Background
Executive Summary (English) | (Albanian) | (Serbian)
Key Findings
The costs of investing in climate resilience and adapting to climate shocks are high, but the costs of inaction are even higher. Kosovo would need to invest an estimated US$2.8 over the next decade to protect people and property from the damaging and escalating impacts of climate change. In the long term, comprehensive adaptation investments represent the equivalent of 1.4 percent of GDP per year until 2050.
The benefits of adaptation go beyond avoiding damage to lives and property, adaptation projects also lead to employment growth, an improvement in skills, and increased trade opportunities. Key sectors such as agriculture could benefit more particularly from climate-proofing, safeguarding food security and rural livelihoods. Many other co-benefits can be identified: for example, the implementation of adaptation measures in Kosovo’s railway and waste sectors is expected to bring significant environmental and public health benefits while creating new job opportunities.
Accelerating the energy transition to achieve economy-wide net zero emissions in Kosovo by 2050 is feasible, but it will require radical transformation and decisive action on the national and regional level. An energy system modeling analysis was carried out as part of the WB6 CCDR to assess sectoral decarbonization pathways for all WB6 countries. Kosovo’s existing climate targets and policies are already ambitious, and radical transformation of the energy system will be necessary to achieve full decarbonization. To achieve net zero, lignite power plants would need to be fully decommissioned by 2045, replaced by significant upscaling of wind and solar capacity, complemented by storage capacity and strong regional ties and regional power sector integration.
The target of net zero by 2050 can be achieved with minimal impact on the economy’s current potential growth. Overall, compared to a reference scenario (RS), Kosovo would need to invest in the energy system an additional US$760 million until 2030 and US$4.7 billion until 2050 (expressed in present values and in 2020 dollars) to achieve economy-wide net zero, which is equivalent to about 2.9 percent of GDP per year on average until 2050. Most of this investment would be in the power sector to transition it from the dominance of lignite-based power generation to renewables, and much of it could come from the private sector.
Commercial banks and firms have much to contribute to supporting both mitigation and adaptation action in Kosovo. Raising capital to finance climate change-induced investments requires creating an enabling regulatory environment. Under a net-zero emissions trajectory for Kosovo, the private sector is expected to undertake most of the investment in decarbonization (about 85 percent), especially in the transport, buildings, and power sectors.
Recommendations
Kosovo can use climate change adaptation and mitigation measures as opportunities to achieve a more sustainable growth model with higher productivity. To do so, it will need to:
- adopt a more equitable fiscal policy,
- improve the business environment (including adoption and diffusion of technologies, better SOE management) and trade integration,
- invest in human capital and improving inclusion, and
- improve environmental management and planning.