Western Balkans Require $37 Billion Investment for Climate Resilience: World Bank Report

Effective climate action in the Western Balkans would yield substantial benefits, including the avoidance of human and property losses, and the acceleration of economic growth.

The six economies of the Western Balkans—Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia—must 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, according to the World Bank Group's Western Balkans regional Country Climate and Development Report (CCDR), released today.

Significant Benefits of Climate Action

Effective climate action in the Western Balkans would yield substantial benefits, including the avoidance of human and property losses, and the acceleration of economic growth. The region is already experiencing severe impacts from climate change, with floods affecting two million people over the past decade and wildfires increasing by 21% in 2021 alone. Droughts and heatwaves are further exacerbating agricultural production challenges and contributing to air pollution, which causes thousands of premature deaths annually.

"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."

Investment in Adaptation Yields High Returns

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

Reducing Greenhouse Gas Emissions

To remain competitive, bolster energy security, and attract international investments, Western Balkan countries need to reduce their greenhouse gas emissions. Reaching climate neutrality by 2050, in line with the European Union's objectives, requires additional investments of $32 billion. Achieving this goal is feasible if solar, wind, and hydropower could generate over 95 percent of total energy production, a significant increase from the current one-third of generation.

Decarbonizing the Building and Transport Sectors

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

Mobilizing Private Sector Participation

The report emphasizes the importance of mobilizing private sector investments to meet climate goals. Countries in the Western Balkans must ensure stable regulatory environments and attractive financial markets to encourage private investment in the green 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."

Policy Recommendations

The Western Balkans CCDR outlines several policy recommendations organized into three categories:

Transversal Policies: Integrating adaptation and mitigation efforts across institutions is necessary for effective climate action. This includes creating specialized climate-focused agencies or commissions and ensuring that national climate change commitments serve in an advisory capacity on all climate-related issues.

Transboundary Policies: 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 Policies: Addressing the specific needs of vulnerable communities is crucial for effective solutions and policy implementation. Targeted policies include education and training reforms to enhance labor mobility and efforts to adopt climate-smart practices.

World Bank Group's Commitment

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