FROM COAL TO CBAM: ASSESSING VULNERABILITY IN THE WESTERN BALKANS’ TRANSITION TO THE EU GREEN ECONOMY
FROM COAL TO CBAM: ASSESSING VULNERABILITY IN THE WESTERN BALKANS’ TRANSITION TO THE EU GREEN ECONOMY

Summary/Abstract: This paper explores the macroeconomic and social implica-tions of the European Union’s Carbon Border Adjustment Mechanism (CBAM)for the Western Balkan countries. The study employs a partial equilibrium sec-toral exposure model that estimates potential CBAM-related costs in core in-dustries – steel, cement, and electricity – by comparing projected carbon pric-ing burdens to sectoral revenues and employment levels. The analysis identi-fies areas of high vulnerability where CBAM-induced costs could undermineexport competitiveness, threaten fiscal stability, and increase the risk of jobdisplacement in carbon-intensive sectors. Framed through the concept of de-velopment leakage, the paper argues that policies aimed at preventing carbonleakage within the EU may inadvertently constrain industrial modernizationand economic convergence in its neighboring economies. The findings suggestthat, without transitional financial and technical support, CBAM risks actingas a de facto trade barrier, potentially slowing the Western Balkans’ progresstoward EU accession. To ensure an equitable transition, extended implemen-tation timelines, coordinated carbon pricing mechanisms, and just transitionmeasures integrated into EU-Western Balkan climate cooperation frameworksare needed.

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