The author of the text: Miroslav Tadić, UNDP
Based on the state of environmental infrastructure in the Republic of Serbia and the extrapolation of the situation in the countries that have recently become the members of the EU, it is estimated that the total costs for achieving advanced environmental quality standards, and this primarily refers to the implementation of EU acquis in this area, will amount to over 10 billion euros (up to 2030). The most demanding sectors are water sector (5.6 billion euros), waste sector (2.8 billion euros) as well as the sector of industrial pollution (1.3 billion euros).
The essential part of the costs is related to operating costs for the operation and maintenance of the new plants which cannot be covered entirely from the European and international sources of funding and that must be financed from the budget, private sector resources or through fees. The successful implementation of all these projections is based on the optimal usage of economical instruments, the development of adequate capacities on national and local level (including relevant ministries, public enterprises and units of local administration). On the other hand, direct economic benefits, derived from alignment in the field of the environment, should surpass the expenses in the amount of 2.4 times during the same period. This shows clear direct economic benefit for the Republic of Serbia from the implementation of EU acquis in the field of the environment, which is the main priority of the Government of the Republic of Serbia.
Satisfying level of environmental quality represents one of the postulates of the European Union and certain obligation of each country that wants to become a full member. Failure to meet demanding environmental quality standards that were set by European legislation carries hidden economic costs for the society, which must be calculated and transparently displayed. The benefit of timely perceiving of these costs is reflected in: avoidance of damage to health (reduced morbidity and mortality caused by high concentrations of pollutants in environmental media – water, air and soil); avoidance of the damage to property and agricultural production, as well as the benefit for the maintenance of natural ecosystems and ecosystem services. Estimated costs in the industrial sector represent around 13% of total estimated costs of the environment. It takes a great effort in order to transpose and implement European directives of importance for the industrial sector, especially the Directive on industrial emissions in the Republic of Serbia.
Many things have already been done in terms of transposition, but the implementation represents quite a big challenge, especially in terms of necessary investments in cleaner technology and advanced technological processes. From an economic standpoint, desulphurization of the plants will for example be one of the most expensive components, as well as remediation of contaminated locations, etc. During the negotiations on the membership in the EU about this area it will certainly be necessary to negotiate additional, maybe one of the longest periods (so-called Transition periods) for the full implementation of these regulations. Energy sector, industry and economy are to great extent related to the greenhouse gas emissions (GHG) and definitely represent a great potential in the reduction of these emissions, mitigation of climate change consequences and thus achieving a better environmental quality.
The implementation of EU legislations in the field of climate and energy is certainly a cost for the economy and the budget, but it is definitely necessary and profitable long-term investment which enables competitiveness and placing products on the market. In the future, in the field of climate change it is necessary to develop comprehensive national policy and strategy which will be in accordance with the European strategy 2020 and EU 2030 – Climate and Energy Framework. Moreover, EU is dedicated to a long-term goal (goals for 2050 ) to reduce emissions for 80-95% below the level of 1990 by 2050, in the context of the role of the developed countries as a group that takes similar actions on the international level. The reduction of the emissions to this level would require from the EU to become low carbon economy (European Union, 2014). According to these long-term goals, the production of energy should become almost completely free of carbon emissions, using around 30% less energy in 2050 by applying energy efficient measures. Therefore, the challenges for the Republic of Serbia, as a candidate country for the embership in the EU, and its economy are even higher.
Very important fact for Serbia is that the EU is under permanent obligation to comply with the requirements of the UN’s Framework Convention on Climate Change (UNFCCC): the EU’s legislation has developed the entire series of regulations related to the reporting that is in accordance with UNFCCC regulation. The EU has developed clear and direct set of laws in order to comply with the mechanism of monitoring, reporting a verification in terms of GHG emissions and it has established a special policy in the field of climate change as a response to the obligations established by international regulations. In order to align with acquis in the field of climate change, the significant efforts have been made in the Republic of Serbia so as to improve monitoring, capacity in reporting and verification through the adoption of new laws and training, especially of the business entities. The Law on monitoring, reporting and verification of greenhouse gases from the industrial and energy power plants, that should come into force in 2017, is the first step towards the implementation of EU emissions trading systems (EU ETS), but also a serious challenge for the power plants that fall under its jurisdiction. EU emissions trading system is maybe the most important regulation that will have an important impact on the development of Serbian economy and energy sector. Alignment with the acquis and strengthening of the necessary administrative capacities still remains a major challenge. Administrative capacity in the field of climate changes must be strengthened on both central and local level in order to ensure efficient harmonization with the implementation of acquis. In this way the economy will also benefit from the adequately established system with clear guidelines and the support in the implementation of climate regulations.
The key challenge for the Republic of Serbia is to move towards low carbon economy by reducing GHG emissions and at the same time to achieve economic goals and social cohesion. The fulfilment of the obligations that arise from the international agreements, especially UN’s Framework Convention on climate Change, also represents an important framework for future strategic, political and investment trends in the Republic of Serbia. In addition to previous commitments, most of the State Parties of the Convention have submitted to Convention Secretariat their first Intended Nationally Determined Contributions to reduce greenhouse gas emissions (so-called INDCs), in which were expressed the intentions for the reduction of GHG emissions. Serbia has also submitted its INDCs among first countries in June 2015 with a marked reduction of 9,8% in 2030 in comparison to emissions from 1990. Apart from first INDCs of each Member State which have become an integral and essential part of the new Global Climate Agreement in Paris. Periodic “cycles” are provided in which INDSc would be regularly updated every five years. A new Climate Agreement in Paris was adopted during the 21st session of the Conference of the Parties to the UN Framework Convention on Climate Change which was held in Paris, from 30 November to 12 December, 2015 as a global and legally binding document. These ambitious goals will not be achieved without the contribution of the key actors in the field of energy, industry and economy in general. The energy sector, industry and economy will certainly be crucial in meeting the obligations arising from the set of EU regulations in the field of energy and climate change, including at of the costs of approximation. In this context, we have adopted numerous national regulations and policy documents that provide clear guidelines, such as: The Energy Law, the Law on efficient use of energy, Decree on Incentive Measures for Privileged Power Producers, National Renewable Energy Action Plan, Strategy for Energy Development until 2025 with projections for 2030.
Policies in the fields of renewable energy and energy efficiency can have effects both on EU-ETS sectors (reducing the use of fossil fuels ) and sectors that are not covered by EU ETS system. Emissions in EU ETS sectors are affected by energy efficiency policies, renewable energy policies and the implementation of the regulation on carbon capture and storage and the use of flexible mechanisms.On the other hand, the main legal and political framework for the sector of industrial processes is given in the strategic document “Serbian Strategy for Policy for Industrial development (2011-2020)”.Apart from that, the Effort Sharing Decision 406/2009/EC of the European Parliament and of the Council on the effort of Member States to reduce their greenhouse gas emissions to meet the Community’s greenhouse gas emission reduction commitments up to 2020, entered into force in 2009 exclusively for reducing emissions in the sectors not covered by the EU ETS. The sectors that are not covered by the EU ETS are: traffic (cars, vans),construction (heating in particular), services, small industrial installations, agriculture and waste management. This is a part of a package of policies and measures in the field of climate change and energy that will help Europe to transform into low-carbon economy and also to increase its energy security reaching the goal of the total emission reduction EU Climate and Energy Package (20% of reduction below the level of 1990 up to 2020).The Republic of Serbia, once when it starts the process of negotiations, will have to contribute according to its relative wealth, in the economically and technically feasible way, of course taking into account sustainability of the energy, industrial and commercial sector in general.
The costs of implementing these regulations and harmonization with the EU acquis to a large extent rely on the resources of the industry itself that is economy (so called own resources). Certainly in the nomenclature of costs, there are also funds for environmental protection, commercial loans, state budget, but also donor funds. The use of donor funds should certainly be optimized – this involves the establishment of appropriate capacities for absorption, that is adequate institutions and project implementation, as well as balanced economic strategy that will in turn reduce the need for interventions from the state budget. This will reduce the costs to be borne by the Republic of Serbia.