Report of

WP3, Acitivity 3.2

Regional State-of-the-Art Analysis

covering SEE area

Reporting Partner: ERDF PP3 JR on behalf of all LOCEE partners

Regional State-of-the-Art Analysis covering SEE area 2

Synthesis ............................................................................................................................................................................................ 3 1.1 Introduction .................................................................................................................................................................... 3 1.2 Emissions trends and data in the SEE area ........................................................................................................ 4

1.2.1 Emission profiles .................................................................................................................................................. 4 1.2.2 Emission data in Annex-I and non Annex I SEE countries .................................................................. 6 1.2.3 Country Emissions profiles .............................................................................................................................. 8

1.3 Implementing EU energy legislation in SEE countries .................................................................................. 9 1.3.1 The Energy Community treaty ....................................................................................................................... 9

1.3.1.1 The RES directive ..............................................................................................................................................9 1.3.1.2 Progress of the ECT ....................................................................................................................................... 10 1.3.1.3 Energy efficiency ............................................................................................................................................ 11 1.3.1.4 National energy legislations ..................................................................................................................... 12 1.3.1.5 Opportunities for regional cooperation in the energy sector ................................................... 12

1.4 Climate Change strategies in SEE countries .................................................................................................... 13 1.5 Market mechanisms and NAMAs .......................................................................................................................... 14

1.5.1 Experiences with the CDM ............................................................................................................................ 14 1.5.2 NAMAs in SEE countries ................................................................................................................................ 15 1.5.3 Introducing the EU-ETS in SEE countries ............................................................................................... 15

1.6 Vulnerability to Climate Change and Adaptation .......................................................................................... 16 1.7 Barriers and institutions .......................................................................................................................................... 19 1.8 Conclusions.................................................................................................................................................................... 20 1.9 References ...................................................................................................................................................................... 20

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Synthesis

1.1 Introduction

Several SEE countries, which are still not member states of the European Union are analysed in this report: Albania, Croatia, FYRO Macedonia, Montenegro, Kosovo1, and Serbia. Croatia is amongst these countries the only one which was already classified as Annex-I country (industriaized or emerging economies) under the Kyoto Protcol with binding emissions reduction targets. The other ones are classified as Non-annex-I countries (developing countries) wtihout binding emissions reduction obligation. Croatia will enter the EU in July 2013, the other countries have adopted or are adopting the entire EU climate and Energy legislation. Montenegro is a candidate country with an ongoing negotiation process since 2012. Albania, Bosnia and Herzegovina, Kosovo and Serbia are possible candidate countries. The EU accession is regarded as a national priority for some of these countries and the approximation of the EU acquis into national legislation represents a process that is inceasingly shaping the national legal framework and overall political, social and economic reality. FYRO Macedonia for example has started to build its capacities for introduction of an EU ETS. The SEE countries are surrounded by EU member countries, such as Italy, Slovenia or Austria that have economic interests in the region, but also can contribute to implement low carbon strategies in the SEE region by providing kwow how and and technology.

Table 1: Kyoto Protocol ratification year and targets

Country Year of ratification Kyoto Target

Croatia 2007 -5%

FYRO Macedonia 2004 -

Montenegro 2007 -

Serbia 2007 -

Albania 2005 -

Bosnia and Herzegovina 2007 -

1 For Kosovo a separate information is not always available (part of Serbia)

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1.2 Emissions trends and data in the SEE area

1.2.1 Emission profiles

The GHG profile of the West Balkan countries differs significantely and strongy depends on the country’s energy systems. Albania for example derives almost all of its electricity generation from hydropower and is a relatively low net emitter of GHGs, with relatively low per capita CO2 emissions, while it has comparably high emission from agriculture. Also Bosnia and Herzegovina, Croatia and Montenegro have significant hydropower capacities, however also strong fossil fuel electricity generation. In particular Bosnia and Herzegovina, Serbia and FYRO Macedonia are heavily depending on lignite for electricity generation. To date (see Figure 1), only Croatia and Serbia are significant consumers of natural gas; markets in Bosnia and Herzegovina and FYRO Macedonia are small, whereas Albania, Montenegro and Kosovo have no gas related energy production (IEA, 2011). In some of the West Balkan countries also industry is a large emitter.

Figure 1: Differences in the energy mix among West Balkan countries (Source, IEA 2011)

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Figure 2 shows the significant differences across the region in terms of total energy mix. Montenegro saw falling per capitsa GHG emissions in the last decade, in most SEE countries however emissions remained constant and in Bosnia and Herzegovina and Serbia they rose.

Figure 2: Emissions trends in the SEE region (per capita). Figure 3 shows that the entire West Balkan region still has far lower GHG emissions per capita than the EU 27 average.

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Figure 3: Emissions trends in West Balkan countries compared to other regions in the world

(per capita) (Source: World Bank 2011)

1.2.2 Emission data in Annex-I and non Annex I SEE countries

Annex-I countries that are Parties to the Convention (i.e. Croatia), have to submit annual national greenhouse gas (GHG) inventories to the Climate Change secretariat, which are in accordance with Articles 4 and 12 of the Climate Change Convention, and other relevant decisions of the Conference of the Parties. The GHG inventories include estimates for direct GHGs, such as:

CO2 - Carbon dioxide

CH4 - Methane

N2O - Nitrous oxide

PFCs - Perfluorocarbons

HFCs - Hydrofluorocarbons

SF6 - Sulphur hexafluoride as well as indirect GHGs such as SO2, NOx, CO and NMVOC. In accordance with the existing procedures and decisions under the Convention and its Kyoto Protocol, the secretariat is organizing and coordinating in-depth reviews (IDRs) of National Communications (NC) of Annex I Parties. The review of each NC typically involves a desk-based study and an in-country visit, and aims to provide a comprehensive, technical assessment of a Party's implementation of its commitments under the Convention, and for the Annex I Parties that are also Parties under the Kyoto Protocol, under the Kyoto Protocol. In-depth reviews are conducted by an international team of experts from Annex I and non-Annex I Parties, selected from the Roster of Experts. Both Annex I and non-Annex I Parties, must submit national reports on implementation of the Convention to the Conference of the Parties (COP). The required contents and timetable for their submission are different. The main elements of the NCs for both Annex I and non-Annex I Parties are:

information on emissions and removals of GHGs; details of the activities a Party has undertaken to implement the Convention; information on national circumstances; vulnerability assessment; financial resources; transfer of technology; education, training and public awareness;

Annex I Parties have additionally information on policies and measures to add. COP has fixed the date for the submission for their national communications. In 2010 Annex-I countries had to submit their 5th national communication. The sixth one is planned for 2014. Those of the Annex I Parties that have ratified the Kyoto Protocol must include supplementary information in their national communications and their annual inventories of emissions and removals of GHGs to demonstrate compliance with the Protocol's commitments.

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Dates for the submission of national communications of non-Annex I Parties are not fixed, but these documents should be submitted within four years of the initial disbursement of financial resources which they received to assist them in preparing their national communications. Croatia as Annex-I country has submitted its Fifth National Communication. The GHG emissions projections - with and without measures - are available for the years 2012 and 2025. The Non Annex-I countries of West Balkan countries and their status of national communication to the UNFCCC are documented in Table 2:

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Table 2: Status of national communications and latest years of GHG emissions data

Non Annex-I Countries Status of national

communicatiions to the

UNFCCC

Comments

Albania Initial (2002) and second

national communication

(2009)

Latest data 2000. Emissions

data from 2000 will be

recalculated for the third

national communication

Bosnia and Herzegovina Initial national communication

(2010)

Latest data 1990

Montenegro Initial national communication

(2010), 2nd under

development

Latest data 2003

FYRO Macedonia Initial national

communication, 2nd under

development

Serbia Initial national communication

(2010)

Latest data 1998

1.2.3 Country Emissions profiles

In Albania in 2000 the Energy sector accounted for the largest share of the GHG emissions (44.00%), followed by Agriculture (27.12%), Land-Use Change and Forestry (21.60%). The emissions will be recaculated for the third national comunication to the UNFCCC. In FYRO Macedonia the most important key source FYRO Macedoniais the Energy Industry (51.3%), which accounts for the GHG emissions from the lignite-fired power plants. The other key sources, which considerably lag behind, are: Road Transport (7.4%), Solid Waste Disposal on Land (6%), Enteric Fermentation (4.4%), Agricultural Soils (2.9%), Cement Production (2.9%) and Manufacturing Industries and Construction (2.9%). In Montenegro the energy sector is the most important sector from the aspect of its share in the total GHG emissions generated in Montenegro, i.e. of the energy conversion sub-sector (Pljevlja Thermal Power Plant). However, if the emissions are analyzed individually, i.e. from the standpoint of contribution by particular industries, then the largest share in total emissions (emissions caused by fuel combustion, in addition to those resulting from the technological processes) is generated by the aluminum industry (Podgorica Aluminium Plant). Serbia saw a reduction of GHG between 1990 and 1998, but in the meantime the emissions are above the 1990 levels. Emissions increase can be expected by 2015 if not mitigation measures are implemented. In 1998, the date of the latest UN inventory sectors of energy, agriculture, industry and communal landfills and sludge waste contributed in total GHG emissions with 76.19%, 14.32%, 5.46%, and 4.04%, respectively.

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Croatia has pledged in the Annex B of the Kyoto Protocol to reduce its GHG emissions by 5% in the first commitment period 2008-2012, compared to 1990. Also, Croatia has agreed to be bound by the amendment to Annex B of the Kyoto Protocol, which defines the obligations to reduce GHG emissions in the period from 2013 until 2020, adopted at the 8th Conference of the Parties to the Kyoto Protocol in December 2012 in Doha. Average emissions in 2008-2010 were 6% lower than in 1990 with a decreasing trend, due to implementation of the policies and measures established by “Air Quality Protection and Improvement Plan in the Republic of Croatia for the period 2008 – 2011”, but also due to economic crisis. The biggest contribution to GHG emissions in Croatia in 2010 has had the energy sector (73%), followed by agriculture (11.4%), industrial processes (11.3%), waste (3.8%) and solvent and other products sector (0.5%).

1.3 Implementing EU energy legislation in SEE countries

1.3.1 The Energy Community treaty

All West Balkan countres are part of the Energy Community Treaty (ECT) that was was signed in October 2005 by the European Union and nine Contracting Parties (CPs). The Energy Community was created for a period of 10 years, expiring in July 2016 and it can be extended by unanimous decision of its Ministerial Council. The objective of the ECT is to

create a legal and economic framework in order to attract investment in power generation and networks,

create an integrated energy market allowing for cross-border energy trade and integration with the EU market,

enhance the security of supply,

improve the environmental characteristics of the regional energy sector and

enhance competition at regional level, exploiting economies of scale. The Energy Community aims at extending the acquis communautaire of the European Union to the participating countries. By joining the Energy Community Treaty, the CPs have committed themselves to implement the relevant EU rules on energy, environment and competition. The Treaty provides the tools for the adoption of an ad-hoc regulatory framework facilitating the cross-border cooperation of the energy markets in the region and for the establishment of a single energy market (EC, 2011).

1.3.1.1 The RES directive In October 2012, the 10th Energy Community Ministerial Council agreed on the implementation of RES Directive (2009/28/EC) on the promotion of renewable energy (RES Directive) by the Energy Community. With the decision, Albania, Bosnia and Herzegovina, Croatia, FYRO Macedonia, Kosovo, Moldova, Montenegro, Serbia and Ukraine commit to a binding share of renewable energy as part of their overall consumption in 20202. The shares of the nine CPs were calculated based on the EU methodology used in the RES Directive and reflect an equal level of ambition as the targets fixed for EU Member States. The targets for share of renewable energy in CPs in 2020 are depicted in Table 3:

2 http://www.energy-

community.org/portal/page/portal/ENC_HOME/NEWS/News_Details?p_new_id=6342

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Table 3. Targets for the share of renewable energy in ECT Contracting Parties

Country Albania Bosnia and Herzegovina

Croatia FYRO Macedonia

Monte- negro

Moldova Serbia

% share of RES in 2020

38% 40% 20% 28% 33% 17% 27%

With this decision and the acceptance of binding targets, Western Balkan countries will be able to participate in all cooperation mechanisms, meaning in particular that statistical transfers of renewable energy for the purposes of target achievement will be possible independently from physical flow of electricity. In addition, the decision lays down a number of adaptations to the rules for statistical transfers and joint support schemes between the CPs and EU Member States to ensure the original objectives of the RES Directive are preserved.

1.3.1.2 Progress of the ECT The EC report (EC, 2011) that reviews the achievements of the Energy Community Treaty presents the challenges the Contracting Parties face. According to this review,

Despite intensive legislative work, the existence of an open, transparent and competitive national energy market in all contracting Parties, has not been completed yet. In this regard, integration into the EU's internal energy market – seems, for the time being, just a long-term objective. Bridging the existing gap between theory (political commitments) and practice (full implementation of the Energy Community acquis and enforcement of the rules adopted) remains the main challenge.

The Energy Community Treaty faces investment challenges, such as those resulting from the modernisation of the electricity transmission and distribution networks and interconnectors, from the EU requirements and measures related to energy efficiency or from implementation of the Large Combustion Plants Directive, the Sulphur in Fuels Directive and emissions standards of the European Union, requiring rehabilitation of existing generation plants or decommissioning and possible replacement of a number of them by December 2017. Despite the high level of funding from international financial institutions in the region, the level of private investments remains relatively low. Reasons for that include the unreliable implementation of the regulatory framework (rules are not implemented and/or not correctly applied) and the small scale of national markets.

The failure of governments to restructure regulated end-user prices and the associated implicit and explicit subsidies on all energy markets. These subsidies, which are indiscriminately applied, keep, in particular, the wholesale electricity price below the capital replacement level and discourage energy savings and investments in energy efficiency.

In reaction to these challenges highlighted by the EC, the Energy Community Treaty established a Coordinated Auction Office Project Team Company by ten South East European electricity network operators (TSOs of Albania, Croatia, Bosnia and Herzegovina, FYR of FYRO Macedonia, Greece, Montenegro, Romania, Slovenia, Kosovo and Turkey) in June 20123. Next to that, the Energy Community Ministerial Council adopted a Regional Energy Strategy on 18 October 2012 as the first step in the process of a streamlined and cost-efficient energy

3 http://www.setimes.com/cocoon/setimes/xhtml/en_GB/features/setimes/features/2012/07/16/feature-

03

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infrastructure planning and development in the region. It brings together the national strategies and plans of the Contracting Parties with the existing legal commitments of the Energy Community in the fields of energy, competition and environment. As a next step, the Energy Community Treaty will start a process of identifying Projects of the Energy Community Interest (PECIs) with a similar approach as for the Projects of Common Interest in the European Union. The aim of this exercise is to support those energy projects which represent large benefits in fostering market integration and opening, security of supply, sustainability, and provide simultaneous cross-border advantages to several Contracting Parties. It is also expected that a set of associated policy and regulatory measures, technical assistance and possible financial mechanisms will accompany PECIs and stimulate their implementation already in 2013. The Energy Community acquis was also extended in the field of statistics. The ministers agreed to adopt Regulation (EC) No 1099/2008 on energy statistics. As the debate of the renewable energy targets has shown, the region lacks trustworthy, consistent and comparable statistics. Solid statistics is the basis for any energy policy decision.

1.3.1.3 Energy efficiency

The following energy efficiency directives became obligatory for Contracting Parties:

1. Directive 2006/32/EC on energy end-use efficiency and energy services; 2. Directive 2010/31/EU on the energy performance of buildings; 3. Directive 2010/30/EU on the indication by labelling and standard product

information of the consumption of energy and other resources by energy-related products, as well as set of implementing directives;

Directive 2006/32/EC has set up a framework for energy end-use efficiency and energy services. Among other things, this includes an indicative energy savings target for the Member States (i.e. Contract ing Parties), obligations on national public authorities as regards energy savings and energy efficient procurement and measures to promote energy efficiency and energy services NEEAPs are intended to set energy savings targets and propose concrete measures and actions at the level of each Contracting Party that would contribute to meeting the targets. For the purpose of the first NEEAP, each Contracting Party should set an overall national indicative savings target of 9% or higher (see Table 4), to be achieved and measured in 2018, and an intermediate national indicative savings target to be achieved in 2012. All of the West Balkan countries have submitted NEEAPs to the Energ comunity sectretariat.

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Table 4: Energy Efficiency targets in SEE countries

Country Energy Efficiency Target

Albania 9%

Croatia 9% in 2016

Moldova 9% in 2016

Montenegro 9%

Serbia 9%

FYRO Macedonia 12,2%

UNMIK Kosovo 9%

Energy savings and measures in residential buildings stand out in the majority of the NEEAPs. With varying degrees of detail, almost all NEEAPs also include measures aimed at the tertiary sector, transport and industry. Only a few NEEAPs have meas ures that address energy efficiency in agriculture (e.g. Albania and UNMIK) (Energy Comunity 2011).

1.3.1.4 National energy legislations The provision of the Energy comunity in the energy sector triggered the development of energy relate measures or financial incentives in in the SEE countries. Most of them have feed in tarrifts in place today. The feed- in tariff however is often too low to trigger foreign

investments. The massive and complex subsidy system aims at transferring a significant proportion of fossil fuel costs to the public (UNDP, 2011). In the short term, it facilitates employment in industry and the well-being of the population while creating unsustainable longterm fiscal risks. Together with physical transport barriers, fossil fuel subsidies effectively create a strong barrier to entry not only to international trade in energy, but also to international investors in both energy and other sectors of the economy that are more sensitive to price signals than domestic state-owned enterprises (that are granted soft budget constraints). Subsidies facilitate the continued use of uncompetitive technologies and fossil fuel resources as well as unsustainable employment levels and an uncompetitive composition of employment across a region which is slow to turn towards sustainable economic development (UNDP, 2011).

1.3.1.5 Opportunities for regional cooperation in the energy sector Cooperation mechanisms, as described in articles 6 to 11 of the RES Directive (2009/28/EC), were introduced to provide European Member States (MS) with greater flexibility to achieve their national targets for energy consumption from renewable sources (RES) as well as to contribute to achieve the overall European 20% target in a cost effective way. The underlying rational of the cooperation mechanisms is to allow countries with high RES potentials and/or low production costs (in this report referred to as “host countries” or “seller countries”), to sell their RES surplus to those countries that have either low RES endowments and/or have higher generation costs (referred to as “user countries” or “buyer countries”). The cooperation mechanisms – described in detail below – are the following: With the adoption of the RES diretiveunder the Energy Community treaty the West Balkan case study will be eligible to make use of statistical transfers and joint support schemes even if

Regional State-of-the-Art Analysis covering SEE area 13

some of tjhem are not yet EU members. Joint projects between EU Member States and contracting parties to the Energy Community will continue to be governed by the provisions of Article 9 and 10 of the RES Directive (joint projects with third countries), requiring the physical transfer of the involved electricity. Joint projects with the Energy Community countries thus have to follow the same provisions as joint projects with third countries in other regions. It is important to note that Croatia, which is also covered by the project, is scheduled to join the European Union in 2013 and will thus have the same status as any other Member State allowing for the use of all cooperation mechanisms without restrictions.

1.4 Climate Change strategies in SEE countries

While the SEE countries making significant progress on developing strategies in the energy sector, in most countries there are no comprehensive climate strategies. Climate policies are part of different policy stratgies and regulations. On the other side SEE countries are beginning to implemt EU legilsation depending on their status of progress regarding EU accession, primarily however in the area of energy, comprehensive adaptation policies are almost not existent. In Croatia the air Quality Protection and Improvement Plan of the Republic of Croatia for the period 2008 – 2011 (OG No. 61/08) outlines the policies and measures established by the climate change action plan, due which average emissions in 2008-2010 were 6% lower than in 1990 with a decreasing trend, meeting the Kyoto target. The energy sector legislation and strategic outlook is quite comprehensive and detailed but nevertheless it did not take into account how its goals, action plans and measures translate in terms of possible climate change GHGemission targets. These goals and measures currently are not streamlined and consolidated in order to provide clear picture on national situation and position in the field of climate change. In Serbia for the purpose of harmonization of the national legislation with that of the EU acquis in the field of climate change, the implementation of the project: "Establishment of a monitoring, reporting and verification system necessary for the effective implementation of the EU emissions trading system (EU-ETS)", funded under IPA 2012, has begun. Within the framework of this project, the implementation plan will be prepared, as well as the specific legal documents and recommendations for the establishment of the institutional structure necessary for the implementation of the Directive 2009/29/EC.Since the ratification of the UNFCCC considerable efforts have been made in fulfilling the requirements of the UNFCCC. Considerable progress in this context was brought by the beginning of the process of EU accession and the harmonization of national legislation with the EU acquis communautaire. Some sector specific laws, such as on energy, waste and air, are contributing to climate change mitigation, while the policy on forestry includes certain adaptation measures. A certain number of newly adopted, strategic documents treat the climate change problem as being very important. Even there are positive changes, more efficient inclusion of climate change issues into sectoral policies and national development goals is needed. Also, continuous effort in regard to measurement, reporting and verification (MRV) and establishment of efficient and sustainable MRV system, followed by raised awareness is among priorities in a climate change field on the national level. Besides mitigation related activities, work on vulnerability assessment and adaptation planning is among the most important issue for future sustainable development of the country. Albania doesn’t have a separate Strategy on Climate Change but the key policy papers address climatic change issues.

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The Montenegrin national strategic and legal framework are dealing to some extent with climate change issues, however Montenegro is still at early stage in this field. Also Montenegro until now does not have a particularly determined policy on climate change. This area was the subject of consideration through a limited number of adopted strategies and plans. In the FYROM climate chang provisions and strategies are contained in the chapter on “sustainable development and global environmental” issues under the “Law on Environment2, where a national system for the stabilization of greenhouse gas concentrations in the atmosphere is legally established. An article there provides the preparation of the National Plan of climate change mitigation as competence of the Ministry of Environment and Physical Planning and determines its minimum content, which interalia includes the National Inventory of greenhouse gas emissions, and also the bodies, institutions, legal entities and natural persons responsible for implementing the national plan.

1.5 Market mechanisms and NAMAs

1.5.1 Experiences with the CDM

The Clean Development Mechanism (CDM) is one of the flexibility mechanisms defined in the Kyoto Protocol that provides for emissions reduction projects which generate Certified Emission Reduction units which may be traded and used for target achievement of Annex-I countries.Several of the West Balkan countries have implemented projects under the UN Clean development mechanisms (CDM)4. The expectations regarding the CDM in the region were high, in practice however only a few projects were realized under the CDM (Table 5).

Table 5: CDM projects in the SEE countries

Country No of projects Type of project

Albania 3 registered, 6 at validation

FYRO Macedonia 3

3

3

1

fossil fuel switch

wind

hydro

biomass energy

Bosnia-Montenegro 2 registered, 2 at validation

Serbia 6 registered and 5 at

validation

4 See CDM Project Pipeline

http://cdmpipeline.org/

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1.5.2 NAMAs in SEE countries

The term NAMA was first used in the Bali Action Plan as part of the Bali Road Map agreed at the climate change conference of the United Nations Framework Convention on Climate Change (UNFCCC) in Bali in December 2007 (Conference of the Parties, COP, 13). It also formed part of the Copenhagen Accord issued following the climate change conference in Copenhagen (COP 15) in December 2009. NAMAs refer to a set of policies and actions that countries undertake as part of a commitment to reduce greenhouse gas emissions. The term recognizes that different countries may take different nationally appropriate actions on the basis of equity and in accordance with common but differentiated responsibilities and respective capabilities. It also emphasizes financial assistance from developed countries to developing countries to reduce emissions. The Cancun Agreements (COP 16 in 2010) recognize two types of NAMAs – those developed with domestic resources (“unilateral NAMAs”) and those requesting international support (“supported NAMAs”). So far most of the NAMAs seek support but this is not necessarily meant to be of pure financial nature. NAMAs can also comprise elements of technology transfer or capacity building. Financing is thought to be channelled through bilateral or multilateral donors or through facilities officially approved by the Conference of the Parties, such as the Green Climate Fund or the Global Environmental Facility. Supported NAMAs could be co-funded through carbon offset credits generated for the amount of emission reductions achieved (“NAMA crediting”) and traded on the carbon market. However, this concept of credited NAMAs is not currently officially defined under the UNFCC. Only few SEE countries so far have concrete plans for designing NAMAs. Serbia has submitted to the UNFCCC NAMA Registry (UNEP RISOE Centre 20135) eight Nationally Appropriate Mitigation Actions (NAMAs) on:

Energy efficiency in buildings (new regulation);

Introduction of metering system for discrict heating and billing on basis of consumption in Serbia;

Expansion of district heating network in Valjevo;

Installation of solar water heaters in Belgrade;

Construction of new energy efficient natural gas- fired cogeneration planz in Novi Sad;

Restoration and modernization of a lignite thermal power plant (Nicola Tesla Unit 3) with capacity increase of 30 MW (higher efficiancy coal power plant);

Restoration and modernization of a lignite thermal power plant (Nicola Tesla Unit 2) with capacity increase of 47 MW (higher efficiancy coal power plant);

Expanding the lignite Kosalac B power plant from 281MW to 600 MW (higher efficiancy coal power plant).

Albania, Bosnia and Herzegovina, FYRO Macedonia and Montenegro have defined general descriptions of possible NAMAs, which they intend to implement.

1.5.3 Introducing the EU-ETS in SEE countries

Croatia introduced a domestic pilot ETS from 2009. Introducing Emissions trading in the EU 27 was a huge challenge regarding data availability and monitoring, thus early preparation activities in the aceession countries are of large importance.

5 http://namapipeline.org/

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In Serbia the establishment of a monitoring, reporting and verification system necessary for the effective implementation of the EU emissions trading system (EU-ETS)", funded under IPA 2012, has begun. Within the framework of this project, the implementation plan will be prepared, as well as the specific legal documents and recommendations for the establishment of the institutional structure necessary for the implementation of the Directive 2009/29/EC.Also the other EU acession or candidate countrie should early start with EU-ETS preparations.

1.6 Vulnerability to Climate Change and Adaptation

The different countries are characterized by specific climate conditions6. Albania, the southern part of Montenegro and coastal area of Bosnia Herzegovina and Croatia are part of the Mediterranean climate with mild wet winters and hot dry summers. Other parts of Montenegro, Bosnia and Herzegovina range from a temperate continental to a mountain climate. Macedonia is characterized by diverse climates from a sub-Mediterranean to a continental one. Serbia varies between a temperate continental and a mountainous continental climate. Climatic changes to be expected in these countries include:

decrease in the amount of precipitation;

a change in the seasonal distribution of precipitation (less in summer, more in winter);

an increase of temperature;

an increase of the number and intensity of extreme events, such as floods and droughts;

sea level rise in coastal area. Linked climatic impacts and risks to these climate changes comprise droughts and heat waves in summer time with decreases of crop yields, increased risks of agricultural pests, diseases and weeds, deterioration of livestock conditions, increased risks of forest fires and of desertification, decreased water resources with negative impacts on soil structure and increased salinity in summer time, increased risks of floods in winter and spring time, loss of diversity in species, salt water intrusion in coastal areas. Also human health will be impacted. A study of the European Environment Agency on climate change impacts and vulnerability in Europe (EEA, 2012) indicates that “parts of the south-eastern Europe will experience yield reductions from hot and dry summers without the possibility od shifting the crop production into the winter seasons”. The vulnerability can be defined as a function of the following three factors (World Bank 2009, EEA, 2012):

exposure to climate change impacts (hazards depending on future climate change),

sensitivity (degree to which exposure to a hazard causes harm) and

adaptive capacity (ability of social, economic and political institutions to respond to effects of climate change).

The vulnerability of a country is measured by a vulnerability index. It combines indices of the above mentioned three factors. Adaptation can be seen as human reaction to climate change impacts and linked risks. The European Environment Agency (EEA, 2012) and the World Bank (World Bank, 2009) implemented such vulnerability analyses for European Member States and for other European

6 www.climateadaptation.eu/

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and Central Asian countries. A study of ENVSEC (Environment and Security Initiative) and UNEP (ENVSEC, UNEP 2012) looks specifically on climate change issues in the West Balkan countries, partly building on the above mentioned analyses. One result is a map with climate change hotspots in these countries (see Figure 4). Until 2050 all countries will be confronted with a decrease of the annual precipitation and with temperature increase (1.7 – 2,3 °C). Risks of forest fires are already existing in Albania, Macedonia and parts of Croatia and will in future increase. Droughts and heat waves and linked higher risks of agricultural yield losses have to be expected in Albania and Macedonia. Risk of floods are concentrated in parts of Serbia.

Figure 4: Map with climate change hotspots in West Balkan countries

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(Source: ENVSEC, UNEP 2012)

The vulnerability analysis of five Balkan countries in this study comes to the result, that Albania is most vulnerable to climate change, followed by FYRO Macedonia, Serbia and Bosnia and Herzegovina. Croatia is the least vulnerable one between these five countries. Many of the Balkan countries are characterized by a legacy of environmental mismanagement and a weak infrastructure. Their financial position is weak and institutions are under-developed. In consequence, they have often many adaptation deficits. Albania: Because of a decrease of mean annual and seasonal precipitation and an increase in air temperature a negative influence on hydro power generation (in long-term minus 60%) and in agriculture, which is the most important economy sector in this country (58% of employment), has to be expected. The northern part of Albania is sensitive to floods. The adaptive capacity to respond to a change and to enhance resilience is in Albania quite low. FYRO Macedonia has to expect a high variation in temperature and precipitation. Agriculture and forestry in central and south-eastern parts of the country will be effected negatively. The country is characterized by a high unimployment rate and an extensive grey market and the adaptive capacity is judged to be low. Also Bosnia and Herzegovina will be effected by higher temperatures and less precipitation with negative impacts on agriculture, forests energy and water resources management. Because of a lack in management, technological and economic possiblities similar to Albania and FYRO Macedonia the adaptive capacity is also in this country rather low. In Montenegro the forestry sector is of importance and linked climate change impacts have to be considered. Other In Serbia, droughts have already caused negative impacts on agriculture. Because of rising temperatures and precipitation changes, an additional decline in production has to be expected in future. In the northeastern part of the country there is a risk of increased floods. Croatia has to expect greater frequency of droughts, with negative consequences on water resources. Growing requirements for irrigation and drinking water have to be covered. Croatia has the highest adaptive capacity of the Balkan countries. There have been initiated some regional actions, such as the:

Drought Management Centre for Southeastern Europe (DMCSEE):

Southeast European Climate Change Framework Action Plan for Adaptation(SEE/CCFAP-A):

Regional Environmental Network for Accession (RENA):

South Eastern and Central Europe Catastrophe Risk Insurance Facility (SECE CRIF)

Regional Program on Reducing Vulnerability to Climate Change in ECA Agricultural Systems (RP VCC ECA).

The DMCSEE is a net-working driven centre for SEE countries and coordinates the “development, assessment and application of drought risk management tools and policies with the goal of improving preparedness and reducing drought impacts”7. It fosters a balanced territorial development and territorial integration within the cooperation area. Slovenian

7 http://www.dmcsee.org/

Regional State-of-the-Art Analysis covering SEE area 19

environmental agency was trusted with organization of DMCSEE. Up to now the main work was concentrated on the development of drought indices, drought monitoring, vulnerability assessment and linked indices (DMCSEE,2012), resulting in a map based drought monitor system, and linked dissemination of information and capacity building activities. The SEE/CCFAP-A is a subregional cooperation (Albania, Bosnia and Herzegovina, FYRO Macedonia, Montenegro, and Serbia) on climate change and established long-term partnerships with the goal to raise awareness amongst all relevant groups. An action plan for adaptation (SEE/CCFAP-A, 2008) was prepared in 2008 (Khovanskaya, 2009), drafting a framework for developing and implementing cost-effective multi-sectoral adaptation options. Another focus is on capacity building measures through information dissemination, training and research. The by EU financed RENA8 has a special Working Group 2 on climate change, which is supporting the beneficiary countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYRO Macedonia, Montenegro, Romania, Serbia and Kosovo) and their efforts in setting up the structures and strategies to limit GHG emissions and to adapt to expected changes in circumstances. The SECE CRIF is a regional catastrophe insurance program which was facilitated by the World Bank together with the United Nations International Strategy for Disaster Reduction (UN ISDR) and the Regional Cooperation Council (RCC) (10) This regional catastrophe risk pool is owned by the governments of the participating countries, which are Albania, Bosnia and Herzegovina, Croatia, Montenegro, Serbia and Bulgaria. The aim is to “facilitate the development of a catastrophe insurance market in South East Europe and thereby provide access for homeowners and SMEs to affordably priced (but not subsidised!) catastrophe insurance”9. The RP VCC ECA is carried out by the World Bank to “better determine the potential impacts of climate change on the agricultural sectors of vulnerable ECA countries, and to provide practical recommendations on actions these countries can take to increase the resiliency of their farmers in the face of climate phenomena”10. This program will initially be carried out in four pilot countries—Albania, FYRO Macedonia, Moldova, and Uzbekistan, because it can be expected that these countries have the greatest negative agricultural impacts and tend to have relatively large agricultural sectors or high numbers of small-scale, mostly poor farmers. There have been produced Country Notes on Climate Change and Agriculture with country-specific information on climate and crop projections, adaptation options, policy development, and institutional involvement on agriculture and climate change (Albania, 2011 and FRRO Macedonia, 2010).

1.7 Barriers and institutions

Apart from economic barriers to invest in renewable energy sources a major hurdle for implemeting climate channge measures in the West Balkans are intitutional barriers. The implementation of climate strategies need considerable efforts in political and other

8 http://www.renanetwork.org/index.php?view=wgroup&groups=wgroups&id_group=2

9 http://www.climateadaptation.eu/serbia/insurance-and-business/

10http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/0,,contentMDK:22626153~pag

ePK:146736~piPK:146830~theSitePK:258599,00.html

Regional State-of-the-Art Analysis covering SEE area 20

stakeholder organisations, however the needed personal capacity for carrying out comprehensive implementation measures is often not available. Also there is a lack of coordination among institutions regarding the cross cutting issue of Climate change. Croatia has initiated an interministerial Working group to assist the implementation of climate related legislation.

1.8 Conclusions

The report shows that the implementaion of the energy related EU aquis is advancing, however in most SEE countries no comprehensive Climate Strategies exist. The Western Balkan countries have to gradually comply with the climatechange acquis but most of them are in an early stage. For most of them as beeing non-Annex I countries climate change mitigation was not on the policy agenda. In addition the Kyoto flexible mechansims didn’t see a widespread use. While SEE countries are at high risk regarding climate change impacts, comprehensive adapataion policies are missing. In total the awareness of climate change issues in the region is low and there is and limited administrative capacities in the relevant ministries to deal with Climate change measures. The common aim to join the EU however will be a significant driver of adopting EU climate legislation in the West Balkans

1.9 References

Albania, 2011: Albania Climate Change and Agriculture Country Note, World Bank, February 2011 http://siteresources.worldbank.org/ECAEXT/Resources/258598-1277305872360/7190152-1303416376314/AlbaniaupdateCountryNote-final.pdf DMCSEE, 2012: Drought Management Centre for Southeastern Europe, Summary of project results, Slovenian Environmental Agency, 2012. ENVSEC, UNEP (2012), Climate Change in the West Balkans. European Environment Agency (EEA), 2012: Climate Change, Impacts and Vulnerability in Europe 2012. An Indicator-based Report. EEA Report No. 12/2012, Copenhagen, Denmark. FYRO Macedonia, 2010: FYRO Macedonia Climate Change and Agriculture Country Note, World Bank, September 2010 http://siteresources.worldbank.org/INTECA/Resources/MacedoniaCountryNote.pdf World Bank 2009: Adapting to Climate Change in Europe and Central Asia. World Bank, June 2009. IEA, 2011 Energy in the Western Balkans. Khovanskaya M 2009: Southeast European Climate Change Framework Action Plan for Adaptation. Presentation 19-20 October 2009, Zagreb. RENA…… SEE/CCFAP-A, 2008: Southeast European Climate Change Framework Action Plan for Adaptation, November 2008.

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UNEP RISOE Centre 2013: UNEP Risoe NAMA Pipeline Analysis and Database, Roskilde, Denmark. http://namapipeline.org/, UNDP 2011: Fossil Fuel Subsidies in the Western BalkansSubsidie