16. Environment policy (Dimension 13)

Since the last assessment, the six Western Balkan (WB6) economies have slightly improved their scores in the environment policy dimension (Figure 16.1). While the situation in Bosnia and Herzegovina1 has improved, its score is still the lowest of all the assessed economies. Montenegro and North Macedonia have made the most progress between 2018 and 2021 and rank first and second respectively in the Western Balkan region for environment policy.

There has been only limited progress overall on implementing the policy recommendations made in the CO 2018 (Table 16.1), although there are large differences in implementation across economies. Moderate advances have been made in accelerating the transition to a low-carbon economy, but improvements in defining clear roles and responsibilities at local levels, strengthening natural asset management, and institutionalising the collection of key environmental data are limited.

Climate change is increasingly affecting people’s lives, disrupting economies and transforming ecosystems. Considering the Western Balkans’ vulnerability to the impacts of climate change, building resilience to natural disasters and other environment-related risks will be necessary for the region’s economic growth and people’s well-being. To develop and maintain their competitiveness (especially in the long run), the WB6 economies need to pursue green growth, i.e., sustaining economic growth while safeguarding their natural assets to maintain the environmental services on which their citizens’ well-being depends. By aiming to achieve the net-zero goal for greenhouse gas emissions and mainstreaming environmental considerations into all areas of policy, including by adopting a circular economy, the WB6 can increase their efficiency and competitiveness, spurring green innovation, new markets and jobs. Current business models need to adapt to account for climate change, resource bottlenecks, air and water pollution, and irreversible biodiversity loss (OECD, 2017[1]).

The Competitiveness Outlook’s environment policy dimension assesses the WB6’s key environmental characteristics, and their policies to protect natural resources and facilitate their sustainable use. Policies that affect the environment are cross-cutting, meaning that policy design and implementation need to be well integrated into key economic and sectoral policies – both vertically (international, central, local) and horizontally (inter-sectoral and across line ministries) – including energy, transport, agriculture, and health. Therefore, this chapter is related to all other dimensions in the Competitiveness Outlook, but has strongest links to the following:

  • Chapter 4. Investment policy and promotion is key to enabling an economy to establish a specific environment that is conducive to scaling up green investments to support green growth.

  • Chapter 7. Tax policy can offer incentives for adopting environment-friendly technologies and discouraging harmful practices.

  • Chapter 14. Transport policy is an essential component for reducing emissions across the region through sustainable transport frameworks, containing adequate rules and options for green fuel and car models. Environment policy is also directly related to the impact assessment for constructing transport infrastructure.

  • Chapter 15. Energy policy and power generation have impacts on air, water and land and account for large shares of WB6 economies’ greenhouse gas emissions. Hence, energy policy frameworks need to be fully aligned with climate change objectives, and policies supporting energy efficiency and renewable energy sources need to be implemented.

  • Chapters 17 and 18. Agriculture and tourism depend on high-quality natural assets and are particularly vulnerable to the negative effects of air, land, and water pollution as well as climate change – for instance ambient air pollution can reduce crop yields, and litter can deter tourists. In turn, these sectors also use natural resources and can be sources of local and transboundary pollution; their activities must therefore be managed to minimise any negative environmental impacts.

This chapter examines policies to facilitate greener growth in the WB6 by assessing three broad sub-dimensions:

  1. 1. Sub-dimension 13.1: Resource productivity assesses how policies facilitate efficient material resource use in production and waste generation and the extent to which they combat climate change.

  2. 2. Sub-dimension 13.2: Natural asset base focuses on the extent to which natural assets are being preserved and managed for the economy and future generations (especially freshwater, biodiversity, forestry and land).

  3. 3. Sub-dimension 13.3: Environmental quality of life examines how environmental conditions affect people’s health and quality of life by measuring air pollution frameworks, water supply and sanitation systems, and industrial waste management.

The three sub-dimensions are based on the OECD Green Growth Indicator framework (Box 16.1) and indicators are also directly linked to the United Nations Sustainable Development Goals. The OECD supports the United Nations in ensuring the success of the 2030 Agenda for Sustainable Development by bringing together its existing knowledge, and its unique tools for monitoring performance. Figure 16.2 shows how the sub-dimensions and their indicators make up the environment policy dimension assessment framework.

The assessment was carried out by collecting qualitative data with the help of questionnaires filled out by governments, as well as face-to-face interviews with relevant non-government stakeholders. Alongside these qualitative inputs, quantitative data on certain indicators – provided by the economies’ statistical offices, relevant ministries and agencies, and other databases – formed an integral part of this assessment. For more information on the methodology see the Assessment methodology and process chapter.

The leaders of the WB6 endorsed the Common Regional Market (CRM) 2021-2024 Action Plan (AP) at the Berlin Process Summit held on 10 November 2020 in Sofia. The Action Plan is made up of targeted actions in four key areas: 1) a regional trade area; 2) a regional investment area; 3) a regional digital area; and 4) a regional industrial and innovation area.

The regional industrial and innovation area includes a component on green and circular economy value chains (Priority 8.4). As part of this area, the WB6 economies commit to closely transform their industrial sectors, shape their value chains and prepare them for the realities of today and the challenges of tomorrow. The findings in the resource productivity sub-dimension, and in particular the circular economy indicator, can inform the implementation of the actions under this component (Box 16.3).

The CO 2021 environment policy dimension assessment framework has been slightly redesigned and restructured since the 2018 edition. It now 1) includes the key priorities of the EU Green Deal (European Commission, 2019[3]), such as the increasing importance of a circular economy; and 2) places a stronger focus on measures to build resilience to climate change-related natural disasters, which present a growing challenge for the WB6. The sub-dimension on “policies for green growth”, present in the 2018 assessment, has been removed and integrated into the three other sub-dimensions.

Outcome indicators assess the performance of overall framework conditions for enabling businesses to be competitive while taking environmental concerns into account. The WB6 lack data for measuring outcome indicators such as environmentally adjusted economic productivity (carbon, water or material productivity). Moreover, greenhouse gas (GHG) inventories have not been conducted by the WB6 during the assessment period. Instead, the composition of value added between economic sectors (Figure 16.3) sets the broader context for looking at green growth, as economic sectors use natural capital and pollute in different ways. The industry sector includes energy, mining, and construction – as such, it is the most resource-intensive economic sector. The agriculture sector uses significant amounts of land and water, and agricultural inputs may be a source of pollution. The service sector is the least resource intensive.

Services contribute the greatest share of value added in the WB6 economies, accounting on average for about 52% of gross domestic product (GDP) (Figure 16.3). However, this share is smaller than in the OECD and CEEC-11,2 where services contribute about 70% and 58% respectively on average. Industry contributes about 23% to value added in the WB6, as in OECD and EU countries. Agriculture’s share in the six economies accounts for 8.5% on average, ranging between 5.6% in Bosnia and Herzegovina to 18.5% in Albania. This is significantly larger than OECD and CEEC-11 averages, which are each at about 1.4% and 2.7% respectively.

Air quality is still a predominant concern in the region, with pollution levels ranking among the highest in Europe – see Environmental quality of life (Sub-dimension 13.3) and Figure 16.12. These levels are of even greater concern in the context of the COVID-19 pandemic. Exposure to ambient and indoor air pollution increases the risk of cardiovascular, respiratory and developmental diseases, as well as premature death, thus making individuals even more vulnerable to COVID-19 (OECD, 2020[5]). Moreover, non-OECD, non-EU European economies, including the WB6, are among the most susceptible to changes in crop yields caused by air pollution, especially wheat, with a model predicting yield decreases of up to 20% by 2060 (OECD, 2016[6]). Given that agriculture accounts for a considerably larger portion of the WB6 economies than in the OECD, these economies could be particularly vulnerable to the negative effects of air pollution.

This first sub-dimension assesses whether policies facilitate efficient material resource use in production and waste generation and the extent to which they address climate change goals. A high level of resource productivity safeguards the environment by reducing the amount of resources an economic activity requires and thereby lessening the associated environmental impacts; it also improves resource security and strengthens economic competitiveness (OECD, 2016[7]). Three qualitative indicators are used to assess resource productivity in the six WB economies. These explore the existence and degree of implementation of frameworks for: 1) climate change adaptation and mitigation; 2) a circular economy; and 3) municipal solid waste management (Table 16.2).

Performance across all WB6 economies is similar for the resource productivity sub-dimension (Table 16.2), although Montenegro has made the most progress since the previous assessment. On average, the six economies score 2.0 overall, indicating that relevant policy frameworks have been adopted. Nevertheless, they have considerable potential for using their available natural resources more productively. Climate change mitigation and adaptation as well as municipal solid waste management are equally advanced with overall scores of 2.3, indicating that policy frameworks are in place, challenges have been identified and implementation has begun. However, circular economy initiatives are still at an early stage of development, and although some actions have been taken, policy frameworks are still largely lacking throughout the region.

Electricity generation and heat production account for the majority of carbon dioxide (CO2) emissions in the six economies – ranging from 61.4% in Montenegro to almost 75% in Kosovo (Box 16.4) – followed by the transport sector, which accounts for around 18% on average. The exception is Albania, where 60% of its CO2 emissions come from transport, as almost 100% of its electricity generation comes from hydropower.

Climate change adaptation legal and policy frameworks are being gradually introduced across the six economies, while climate change mitigation efforts need to be stepped up. Albania (2021), Montenegro (2019), and Serbia (2021) have recently adopted laws on climate change which establish the institutional frameworks and rules for monitoring, reporting and verifying greenhouse gas (GHG) emissions. While Bosnia and Herzegovina (BIH), Montenegro and North Macedonia already had climate change strategies in place, Albania and Kosovo have adopted climate change strategies and related action plans on mitigation and adaptation since the last assessment. This leaves Serbia as the only economy that has not adopted a long-term strategy that encompasses energy and climate targets, although it was developing the integrated National Energy and Climate Plan (NECP) at the time of drafting.3 Climate change goals have been integrated into sectoral strategies in Albania (transport), Bosnia and Herzegovina (energy), and North Macedonia (energy). North Macedonia was preparing a long-term strategy on Climate Action to 2050 at the time of drafting and is the first contracting party under the Energy Community to integrate the pillars of energy and climate into its national energy strategy (European Commission, 2020[9]). Further alignment is needed by Bosnia and Herzegovina and Kosovo (especially with regards to transport, industry and agriculture policies). No systematic monitoring and evaluation of the strategies are conducted in Bosnia and Herzegovina or Kosovo, while Albania and Serbia plan to do so under their recently adopted laws on climate change.

Apart from Kosovo, all WB6 economies are Non-Annex I signatories to the UN Framework Convention on Climate Change (UNFCCC) and its Paris Agreement and are also parties to the Kyoto Protocol. As requested by the Paris Agreement, the five economies have submitted their Nationally Determined Contributions (NDCs), which are currently being updated. All five economies have to submit regular reports in the form of national communications and Biennial Update Reports to the UNFCCC. Nevertheless, the frequency of these reports varies considerably among the economies (UNFCCC, n.d.[10]).4 As for Kosovo, its Energy and Climate Plan (2021-2030), which was being developed at the time of drafting, should set GHG emission reduction targets.

In general, the transition to renewables has been progressing very slowly in the region. While Albania’s new Law on Climate Change sets a 32% renewable energy target by 2030, North Macedonia has revised its original 28% renewable energy target downwards to 23.9% of gross final energy consumption. As in the last assessment, most of the renewable energy produced in the region comes from hydroelectricity, despite the great untapped potential for renewable energy in all the economies, especially solar and wind (see Energy policy chapter).

Major climate-related risks have been identified in Bosnia and Herzegovina, Kosovo and North Macedonia as well as to some extent in Albania and Serbia.5 In Montenegro, the Ministry of the Interior is currently preparing a disaster risk assessment which will cover major climate change-related risks. The WB6 have also undertaken actions related to water-related disasters, and floods in particular. Some flood risk management measures have been implemented through the regional project Adaptation to Climate Change through Transboundary Flood Risk Management in the Western Balkans (2016-2020).6 However, other natural disasters, such as earthquakes, have not been taken as much into consideration in the region.

Limited progress has been achieved in developing circular economy frameworks in all WB6 economies except for Serbia. With an average of 1.3, scores for the circular economy framework are the lowest for all indicators in the environment policy dimension (Table 16.2).

In all six economies except Montenegro, waste generation per capita remains below the EU and OECD averages (Figure 16.5). Nevertheless, very little has been done to decrease the amount of waste and volumes are increasing constantly. Recycling rates for municipal waste in all six economies also remain extremely low (Figure 16.6). Albania recycles around 18.5% of its municipal waste, which is the highest rate in the WB6 region, but still significantly lower than the European Union average (47%). All other assessed economies recycle less than 5% of their municipal waste, and the rest is largely landfilled. Only a few recycling centres exist, although new recycling yards and sorting plants are being constructed throughout the region. Some progress has been achieved since the last assessment: North Macedonia has increased the recycling rate of its packaging waste, the RS in BIH has established a packaging waste management system and introduced extended producer responsibility, and Serbia has a new regulation for reducing packaging waste (2014-2020). According to relevant authorities, the recycling industry is currently gaining momentum in Kosovo as the private sector takes advantage of a lucrative opportunity for exporting secondary material within the region and to several EU Member States. In addition, awareness-raising activities on recycling are organised in schools throughout the WB6, though on a rather ad-hoc basis.

In 2020, Serbia was the first WB6 economy to have prepared a roadmap for a circular economy, which it aims to harmonise with EU recommendations (Box 16.2). North Macedonia is preparing a new Law on Waste, which should promote the circular economy and the use of secondary raw materials, in line with the EU acquis in this area. The Albanian government also plans to revise its legislative framework in this area, such as through the new law on extended producer responsibility, which is slated for adoption during 2021 and which will promote a circular economy. The legislative framework in all other economies is being developed, although the topic of circular economy is mostly covered indirectly in different strategies.

The findings of this assessment are also relevant for the WB6 economies’ implementation of the Common Regional Market Action Plan, which includes a component on green and circular economy value chains (Box 16.3).

Municipal solid waste management safeguards the environment and public health. All six economies have strategies that lay out objectives for municipal solid waste management, and implementation has begun. Since the last assessment, Albania has adopted two waste management strategies7 (in 2019 and 2020) and laws and strategies are being revised in Kosovo, Montenegro and Serbia to transpose the relevant EU directives. Serbia’s implementation is quite advanced thanks to its good institutional capacity and strong co-ordination with local authorities. However, although mechanisms for monitoring implementation or targets are envisaged in the strategies, they are largely lacking in all assessed economies.

Across the WB6, waste disposal tariffs are too low to cover the costs of municipal waste collection, let alone the costs of infrastructure construction or maintenance. Consequently, waste collection and treatment infrastructure remains largely dependent on donor funds, which impedes regular maintenance (Eunomia, 2017[14]). In a positive move, Albania has developed a new methodology to calculate waste management costs, which has improved its waste service.

Primary waste selection is almost non-existent throughout the region and there is no systematically organised separate collection, sorting or recycling of municipal waste. Nevertheless, waste separation at source has been slowly introduced since the last assessment in certain municipalities in Kosovo and Montenegro, and the RS in BIH has introduced “green islands” for the separate collection of waste in public areas. Moreover, there has been large-scale investment in new waste treatment facilities in Albania and Serbia.

The continued prevalence of unregulated burning and illegal dumping of waste in the region poses threats to the environment and public health through groundwater, soil and air pollution (UNECE, 2019[15]). Although all assessed economies have sanctions and mechanisms to report these practices in their legal frameworks, implementation has been weak. Some actions are underway to improve the situation: civil society organisations have been mapping illegal dumpsites across BIH and Montenegro; projects to clean up and combat illegal landfills have been implemented in Kosovo and Serbia; illegal dumpsites are being closed in BIH; and Albania’s Waste Management Plan foresees replacing illegal dumpsites with 10 regional controlled landfill sites by 2028.

  • Improve waste management by enforcing measures to separate and reduce waste and increase recycling and recovery in line with circular economy principles. The WB6 economies should strengthen their legal and policy frameworks for a circular economy in line with EU regulations. Serbia’s Roadmap for a Circular Economy could serve as a model (Box 16.2). Governments need to step up enforcement efforts and strengthen co-operation with local governments to improve waste management.

  • Put in place educational and awareness raising activities for waste prevention, separate collection, waste reduction and recycling. Public awareness and support are key factors in changing behaviour and thus for the success of waste policies. Good practice from OECD countries might serve as inspiration (Box 16.4).

  • Establish a regional Green Start-up Network based on existing domestic start-up programmes. As recommended in the CRM Action Plan (2021-2024); (Box 16.3), this network should identify key circular and green business opportunities and boost business networking. Good practice from the Interreg Europe Green Start-up Support (GRESS) project, financed by the EU, could serve as a good example for a WB6 green regional network (Box 16.5).

This sub-dimension assesses the extent to which the natural asset base is being preserved for economic activity and for future generations. Safeguarding the quantity and quality of water, forest and biodiversity resources protects current and future public health and the livelihoods that depend on them. This entails effective management of resource supply and demand as well as balancing competing uses. Three qualitative indicators assess the presence and implementation of management frameworks for: 1) freshwater; 2) biodiversity and forests; and 3) land use.

On average, the WB6 economies achieved a score of 2.1 for the natural asset base sub-dimension (Table 16.3), signifying that the relevant policy frameworks are mostly adopted. Across these economies, biodiversity and forestry policies are the most advanced and implementation is beginning, but inventories and monitoring programmes are still lacking. Little progress has been achieved on land-use management frameworks and implementation is slow.

The Western Balkans are home to rich, diverse and interconnected transboundary freshwater resources, from the karstic regions of the Dinaric Alps and the Adriatic coast to the Danube, Drin and Vardar river basins and the ancient lakes of Ohrid, Prespa and Skadar. However, water resources are distributed unevenly across the region (Figure 16.7) and are used differently by the assessed economies. In contrast to most OECD countries, where agriculture uses the largest share of water resources, in Albania, BIH, Kosovo and Montenegro, households account for the largest share (Figure 16.8). In Serbia, the industrial sector accounted for 75% of total freshwater abstractions in 2017, mainly for cooling purposes in electric power generation. Anthropogenic pressures on water resources, including water pollution resulting from insufficiently treated industrial and municipal wastewater, still raise key concerns in this area. Moreover, the lack of data and projections on water demand from agriculture, industry (including energy) and households in all assessed economies complicates decisions on handling competing uses now or in the future.

The groundwork for the freshwater management legislative framework has been done in most of the assessed economies. Albania and North Macedonia have adopted new laws and strategies, though there have been no major changes to the frameworks in BIH, Montenegro and Serbia. Kosovo’s framework is still only partially developed and efforts need to be stepped up to complete it. Implementation has been rather limited throughout the region. Some positive developments have been noted in Montenegro, which has signed the new EU-Instrument for Pre-Accession Assistance (IPA) project on Support to the implementation and monitoring of water management. Kosovo has created reservoirs to improve drinking water supply, but their safety management is inadequate, especially in light of water stress resulting from climate change (European Commission, 2020[9]). Moreover, monitoring and evaluation mechanisms are largely lacking, except in Serbia which conducts annual water status monitoring.

The planning and management of hydropower plants, including a requirement for a detailed environmental impact assessment (EIA), are regulated by law in all assessed economies. However, the legal procedures have been largely circumvented in all six economies, in particular for mini hydropower plants. In practice, there are too many cases in which licences for hydropower plants are given before an EIA report is issued or without taking the EIA report into account. This problem is particularly important in Albania, as most of its nationally produced electricity comes from hydropower.

Donors have driven the international co-ordination of transboundary river basins,8 but efforts are hampered by poor domestic co-ordination among water-related public institutions. River basin management systems involving co-operation with neighbouring economies have been developed since the last assessment in Albania, BIH, Kosovo and North Macedonia.

The Western Balkan’s richly varied geography is mirrored in the diversity of its flora and fauna. Moreover, the region’s forests serve as valuable sources of income (timber and other forest products, agroforestry, and recreation) and reservoirs of biodiversity, which also provides social benefits. Forests in the WB6 cover a larger share of territory than in the average OECD country (Figure 16.9), with Montenegro being the most forest-rich economy, accounting for 61.5% of its territory. However, human pressures are major threats to protecting biodiversity and maintaining forestry resources, and include illegal logging, tourism, urbanisation, hydropower, pollution, illegal waste, as well as forest fires, climate change and invasive species.

Strong biodiversity and forestry frameworks are key to overcoming these challenges and conserving the region’s ecosystems. All assessed economies have adopted policy frameworks for biodiversity conservation. North Macedonia adopted its National Biodiversity Strategy in 2018 and was drafting a new Law on Nature at the time of writing. Biodiversity frameworks are also being updated in Kosovo, the Federation of Bosnia and Herzegovina (FBiH) and Serbia. Since the last assessment a new Law on Forests (2020) and Forest Policy Document (2018) have been adopted in Albania and a Forest Management Programme was adopted in Montenegro in 2019.

Biodiversity is monitored annually in Albania, whose government has developed a national biodiversity platform, which is currently the largest aggregator of primary biodiversity data in the economy. It also monitored annually in Montenegro through direct co-operation with institutions responsible for different thematic areas as prescribed by the Law on Nature Protection. Information is also collected in Kosovo (biodiversity indicators, including conservation status of threatened species and habitats) and Serbia (indicators on biodiversity, forestry, hunting and fishing, as well as sustainable use of natural resources) by their respective statistical offices. North Macedonia plans to establish a monitoring system under the biodiversity strategy. Entities in BIH lack the capacity to establish their own monitoring systems as stipulated in their respective laws on nature protection (UNECE, 2019[15]). Moreover, up-to-date forest inventories are lacking in BIH, Kosovo and North Macedonia. Forest inventories exist in Albania (completed in 2021) and in Montenegro, and Serbia’s Second National Forest Inventory is expected to be completed by 2022. Even when forestry legal and policy frameworks are in place, local forest management capacity and enforcement are insufficient. Illegal logging and forest fires are legally regulated in all assessed economies; however, sanctions are rarely enforced.

Implementation of biodiversity and forestry strategies has been rather limited since the last assessment, in particular because of poor co-ordination among the relevant bodies at central and local levels. Nevertheless, Albania, both entities of BIH, Kosovo and North Macedonia have adopted plans for the protection of endangered species and fauna, as well as proclaiming new protected areas. Most economies have also established information systems for nature protection.

All WB6 economies (except Kosovo due to its status), are parties to the Convention on Biological Diversity (CBD), an international treaty with 196 parties. The CBD includes the 20 Aichi Biodiversity Targets, which address five strategic goals. Aichi Target 11 states that by 2020, at least 17% of a party’s terrestrial territory should be designated as protected areas.9 Progress towards this target has been made in almost all assessed economies (Figure 16.10), but only Albania has managed to exceed the 17% target, reaching 18.5% in 2020 despite having one of the lowest levels in 2014. With over 10% of their land area designated as protected, Kosovo, Montenegro and North Macedonia have also made significant progress.

In addition to the above-average share of land covered by forests, agricultural land (especially arable and permanent cropland) accounts for a larger share of the territory in the assessed WB6 economies than it does in OECD economies (Figure 16.11). This trend has been slowly decreasing in recent years, with the most pronounced example being Montenegro (down from 38% in 2012 to 18.5% in 2016).

Land-use frameworks have changed little in most assessed economies since the last Competitiveness Outlook, except for North Macedonia. Major developments have been noted in North Macedonia’s legislative framework with the adoption of a new Law on Urban Planning (2020), and the upcoming Law on Spatial Planning and National Spatial Plan (expected in 2021). Serbia has a relatively well-developed land-use framework, a new Spatial Plan for the period 2021-35 is being prepared and monitoring is in place. In all other economies legislative frameworks are still underdeveloped, and little progress has been achieved on the policy side. Montenegro has adopted a new Spatial Plan and Kosovo is updating relevant strategies which will indirectly regulate land use.

Some projects on agricultural land consolidation10 exist in Kosovo, and Serbia is in the process of establishing a domestic soil monitoring programme. Albania, Kosovo and the RS in BIH are preparing municipal land development plans together with local municipalities, which aim to ensure sustainable territorial development and rational land use. The fact that key indicators of land-use management are not collected regularly (except for agricultural, forest and other semi-natural land in Serbia), or georeferenced or harmonised across public bodies, is holding back proper implementation. Also, outdated building codes and illegal construction remain important challenges in the region, especially in Albania in light of the economy’s vulnerability to geophysical hazards, such as earthquakes. The Western Balkan region is threatened by multiple hazards; the 2020 floods in Kosovo and Serbia and the 2019 earthquake that hit Albania highlighted the weaknesses of land-use frameworks and systems.

  • Design and implement effective, efficient, and inclusive freshwater policy responses to water challenges. The WB6 should ensure the proper collection of data and projections on water demanded from different economic sectors to guide decisions on water use. The OECD Toolkit for Water Policies and Governance – especially Turkey’s data collection example – is a good source of advice on this matter (Box 16.6).

  • Enforce close regional co-operation at the river basin level to protect and manage water, bringing together all interests upstream and downstream. A joint approach to the diverse and interconnected transboundary freshwater resources in the WB6 is still in its infancy and the main river basin management projects are donor driven. All EU Member States have used a river basin approach for water management since the adoption of the EU Water Framework Directive, which establishes a legal framework to protect and enhance the status of aquatic ecosystems, prevent their deterioration and ensure long-term, sustainable use of water resources. The International Commission for the Protection of the Danube River (ICPDR), which implements the EU Water Framework Directive, could be a model for other river basins in the region (Box 16.7).

  • Develop a comprehensive land-use policy framework to ensure effective land-use planning, preserve land and foster resilience to hydro-meteorological and geophysical hazards. To achieve this, the WB6 should focus on establishing an all-inclusive land-use policy framework focusing on modernising the building codes, updating seismic hazard maps and combatting unregulated and illegal building activities by enforcing the cadastre.

The third sub-dimension assesses how environmental conditions affect people's health and quality of life. Three qualitative indicators assess the environmental quality of life in the WB6 economies: 1) the air quality framework; 2) the water supply and sanitation system; and 3) industrial waste management. Air pollution is a very serious environmental threat, resulting in premature deaths, increased respiratory disease and lower crop yields. The absence of high-quality water supplies and sanitation can increase health costs and decrease labour productivity. Finally, poorly managed industrial waste can result in contaminated land, with serious repercussions for human and natural health.

On average overall, the WB6 economies score 2.3 for this sub-dimension (Table 16.4), indicating that policy frameworks for air quality, water supply and sanitation and industrial waste management have mostly been adopted. The economies, especially Montenegro and North Macedonia, have made the most progress in developing frameworks for air quality, which is one of the most pressing issues in the region. Industrial waste management frameworks and implementation are still lagging behind.

Air quality is still a major concern in the region, with concentrations of air pollutants such as fine particulate matter (PM2.5) ranking among the highest in Europe. PM2.5 is the air pollutant posing the greatest risk to health globally, affecting more people than any other pollutant. With an average concentration of 25.77 µg/m3 in 2019 for the six economies, the exposure of these economies’ populations to PM2.5 is two to three times higher than the WHO recommended highest levels of 10 µg/m3. It is also much higher than OECD and CEEC-11 values (Figure 16.12). However, promisingly, since 2014, PM2.5 levels have been slowly decreasing in all economies in the region.11 Across the region, power generation, heating, industry, and transport are the main sources of air pollution. The problem is exacerbated in winter, when air pollution increases due to solid fuel heating (using coal as a low-cost source of energy). Some of the WB6 economies plan to continue to rely primarily on coal-fired power generation to supply growing energy consumption, and to expand their existing coal fleet, while continuing to subsidise coal (Kosovo and Serbia in particular). Uncontrolled pollution, notably from outdated thermal power plants, calls for urgent action. In 2016, 16 coal-fired thermal power plants in the WB6 emitted more sulphur dioxide than all of the 250 plants in the EU combined (Balkan Green Foundation, 2016[24]).

Nevertheless, with an average of 2.7 for the air quality framework indicator (Table 16.4), the six assessed economies have made considerable progress in developing their frameworks and harmonising their legislation with the EU acquis (such as Directive 2008/50/EC on ambient air quality). Since the last assessment, Albania’s main law on the protection of ambient air quality has come into force (in 2018) and Albania, Kosovo, Montenegro, North Macedonia and Serbia have all adopted policy frameworks with clearly defined objectives for air quality management. Meanwhile, the Swedish Environmental Protection Agency Programme on improving air quality and air quality management in Bosnia and Herzegovina (2017-2021) aims to build the capacity of the key government institutions to manage air quality and improve air quality data collection. Local air quality plans, urgently needed for areas in which pollutant levels regularly exceed health guidelines, have been developed in North Macedonia and Serbia and are being prepared in Albania (started in 2021) and Kosovo (envisaged for the 2020-2025 period).

Implementation varies across the assessed economies. Implementation in Montenegro and North Macedonia is relatively advanced with several programmes in place for reducing air pollution and raising public awareness of air quality improvements. An air protection programme is being developed in Serbia and is expected to align Serbia’s practices with EU directives.12 Ad-hoc measures are taken when pollution limit values are exceeded in Albania and BIH. However, Kosovo has not yet implemented most measures in its air management strategy. For instance, the 2018 ban on the use of coal for heating in public buildings was not backed up by any financial support and consequently has not seen any meaningful implementation.

The fact that air quality frameworks do not stipulate clear obligations for polluters in the assessed economies impedes the efficiency of responses. In the EU, best available techniques for a range of industrial processes and emission rates must be taken into account by industry. They can also serve as a good basis for the WB6 (Box 16.8).

Air quality is monitored regularly across the region by permanent air quality monitoring stations and information on air quality is mostly made available promptly. The exception is Albania, where all stations have been turned off due to a lack of funding (European Commission, 2020[27]). Since the last assessment, North Macedonia has been working on establishing a national environmental information system to gather environmental data in one central database. Montenegro has re-established reporting on air pollutant emissions and provided all missing data for the period 2011-18, which will help in measuring the effect of air quality measures on actual emission levels. In Kosovo, a new action plan for air quality monitoring is under development with international support. Although air monitoring has improved in BIH, it is not well co-ordinated, with different methodologies used by different entities, which means there are no air quality data for the entire economy.

Access to an improved water source (e.g., household connection, public standpipe or protected dug well) is nearly universal in all assessed economies (all over 95%). A smaller share of the population is connected to sewage systems: 35% in BIH, 51% in Albania and 58% in Serbia (UNECE, 2019[15]). Far fewer people are connected to wastewater treatment facilities, with the average for the WB6 around 6.5%, which is significantly lower than the EU average of 86%. However, this share varies from 58.4% in Montenegro to 1% in Kosovo (Figure 16.13). Moreover, water pollution and water losses from the system are key challenges. The losses range between 33% in Serbia to almost 60% in Bosnia and Herzegovina, Kosovo, and North Macedonia, often due to outdated water supply networks. Despite these statistics, only the government of North Macedonia has started to take action to decrease these losses. In addition, infrastructure is often made of hazardous material – such as asbestos in BIH.

The water supply and sanitation legislative framework is almost fully aligned (95%) with the EU acquis in Montenegro and North Macedonia.13 Serbia needs to make significant efforts to further align its legislation with the EU acquis and to strengthen administrative capacity, in particular for monitoring, enforcement and inter-institutional co-ordination (European Commission, 2020[9]). Kosovo’s policy framework has been complemented with a new strategic plan for regional water companies (2018) and Albania’s legislative and policy frameworks were being updated at the time of drafting with the preparation of the Law on Water Supply and Sewerage Sector and a new strategy.14 No major changes have been recorded in Bosnia and Herzegovina, but the Water and Sanitation Infrastructure Project (WATSAN) implemented in both entities will harmonise the water supply and sanitation frameworks with EU legislation.15

Water supply and sanitation infrastructure projects have been implemented since the last assessment, with new wastewater treatment plants (WWTP) being constructed in all assessed economies. WWTPs are also planned in Belgrade and Skopje where a lack of plants means that all wastewater is discharged untreated into rivers. However, water supply and sanitation infrastructure projects are still largely dependent on donor funding throughout the assessed economies, and water tariffs are too low to cover service costs. The long-term affordability of new infrastructure maintenance under these conditions appears doubtful. For instance, although eight new plants were built in Albania in 2016, the lack of finance and limited technical capacities rendered three of them idle, and their long-term operational arrangements are unclear (UNECE, 2019[15]).

Little progress has been achieved on the industrial waste management framework. Across the assessed economies, laws and strategies on waste management also regulate the management of industrial waste. As regards managing and controlling industrial risks and accidents, the EU Seveso-III Directive (2012/18/EU) has been fully transposed into legislation in Kosovo, Montenegro, and North Macedonia, and partially in Albania (European Commission, 2020[9]). Alignment with most of the EU acquis is at an early stage in Serbia, including on the Industrial Emissions Directive. However, Serbia adopted its long-awaited national emission reduction plan in 2020 and established a database strengthening the monitoring of Seveso III operators (European Commission, 2020[9]).

In terms of chemicals, North Macedonia, Serbia, and the RS in BIH have an official register of chemicals on the market, as well as classification, packaging and labelling rules. Kosovo and Montenegro are working on establishing a domestic chemical register. By law, any chemicals produced in or imported into Albania need to be registered on an electronic chemical register, but the register has not yet been established. Pollutant Release and Transfer Register (PRTR) systems have been established in Albania, North Macedonia and Serbia. The PRTR Protocol has been ratified by Montenegro but the register has not yet been set up. Kosovo and the FBiH and RS in BIH have established their registers but they are still not fully operational. No hazardous waste disposal facilities exist in any of the assessed economies and waste must be exported for treatment. A project is being implemented for this in Kosovo, but it has been stalled for the past two years.16

There is no policy or legislative basis for soil protection in any of the assessed economies, except for Serbia, which recently established a national soil monitoring programme. Serbia has also established reporting on contaminated sites in 2020 through the cadastre of contaminated sites information system as part of the environmental information system. Provisions for soil protection will also be included in the amendments to the Law of Environment of North Macedonia, which was in the process of being adopted by the government at the time of drafting. Developments on identifying contaminated areas have only been recorded in Kosovo and Montenegro, with the former starting a World Bank-financed project to clean up contaminated areas.

  • Improve air quality by decreasing dependence on fossil fuels in the energy mix, upgrading household heating systems, reducing transport emissions, and decreasing emissions from industry.

  • Phase out coal subsidies and decarbonise the energy sector, and introduce incentives that support renewable integration. This will be particularly important if the EU moves to introduce a carbon border tax (currently being discussed), as this would make energy-intensive economic sectors increasingly uncompetitive. For more information, see the Energy policy chapter.

  • Include measures to prevent air emissions from industry more regularly in the environmental permits for industrial facilities. These could follow those described in the EU Best Available Technique Reference Documents (Box 16.8).

  • Promote sustainable transport options: modernise the bus fleet (low-emitting buses), and influence private vehicle purchasing and renewal decisions through ecological vehicle taxes which vary according to vehicle age and level of CO2 emissions. France’s bonus-malus scheme could be a good model to follow, which imposes a fee on vehicles with high CO2 emissions or fuel consumption and provides a rebate for vehicles with low CO2 emissions or fuel consumption (Box 16.9).

  • Increase the number of wastewater treatment plants and reassess the fee structure so that fees cover the service costs. Enforce the implementation of the water-user and polluter pays principles17 for all water users and dischargers, paying attention to vulnerable social groups. Ensure regular maintenance of the existing WWS network.

  • Introduce land-use management and soil protection legislative and policy frameworks. There are almost no relevant frameworks in the region and processes remain ad-hoc. Given the environmental importance of soil protection in most economies of the region, it is important to introduce a comprehensive policy framework for identifying, characterising and remediating contaminated sites. This should be backed up by concrete guidelines to facilitate the process of further land identification and its clean-up. Economies could follow the approach taken by Israel (Box 16.10).

The environmental legislative framework is relatively well advanced in the Western Balkan economies; progress has been made to transpose EU environmental directives and adopt missing legislation on climate change and on managing water, biodiversity, and forestry. However, the challenge now lies in implementing key measures. Air pollution, unregulated and illegal dumping of waste and the lack of wastewater treatment remain the most pressing challenges in the region. Poor co-ordination mechanisms among central, regional and local authorities and lack of human and financial resources are hampering proper implementation, while the lack of environmental monitoring systems, national inventories and statistics is hindering evidence-based policy making.

Long-term economic competitiveness and social development depends on fostering growth while safeguarding natural assets which provide vital resources and environmental services. Despite some progress, a sufficiently coherent policy framework to grow and boost competitiveness in an environmentally sustainable way is still lacking in all six Western Balkans economies. Successful green growth in the region is closely tied to the implementation of the recommendations put forward in this chapter, as well as in the other chapters relevant to environmental policy.


[24] Balkan Green Foundation (2016), Balkans United for Clean Air, https://www.balkangreenfoundation.org/uploads/files/2021/January/20/English1611131274.pdf.

[30] D’Haultfœuille, X., P. Givord and X. Boutin (2014), The Environmental Effect of Green Taxation: The Case of the French Bonus/Malus, The Economic Journal, Volume 124, Issue 578, https://doi.org/10.1111/ecoj.12089.

[28] EEA (n.d.), EU Best Available Techniques reference documents (BREFs), https://www.eea.europa.eu/themes/air/links/guidance-and-tools/eu-best-available-technology-reference.

[14] Eunomia (2017), A Comprehensive Assessment of the Current Waste Management Situation in South East Europe and Future Perspectives for the Sector Including Options for Regional Co-Operation in Recycling of Electric and Electronic Waste, Publications Office of the European Union, Luxembourg, https://ec.europa.eu/environment/enlarg/pdf/pilot%20waste/final_report_en.pdf.

[9] European Commission (2020), 2020 Enlargement Package, European Commission, Brussels, https://ec.europa.eu/neighbourhood-enlargement/countries/package_en.

[27] European Commission (2020), Albania 2020 Report, Commission Staff Working Document, 2020 Communication on EU Enlargement Policy, European Commission, Brussels, https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/albania_report_2020.pdf.

[3] European Commission (2019), A European Green Deal, https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en (accessed on  May 2012).

[12] Eurostat (2020), Recycling of municipal waste, Eurostat Statistical Recovery Dashboard, http://ec.europa.eu/eurostat/data/database.

[13] Government of Serbia (2020), Mapa puta za cirkularnu ekonomiju, https://www.ekologija.gov.rs/sites/default/files/2021-01/mapa-puta-za-cirkularnu-ekonomiju-u-srbiji.pdf.

[17] GRESS-Interreg Europe (n.d.), GREen Startup Support, Project Summary, https://www.interregeurope.eu/gress/.

[23] International Commission for the Protection of the Danube Rive (2020), International Commission for the Protection of the Danube River, http://www.icpdr.org/main/.

[22] OECD (2021), Toolkit for Water Policies and Governance: Converging Towards the OECD Council Recommendation on Water, OECD Publishing, Paris, https://doi.org/10.1787/ed1a7936-en.

[5] OECD (2020), Environmental health and strengthening resilience to pandemics, OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris, http://www.oecd.org/coronavirus/policy-responses/environmental-health-and-strengthening-resilience-to-pandemics-73784e04/.

[25] OECD (2020), Exposure to air pollution, OECD Environment Statistics (database), https://stats.oecd.org/Index.aspx?DataSetCode=EXP_PM2_5.

[32] OECD (2020), Green Budgeting and Tax Policy Tools to Support a Green Recovery, OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris, https://doi.org/10.1787/bd02ea23-en.

[11] OECD (2020), Municipal Waste, OECD Environment Statistics (Database), https://data.oecd.org/waste/municipal-waste.htm.

[20] OECD (2020), Protected areas, OECD data, https://data.oecd.org/biodiver/protected-areas.htm.

[16] OECD (2019), Waste Management and the Circular Economy in Selected OECD Countries: Evidence from Environmental Performance Reviews, OECD Environmental Performance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264309395-en.

[29] OECD (2018), Wastewater treatment, OECD Statistics, https://stats.oecd.org/Index.aspx?DataSetCode=WATER_TREAT.

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[2] OECD (2017), Green Growth indicators framework, http://www.oecd.org/greengrowth/green-growth-indicators/.

[7] OECD (2016), Policy Guidance on Resource Efficiency, OECD Publishing, Paris, https://doi.org/10.1787/9789264257344-en.

[6] OECD (2016), The economic consequences of outdoor air pollution, OECD Publishing, Paris, https://doi.org/10.1787/9789264257474-en.

[33] OECD (2011), Environmental Performance Reviews, Israel, OECD Publishing, Paris, https://doi.org/10.1787/9789264117563-en.

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[15] UNECE (2019), Environmental Performance Reviews, United Nations, https://unece.org/environment-policy/environmental-performance-reviews.

[10] UNFCCC (n.d.), National Reports, https://unfccc.int/es/topics/mitigation/workstreams/nationally-appropriate-mitigation-actions/national-reports (accessed on  May 2021).

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← 1. In Bosnia and Herzegovina, competences for environment and climate change rest with the two entities, and Brčko District. In the FBiH, the competence is shared between the Federation and the ten cantons. At the state level, the Ministry of Foreign Trade and Economic Relations (MOFTER) BIH is responsible for defining policies and basic principles, co-ordinating activities and consolidating entity plans with those of international institutions in the area of energy, agriculture, protection of environment and use of natural resources and tourism. Entity level institutions are responsible for strategic framework, policy setting, data exchange and reporting.

← 2. The 11 Central and Eastern European countries (CEECs) joining the European Union: Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic and Slovenia.

← 3. The NECP will define targets in the field of renewable energy sources, energy efficiency and GHG emissions reductions to 2030, and with a long-term vision to 2050. The NECP is prepared through the IPA 2017 project Further Development of Energy Planning Capacity, which started in February 2021.

← 4. North Macedonia in particular hasn’t submitted national communications since 2014 and Albania hasn’t submitted any Biennial Update Reports.

← 5. In Albania, climate-related risks are partly identified in the UNFCC report and a Disaster Risk Reduction strategy is being prepared. Serbia has a programme for disaster risk management but climate change policies are not sufficiently reflected in it. More information in the Albania and Serbia profiles.

← 6. The project focuses on the development of integrated water resource management and implementation of adaptation strategies in the Drin River Basin, covering the following economies: Albania, Kosovo, Republic of North Macedonia and Montenegro. It is implemented by GIZ. The main objective is to mitigate the impacts of climate change by focusing on flooding and drought risk management as well as strengthening regional co-operation as it pertains to the management of water resources.

← 7. The Waste Management Strategy (WMS) with the related Waste Management Plan (WMP) (2020-2035) and the National Sectorial Plan for Solid Waste Management (NSPSWM) (2019-2035).

← 8. For instance, the West Balkans Drina River Basin Management project is led by the World Bank and aims at managing the transboundary Driva River Basin (2016-2021) between Bosnia and Herzegovina, Montenegro and Serbia. The World Bank is also providing technical assistance for improving the effectiveness of the joint flood management by the economies co-operating in the Sava River basin (Bosnia and Herzegovina, Montenegro, Serbia).

← 9. Aichi Target 11 also covers marine protected areas. Limited progress has been achieved in Albania, with 3% of its marine areas protected (the target being 6% by 2020). No marine protected areas have been established in Montenegro (the target being 10% by 2020 but research is currently underway into three potential marine protected areas (Platamuni, Katic and Stari Ulcinj). No data are available for Bosnia and Herzegovina, but the authorities report that the Aichi Biodiversity Targets have not been achieved.

← 10. The current agricultural land consolidation project, Strengthening Spatial Planning and Land Management (SSPLM), involves 21 cadastral zones and 10 municipalities. It aims to provide technical assistance for the preparation of municipal land development plans, and is to be finalised by the end of 2021.

← 11. Data are unavailable for Kosovo beyond 2015.

← 12. Supported by an EU-funded project, Serbia was developing the Air Protection Programme and Action Plan at the time of drafting (to be finalised in 2021). This programme is expected to provide a basis for further developing and adopting bylaws and the continued implementation of EU legislation in the field of air protection.

← 13. The legislative framework in North Macedonia was amended in 2017 with the adoption of the Law on Setting the Prices for Water Services, which represents the main legal act in this area and is almost fully aligned (95%) with the EU acquis. In addition to this legislative change, in 2017 the government conducted a National Water Study on an investment framework for the implementation of projects for water supply and wastewater treatment, in accordance with the requirements of the relevant EU Directives.

← 14. Although the legislative and policy framework in Albania is not fully aligned with the EU acquis in the area of wastewater management, monitoring mechanisms are envisaged, the responsible institution has been assigned and concrete objectives, budget, measures and a timeline have been set.

← 15. The overall objectives of WATSAN (to be finalised by the end of 2021) are to improve the living conditions of the population, secure adequate hygiene in water supply and sanitation, and implement environmental protection measures, in line with the obligations of EU accession and harmonisation with EU legislation, in particular the Water Framework Directive, Drinking Water Directive and Urban Waste Water Directive.

← 16. The government had planned to build a central disposal facility for hazardous waste in 2018 in the municipality of Fushe Kosove/Kosovo Polje. It organised several rounds of consultations with citizens, but agreement to build the facility could not be reached. See Kosovo economy profile.

← 17. The polluter pays principle is a basic principle of all European environmental policies. It is specifically referred to in the EU Water Framework Directive (WFD), which establishes clear requirements concerning financing for water management in EU Member States. The polluter pays principle states that those who pollute should bear the costs of preventing damage to human health or the environment.

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