are 
conceived as place-based, innovation-led transformation agendas for sustainability. S3 create the opportunity 
to  engage  regions  and  cities  in  transformation  contributing  to  the  green  transition,  focusing  on  identify 
innovation investments.  

The S3 already adopted in Montenegro and Serbia can serve as example to the other Western Balkan economies. 
The Smart Specialisation Strategy of Montenegro, adopted in 2019, addresses environmental and sustainability 
in two priority domains: first, sustainable agriculture and food value chain; and second, energy and sustainable 

35 https://www.rcc.int/balkanbarometer/ 
36 BALKAN BAROMETER INFOGRAPHIC 2023.  

86 

 
 
 
environment37.  The  S3  of  Serbia  address  also  on  production  on  food  for  future  and  future  machines  and 
manufacturing  systems,  strongly  connected  with  sustainable  goals  and  environmental  issues.  Both  S3  has 
priority connected to information and communication technologies while digitalisation will be a key enabler for 
five pillars of GAWB in line with the concept of the dual green and digital transition.  

Very important are conclusions from the lasts Conference "Policy Dialogue on Aligning Priorities in the Western 
Balkans" Green Agenda for the Western Balkans –the way forward”, held in Sarajevo sept 202338 ; 

•  Decentralize the implementation of the Green Agenda by incorporating local municipalities and 

• 
• 

encouraging more private sector involvement. 
Strengthen local governance capacities to conduct proper GAWB implementation. 
Strengthen regional cooperation to ease the green transition by lowering costs and avoiding 
inefficient parallel structures in implementing the Green Agenda. 

• 
• 

•  Raise awareness about the importance of clean energy and environmental protection both among the 
population and at the policy level, including by sensitizing youth to the severity of the issue and the 
potential for the future of the energy transition through education. 
Strengthening GAWB coordination, monitoring, and reporting systems at the regional level. 
Ensure that energy transition strategies are coordinated and multidisciplinary, involving social, legal, 
economic, technical, and educational considerations. 
Seek out expert-informed recommendations during the policy-making process  

• 
•  Use the energy crisis as a catalyst for a green transition. 
• 
• 
• 

Improve university curricula and enhance regional cooperation to promote research  
Promote the exchange of knowledge and resources on a regional level. 
Counteract the public misconception of CE as a form of waste management with awareness and 
education campaigns that explain the complexity of the issue  
Increase furthered EU support for the long-term implementation of the Green Agenda. 

• 
•  Make clear that energy security questions in the Western Balkans need to be tackled together with 

• 

• 

the EU instead of leaving the Western Balkans to create a unique and isolated solution. 
Seek a wider exchange between politics, business, and non-governmental organisations to find 
compromises and partnerships in securing energy and raw materials as well as protecting 
employment. 
Increase efforts to raise understanding and incentives for the implementation of the Green Agenda, 
both at the civil society as well as at the policy-making level. 

37 Brussels, 6.10.2020  SWD(2020) 223 final  COMMISSION STAFF WORKING DOCUMENT Guidelines for the Implementation of the Green 

Agenda for the Western Balkans 
38 https://wbc-rti.info/object/news/24487 

87 

 
 
 
Table 13. Priorities as defined in Green Agenda for Western Balkan and  Smart Specialisation Strategy for WB economies   

GAWB 

priorities 

Main areas  

MONTENEGRO 

SERBIA 

Decarbonisation: 
climate, energy, 
mobility 
Circular economy 

Depollution: air, 
water & soil 

Sustainable 
agriculture and food 
value chain  
Information and 
Communication 
Technologies  
Sustainable and 
health  tourism  

Sustainable food 
systems & rural areas 

Energy and 
sustainable 
environment  

Food for future  

Information and 
Communication 
Technologies 
Future Machines and  
Manufacturing 
Systems  
Creative industry  

Biodiversity: 
protection & 
restoration of 
ecosystems 
Note : followed by 
Dual green and 
digital transition 

Smart Specialisation priorities 

NORTH 
MACEDONIA 
Agriculture and food 
processing with high 
added value  
Information and 
Communication 
Technologies 
Smart/sustainable 
buildings and 
materials  
Electrical equipment 
and mechanical parts  

KOSOVO* 

ALBANIA 

ICT 

Agriculture , forestry 
and fishing  

Creative industry 

Manufacturing  

BOSNIA AND 
HERCEGOVINA  
ICT and digitalisation  

Metal and electrical 
industry 

Agroprocessing 
industry 

Energy  

Production and 
processing of plastics  

Wood processing 
industry 

Green energy  

Accommodation and 
support service 
activities  
Information and 
communication 

Production and 
processing of food 
and beverage  
Wood industry 

Tourism industry  

Note: As of December 2023, the priority areas for ME, MK, RS were either part of adopted strategies or in the case of AL and XK being furhter invstignated , while for BA they were considered 
as potential, since the mapping phase is not offically concluded. Same colours mark direct links between the GAWB and S3 priorities.  

Source: Authors. 

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence. 

88 

 
 
 
 
 
 
 
 
 
 
 
 
The  Green  Agenda  for  Western  Balkan39  is  the  new  growth  strategy  for  the  Western  Balkan  economies.  The 
Communication introducing the Green Agenda also admits that this transformation will ‘require a strong policy 
response at all levels’ and significant investment efforts.   

Both the Green Agenda for the WB and Smart Specialisation represent transformation policy frameworks. While 
Smart Specialisation is a place-based innovation policy approach, the Green Agenda can benefit from place-based 
dynamics; therefore, such combination enables and supports transformation. The policy framework of the Green 
Agenda  needs  to  take  Smart  Specialisation  explicitly  on  board.  The  correlation  between  GAWB  and  S3  is 
presented in the Table 13, while the summary of correlation is presented in the Table 14. 

Table 14. Relation between GAWB and priorities in S3 per Western Balkan economies 

MAIN AREAS RELATED TO THE GAWB  

S3 PRIORITIES IN 2023  

Decarbonisation: climate, energy, mobility 

Montenegro, Kosovo, Albania  

Circular economy 

Indirectly: North Macedonia, Kosovo, B&H  

Depollution: air, water & soil 

Serbia, North Macedonia, Kosovo, Albania, B&H 

Sustainable food systems & rural areas 

All economies  

Biodiversity: protection & restoration of ecosystems  Montenegro , B&H 

Note: followed by Dual green and digital transition 

All economies  

Note: As of December 2023, the priority areas for AL, ME, MK, RS and XK were either part of adopted strategies or 
considered final, while for BA they were considered as preliminary.  

Source: Authors. 

39 Brussels, 6.10.2020  SWD(2020) 223 final  COMMISSION STAFF WORKING DOCUMENT Guidelines for the Implementation of the Green 

Agenda for the Western Balkans 

89 

 
 
 
 
 
 
4  Conclusions and recommendations 

Based on the previous analysis, a survey was conducted aiming at receiving qualitative feedback on the main 
challenges on the use of Smart Specialisation results for the green transition of the region. The  participants to 
the survey came from different economies from the Western Balkan region. The chosen consultation method 
used for the development of this study depended on the limited time and accessibility of potential participants 
in the consultations. The methodology for data collection is given in the annex. 

4.1 

Conclusions 

The six economies of the Western Balkans are at different stages of economic transformation, striving to develop 
policies  that  maximize  their  potential.  Environmental  degradation  in  the  Western  Balkan  region  is  notably 
present in soil, water, and air pollution. This degradation is attributed to various socio-economic factors such as 
weak or recovering economies, limited budgets for environmental protection, insufficient regulation and public 
participation, old industry, and restricted access to cleaner technology and environmental information. 

Despite experiencing growth, the Western Balkan economies faced various challenges, including inflation surges, 
electricity and heating outages, and inflation pressures persisting in early 2023. However, investments in the 
Western Balkans have shown resilience, and employment levels, except in North Macedonia, remain above pre-
crisis levels. Small and medium-sized enterprises (SMEs) significantly contribute to economic performance and 
sustainable development in the  Western Balkan region, accounting for a substantial portion of private-sector 
employment and value added. 

The  fragmentation  and  small  scale  of  the  economies  pose  challenges  to  the  economic  growth  and 
competitiveness of the Western Balkan economies. Additionally, the Western Balkan economies are at varying 
stages  in  the  EU  enlargement  process  and  accession  negotiations.  The  level  of  alignment  with  the  Energy 
Community methodology differs across the region. 

Smart Specialisation is recognized as a new policy approach and a tool for industrial development in the Western 
Balkans. It aims to concentrate resources on key priorities for economic transformation. The Smart Specialisation 
approach in the Western Balkan region can optimize public funds, stimulate private investment, and focus on 
key  priorities  rather  than  spreading  investments  thinly.  The  Western  Balkan  economies  are  committed  to 
Sustainable  Development  Goals,  the  European  Green  Deal,  and  the  Green  Agenda  for  the  Western  Balkans. 
However, the Green Agenda's implementation lags due to incomplete legal documents and necessary reforms. 
Governments perceive the green transition mainly as an obligation imposed by the European Union. 

Coal remains the primary energy source in the region, accounting for 70% of electricity production. The Western 
Balkans  lack  a  comprehensive  industrial  policy,  and  the  adoption  of  Smart  Specialisation  Strategies  (S3)  is  a 
relatively  recent  development.  Although  S3  strategies  have  been  adopted,  their  effects  remain  uncertain  in 
Montenegro and Serbia, while other economies are at different stages of S3 development. Environmental topics 
are occasionally part of S3 priorities. The Western Balkans are in the initial stages of their green transition. 

Policies related to fulfilling the Green Agenda in the Western Balkans are outlined in Table 8. The transition to a 
low-carbon, environmentally sustainable economy has started in the  region, but progress has been slow with 
setbacks.  Progress  in  aligning  with  waste  management  legislation  and  circular  economy  provisions  is  slow, 
presenting enforcement challenges. Air pollution in the Western Balkans remains among the highest in Europe, 
primarily due to emissions from older coal plants and heavy reliance on private transportation. 

Agriculture's crucial role in food production, safety, environmental protection, and climate change mitigation is 
juxtaposed with threats from climate-induced factors. The percentage of protected areas in the Western Balkans 
is below the 20% mark, with some economies having less than 5% territory under protection. Available indicators 
on the green transition in the WB are not encouraging within a relatively short period since the development of 
the Green Agenda in 2019. Enhancing green skills is crucial for the ecological transition, particularly for younger 
generations. 

SMEs  are  recognized  as  key  players  in  developing  innovation-  and  knowledge-based  economies.  Smart 
Specialisation  is  a  tool  for  sustainable  growth  and  innovation  across  the  entire  WB  region.  Improving  the 
implementation  of  the  Green  Agenda  and  utilizing  Smart  Specialisation  to  mobilize  innovation  efforts  are 
essential.  Communication  and  collaboration  among  relevant  ministries  and  sectors  for S3  and  Green  Agenda 
implementation  need  improvement.  Engagement  between  local  governments  and  government  bodies  is 
insufficient. Government officers are more familiar with the Green Agenda than with S3. 

90 

 
 
Additional  knowledge  and  cross-sectoral  connections  are  needed  for  successful  Green  Agenda  and  S3 
implementation. Upskilling and reskilling are necessary across sectors, especially in corporate settings, for a just 
transition. Increasing public awareness and changing mentalities are crucial for the green transition. Considering 
local, regional, national, and transnational dimensions concurrently is necessary. Redirecting existing budgets 
toward promising areas identified for the future is crucial for green transformation. 

Box 10. Need for the unified transition plan in the Western Balkans 

The Western Balkan economies lack a comprehensive and unified plan for the transition, considering supply and 
demand for different forms of energy across the region, and energy trade at both intra-regional level and with 
neighbouring  countries  (OECD,  2022a).  In  particular,  the  challenge  of  replacing  baseload  power  currently 
generated from coal has not been resolved. To address the remaining challenges, the Western Balkan economies 
can advance in several interrelated areas: continue their transition away from coal towards cleaner forms of 
energy; strengthen their performance on energy efficiency; reform energy pricing in an equitable and strategic 
way that takes account of both vulnerable groups and environmental concerns; enhance regional integration in 
the energy sector; and mobilise financial resources for a green recovery. 

4.2 

Recommendations 

Following the concept of a dual green and digital transition, it is crucial to implement the Green Agenda using 
innovative solutions that minimize costs. The interconnectedness of the five Green Agenda pillars emphasizes 
the  importance  of  a  holistic  approach  and  coordinated  action  across  all  mentioned  areas.  Thus,  integrating 
environmental  protection  into  other  policies  and  development  programs  should  establish  a  green  economy, 
conducting economic activities with low carbon emissions and efficient resource utilization. To fully realise this 
green transition, administrative capacity at both national and local levels needs strengthening, along with law 
enforcement.  This  transition  to  a  green  economy  should  coincide  with  public  administration  and  judiciary 
reforms.  Moreover,  the  socio-economic  impact  of  this  transition  requires  consideration,  ensuring  the  Green 
Agenda's implementation is socially just and inclusive. 

Measures  taken  to  address  the  just  transition  can  significantly  impact  economic  sectors  and  the  labor  force 
within these sectors. Vulnerable or precarious employment groups might be particularly affected by mitigation 
measures in the just transition. Hence, monitoring and planning measures that provide alternative solutions to 
the affected labor force are essential. Data on vulnerable employment can identify groups with low potential for 
adaptation  and  resilience  due  to  inadequate  integration  into  the  labor  market  and  weak  socio-economic 
positions. Addressing the social component, being the most sensitive and complex issue, requires careful long-
term planning at the national and regional levels. 

Governments in the Western Balkans perceive the green transition and decarbonization primarily as obligations 
imposed  by  the  European  Union.  Enhancing  this  perception  as  an  opportunity  to  strengthen  economies, 
societies, and improve citizens' health and living conditions remains a low priority. This perception should be 
reinforced through research and public campaigns. The economy and its stakeholders need to adapt and actively 
participate in the new just transition process, as it shapes their operations in the future. 

The development of the second generation of Smart Specialization Strategies in the Western Balkan economies 
will occur in a different context, aligned with the new Green Agenda for the Western Balkans. Policy makers and 
citizens will need to include societal challenges associated with green transformation across the economies. 

To  facilitate  the  implementation  of  the  Sofia  Declaration  on  the  Green  Agenda  for  the  Western  Balkans,  the 
following  actions  are  necessary:  ensuring  regional  ownership  and  cooperation,  adopting  a  multi-stakeholder 
approach,  fostering  cross-sectoral  collaboration  involving  all  relevant  Western  Balkan  authorities,  and 
strengthening cooperation at various levels. 

Table 15. Summary of recommendation based on findings in Study and Green agenda Action plan40  

TO BE 
ADDRESSED 
Legislation, 
policies, 

DUTIES /TASKS BASED ON GREEN AGENDA  

RESPONSIBILITY /WHO  

•  Align with the EU Climate Law with a vision of achieving 
climate neutrality by 2050, adoption of strict climate 

•  Government.  

40 cc.int/docs/596/action-plan-for-the-implementation-of-the-sofia-declaration-on-the-green-agenda-for-the-western-balkans-2021-2030 

91 

 
 
 
•  Relevant ministries 
(primarily for 
energy, 
environmental 
protection, 
education, finance).  
•  Gov. bodies: agency 
for energy and 
similar.  

•  Municipalities.  
•  Chamber of 
commerce. 

• 

•  Regional chambers 
of commerce. 
Sector level 
associations. 
SMEs associations. 
Power utilities. 

• 
• 
•  Coal mines. 
•  Academia.  
•  NGOs. 

regulations, S3 
and GAWB 
strategies  

policies and reforms in the energy and transportation 
sector. 

•  Harmonisation of national legislation on climate change 
with the EU regulations and development of integrated 
national energy and climate plans in the Western Balkan 
economies. 
Preparations to introduce the Emission Trading Scheme 
(ETS) and carbon pricing.  

• 

•  Review and revise, where necessary, all relevant legislation 
to support progressive decarbonisation of the energy 
sector. 
Prepare an assessment of the socio-economic impact of 
decarbonisation at the individual economy and regional 
level. 

• 

•  Develop legal frame for giving advantage to energy 

efficiency and improving it in all sectors, with a particular 
focus on energy renovation of buildings. 
Increase the percentage of renewable energy sources and 
reducing energy poverty. 
Increase the share of renewable energy sources and 
provide the necessary investment conditions. 

• 

• 

•  Decrease and gradually phase out coal subsidies, strictly 

• 

• 

respecting state aid rules. 
To prevent adverse social effects of the green transition, 
governments should draft “just transition strategies”, 
including social measures for different societal groups, 
based on an assessment of their relative vulnerability to 
the transition process. 
Ensure participation in the Coal Regions in Transition 
initiative for the Western Balkans. 

•  Develop programmes for addressing energy poverty and 

• 

financing schemes for household renovation and providing 
basic standards of living. 
Supporting smart infrastructure, digitalisation of all types 
of transport, defining new corridors in rail transport and 
introducing new alternative fuels (hydrogen). 

•  Additionally address waste legislation in the part related to 

by-products and end-of-life products, as it lacks incentive 
measures for stimulating waste as “zero waste”. 

•  Develop circular economy strategies looking at the entire 

lifecycle of products. 

•  Make further progress in the construction and 

maintenance of waste management infrastructure for 
cities and regions. 
To develop methodology to incorporate environmental 
policy and digitalisation I all other national policies as 
obligatory.  
It is necessary to prioritise and mainstream environmental 
and climate issues contained in the GAWB into all policy 
areas. Specific funds need to be earmarked for 
implementing the Green Agenda. 
Incorporate municipality and corporate sector as well as 
other in decision making process. 

• 

• 

• 

•  WB governments need to draft long-term, visionary 

strategic plans (encompassing the next decades, instead of 
only a few years) on how to successfully implement the 

92 

 
 
objectives of the GAWB with clear timelines and specific 
targets. 

•  All relevant stakeholders, including the business 

community, trade unions, CSOs, think tanks, local 
communities, international financial institutions, etc., need 
to be actively engaged in the drafting and implementation 
of these strategic plans. Governments should also 
coordinate within the region when designing these plans. 

Corporative 
laws, 
strategies, 
policy   

•  Businesses in the Western Balkans need to understand the 
urgent need to decarbonise their activities and production 
processes, as they will otherwise be severely hit by EU 
climate policies, for instance through a CBAM. In this 
regard, businesses will have a hard time reducing the 
carbon footprints of their products and activities. 
•  Assist in the development of plans for corporations, 

•  Responsible 
ministries for 
energy, education, 
economy, 
environment, 
labour.  
•  Business 

community. 
trade unions. 

• 
•  CSOs.  
• 
• 

local communities.  
international 
financial 
institutions. 

•  Responsible 
ministries for 
education and 
science, energy, 
environment.  
•  Other responsible 
ministries.  

•  Research 

institutions.   

Academia 
topics, 
education   

especially those that are exposed to the negative impact of 
the transition. 

•  Organise and coordinate the establishment of SME 
networks for the energy transition with chamber of 
commerce and universities.  

•  Create conditions for the transformation of the current 
utility business model into a model for “the utility of the 
future”.  

•  Cooperate with scientific, education, business, and 

agricultural holdings to facilitate transfer to innovative and 
environmentally friendly technologies and farming 
methods. 

•  Development of new curriculum in social, technical, and 

• 

environmental sciences.  
The perception of the transition as an opportunity for 
strengthening economies and societies and for improving 
citizens’ health and living conditions remains low and 
should be strengthened through research and public 
campaigns. 

•  Governments and public institutions in the WB lack 

• 

• 

• 

knowledge when it comes to policy options, changes in 
legislation, and strategic planning in the environmental 
and energy sector. 
In the future, environmental research should focus on 
maintaining and enhancing existing cooperation with 
university-level education institutions and scientific 
institutes worldwide, and on promoting the establishment 
of new cooperation. 
Promoting the area of environmental protection can be 
established through primarily engaging young researchers 
on programmes of general interest in line with the law, 
such as those supporting and funding scholarships for 
young, gifted scientists and researchers, programmes for 
developing human resources in scientific and research 
work, programmes for funding doctoral academic studies. 
Improving international bilateral and multilateral 
cooperation will enable sharing and transferring 
experiences among partners. This kind of cooperation, 
particularly established through the mobility of researchers 
and exchange of experiences and results, also increases 
the level of expertise and knowledge of each of the 

93 

 
 
 
• 

Smart 
Specialisation 
strategies  

partners in environmental protection and energy 
management.  
Fully implement Smart Specialisation Strategies, place-
based, innovation-led transformation agendas for 
sustainability. 

• 

•  Having in mind that the area of environmental protection 
was not in a sufficient extent identified in the process of 
mapping economic, scientific and innovation potential in 
all economies, more attention should be paid in the future 
to actions concerning environmental protection. 
The preparation of the second generation of S3 in the 
Western Balkan economies will take place in a different 
context, in line with the new GAWB. In this respect it will 
be required from policy makers and other stakeholders to 
include the societal challenges associated with green 
transformation across the economies. 
Support the development of smart transport 
infrastructure, promote fostering of innovative 
technologies (such as paperless transport, artificial 
intelligence, multimodal passengers ticketing, mobility as a 
service, border/boundary crossing applications). 

• 

Green 
transition  

Depollution  

•  Horizontal networking of identified companies in this area 

with key stakeholders in machine industry and 
electroindustry, as well as agriculture and food industry, 
will contribute to successful application of the concept of 
smart specialisation (e.g in Serbia).  
Investments in scientific and research projects in 
environmental protection should be increased. 
Explore possibilities for establishing a functional and 
dedicated government fund for just transition.  
Identify burning issues and find the best solutions for 
addressing them by involving all stakeholders in the chain. 

• 

• 

• 

• 

• 

•  Collective dialogue Important to proceed with a 
partnership negotiation between employers and 
employees in the transition process. 
In the regions that are expected to be most affected, 
within the framework of the Regional Chambers, organise 
an institution (e.g. council or similar) for just transition that 
will assist corporations in acquiring new knowledge, but 
also in exchanging experiences of good practice. 
Learn on examples on how to raise capacities to better 
address just transition. Look for best practices on the 
international market. 
Finalise the process of ratification of Convention on Long-
range Transboundary Air Pollution and its protocols; 
Support modelling to establish economy-wide emission 
reduction commitments for the five main pollutants 
covered by the NEC Directive and the Gothenburg Protocol 
under the Convention on Long-range Transboundary Air 
Pollution; 
Increase the uptake of Best Available Techniques in 
accordance with the Industrial Emissions Directive; 
Establish an adequate air quality monitoring system, 
including through accreditation of air quality monitoring 
networks; 

• 

• 

• 

• 

94 

•  Government.  
•  Relevant ministries 
(primarily for 
energy, 
environmental 
protection, 
education, finance)  
•  Gov. bodies: agency 
for energy and 
similar.  

•  Municipalities.  
•  Chamber of 
commerce. 

• 

•  Regional chambers 
of commerce. 
Sector level 
associations. 
• 
SMEs associations. 
• 
Polluters.  
•  Academia.  
•  NGO. 

• 

Employers and 
employees 
connected through 
company work 
agreements.  

•  Chamber of 
commerce. 

•  Regional chambers 
of commerce. 
Interested parties 
and corporations.  

• 

•  Government.  
•  Relevant ministries 
(primarily for 
energy, 
environmental 
protection)  

•  Gov. bodies: agency 
for energy and 
similar.  

•  Municipalities.  
•  Chamber of 
commerce. 

 
 
 
Circular 
economy  

Agricultural 
policy  

• 

•  Modernise water monitoring infrastructure and Build the 
necessary infrastructure for wastewater treatment reach 
good status for all water bodies; 
Integrate soil protection in other policy areas and establish 
a regional soil partnership to improve knowledge exchange 
and identify examples of best practices for soil protection 
from pollution and degradation; 
Establish legal basis. 
Support the establishment of a digital platform to assist 
the economies, further inform and connect them. 

• 
• 

• 

•  Revise the urban planning laws, as they do not follow the 
requirements of new businesses and sectors. In the 
context of legislative issues, it is necessary to include 
corporate sector. 
Improve sustainability of primary production of raw 
materials. 
Establish a centre for training and education of SMEs, e.g., 
in chambers of commerce or at the regional level for 
education and training. 

• 

•  Apply an industrial ecosystem approach to attain 

environmentally sustainable, balanced economic recovery. 

•  Connect as much as possible with the companies already 

working on the international markets in the waste sector.  

• 

•  Align the agri-food and primary production sector with the 
EU standards on food safety, plant and animal health and 
welfare and environment.  
Strengthen the official sanitary controls along the entire 
food chain and improve the traceability and labelling of 
food products. 
Promote environmentally friendly (zero pollution) and 
organic farming and reduction of synthetic chemical 
products used in food production. 
Support investments in renewable energy production and 
technologies as well as GHG emission reductions and 
adaptation to climate change measures in agriculture. 

• 

• 

Protection of 
nature and 
biodiversity 

•  Develop and implement the Western Balkans 2030 

• 

Biodiversity Strategic Plan. 
Prepare nature protection and restoration plans including 
for marine areas. 

•  Develop and implement the Western Balkans Forest Plan.  
•  Analyse biodiversity benefits of nature-based solutions and 
opportunities for their integration into the development of 
climate, restoration and other plans. 

•  Development of green infrastructures and ecosystem 

connectivity. 

• 
Polluters.  
•  Academia.  
•  NGOs. 

•  Government.  
•  Gov. bodies: agency 
for waste, etc.  
•  Municipalities.  
•  Chambers of 
commerce.   

•  Recyclers. 
•  Waste producers.   
•  Other potential 

users.  
• 
Polluters.  
•  Academia.  
•  NGOs. 
• 

International 
organisations. 

•  Government.  
•  Relevant ministries 
(primarily for 
environmental 
protection and 
agriculture)   
•  Municipalities.  
• 
Farmers.  
•  Association of 
farmers.  
• 
SMEs.  
•  Academia.  
•  NGOs. 

•  Government.  
•  Relevant ministries 
(primarily for 
environmental 
protection, forest, 
water and 
agriculture).   
•  Municipalities.  
•  Academia.  
•  NGOs. 

Public 
awareness  

• 

The awareness among governments and public institutions 
in the WB needs to be enhanced. 

•  All.  

•  Design and implement consumer-targeted initiatives to 

raise awareness of citizens on waste prevention, separate 
collection, and sustainable consumption. 

95 

 
 
Education and 
qualifications 

•  Government.  
•  Responsible 
ministries for 
education 
environment and 
energy.  

•  Agency responsible 
for school curricula. 

•  Corporate sector. 

•  Governments and public institutions in the WB lack 

knowledge when it comes to policy options, changes in 
legislation and strategic planning in the environmental and 
energy sector. Capacity development and awareness-
raising campaigns for public officials are needed in this 
regard. 

•  Corporate sector should share its needs for different 

professions with the body responsible for school curricula 
and enable assessment of new job descriptions and 
education of the young in the most adequate direction. 
•  Need for trainings and education in relation to new green 
jobs for those already employed and opening possibilities 
of informal education. 
SMEs should domestically, cross-regionally, and 
internationally create networks to share experiences and 
knowledge. Thereby, the SME sector could become a 
competitive “laboratory” for innovations and the reduction 
of emissions in production processes. 

• 

Access to 
information 

•  Dissemination of important and relevant information to 
citizens, workers unions and other stakeholders, through 
panel meetings, workshops and similar events. 

• 

Local governments 
to take active role 
in informing 
members-citizens 
and workers 
unions. 

Young 
population 

•  Bearing in mind that the crucial participants in the just 

transition will be young people, it is necessary to pay 
special attention to the development of the education 
sector at all levels. Necessary professional profiles should 
be defined in cooperation with the needs of the economy, 
more precisely of the market itself. 

Gender 
balance and 
empowerment 
of vulnerable 
groups 

Regional 
cooperation  

•  Relevant ministries to prepare adequate inclusive 

• 

strategies for women to decent employment, education, 
and health.   
Initiate entrepreneurship as a possibility for more new 
jobs. More incentives should be offered for women, 
vulnerable groups, and young persons.  

•  Consider the possibility of establishing training centers for 
education in the local governments that will be most 
affected, given that these municipalities will gain 
experience in the green transition process that is 
important to share with other municipalities and 
individuals (for example, for organic food production, 
development of sustainable tourism, protection of natural 
entities). 

•  Companies should establish networks and build coalitions 

amongst themselves to jointly advocate for the 
implementation of the GAWB. 
In this regard, business associations and chambers of 
commerce should take a more proactive role in promoting 
the implementation of the GAWB.  
The business sector should also increase its cooperation 
with universities in this context. 

• 

• 

•  Government.  
•  Responsible 
ministries for 
education, energy, 
environment, 
labour and 
employment. 

•  Responsible 
ministries for 
labour, 
employment, family 
care and 
demography, and 
education. 
Local governments. 

• 
•  NGOs. 

•  Government.  
•  Responsible 
ministries for 
education, energy 
and environment. 

•  Academia.  
•  Corporate sector. 

96 

 
 
• 

Increase regional cooperation in alternative fuels 
infrastructure development. 

•  Conclude and implement a regional agreement on the 
prevention of plastic pollution, including specifically 
addressing the priority issue of marine litter. 
Strengthen the mechanisms for regional cooperation and 
strategic planning on biodiversity conservation and 
implementation of the commitments under the 
Convention on Biological Diversity. 

• 

•  Regional collaboration can take many forms. Economies 

• 

• 

• 

• 

might share selected building blocks of pricing mechanisms 
including on institutional infrastructure and MRV as well as 
on market operation and flexibility mechanisms in the case 
of emissions trading schemes. 
Economies also may opt for looser collaboration, in the 
form of pooling resources; exchanging lessons on common 
challenges and issues or sending an aligned political signal 
on carbon pricing. 
Set up the Western Balkans Biodiversity Information Hub 
to improve knowledge exchange and availability of 
information. 
Improving international bilateral and multilateral co-
operation will enable sharing and transferring experiences 
among partners. This kind of cooperation, particularly 
established through the mobility of researchers and 
exchange of experiences and results, also increases the 
level of expertise and knowledge of each of the partners in 
environmental protection. Other advantages will include a 
comparison of established approaches and results, as well 
as scientific and technological comparison, that will reduce 
the differences among individual institutions and increase 
the usage of results. 
It is necessary to continue with the implementation of 
results that are directly implementable in practice. Within 
this sub-area, the following potentials, requiring additional 
research, were identified: biomass (pellet, bio-degradable 
waste); efficient bacteria; leftovers from other processes – 
waste treatment: dry farm leftovers (cows, cattle, pigs, 
chickens); leftovers from meat industry – their 
rehabilitation and further exploitation; municipality waste 
treatment; geothermal energy and solar energy. 

•  Governments need to update their industrial policies and 
create an inducive environment for businesses and 
investments by setting market incentives. This could be 
achieved, for instance, through granting subsidies, 
imposing carbon prices, or providing green bonds. Close 
cooperation between the public and the private sector as 
well as with international financial institutions is crucial in 
this regard. 

•  Connect as much as possible with the companies already 
working on the international markets in the e.g. waste 
sector. 
It is necessary for governments and public authorities to 
prioritise and mainstream environmental and climate 
issues contained in the GAWB into all policy areas. Specific 

• 

97 

International 
market -
connections at 
different 
levels 

Access to 
finance 

•  Ministries of 
economy.  
•  Chambers of 

• 

commerce. 
Sector-level 
associations.  

•  Commercial banks. 
• 
•  Chambers of 

IFIs. 

commerce and 

 
 
funds need to be earmarked for implementing the Green 
Agenda. 

regional chambers 
of commerce. 

•  Responsible 
ministries of 
finance, 
environment and 
energy. 

•  New green products are already available for both 

• 

population and corporate sector. 
For the corporations and interested parties, it is crucial to 
learn how to prepare projects and access funding. 
•  Access to IFI’s and Banks finance capital projects under 
newly set out conditions for green projects. Acquire 
information on potential financing options from relevant 
ministries, organisations and e.g. chambers of commerce. 

•  Clear and full cooperation with the banking sector is 

• 

expected. 
SMEs lack financial resources, capacities, and know-how 
concerning the green transition. Governments should 
provide special loans, subsidies, and trainings for SMEs to 
help them manage the green transition. 

NGO sector 

•  CSOs should be strongly supported in their task of 

educating and informing citizens, but also politicians, 
about the implications of the green transition and about 
the goals and commitments contained in the Green 
Agenda for the Western Balkans.  
Specialized online portals and media outlets should be 
created, to generate public interest in the topics of the 
Green Agenda. 

• 

•  Relevant ministries. 
•  Academia. 
•  NGOs. 

• 

• 

•  As there is only a small number of CSOs and think tanks 
working on environmental/climate change topics in the 
WB region, they should form cross-regional and cross-
sectoral alliances of supporters of the Green Agenda for 
the Western Balkans to strengthen their advocacy efforts. 
International partners play a key role in holding incumbent 
governments accountable for their commitments and the 
timeframes to which they have committed. 
The EU needs to take into consideration the starting point 
of the Western Balkans economies when it comes to 
decarbonization and grant feasible transition periods when 
introducing climate policies that affect external trading 
partners (such as, for instance, CBAM). 
The EU should provide special financial support (on the 
scale of structural funding) to the economies of the WB in 
their decarbonization efforts.  
Transparency in the allocation and use of funds dedicated 
to implementing the Green Agenda should be ensured with 
a strong focus on monitoring compliance to allocation 
requirements. 
International donors should streamline and coordinate 
their efforts in the form of a donor coordination platform 
to avoid overlapping of measures targeted at 
implementing the GAWB. 

• 

• 

• 

EU level 

Source: Authors. 

98 

 
 
 
Box 11. General recommendations 

As part of the modern trends in creating scientific and innovation policies, effort in WB should be invested in 
strengthening co-operation among decision makers, the scientific community, academia and the business sector 
and civil society – with the aim to increase the competitiveness of the economy, economic growth, and societal 
progress, by interlinking research, industrial and innovation strengths, and resources. 

It is necessary to direct resources and research to several priority areas, especially those exhibiting issues with 
potentially  significant  effects on the society and enable more efficient  use of domestic but also international 
potentials for better positioning in global, international institutions, relevant to the area. 

By  developing  innovation, science,  and  technologies  in  environmental  protection,  conditions  are  met  for  the 
preservation of our living space and the protection of health of the environment and the bio fund. This will help 
preserve the health of people and provide potentials for a healthy future of our children and generations yet to 
come. 

99 

 
 
Annexes 

Annex 1: Methodology for data collection 

The methodology conducted for purpose of the study included analysis of the following: 

• 

• 

• 

available EU policy documents concerning Green Deal, Green agenda for the Western Balkans and Smart 
Specialisation,  strategic,  legal  and  policy  framework  in  relevant  areas,  case  studies  and  examples  of 
good practice; 
available literature concerning the Smart Specialisation in the Western Balkans, as well as concerning 
the green transition of the Western Balkan economies.  
relevant  national  legislation,  including  the  EU  accession  documentation  for  all  Western  Balkan 
economies  and  national  policies  for  green  transition  and  innovation  related  areas,  as  well  as  other 
national strategic documents of concern. 

The methodology also included: 

• 

• 

identification of key stakeholders relevant for the Smart specialisation and Green agenda for Western 
Balkan;  
development of questionnaire and conducting a survey concerning the main challenges regarding role 
of stakeholders and the topic of this study. 

Based on the work, the report aimed at providing  relevant conclusions and recommendations on the possible 
uses of the Smart Specialisation process and outcomes for supporting the green transition of the Western Balkan 
region, including proposals for national and regional collaborative activities. 

Research on EU policy 

General desk research for Smart specialisation and Green deal was conducted on: 

International and European policy for Smart Specialisation and Green deal;  
EU Legal and institutional framework;   
International studies; 

• 
• 
• 
•  Good learning practices in other countries in Europe;  
•  Guidelines;  
• 

Literature review also included consulting web-based resources. 

Research on Smart Specialisation and green transition in the Western Balkans 

Desk research on the Smart Specialisation and green transition in the Western Balkan consulted the following: 

International sources on the WB economies; 

• 
•  National strategic documents and data basis for WB economies concerning S3 and GAWB; 
•  National  documents,  national  statistics,  data  basis  concerning  economy,  innovation,  research, 
environmental protection, employment, and other topics of concern like, but not limited to (if available) 
national  integrated  energy  and  climate  plan,  climate  strategies  and  action  plan,  S3,  low  carbon 
development strategies; 

•  Regulations and relevant legislature on environmental protection, energy management; 
•  Relevant  instructions  from  the  ministries  responsible  for  energy,  environmental  protection,  labour, 

education, science, economy, finance; 

•  Web  sites  of  Governments  at  national  and  local  level,  national  institutions,  ministries,  academia, 

corporate sector, NGO;   

•  Overview of existing and previous practices and projects relating to S3 and GAWB in the Western Balkan 

economies;  
Lessons learned, good practice mapping;  
Identification of gaps; 
Conclusions and recommendations.  

• 
• 
• 

Identification of stakeholders 

The first phase in the development of the study was to identify and collect primary data based on national and 
international practice all possible groups of stakeholders that should be involved in development of the study. 

100 

 
 
It must be underlined that the transition of Western Balkan economies towards green economies must be just 
and  fair,  maximizing  opportunities  for  economic  prosperity,  social  justice,  rights  and social  protection  for  all, 
leaving no one behind. A green transition requires the inclusion of a broad and diverse range of stakeholders, 
including  governmental  bodies,  specialists  from  environmental,  science,  education,  energy  management, 
business, financial and academic spheres. It is another key element of collaborative governance at the national 
and local levels for the implementation of inter-sectoral dialogues and the development of cooperation. 

The framework for the definition of stakeholders laid down in correlation between S3 and GAWB is given in the 
Table 13.  

Important  consultations  are  implemented  in  the  process  of  development  of  this  study.  The  purpose  of  the 
consultation process was to gather data from the stakeholders and target groups, required to implement Green 
Agenda for the Western Balkans and Strategy for Smart Specialisation in each economy of the Western Balkan 
region and to define optimum public policy measures. The goal of the stakeholder selection was to propose a 
comprehensive list of potential stakeholders to be involved in development of this study.  

The full-scale mobilisation of  available resources and capacities should lead to an extensive dialogue process 
aiming at achieving the participatory cooperation framework. 

Criteria for the identification of stakeholders 

In  the  process  of  creating  a  Smart  Specialisation  strategy,  each  Western  Balkan  economy  identified  4  to  5 
priorities. On the other hand, the Green agenda for the Western Balkans has 5 pillars of its priorities. The synergy 
of both priority lists as it is presented in the Table 13 and defines the framework for stakeholders that need to 
be included in the analysis. 

Stakeholder  involvement  is  about  building  and  maintaining  constructive  relationships  over  time  with  all 
institutions,  bodies  and  their  representatives,  corporate  sector,  academia,  NGOs,  who  are  engaged  in  the 
development not only of the Smart Specialisation strategy but also of different strategies and programs related 
to the requirements of Green agenda, such as strategies for circular economy, decarbonisation, mitigation with 
climate  changes,  air  protection,  energy,  renewable  energy,  sustainable  transport,  protection  of  biodiversity, 
production of agri-food, etc.  

Due to the complexity of Green transition and Smart Specialisation and their cross-relations, the ten key groups 
of stakeholders have been identified as priority aggregates based on their type, roles and responsibilities. Each 
group of actors presented below has a certain capability to impact the successful analysis in the development of 
the study from various perspectives and with diverse levels of knowledge and experience, gaining a potential 
role:  

•  Ministries, as bodies that formulate government policies and lead the decision-making processes on the 
national level, each responsible for its area of action. The role of ministries is essential from the point 
of view of the green transition and Smart Specialisation governance, as well as the organisation of the 
close inter-ministerial cooperation because the quality analysis requires a multi-sectoral approach. As 
key creators of public policies at the national level, the ministries that formulate development directions 
in  the  field  of  energy,  environmental  protection  and  climate  change,  industry  and  infrastructure, 
employment  and  labour  market,  social  protection,  education  and  science,  economy,  finance,  trade, 
entrepreneurship and innovation, agriculture, forestry, and tourism are included (see Annex).  

•  Governmental  institutions  and  regulatory  bodies,  as  state  or  independent  bodies  specialised  and 
responsible  for  various  fields.  Together  with  the  ministries,  they  represent  the  backbone  of  leading 
changes  and  coordination,  implementation,  and  monitoring  of  certain  government  policies.  Such 
institutions  are  mainly  governmental  agencies  such  as  but  not  only:  agencies  responsible  for 
management of environmental data, energy agencies, Agencies for nature protection, etc (see Annex). 
•  City  administrations  and  local  governments,  as  local  authorities  of  concerned  and  affected 
environments  which  should  oversee  organising  and  implementing  the  transition  towards  green 
economy in decentralised and transparent manner, bringing local communities and regions that are at 
the  forefront  of  the  energy  transition  into  the  central  position  of  further  national  plans  and  policy-
making (municipal governments from main cities included, as well as Standing conference of towns as 
representer of municipal interests; see Annex). 

•  Corporate sector, as the group of public and private companies, private businesses, SMEs, as well as 
their  associations  presenting  major  players  in  terms  of  change  in  the  business  development  and 

101 

 
 
business model, also related to GAWB topics like decarbonisation of the core carbon-intensive business 
activities, high  energy consumer and huge environmental polluters portfolio which  would have wide 
impact on future local and national socio-economic development. Furthermore, it should also include 
entities that would be indirectly affected by such transformation and which should closely cooperate 
and coordinate with priority companies on planning and implementation (included main polluters, big 
energy consumers; see Annex).  

•  Business and professional organisations, as the actors that gather specialised professionals or interest 
groups,  possessing  thematic  expertise  and  skills  valuable  in  the  green  transition  process  (including 
chambers of commerce from the whole Western Balkan region, as representer; see Annex).   

•  Academia and local school administrations, as the educational institutions that present a backbone of 
the future labour market, carriers of knowledge and sources of a needed qualified workforce. Academia 
also  has  a  specific  dimension  related  to  science  in  terms  of  research  and  innovation,  which  should 
strongly support the transformative process as an important component, while the role of local schools 
lies  in  their  competence  to  lead  regional  reskilling  and  retraining  activities  (included  all  national 
universities; see Annex). 

•  Non-governmental organisations, as the actors of high importance for the just transition framework, 
which should be considered as partners able to effectively support the process from the perspective of 
advocating, knowledge-sharing, promotional activities, informal education, and similar sector-specific 
activities.  

o  Note  that  chambers  of  commerce  and  associations  of  local  governments  are  non-profit 
organisations supporting activities of their members (corporations, SMEs, local governments 
etc). Due to survey time constraints, NGOs were not directly responding to the questionnaire, 
but the data from research documents from NGOs were included in the analysis (e.g., through 
Bankwatch, Aspen institute, EIB and other sources).  

• 

Financing  institutions,  as  the  enablers  of  funding  opportunities  and  securing  sustainable  resources. 
While  international  funds  and  banks  already  lead  the  support  toward  transformation  and  must  be 
continuously included, the commercial banking sector operational on national level should be attracted 
and mobilized as well (included indirectly in the frame of ministries responsible for finance). 

o  Note: due to survey time constraints, financial institutions from the Western Balkan region were 
not directly responding to the questionnaire; instead, the data from the World Bank, EBRD and 
other sources were used for this study.   

•  Other relevant actors with the potential ability to support just transition and have a valuable assisting 

roles in the implementing its certain activities.  

o  Note – the study includes data from documents  originating from UNDP, OSCE, IFI as well as 

regional portals and news etc. For the full list, please see References.  

Besides grouping the stakeholders as per their category, interest and responsibilities, additional grouping should 
be performed based on the range of their influence, in terms of national-level or local-level. To achieve deeper 
analysis between the groups in examining green transition in the context of Smart Specialisation the following 
stakeholder groups were differentiated during the development of this study: 

• 
• 
• 

Level 1 – Directly involved institutions and groups; 
Level 2 – Other project-related institutions and organisations; 
Level 3 – Other interesting parties. 

Related to the level of involment, for the purpose of this study, the list of stakeholder categories is the following: 

Level 1.  Directly involved  

•  Ministries  and  governmental  organisations  and  bodies,  multisectoral  groups  covers  by 
government/ministries:  responsible  for  environmental  protection,  agriculture,  Smart  Specialisation, 
energy management, education, science, finance;  
• 
Environmental agencies; 
• 
Energy agencies;  
•  Coal energy producers; 
•  Coal mines;  
• 
•  Big industrial energy consumers;  
•  Chambers of commerce;    

IPPC polluters;  

102 

 
 
Industry and other relevant business/industry associations; 

• 
•  Academia (environmental and energy, agriculture, science, education, finances). 

Level 2. Other related institutions/organisations   

Local administration and governments of cities impacted by green transition;   

•  Other ministries/indirectly involved ministries;  
• 
•  Academia (other);  
•  Representatives of local small and medium enterprises; 
•  Unions of workers;  
•  NGOs. 

Level 3. Other interested parties 

•  Polluters and energy consumers;  
•  Renewable energy operators;  
•  General public; 
•  Other projects related to S3 and GAWB;   
•  Banks and other funding organisation. 

Questionnaires based on stakeholder perception 

Based on the findings from the analysis of policy documents, legal and institutional frame for WB economies, 
concerning Smart  Specialisation and Green Agenda  for Western Balkan, semi-structured questionnaires  were 
prepared for 3 groups of stakeholders: 

1.  Governmental and related bodies;  
2.  Corporate sector;  
3.  Academia. 

Communication  

The process of collecting data intended to utilise various methods of engagement that will be used as part of its 
continuous interaction with the stakeholders. Due to the current situation (short time for performing the project, 
past issues caused by the COVID-19 pandemic), the format of consultation was significantly reduced and focused 
on online communication and direct communication with the stakeholders. 

Content of questionnaires  

Questionnaires  needed  to  address  topics  closely  related  to  the  living  conditions  in  the  Western  Balkan 
economies, and were to be filled in by the interested parties/stakeholders living and working in the region. 

Three  types  of  questionnaires  were  developed  for  3  groups  of  stakeholders  (government,  corporates,  and 
Academia) and consisted of: 

•  General information;  
• 
Specific information.  

Specific information was needed for each group considering their specific roles and duties in the development 
of S3 and the Green agenda requirements. 

Conclusions from the survey 

Tree types of questionnaires were developed: for governmental bodies and institutions, corporate sector, and 
academia  and  research  institutes.  Questionnaires  were  distributed  by  mails  to  110  stakeholders  from  the 
Western  Balkan  economies  and  the  response  rate  was  28%.  The  survey  was  enhanced  also  through  direct 
communication  with  some  stakeholders.  The  additional  research  included  official  documentation  and 
publications available on the relevant websites and portals, and data from previous related studies. 

Main goal in developing the questionnaires was to explore some of the key questions addressing the uncertainty 
on how can the green transition be implemented by using smart specialisation strategy in the  Western Balkan 
region: 

•  Where will the main directives regarding green transition be coming from and how will they influence 

operating of government/companies/academia; 

103 

 
 
•  How will the economies access financial market and will they be able to meet the new requirements in 

funding of green projects; 

•  Which kind of expertise is needed in future; 
•  How will the education activities be organised; 
•  How will the reskilling of current employees be identified and organised;  
•  Will the labour force have enough time to acquire education necessary for green transition, new green 

jobs;   

•  How will academia adapt to it. 

104 

 
 
 
 
 
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List of abbreviations and definitions  

CBAM 

Carbon Border Adjustment Mechanism 

CPD 

EU  

FDI 

GAWB 

GDP  

GHG 

GPP 

GVC 

ICT  

ILO 

IOT  

IPR  

ITE  

KET  

R&D 

SEE 

continuous professional development 

European Union 

Foreign Direct Investment 

Green Agenda for the Western Balkans 

Gross Domestic Product 

Greenhouse gas emissions 

Green Public Procurement 

Global Value Chains 

Information and Communication Technology 

International Labour Organisation 

Internet of Things 

Intellectual Property Rights 

Initial teacher education  

Key Enabling Technologies 

Research and development 

South East Europe 

SEECP 

South-East European Cooperation Process 

SME 

S3  

STP  

TTO  

UNEP 

WB  

Small and medium enterprise 

Smart Specialisation Strategy 

Science and Technology Park 

Technology Transfer Office 

United Nations’ Environment Programme 

Western Balkans 

109 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
List of boxes  

Box 1. Production with CBAM requirement ......................................................................................................... 14 

Box 2. Just transition and the SDGs ...................................................................................................................... 15 

Box 3. Green Deal ................................................................................................................................................. 28 

Box 4. Definitions of RIS3 ...................................................................................................................................... 28 

Box 5. Smart Specialisation ................................................................................................................................... 29 

Box 6. New skills ................................................................................................................................................... 32 

Box 7. Outlook for WB .......................................................................................................................................... 39 

Box 8. Just transition ............................................................................................................................................. 61 

Box 9. Mutual S3 priorities across the Western Balkan region............................................................................. 83 

Box 10. Need for the unified transition plan in the Western Balkans .................................................................. 91 

Box 11. General recommendations ...................................................................................................................... 99 

110 

 
 
 
List of figures 

Figure 1. Overview of EU progress towards the SDGs (2015-2021) ....................................................................... 7 

Figure 2. Production in industry, EU, 2019–2022 (volume index of production, 2015 = 100)................................ 8 

Figure 3. Quarterly greenhouse gas emissions, by economic activity, EU, 2015–2022 (million tonnes of CO2-
equivalent) .............................................................................................................................................................. 8 

Figure 4. The components of the European Green Deal ...................................................................................... 11 

Figure 5. Overview of selected EU policy objectives and targets related to waste and resources ...................... 16 

Figure 6. Performance of EU Member States’ innovation systems ...................................................................... 21 

Figure 7. Map showing the performance of European countries’ innovation systems ........................................ 23 

Figure 8. Performance of eco-innovation systems in 2022, 2021 and 2013......................................................... 26 

Figure 9. EU performance change......................................................................................................................... 27 

Figure 10. Occupations most in demand across industries in a global energy sustainability scenario, 2030 ...... 31 

Figure 11. Occupations most susceptible to job destruction and reallocation across industries in a global 
circular economy scenario, 2030 .......................................................................................................................... 32 

Figure 12. WB Sustainable development cycle ..................................................................................................... 37 

Figure 13. Real GDP growth slowed in 2022 ......................................................................................................... 40 

Figure 14. Alignment with the EU environment and climate acquis in WB (%), updated on 11/2021 (EnCS, 2021)
 .............................................................................................................................................................................. 44 

Figure 15. SDGs with an environmental dimension .............................................................................................. 45 

Figure 16. Ranking of Eionet countries on SDG Index 2019 with an environmental dimension .......................... 47 

Figure 17. Administrative structure of Bosnia and Herzegovina .......................................................................... 48 

Figure 18. Process for implementation green deal in the Western Balkans......................................................... 53 

Figure 19. The circular economy model ................................................................................................................ 56 

Figure 20. Cost of pollution impact on health in the Western Balkans in 2016 (in millions EUR) ........................ 57 

Figure 21. Western Balkans’ energy mix: Gross available energy by product, 2015 and 2020 ............................ 59 

Figure 22. Share of exports exposed to CBAM by sector and economy, 2018-2022 ............................................ 62 

Figure 23. Air pollution as measured by concentration of fine particulate matter (PM2.5), mean annual 
exposure (micrograms per cubic metre), 2016 ..................................................................................................... 66 

Figure 24. Years of life lost per 100,000 inhabitants attributable to exposure to pollution in 2016.................... 67 

Figure 25. EBRD scores on green quality of a sustainable market economy, 2021 .............................................. 68 

Figure 26. Carbon Dioxide Emissions (metric tons per capita), 2019 ................................................................... 69 

Figure 27. Performance groups: innovation performance per dimension ........................................................... 76 

Figure 28. Resource efficiency measures undertaken by SMEs (2021) ................................................................ 77 

111 

 
 
 
List of tables 

Table 1. Direct and indirect emissions .................................................................................................................. 14 

Table 2. Framework for achieving results ............................................................................................................. 22 

Table 3. Indicator measuring progress towards SDG 9 ......................................................................................... 24 

Table 4. Changes in skills required, by skill level of occupation ........................................................................... 33 

Table 5. Main core skills required for green jobs, by skill level of occupation ..................................................... 34 

Table 6. Table Western Balkan outlook 2020-25 .................................................................................................. 39 

Table 7. Western Balkans’ strategic and legislative frameworks on energy and climate ..................................... 52 

Table 8. Policies related to fulfilling the Green Agenda in the Western Balkans ................................................. 58 

Table 9. Coal Regions in the Western Balkans ...................................................................................................... 61 

Table 10. GAWB indicators ................................................................................................................................... 71 

Table 11. Policy documents for innovation in the Western Balkans relevant to Smart Specialisation ................ 81 

Table 12. Smart Specisalisation priorities identified/under investigation in the Western Balkans ...................... 82 

Table 13. Priorities as defined in Green Agenda for Western Balkan and  Smart Specialisation Strategy for WB 
economies ............................................................................................................................................................. 88 

Table 14. Relation between GAWB and priorities in S3 per Western Balkan economies .................................... 89 

Table 15. Summary of recommendation based on findings in Study and Green agenda Action plan ................. 91 

112 

 
 
 
 
 
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