Green and Resilient by Accession: A Competitiveness Agenda for the Western Balkans

1. Introduction

The return of enlargement to the centre of European strategy has changed the political meaning of the Western Balkans’ green transition. Climate alignment can no longer be treated as a distant requirement to be fulfilled at the end of accession negotiations, nor as a narrow environmental obligation added to an already demanding reform agenda. It is becoming part of the economic and institutional conditions through which the region will be able to converge with the European Union before membership. This is especially true at a time when the EU’s own economic model is being reshaped by decarbonisation, energy-security concerns, industrial policy, sustainability regulation and the need for more resilient infrastructure.

For the Western Balkans, the challenge is therefore not simply to transpose the EU climate acquis. The more difficult task is to ensure that climate alignment strengthens, rather than weakens, the region’s capacity for growth. If the green transition is approached mainly as compliance, it risks being experienced by governments, firms and citizens as an externally imposed cost. If it is connected to investment, market integration, institutional capacity and territorial development, it can become a pathway to competitiveness. This distinction is central. The political economy of transition in the Western Balkans is shaped by limited fiscal space, ageing infrastructure, energy poverty, coal-dependent regions, weak administrative capacity, fragmented governance in some countries, and firms that often lack the finance and technical expertise required to adjust to the EU’s emerging low-carbon market.

The case for a more strategic approach is reinforced by the fact that climate risks are already affecting the region’s development prospects. The World Bank’s regional Country Climate and Development Report (CCDR) for the Western Balkans shows that floods, droughts, heatwaves, wildfires, landslides and water stress are already material economic risks for the region, with consequences for electricity generation, agriculture, transport corridors, urban infrastructure, public health, municipal budgets and – ultimately – investor confidence (World Bank Group 2024a). In several Western Balkan economies, the same sectors that are central to growth and employment are also exposed to physical climate risks or transition risks. Hydropower-dependent systems face drought volatility; coal-heavy systems face ageing assets, air pollution, carbon-pricing exposure and future market constraints; industrial exporters face stricter carbon and sustainability requirements in the EU market; and municipalities are being asked to deliver adaptation and public-service upgrades with limited financial and technical capacity.

This paper argues that the Western Balkans need a model of green accession that is investment-led and credible. Furthermore, the transition should not be designed as a uniform template applied across six economies. Albania’s main challenge is not the same as Bosnia and Herzegovina’s; Kosovo’s pathway differs from Serbia’s; North Macedonia’s just-transition planning offers different lessons from Montenegro’s small-system vulnerabilities. The region shares an accession destination, but each economy enters the green transition with a distinct energy mix, industrial structure, climate-risk profile and governance capacity. A credible accession strategy must therefore combine common EU standards with differentiated national and local pathways.

The EU has already created much of the policy architecture required for such an approach. The Green Agenda for the Western Balkans provides the broad framework, covering decarbonisation and climate resilience, circular economy, depollution, sustainable food systems and biodiversity (European Commission 2023b). The Growth Plan for the Western Balkans goes further by linking reform, regional integration, progressive access to parts of the Single Market and the Reform and Growth Facility (European Commission 2023a). The Facility’s performance-based design is particularly important because it can connect reform milestones to financing before accession. In principle, this creates a mechanism through which climate and energy reforms can be rewarded not only by political recognition, but by investments and earlier integration into European markets.

The central question is whether these instruments will be used to transform the green transition into a convergence strategy. Carbon Border Adjustment Mechanism (CBAM) exposure illustrates the stakes. For coal-heavy electricity exporters and carbon-intensive industrial producers such as Bosnia and Herzegovina, CBAM can become a competitiveness shock if industrial upgrading lags behind. At the same time, cleaner electricity and stronger energy-market integration can become competitive advantages. The same logic applies to adaptation. Climate-proofing roads, grids, schools, water systems and cities should be treated as a condition for protecting public investment and reducing future fiscal risk, not “just” as a requirement.

A successful green accession agenda must also address the social and territorial dimensions of transition. Coal regions cannot be treated as residual casualties of decarbonisation. They are labour markets and communities with specific identities and institutional needs. Mine closure or power-plant retirement without reskilling or local investment will undermine public trust. Similarly, energy-price reform and carbon pricing will be politically fragile if they are not paired with targeted household protection and energy-efficiency measures. In societies where confidence in institutions is often limited, the legitimacy of transition will depend on whether citizens can see credible benefits: cleaner air, safer infrastructure, lower energy waste, new skills, stronger local economies and access to better public services.

The paper therefore proposes the idea of Green Single Market Accession Compacts. These would be country-specific packages embedded in Reform Agendas and linked to EU financing, WBIF investments and progressive market integration. Their purpose would be to connect climate alignment with concrete implementation and would not require an entirely new EU instrument. They would organise existing tools around a clearer objective: making green accession a route to competitiveness and resilience before formal membership.

The broader argument is that green alignment should be understood as one of the core conditions of the Western Balkans’ future place in Europe. Enlargement policy should therefore avoid presenting climate transition as an additional burden placed on late-converging economies. Properly designed, it can become part of the convergence process itself.

2. From Conditionality to Convergence

The Western Balkans’ relationship with the European Union has long been shaped by the promise of membership, but the meaning of that promise has changed over time. Since the early 2000s, EU policy toward the region has been built around the Stabilisation and Association Process, the gradual adoption of the acquis, regional cooperation, democratic reform and the prospect of eventual accession. The 2003 Thessaloniki agenda established the political basis for this trajectory by confirming that the future of the Western Balkans lay within the European Union. Yet for much of the following two decades, enlargement operated largely as a conditional and procedural framework. The countries of the region were expected to reform, align and demonstrate readiness, while the practical benefits of membership remained distant and unevenly felt.

This distance between accession perspective and lived convergence has been one of the central weaknesses of the process. Formal progress has often been slow, partly because of unresolved bilateral disputes, statehood questions, institutional fragility, and limited institutional capacity. At the same time, enlargement fatigue within the EU reduced the credibility of the membership horizon. The result has been a recurring gap between the geopolitical language of enlargement and the economic reality experienced by firms, municipalities and citizens in the Western Balkans. The region remained formally on a European path, but the material experience of integration was often delayed, partial or concentrated in specific sectors.

The EU’s 2018 strategy for the Western Balkans attempted to respond to this gap by presenting enlargement as a strategic investment in Europe’s stability, security and influence (European Commission 2018). It stressed rule of law, economic competitiveness, reconciliation, connectivity, digital integration, social development and stronger engagement through EU instruments. The strategy was important because it moved beyond a narrow reading of enlargement as legal approximation. It recognised that accession credibility depends on whether reform is accompanied by visible improvements in infrastructure, markets, institutions and opportunities. Connectivity, in particular, became a central theme: transport, energy and digital links were treated as prerequisites for economic integration and regional stability.

The climate dimension was still less developed in the 2018 framework than it is today. Energy transition appeared mainly through the extension of the Energy Union, electricity-market integration, energy efficiency and renewables. These priorities remain relevant, but the policy environment has since changed substantially. The European Green Deal, the energy shock following Russia’s invasion of Ukraine, the acceleration of carbon regulation, and the introduction of the CBAM have altered the economic context in which accession will take place. The acquis that candidate countries are expected to align with is no longer only a body of market, legal and institutional rules; it is increasingly connected to the EU’s transformation into a low-carbon, more energy-secure and more sustainable economy.

This change has direct implications for the Western Balkans. The region’s accession process now unfolds in parallel with the EU’s own green industrial transformation. Candidate countries are not preparing to join the Single Market as it existed in the early 2000s, but one increasingly structured by carbon accounting, energy-system integration, sustainability standards, climate-risk screening, circular economy requirements and more demanding environmental enforcement. For the Western Balkans, this creates both risk and opportunity. The risk is that alignment with the EU’s climate framework may be experienced as an additional cost before the region has acquired the investment capacity to adjust. The opportunity is that climate alignment can become a way of accelerating integration into the markets, infrastructure systems and value chains that will define Europe’s future economy.

The Green Agenda for the Western Balkans, endorsed in the context of the 2020 Sofia Declaration, marked an important step in this direction. It placed the region’s environmental and climate transition within a broader development framework, covering decarbonisation and climate resilience, circular economy, depollution, sustainable food systems and biodiversity. This breadth matters. It shows that the EU’s green agenda for the region is not limited to closing coal plants or adding renewable capacity. It also concerns waste systems, air and water quality, rural development, biodiversity, public health, urban resilience and private-sector transformation. In that sense, the Green Agenda broadened the accession conversation by linking climate alignment to the quality of development.

The 2023 Growth Plan for the Western Balkans added a second, more operational layer (European Commission 2023b). Its central premise is that economic convergence should begin before accession, through progressive integration with the EU Single Market, deeper regional integration, accelerated reforms and increased financial assistance through the Reform and Growth Facility (European Commission 2023a). This represented a significant shift in emphasis. Instead of treating the benefits of membership as available only after accession, the Growth Plan seeks to bring some of those benefits forward, provided that the countries of the region implement agreed reforms. For green accession, this is particularly important because many climate and energy reforms require upfront investment and market confidence before their benefits become visible.

The Growth Plan’s reference to the integration and decarbonisation of energy markets is especially relevant. It links the region’s electricity-market integration with the EU to decarbonisation, carbon pricing and CBAM. This connection reflects the new reality of enlargement policy: market access, energy security and climate alignment are now interdependent. A coal-heavy power system cannot be integrated into the future European electricity market on the same terms as a cleaner and better-regulated one. Similarly, industrial exporters cannot rely on proximity to the EU market if their production remains highly carbon-intensive and poorly documented. The accession process increasingly requires the construction of market institutions able to operate in a carbon-constrained economy.

The Reform and Growth Facility gives this approach a financial and disciplinary structure. Its model of Reform Agendas and twice-yearly disbursement links EU support to verified implementation rather than broad political declarations. This creates an opportunity to make green reforms more concrete. Measures such as grid investment, energy-efficiency programmes and coal-region transition plans can be expressed as measurable steps. The Commission’s 2026 decision on Serbia’s first release of funds illustrates the practical importance of this model: payments can be partial and conditional, depending on the fulfilment of agreed reform conditions (European Commission 2026). For climate policy, this performance-based approach can help distinguish formal alignment from actual implementation.

The Western Balkans Investment Framework (WBIF) complements this by providing the project channel through which reforms can become physical and economic infrastructure. Recent WBIF-backed investments show the range of what green accession can mean in practice: electrified rail links, upgraded electricity transmission systems, wastewater treatment, energy-efficient public buildings, broadband infrastructure and SME green-finance programmes (WBIF 2026). Such projects are important not only because they reduce emissions or improve environmental performance, but because they make accession visible in daily economic life. They can reduce logistics costs, improve public services, strengthen local resilience and make firms more capable of operating in EU markets.

This historical evolution suggests that enlargement policy is moving from a primarily procedural model toward a more integrated convergence model. Legal approximation remains essential, especially in rule of law and market regulation. However, it is no longer sufficient. The credibility of enlargement now depends on whether the process can generate earlier economic value, stronger institutions and tangible improvements in resilience. Climate policy sits at the centre of this shift because it connects several dimensions of accession: infrastructure, energy markets, industrial competitiveness, public finance, social policy, territorial development and governance.

The policy challenge is therefore to avoid a separation between enlargement and green transition. If climate alignment is treated as a sectoral obligation, it will remain politically vulnerable and fragmented. If it is integrated into the logic of pre-accession convergence, it can help answer one of the most persistent weaknesses of the enlargement process: the long delay between reform and tangible benefit. Green accession should therefore be understood as part of the next phase of enlargement policy. It links the traditional accession agenda of rules, institutions and market integration with the newer European priorities of resilience, decarbonisation and competitiveness.

3. One Region, Six Transition Pathways

The Western Balkans – or Western Balkans 6 (WB6) – are often discussed as a single enlargement space, but their green-transition challenges differ substantially. This matters for policy design. A regional framework is necessary because the six economies share accession commitments, energy-market interdependence, exposure to EU rules and a common interest in deeper integration. Yet a uniform transition model would obscure the differences that determine whether climate alignment becomes economically viable. The region needs common standards, but differentiated pathways.

Albania is the clearest example of why decarbonisation and resilience should not be treated as identical policy objectives. Its electricity system is already among the least carbon-intensive in the region, largely because of hydropower. This gives Albania a potential advantage in a European, however, hydropower dependence also exposes the country to rainfall volatility, drought and water-management risks. In dry years, lower hydropower output can force costly electricity imports; in wet years, poorly managed reservoirs and flood risks can create pressure downstream. The key lesson is that even a low-carbon power system can still be climate-vulnerable if it is insufficiently diversified and poorly adapted to future hydrological conditions (World Bank Group 2024b). For Albania, green accession should focus on turning a clean-electricity advantage into durable competitiveness through diversification, storage and regional electricity trade.

Bosnia and Herzegovina represents a very different challenge. It combines coal-dependent electricity, carbon-intensive exports, fragmented governance, serious air pollution and high exposure to floods. This makes it one of the clearest tests of whether green accession can become more than formal alignment. The country’s electricity-export model has long relied on lignite, but that model is increasingly exposed to ageing assets, EU pollution standards, CBAM and the need for carbon pricing and emissions monitoring. At the same time, Bosnia and Herzegovina is highly vulnerable to riverine flooding, with past events already producing severe macroeconomic damage. Its transition challenge is therefore not only to decarbonise electricity or comply with EU rules, but to coordinate climate, energy and investment policy across a complex institutional system. The Commission’s assessment of Bosnia and Herzegovina’s Reform Agenda recognises this connection by linking energy-market reform, carbon pricing, MRVA implementation, renewable deployment and just transition within the same accession framework (European Commission 2025). This is the country where the paper’s central argument is most visible: green transition will be perceived as a burden if it arrives as CBAM exposure and coal decline without investment and redevelopment.

Kosovo’s transition is sharper in energy terms but also contains a clearer opportunity for technological leapfrogging. Its electricity system remains overwhelmingly dependent on lignite, and energy poverty is already a significant social constraint. This means that any pathway toward carbon pricing, tariff reform or coal phase-down must be carefully sequenced with household protection and energy-efficiency measures. At the same time, Kosovo has the possibility of moving more directly toward renewables, efficiency and regional electricity integration without creating long-term dependence on gas infrastructure. The World Bank’s Kosovo compendium emphasises that the scale of transformation required is substantial, but also that the macroeconomic effect of reaching net zero can remain modest if investment is mobilised and reforms are well designed (World Bank Group 2024d).

North Macedonia offers the most constructive example of just-transition planning in the region, while also showing the limits of ambition without implementation capacity. It has adopted some of the Western Balkans’ most ambitious climate commitments and has developed a Just Transition Roadmap focused on Pelagonija and the Southwest region. This matters because the roadmap treats coal transition as regional development, not merely as power-sector restructuring. It links clean energy, private investment, green infrastructure, skills and labour-market support. At the same time, North Macedonia remains exposed to CBAM through electricity and industrial exports, faces serious air-pollution and public-health costs, and requires major investments in adaptation and energy-system transformation (World Bank Group 2024f). Its experience suggests that climate ambition can be economically credible when it is connected to territorial planning and industrial upgrading. It also shows that targets, roadmaps and laws are only the first step. The harder task is to finance and implement them through public investments and enabling private-sector participation.

Serbia is the region’s scale case. It accounts for the largest share of Western Balkan emissions, has the largest coal and electricity system, and contains major state-owned or state-linked actors in energy, transport, utilities and high-emitting sectors. Its transition choices will therefore have regional consequences. Serbia also has assets that could make it a facilitator of regional decarbonisation: a more developed electricity market, interconnections with several neighbours and potential as a regional trading hub. This dual role is important. If Serbia delays coal phase-down, carbon pricing, SOE reform and renewable integration, it may transmit transition risk through the region. On the contrary, if it advances the convergence, it can reduce regional transition costs. Serbia’s critical minerals also place it within Europe’s wider green industrial strategy, but this opportunity depends on environmental governance. The World Bank (2024e) stresses that the technical feasibility of decarbonisation is less problematic than the political economy of implementation.

Montenegro’s relevance lies in the vulnerabilities of a small electricity system and the interaction between hydropower and coal. Like Albania, Montenegro faces hydrological variability; like other coal-using economies, it must manage the future challenges of phase-out; and like small systems generally, it depends heavily on regional integration for flexibility and security of supply. The country is therefore best used as a reminder that green accession must also work for small markets where transition costs become constraints and climate shocks can have outsized effects.

This differentiated country picture has two implications for enlargement policy. First, regional integration remains essential. Electricity markets, transport corridors, emissions data, CBAM, river basins and emergency response all require cooperation beyond national borders. Second, regional integration cannot substitute for country-specific transition design. This is also why tailored investment is a condition for effectiveness. EU standards provide the direction of travel, but the route into the EU’s future low-carbon economy will differ by country and territory. The Western Balkans’ green transition will become credible only if accession policy recognises these differences and converts them into specific investment and local development strategies.

4. Climate Resilience as Pre-Accession Infrastructure

The Western Balkans’ climate challenge is often discussed through the language of decarbonisation, but the region’s more immediate accession problem may be the fragility of its infrastructure under changing climate conditions. Roads, railways, power systems, water networks, schools, hospitals and urban settlements built or rehabilitated today will remain in use for decades. If they are financed without climate-risk screening, the EU and its partners may be investing in assets whose economic value will deteriorate before the region has completed accession. This is why adaptation should be treated as part of pre-accession infrastructure policy.

The World Bank’s CCDR estimates that the Western Balkans will face rising losses from floods, droughts, heat stress and other hazards, while adaptation investment can produce returns that exceed its cost. Its modelling suggests that an initial comprehensive adaptation package for the region would cost around US$37.2 billion over thirty years, with annual adaptation investment averaging about 1.3 percent of GDP between 2025 and 2050 and annual benefits estimated at 1.7 percent of GDP. The scale of these figures is significant, but they should be compared with the fiscal consequences of inaction. A region trying to converge with the EU cannot repeatedly absorb shocks without weakening the very economic base on which accession depends (World Bank Group 2024a).

The distribution of risk is uneven. Serbia and Bosnia and Herzegovina emerge as the most exposed among the modelled economies. In Serbia, the World Bank estimates that without adaptation the country could suffer a 14.7-17.8 percent reduction in GDP by 2050 under trend growth, depending on the climate scenario. Flood risk is particularly severe: Serbia’s 2020 flood-risk assessment identified 115 towns and municipalities, with around 5.5 million people, as highly susceptible to flooding. A 100-year flood could submerge more than 4,100 square kilometres and directly affect around 1.15 million people. This makes resilience a matter of national economic planning. It also matters regionally, because Serbia’s transport routes, electricity system and market position influence wider Western Balkan connectivity (World Bank Group 2024e).

Bosnia and Herzegovina is similarly exposed, but through a combination of physical climate risk and transition risk. The 2014 floods affected around one million people, caused 25 fatalities and generated damages and losses estimated at US$2.14 billion, close to 15 percent of GDP. The World Bank’s country compendium projects that, without adaptation, combined damages from riverine floods, drought effects on wheat and maize, and labour heat stress could reach around 14 percent of GDP by 2050 under RCP 4.5, with riverine flooding responsible for more than 90 percent of those damages. This should change how Bosnia and Herzegovina is understood in the green accession debate. Delayed tailored investment would compound the economic costs of coal dependence and industrial carbon exposure (World Bank Group 2024c).

Albania shows a different type of vulnerability. Its power system is already comparatively clean, with roughly 95 percent of electricity generated from hydropower. This could become an advantage as the EU market increasingly differentiates between high- and low-carbon production. Yet Albania’s hydropower dependence also makes electricity security sensitive to climate variability. The World Bank estimates that average annual production from large hydropower plants could fall by 15-20 percent by 2050, while drought years have already forced expensive imports and energy-security stress. Albania therefore demonstrates that a low-carbon electricity mix does not automatically produce resilience (World Bank Group 2024b).

North Macedonia adds a more urban and human-capital dimension to the adaptation problem. The country has recorded more than US$667 million in losses from disasters and extreme climate events over the past two decades. The 2015 floods caused seven fatalities, affected more than 100,000 people and produced US$107.4 million in losses; the 2016 floods killed 22 people and caused around US$61 million in damages and losses. Flooding is not the only concern. In Skopje, the urban heat-island effect raises nighttime temperatures in the city centre by 4.7°C compared with surrounding rural areas, largely because of limited vegetation and extensive impervious surfaces. Heat is therefore shaped by urban planning, not simply by climate trends. The exposure of educational infrastructure is also significant: around 13 percent of schools are highly exposed to floods, 28 percent have medium or higher exposure to landslides, and 9 percent are highly exposed to landslides. These figures show why adaptation investment should include schools, health facilities, public buildings and urban planning (World Bank Group 2024f).

Kosovo’s resilience challenge is closely linked to water and local infrastructure. Around 80 percent of municipalities have experienced water scarcity since 2004, and most of these cases have worsened in recent years because of drought and poor water-resource use. The country also faces substantial wildfire and landslide exposure: 36.8 percent of its territory is under medium wildfire risk, 15.8 percent under high wildfire risk, and 47.9 percent is susceptible to very high or high landslide risk. These hazards interact with weak municipal capacity, energy poverty and a lignite-dependent electricity system. Kosovo’s adaptation needs, estimated at about US$2.8 billion over thirty years, should therefore be understood as part of the same accession challenge as energy reform (World Bank Group 2024d).

The sectoral pattern across these country cases is instructive. Transport infrastructure is repeatedly exposed to floods, landslides and heat. This matters because the EU’s enlargement agenda places heavy emphasis on connectivity. Climate adaptation is therefore not a separate policy field next to infrastructure. It is a condition for infrastructure to perform its economic function.

Agriculture also deserves more attention in the accession debate. The regional CCDR shows that droughts threaten maize and wheat yields, while small family farms are often poorly protected by irrigation, hail protection, insurance or modern risk-management tools. In North Macedonia, the report notes that 19.5 percent of crop area is projected to be under very high wildfire risk, with cascading effects through soil degradation, flash floods and landslides. These risks matter for rural livelihoods, food prices and territorial cohesion. A green accession agenda that focuses only on electricity and industry would miss a substantial part of the region’s vulnerability, especially in rural municipalities already affected by depopulation and weak public services.

Waste management is another example of how adaptation, mitigation and public health intersect. The regional CCDR finds that 22.2 percent of dumpsites measured within a one-kilometre radius are in areas with very high wildfire risk, while 18.18 percent of waste disposal sites are located in areas with very high landslide risk. Poorly managed waste also contributes to methane emissions and air pollution. In Tirana, the Sharra dump has recorded PM10 concentrations close to ten times the WHO standard. In practice, poorly managed waste becomes source of toxic exposure – both for the environment and society. The Green Agenda’s circular-economy and depollution pillars are therefore directly relevant to resilience.

In fact, social protection is also part of resilience infrastructure. Climate shocks affect households in several ways, such as damaged homes, health risks and interrupted services. Several Western Balkan systems are not yet sufficiently adaptive. Kosovo’s social assistance system remains limited and is not designed to scale rapidly after shocks. Albania’s unemployment protection reaches only a small share of registered jobseekers. North Macedonia has more developed mechanisms, including the Guaranteed Minimum Assistance programme and One-Off Financial Assistance, but the World Bank notes that these are not yet sufficiently linked to early-warning systems or backed by dedicated contingency financing. For green accession, this matters because climate resilience requires institutions capable of protecting households when shocks occur.

The institutional problem is that adaptation benefits are often less visible than the benefits of new construction. A railway, bridge or transmission line has an obvious output; avoided losses are harder to communicate politically and financially. This creates an incentive to underinvest in adaptation until after a disaster occurs. Enlargement policy should counter this bias. The Reform and Growth Facility and WBIF should require risk screening for major transport, energy, water, education and urban projects, while also supporting project-preparation capacity for adaptation investments. Without this, climate resilience will remain a general objective rather than an operational investment criterion

The accession implications are practical. EU-supported infrastructure should be assessed not only by whether it advances connectivity, decarbonisation or market integration, but also by whether it reduces future climate liabilities. Recent WBIF-backed projects already point in this direction

A more precise resilience agenda would also improve the political credibility of the green transition. Citizens may experience climate policy through energy prices, long before they experience the benefits of decarbonisation. Adaptation investment can make the green agenda more tangible: fewer flood disruptions, safer schools, better drainage, cleaner waste sites, more reliable electricity, improved water security, et cetera. These are not substitutes for mitigation, but they can strengthen public support for a transition that might otherwise be understood mainly through costs.

5. CBAM and the First Test of Green Market Access

The CBAM is one of the first major case in which the Western Balkans’ green transition meets EU market access before accession. Its importance lies less in the aggregate macroeconomic shock it may create than in the way it exposes specific weaknesses in the region’s energy systems, industrial structures and regulatory capacity. For firms exporting electricity, iron and steel, aluminium, cement or fertilisers to the EU, the carbon content of production is becoming part of the effective cost of market access. This changes the accession debate. Alignment with EU climate policy is no longer only a future obligation under Chapter 27 or the Energy Community framework; it is becoming part of the commercial conditions under which WB6 firms trade with the Union.

The regional exposure is uneven. The World Bank’s 2026 Western Balkans Regular Economic Report identifies electricity, iron and steel, aluminium and cement as the main sectors directly covered by the first phase of CBAM, with exposure varying substantially by country (World Bank Group 2026). Bosnia and Herzegovina, Serbia, North Macedonia, Kosovo and Montenegro do not face the same risk profile. In some cases, electricity dominates the exposure; in others, industrial products such as iron, steel or aluminium are more important. This matters because the policy response cannot be reduced to a single carbon-pricing recommendation. Electricity exporters, steel producers, aluminium smelters and cement firms require different combinations of regulatory adjustment.

Bosnia and Herzegovina is the most politically revealing case because CBAM interacts with coal dependence and electricity exports. The country has long benefited from being a net electricity exporter, but much of that position rests on lignite-fired generation and ageing assets. Cheap coal-based electricity has supported domestic utilities and export revenues, yet the model is increasingly exposed to EU carbon costs and the need for credible emissions data. The World Bank notes that CBAM-applicable exports account for more than 5 percent of GDP under the current scope (World Bank Group 2024c). In Bosnia and Herzegovina, therefore, CBAM is a test of whether a fragmented institutional system can convert external pressure into coordinated energy and industrial reform.

The electricity dimension is especially sensitive. The Western Balkans are already linked to the wider European power system through trade, transit and interconnection, but the economics of electricity exchange will change as carbon costs become more binding. A coal-heavy electricity exporter may face declining competitiveness if it cannot document emissions accurately, introduce an equivalent carbon price or qualify for electricity-related exemptions. The Growth Plan recognises this link by treating integration and decarbonisation of energy markets as one of the priority areas for closer integration with the EU Single Market (European Commission 2023a). The implication is clear: electricity-market integration cannot be separated from decarbonisation.

This is why emissions data should be treated as market infrastructure. Under CBAM, the ability to measure and verify embedded emissions affects commercial outcomes. Where facility-level data are absent or not credible, exporters may face default values that can overstate their emissions and weaken competitiveness. For WB6 economies, MRV and MRVA determine whether firms can defend their real emissions profile, whether carbon costs are paid at the EU border or partly retained domestically through carbon pricing, and whether investors can assess risk. The CEPS (2025) states that emissions’ data are a precondition for unlocking energy investment, and the World Bank and JRC evidence point in the same direction: carbon accounting is becoming part of the basic infrastructure of EU market participation (World Bank Group 2026; Joint Research Centre 2026).

North Macedonia illustrates a different version of the problem. CBAM covers close to 10% of national exports, with electricity a significant component, and later estimates suggest meaningful compliance costs concentrated in iron, steel and electricity (World Bank Group 2024f). As we have already mentioned, North Macedonia has adopted ambitious mitigation targets and a Just Transition Roadmap. If the country can combine emissions monitoring and industrial upgrading, CBAM can become a catalyst for competitiveness. If these elements remain weakly coordinated, it risks becoming another cost layer on an already fragile industrial base.

The common lesson is that CBAM-readiness requires a package of reforms and investments. The private sector cannot supply all of this alone, particularly if such policies foster volatility and uncertainty. Many firms, especially SMEs and mid-sized industrial suppliers, lack the finance and expertise to conduct emissions accounting or meet EU sustainability documentation requirements. Without support, CBAM may accelerate the exclusion of smaller firms from EU value chains, even where their production could become competitive with targeted investment. The Common Regional Market and the Energy Community provide channels through which CBAM-readiness can be coordinated. Shared approaches to emissions data, customs cooperation and industrial standards would reduce fragmentation. They would also strengthen the region’s negotiating and implementation capacity vis-à-vis the EU. A purely national approach risks producing uneven results, hence delayed market integration. Since electricity flows, industrial supply chains and logistics corridors are regional, the response to CBAM should also have a regional component.

Domestic carbon pricing deserves particular attention. If introduced gradually and credibly, it can help prepare firms for EU carbon costs while allowing revenues to remain within the region. These revenues could then support targeted investments. Without domestic pricing or equivalent measures, a larger share of the adjustment may occur through payments at the EU border, with fewer resources available for local transformation. This does not mean that carbon pricing should be introduced abruptly or without social safeguards. In coal-dependent and energy-poor economies, poor sequencing would provoke resistance and deepen vulnerability.

6. Energy Security and Market Integration

Energy security in the Western Balkans has often been interpreted through the availability of domestic generation, especially lignite. This logic has historical and political weight. Coal-fired electricity has helped several countries avoid full dependence on imported gas or oil, kept domestic electricity prices relatively low, and sustained employment in mining regions. Yet the meaning of energy security is changing. A system built around ageing coal assets and limited market liquidity may provide short-term supply stability, but it is increasingly misaligned with the energy order into which the WB6 are expected to integrate.

The EU’s Growth Plan makes this shift explicit by identifying the “integration and de-carbonisation of energy markets” as one of the priority areas for progressive integration with the Single Market (European Commission 2023a). The wording is significant. It does not treat energy-market integration and decarbonisation as separate reforms. It recognises that the Western Balkans’ future access to the European electricity market depends on both regulatory alignment and the carbon profile of power generation. The Energy Community framework had already pushed the region toward EU-compatible electricity rules, but CBAM, the European Green Deal and the acceleration of EU climate policy have made the cost of delay more visible.

This is particularly important for electricity. The Western Balkans are physically connected to the wider European power system, but market integration remains incomplete. The region is not peripheral to European electricity flows: it is a transit and exchange space whose integration affects the wider Southeast European system (Vujanović, Stubbe, and Catarina-Louro 2025). However, the region’s electricity markets remain fragmented by uneven implementation of market rules, regulatory delays, limited liquidity, incomplete day-ahead and intraday market development, and slow progress on market coupling. These weaknesses reduce the value of interconnectors and make renewable integration more difficult than it should be.

The technical language of market coupling can obscure its economic meaning. A coupled electricity market allows power to move more efficiently across borders, improves price formation, and helps balance variable renewable generation across a larger geographic area. For small systems such as Kosovo, Montenegro or Albania, this is especially important. A small electricity system has fewer domestic balancing options and is more exposed to weather, outages or demand shocks. Integration allows countries with different generation profiles to complement one another.

Albania and Kosovo already illustrate this logic. Albania’s hydropower-based system produces cleaner electricity than most of the region, but it is vulnerable to drought and seasonal variation. Kosovo’s electricity system remains dominated by lignite, but it has a strong need to diversify into renewables, storage and imports without undermining affordability. Bilateral cooperation through ALPEX (a joint venture between the Transmission System Operators of Albania OST and Kosovo KOSTT established in October 2020) and balancing arrangements points to the kind of functional integration that should be scaled regionally.

Serbia is the decisive case for regional market integration. It has the largest electricity system, the most developed market infrastructure in the region, and the potential to act as a regional trading hub. SEEPEX gives Serbia an institutional advantage, and its geography connects it to several neighbouring systems. Designated as Serbia’s NEMO on 16 June 2022, SEEPEX has become one of the most important organised electricity markets in Southeast Europe. Through cooperation with neighbouring transmission-system operators and participation in broader European market-coupling initiatives, SEEPEX has helped connect the Western Balkans more closely to EU electricity-market structures. Its role has expanded further through participation in the ADEX group, created through the integration of SEEPEX with Slovenia’s BSP SouthPool and Hungary’s HUPX, with the strategic objective of integrating regional markets into the European Single Day-Ahead Coupling (SDAC) and Single Intraday Coupling (SIDC) frameworks. Serbia’s exchange could play an increasingly important role in enabling more efficient cross-border balancing across the region. Yet this opportunity is constrained by the the continued role of lignite and the absence of a clear coal phase-out date. Serbia’s market role will therefore depend on whether it can convert its system scale into lower-carbon flexibility, rather than exporting carbon risk into the regional market.

As we have seen, Bosnia and Herzegovina presents the opposite problem: significant electricity-export capacity combined with fragmented governance and a highly exposed coal fleet. The country’s electricity exports have been economically useful, but they rely heavily on lignite and ageing thermal plants. Western Balkan coal-heavy electricity exporters face a particularly difficult adjustment as carbon costs become more relevant to EU trade (CEE Bankwatch Network 2025, Majstorovic 2026).

Furthermore, the JRC’s 2026 assessment of the Western Balkans energy transition emphasises that grid infrastructure, transmission and distribution capacity, connection procedures, balancing arrangements and administrative capacity are now central constraints (Živković et al. 2026). This distinction matters: a country can announce large solar or wind pipelines while still failing to connect projects, manage congestion or provide credible balancing services. This point has also been highlighted in wider Central and Eastern European debates, where analysts increasingly argue that grid access, rather than generation capacity, has become the principal constraint on the energy transition. In several countries, renewable projects face long waiting times for connection approvals, limited transmission capacity and uncertainty over network upgrades, creating a situation in which investment interest exceeds the ability of the system to accommodate new generation (Pintilie 2026).

Energy security also has a geopolitical dimension that should not be reduced to gas dependence. Russian-linked energy assets and supply exposure in parts of the region is still relevant, particularly in Serbia and Bosnia and Herzegovina (Vujanović, Stubbe, and Catarina-Louro 2025). Serbia’s NIS refinery illustrates how ownership structures in oil and gas can become strategic vulnerabilities, especially when sanctions or geopolitical tensions affect supply chains and corporate control. Diversification therefore concerns infrastructure, ownership, regulation and market rules, not only fuel sources. Deeper integration with EU energy markets can reduce some of these vulnerabilities, but only if domestic governance improves.

For the Western Balkans, energy security by accession should mean a region less dependent on ageing coal assets and geopolitically exposed fossil-fuel structures, more capable of integrating renewables, and progressively connected to the EU electricity market under credible rules. The EU already has instruments to support this through the Growth Plan, Energy Community, WBIF and Reform and Growth Facility. The policy task is to align these tools around implementation rather than declarations.

7. Just Transition as Territorial Development

The Western Balkans’ coal transition will not be politically credible if it is framed only through targets or compliance with EU climate rules. Coal remains embedded in labour markets, municipal budgets, public utilities and local identity. This is particularly true in Bosnia and Herzegovina, Serbia, Kosovo and North Macedonia, where coal assets are parts of regional economic systems. A just transition agenda for the Western Balkans should therefore be understood as territorial development policy. Its central task is to create credible alternatives before decline becomes social crisis.

This is directly relevant for accession: EU climate alignment will be politically vulnerable if it is experienced as a process negotiated between Brussels, national ministries and utilities, while municipalities, workers, SMEs and affected communities are consulted late or formally (Berisha et al. 2026). In coal regions, public legitimacy depends on whether local actors believe that transition planning reflects their economic reality and not only national-level climate commitments.

Bosnia and Herzegovina shows the problem most clearly. It reflects a system in which coal is tied to electricity exports, employment, public enterprises and regional identity (Novikau and Krupalija 2026). Coal-related industry directly employs almost 17,000 workers, with wider indirect employment also significant. More importantly, coal employment is geographically concentrated in places such as Tuzla, Kakanj, Zenica, Gacko and Banovići. In some municipalities, the mine or power plant is the organising institution of the local economy. This concentration changes the transition problem. A national coal phase-out may look manageable in aggregate employment statistics while remaining highly disruptive in specific labour markets. For instance, the Zenica mine case illustrates the difference between closure and transition. The mine employed 615 people in 2024, but production had fallen far below target and revenues were insufficient to cover wage costs. Its closure was linked to financial unsustainability and discussed in the context of transition support, yet workers faced uncertainty over unpaid wages and pension contributions (Novikau and Krupalija 2026). In such circumstances, the green transition is unlikely to be judged by citizens according to climate benefits, rather by whether institutions kept basic promises to workers and communities.

The Commission’s 2025 assessment of Bosnia and Herzegovina’s Reform Agenda recognises the need for a just-transition roadmap, including worker reskilling and new sustainable economic activities in coal regions (European Commission 2025). This is an important step, but it should not remain at the level of a planning requirement. Bosnia and Herzegovina’s fragmented governance makes implementation especially difficult. Responsibilities for energy, labour markets, land, social policy and local development are spread across state, entity, cantonal and municipal levels. A credible roadmap therefore needs a financing mechanism, clear institutional responsibility, municipal participation, and project pipelines for investment. Without these elements, the roadmap risks becoming another formal accession document with limited local effect.

North Macedonia offers a more constructive model, although it is still early. Its Just Transition Roadmap for Pelagonija and the Southwest region treats coal transition as a regional transformation rather than a narrow energy-sector adjustment. The roadmap combines clean energy, private investment and start-up development, green and smart infrastructure, and skills policy. Its estimated annual cost of €29.4-44.6 million is modest compared with the broader cost of unmanaged regional decline, while the related Accelerating Coal Transition Investment Program seeks to mobilise substantially larger public, private and multilateral financing (World Bank Group 2024f). The importance of the North Macedonian case lies in its structure: it links coal phase-out to local development instruments. This is the type of approach that should inform Reform Agendas across coal-dependent economies.

Serbia’s challenge is different because of scale. Coal is concentrated in major systems such as Kolubara, Kostolac and Resavica, and is deeply linked to EPS. The World Bank estimates that around 12,000 jobs are at risk from the planned coal phase-down up to 2030 (World Bank Group 2024e). The employment figure alone understates the political problem. EPS is a strategic company, a major employer and a central actor in Serbia’s electricity security. Transition planning must therefore address issues such as regional employment, fiscal effects at the municipal level and the future of electricity affordability. Serbia needs territorial transition plans that connect coal-region redevelopment to the wider reform of the power sector.

Kosovo adds another dimension: energy poverty. Its electricity system is still overwhelmingly lignite-based, but households are already vulnerable. Around 22 percent of households spend at least 10 percent of monthly expenditure on energy bills, and more than 40 percent are unable to keep their homes adequately warm (World Bank Group 2024d). This makes Kosovo a difficult test for sequencing. Coal phase-down, tariff reform and carbon pricing cannot be designed without household protection and energy-efficiency investment. A transition that raises costs before improving buildings, heating systems and targeted support would deepen vulnerability and weaken public support. Kosovo’s just transition should therefore combine power-sector reform with social protection, building renovation, district heating alternatives, and training for a young workforce that could enter newly created occupations.

Across these cases, a just transition cannot be reduced to labour-market policy. Reskilling is necessary, but insufficient if no local economy exists to absorb workers. Early retirement can reduce immediate pressure, but it does not create a future for younger workers or municipalities. Compensation may be justified, but it cannot substitute for investment. The relevant unit of policy is the territory: its workers, suppliers, land, infrastructure, fiscal base, skills institutions and political trust.

The skills dimension is also wider than coal. Several sources point to a broader workforce transition across energy, transport, construction, industry and services. Estimates show that 16.9% of North Macedonia’s workforce will need upskilling or retraining in the medium term, with around 66,000 workers in occupations with high retraining needs and large skill gaps (World Bank Group 2024f). The WB6 CCDR similarly suggests that a significant share of workers will need to adapt to new technologies and business models. This has direct accession relevance. The EU’s low-carbon market will require installers, electricians, grid operators, energy auditors, carbon accountants, environmental inspectors, building-renovation workers, recycling specialists and urban planners. Upskilling should therefore be treated as part of the green accession infrastructure.

The distribution of green investment also matters. If subsidies for solar panels, energy-efficiency renovations or clean mobility are captured mainly by wealthier households, larger firms and capital cities, the transition may widen existing territorial inequalities. Early work on implementing the Green Agenda warned that the transition could be perceived as externally imposed if feasibility, social impacts and local capacities were not addressed (Aspen Institute Germany 2021). Additionally, bottom-up initiatives should not be ignored. Germanwatch (2025) and regional partners have shown that energy communities and prosumers can help make the energy transition more socially credible. These initiatives cannot replace national grid reform or market coupling, but they can reduce resistance and broaden participation. This is particularly relevant for coal regions and energy-poor communities, where the transition will be judged through concrete changes rather than national targets.

Public trust is particularly important because the Western Balkans have a long experience of “transition” as an uneven and often socially costly process. For many citizens, the term evokes privatisation, industrial decline and emigration (BiEPAG 2023). There is a concrete risk that local elites, weak governance and external actors can shape energy choices in ways that reduce public confidence in the transition (BiEPAG 2023). A just transition strategy must therefore address not only who pays and who benefits, but also who decides. Thus, mechanisms like transparent project selection and accessible information are practical governance requirements.

The EU’s role should be to make just transition a condition of credible green accession. Reform Agendas should include concrete milestones for coal-region transition: worker registries, social settlement mechanisms, land-reuse plans, local investments, municipal fiscal assessments, training programmes and governance structures involving local authorities and social partners. WBIF financing should support projects that create alternative economic activity in affected territories and carbon-pricing revenues, where introduced, should be partly recycled into these territories.

A just transition agenda also requires safeguards against low-quality green investment. Large renewable installations can generate local opposition if environmental impacts or land rights are poorly handled. In particular, safeguards should be in place against greenwashing and elite-driven projects that carry a green label but reproduce exclusion or environmental harm (Berisha et al. 2026). Public legitimacy will depend on whether these projects are governed to accession-quality standards.

The strongest argument for just transition is therefore institutional. Without a territorial strategy, coal decline will produce resistance; without household protection, price reform will be socially fragile; without skills, green investment will face labour bottlenecks; without participation, projects will generate distrust; without local economic alternatives, accession alignment will be blamed for decline that was already structurally underway. Green accession can avoid this outcome only if it links decarbonisation to local development before disruption becomes irreversible.

The purpose of just-transition policy is therefore not only to slow decarbonisation, but to make it socially and politically executable/acceptable.

8. Green Competitiveness

The Growth Plan’s priority areas for progressive Single Market integration include free movement of goods and services, road transport, integration and decarbonisation of energy markets, access to the Digital Single Market and integration into industrial supply chains (European Commission 2023a). These areas should not be read separately. A firm seeking to export green or lower-carbon products needs reliable transport, certification, digital documentation, cleaner electricity, easy customs procedures and access to finance. The Growth Plan therefore creates an opportunity to treat green competitiveness as a cross-sectoral accession objective rather than as a separate environmental policy.

Furthermore, tariffs are not the principal barrier to deeper integration between the EU and WB6. The more persistent constraints lie in non-tariff barriers: standards, logistics, customs procedures, regulatory uncertainty and poor firm capabilities (Darvas et al. 2026). Green transition adds another layer to these constraints: firms that cannot measure emissions, certify inputs, document energy use or comply with sustainability requirements may remain formally close to the EU market while becoming commercially less attractive to European buyers. This risk is especially important for SMEs, which often lack the internal expertise and financing capacity to adjust quickly.

The WBIF has begun to address this gap through private-sector instruments, although the scale remains limited relative to need. The 2026 WBIF investment package includes programmes such as SME Go Green, Western Balkans Forward and W BOND. These initiatives are important because they move the green agenda closer to the firm level: green and circular-economy investments, agribusiness competitiveness, export facilitation and alternative financing channels for SMEs (WBIF 2026).

North Macedonia shows the potential of this approach. It is exposed to CBAM through electricity and industrial exports, but it also has comparative advantages in environmental goods and EU-oriented value chains. The World Bank notes that environmental goods have represented a meaningful share of merchandise exports over the past decade, with opportunities in wind, solar and electric-vehicle-related products (World Bank Group 2024f). More importantly, North Macedonia’s export structure is already strongly linked to the EU, and a large share of FDI comes from EU sources. This creates a basis for green industrial upgrading if climate policy is connected to standards, skills, supplier development and reliable clean electricity. North Macedonia’s challenge is to convert climate strategy into productive capacity.

Digitalisation is another competitiveness condition that is often underestimated in green-transition debates. The Digital Agenda for the Western Balkans, the Growth Plan’s Digital Single Market priority and broadband investments through WBIF all matter for climate policy because documentation, monitoring and compliance are increasingly digital. Firms need systems to track inputs, energy use, emissions and product standards. Governments need interoperable databases for permits, emissions reporting, customs, public procurement and environmental monitoring. Digital infrastructure also matters for SMEs outside capitals, where weak connectivity limits their capabilities to upgrade.

Green competitiveness also depends on skills. The just-transition section focused on coal regions, but the skills question is broader. The EU’s Agenda on Innovation, Research, Education, Culture, Youth and Sport for the Western Balkans is relevant here because it links green and digital transition to human capital and research capacity (European Commission 2021). Without vocational and technical capacity, green finance will face implementation bottlenecks even where capital is available.

The Central and Eastern European comparison is useful, but it should be interpreted carefully. Poland shows that coal transition is politically durable only when linked to territorial policy, labour-market protection and industrial alternatives. Romania and Bulgaria show that EU funds and renewable potential do not automatically solve grid bottlenecks, administrative constraints or regional disparities. Croatia shows the benefits of accession and euro adoption, but also the limits of relying on membership alone to solve implementation problems. These cases suggest that the Western Balkans should not wait until accession to build green competitiveness. The institutional and infrastructure choices that determine competitiveness must be made before membership.

A stronger green-competitiveness agenda would therefore combine three levels of intervention. At the firm level, SMEs and exporters need finance, advisory support, emissions accounting and certification. At the infrastructure level, the region needs grids, logistics, digital systems, laboratories and energy-efficiency programmes. At the policy level, governments need predictable regulation, transparent funding, credible procurement, innovation support and closer coordination with EU market requirements. Together, they determine whether green alignment becomes a productive capability or remains a compliance cost. The Growth Plan and Reform and Growth Facility can be used to make this agenda operational.

The strategic objective is to equip Western Balkan firms to operate inside it. If firms are left to absorb new standards without finance, skills and infrastructure, green alignment will reinforce divergence.

9. Cross-Border Cooperation

Cross-border cooperation adds a second dimension. Many of the Western Balkans’ climate and environmental risks do not correspond to state borders. Rivers, floods, wildfires, air pollution, biodiversity, transport corridors and waste flows are functional systems (Nikolov 2026). This formulation is particularly relevant for enlargement: the WB6 do not need to wait for accession to practise EU-style cooperation in areas where geography already requires it.

The Serbia-Croatia and Serbia-Bosnia and Herzegovina border areas show the point clearly. These territories are shaped by the Danube, Sava and Drina river systems, as well as by demographic decline, uneven infrastructure and shared environmental risks These areas cannot be managed effectively by one administration alone. The fact that Croatia is already an EU member while Serbia and Bosnia and Herzegovina remain enlargement countries makes these borders especially useful. They can function as practical interfaces between EU standards and Western Balkan implementation.

Cross-border public services should therefore become a more explicit part of green accession. Existing cooperation structures already cover fields such as public transport, border-crossing services, spatial planning, water management, solid waste, wastewater, firefighting, flood management and major disaster response (Nikolov 2026). These are exactly the services through which citizens experience whether institutions can manage shared risks. Joint operations can make European integration more tangible than another national strategy.

The Green Agenda for the Western Balkans already provides thematic breadth for this type of cooperation (European Commission 2023b). EU4Prespa is a useful example because it links agriculture, local business, biodiversity and a transboundary lake area. Similar logic could be applied elsewhere: Drina and Sava flood management, Danube biodiversity, cross-border wildfire response, shared waste and wastewater systems, et cetera. Such projects are politically modest compared with accession negotiations, but they create habits of cooperation that accession will later require.

There is also a South-Eastern European regional dimension: EU member states such as Croatia, Bulgaria and Romania are neighbours and potential partners in practical green integration. Croatia’s border with Serbia and Bosnia and Herzegovina can support river, transport and environmental cooperation. Bulgaria and Romania are relevant for Danube governance, electricity interconnection, renewables, Black Sea and Balkan transport corridors, and lessons on EU funds. Many of their implementation problems are shared across wider Balkan peninsula, though often under different institutional conditions.

The bottom-up and cross-border dimensions also help address the legitimacy problem of green accession. Large-scale reforms can appear remote or threatening, while ocal and cross-border projects show more immediate benefits. These benefits do not remove the need for national reform, but they can make reform less abstract. They also create constituencies for transition beyond ministries, regulators and utilities.

However, localisation should not become fragmentation. Municipalities and border regions need national frameworks, stable financing and technical support. Many will not be able to prepare bankable projects without assistance. Reform Agendas and WBIF pipelines should therefore include capacity-building for local authorities, standardised project-preparation tools, regional advisory facilities and mechanisms for smaller municipalities to access finance. Otherwise, only the most capable local governments will benefit, reinforcing territorial inequality.

A stronger model would combine three levels of implementation. National governments would remain responsible for legal alignment, market design, carbon-pricing pathways, public finance and major infrastructure. Regional and cross-border platforms would manage shared risks such as rivers, wildfire, biodiversity, energy trade and transport corridors. Municipalities and local actors would deliver building renovation, energy communities, waste systems, local mobility, spatial planning and citizen engagement. The success of green accession will depend on whether these levels reinforce one another rather than operate in parallel.

This is where the World Bank’s “transversal, transboundary and targeted” approach to climate policy is useful, but it should be translated into accession practice (World Bank Group 2024a). Transversal means that climate policy enters public investment, transport, energy, agriculture and social protection. Transboundary means that river basins, grids, corridors and ecosystems are governed across borders. Targeted means that coal regions, vulnerable households, SMEs, rural areas and exposed municipalities receive tailored support. The same logic should guide EU instruments in the Western Balkans.

10. Policy Recommendation: Green Single Market Accession Compacts

The preceding sections point to a common problem: the Western Balkans are being asked to align with an EU economy that is changing faster than the traditional accession process. The policy response should therefore be more precise than a general call for “green transition” or “more investment.” Thus, the recommendation is that each Western Balkan partner should have a Green Single Market Accession Compact embedded in its Reform Agenda and linked to Reform and Growth Facility payments, WBIF investment and progressive access to relevant parts of the EU market.

The purpose of these compacts would not be to create a new EU instrument. The Growth Plan already provides the institutional basis by linking Single Market integration, the Common Regional Market, reform delivery and the €6 billion Reform and Growth Facility (European Commission 2023a). The Facility already relies on country-specific Reform Agendas broken into payment conditions. The added value of Green Single Market Accession Compacts would be to organise the climate-relevant parts of this architecture into a clearer implementation layer. At present, they are spread across several policy frameworks. The compacts would identify the limited set of country-specific reforms and investments that determine whether each Western Balkan partner can operate inside the EU’s future low-carbon market, and would connect those priorities more directly to Reform Agenda milestones, WBIF pipelines and progressive market integration.

The first function of the compacts should be to make CBAM-readiness operational. The second function should be electricity-market integration. The Growth Plan’s reference to the integration and decarbonisation of energy markets should become a practical reform sequence. The Energy Community framework already defines many of these obligations, but progress has been uneven. The compact approach would make them more visible within the financing logic of accession.

The third function should be climate-resilient infrastructure. WBIF and Reform and Growth Facility investments should be screened not only for economic relevance and EU connectivity, but also for future climate exposure.

The fourth function should be territorial just transition. Coal-dependent regions need more than compensation mechanisms. Bosnia and Herzegovina’s coal regions, Serbia’s Kolubara and Kostolac areas, Kosovo, and North Macedonia’s Pelagonija and Southwest regions require different instruments, but the compact logic should be similar. Each affected territory should have worker registries, social settlement mechanisms, land-reuse plans, municipal fiscal assessments, training programmes and investment for alternative economic activity.

The fifth function should be SME and industrial competitiveness. Many Western Balkan firms will be affected by EU green standards even if they are not directly covered by CBAM. Suppliers in manufacturing, construction, agri-food, transport and services will face rising expectations on emissions, energy efficiency, documentation, traceability and environmental performance. The WBIF’s SME Go Green, Western Balkans Forward and W BOND programmes point in the right direction, but their logic should be integrated into Reform Agendas rather than treated as parallel financial instruments (WBIF 2026). Compacts should therefore include clear targets to support for firms entering green value chains.

The sixth function should be skills and institutional capacity. As mentioned, the EU’s Western Balkans agenda on innovation, research, education, culture, youth and sport already links green and digital transition to human capital (European Commission 2021). Compacts should connect this agenda to specific labour-market needs. Skills programmes should be embedded in investments projects and designed with both businesses and municipalities.

The seventh function should be governance safeguards. Green investment will be politically vulnerable if it is captured by incumbents, poorly procured or imposed on communities without credible consultation. Compacts should therefore include governance conditions for major EU-backed projects such as transparency and accountability, as well as “do no significant harm” screening. The Commission’s Bosnia and Herzegovina Reform Agenda assessment already applies this logic by linking investments to the EU Taxonomy’s environmental objectives (European Commission 2025).

The eighth function should be regional and cross-border delivery. Some reforms can be national, but many green-transition problems are functional and cross-border. Green Single Market Accession Compacts should therefore include cross-border projects where they create clear integration effects.

The design of these compacts should be selective. They should not become long catalogues of every possible green reform. Their value would lie in identifying the few constraints that most affect each country’s readiness for the EU’s low-carbon market.

The financing model should combine conditionality with support. Excessive conditionality without investment would reproduce the weaknesses of the traditional accession process. Investment without conditionality would risk financing projects that do not transform institutions or markets. The compact approach should therefore connect verified milestones to finance in a way that rewards implementation and would also help the EU communicate the benefits of enlargement more clearly.

The proposal does not require a new institution, but a clearer organisation of existing instruments: the Green Agenda, Growth Plan, Reform and Growth Facility, WBIF, Energy Community, Common Regional Market, EU skills initiatives and cross-border cooperation programmes. The innovation is to connect them around a single objective: preparing each Western Balkan partner to enter the EU’s future low-carbon Single Market in a way that is economically productive, while being socially and politically credible.

Green Single Market Accession Compacts would therefore make the green transition less abstract. They would define what climate alignment means for each economy, identify the reforms that matter most, link those reforms to investment and create a clearer route from accession commitments to local benefits. This is the kind of policy mechanism needed if green accession is to become a convergence strategy rather than another layer of conditionality.

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