Western Balkan Economies Need to Strengthen Climate Resilience to Protect People and Boost Growth: WBG Report

VIENNA – The six economies of the Western Balkans need to collectively invest at least $37 billion over the next decade to effectively protect people and property from the damaging and escalating impacts of climate change, says the World Bank Group’s Western Balkans regional Country Climate and Development Report (CCDR), released today.

The benefits from effective climate action would be huge for the Western Balkans, comprising Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia. These investments would help avoid loss of human life, property, and productivity, and would help accelerate economic growth.

Inaction is not an option for the region, which is already severely impacted by climate change. For instance, floods have directly affected two million people in the past decade, with the impacts set to worsen with more extreme rainfall. Wildfires are a growing threat, with over 1,500 recorded in 2021, a 21% increase over the past decade. Droughts are negatively affecting agricultural production, while heatwaves are contributing to air pollution, causing thousands of premature deaths annually in the Western Balkans.

“Climate change poses a clear threat to economic development in the Western Balkans,” said Xiaoqing Yu, World Bank Country Director for the Western Balkans. “The costs of investing in adaptation are significant. But the good news is that the benefits are even higher. By preparing for climate hazards, we can save lives, safeguard local communities, and stimulate economic growth”.

According to World Bank estimates, climate change adaptation investments, particularly in low-and middle-income economies, yield significant returns, with about $4 in benefits for every $1 invested.

Countries in the Western Balkans also need to reduce their greenhouse gas emissions to remain competitive, bolster energy security, and attract international investments. However, reaching climate neutrality by 2050, in line with the European Union’s objectives, would require additional investments of $32 billion.

Achieving economy-wide net-zero greenhouse gas emissions by 2050 is feasible if solar, wind, and hydropower could generate over 95 percent of total energy production, a substantial increase from the current one-third of generation.

Additionally, decarbonizing the building sector through energy efficiency investments is essential. Furthermore, the transport sector must transform significantly by reducing vehicle demand, shifting to more sustainable modes of transportation, and transitioning to electric vehicles.

The report emphasizes that a significant portion of funding can come from the private sector. To mobilize private investments, however, countries in the Western Balkans must ensure stable regulatory environments and attractive financial markets to encourage companies to engage in the opportunities presented by the transition.

“Adapting to climate change is key for the countries in the Western Balkans to maximize their potential and spur strong sustainable growth,” said Nicolas Marquier, IFC Regional Manager for the Western Balkans. “For this, private sector participation will be essential. The report outlines a clear and timely pathway to achieving this shift to net zero and to ensure local communities are protected and receive the economic benefits from this green transition”.

The Western Balkans CCDR outlines several policy recommendations to guide the region’s transition to climate neutrality by 2050. These recommendations are organized into three categories of policies:

• Transversal: Integrating adaptation and mitigation efforts across institutions is needed for effective action on climate change. For instance, specialized climate-focused agencies or commissions should be created, and national climate change commitments should serve in an advisory capacity on all climate-related issues.
• Transboundary: Cross-border collaboration is essential for tackling climate risks that exceed geographical limits. Strengthening regional institutions is key to enabling coordination in areas like early warning systems, shared resource management or harmonized energy systems.
• Targeted: Addressing the specific needs of vulnerable communities is essential for effective solutions and policy implementation. Targeted policies include education and training reforms to enhance labor mobility and efforts to adopt climate-smart practices.

The World Bank Group is helping countries curb carbon emissions and build resilience to extreme weather. It is setting an ambitious goal to devote 45% of its financing to climate action by 2025, deployed equally between mitigation and adaptation. During fiscal years 2023 and 2024, the World Bank Group has committed nearly $1.2 billion of climate finance in the Western Balkans.