KONCEPTUALNA PLATFORMA ZELENE ENERGETSKE TRANZICIJE I ULOGA PORESKE POLITIKE: SLUČAJ SRBIJE
CONCEPTUAL PLATFORM FOR GREEN ENERGY TRANSITION AND THE ROLE OF TAX POLICY: THE CASE OF SERBIA

Author(s): Dragan Đuričin
Subject(s): National Economy, Energy and Environmental Studies, Economic policy, Environmental and Energy policy, Fiscal Politics / Budgeting
Published by: Finrar d.o.o Banja Luka
Keywords: Serbia; polycrisis; polytransition; energy security; sustainable growth; clean reindustrialization; biomass energy production; green financing; automatic fiscal stabilizers;
Summary/Abstract: Serbia’s economy stands at a crossroads. Faced with geopolitical crises and fierce global competition, exacerbated by trade wars and the soaring costs of raw materials and energy, in the last period it has struggled to stay afloat. If Serbia fails to preserve its current manufacturing base and ensure energy security, it risks undermining its economic fundamentals and strategic autonomy. A well-balanced industrial structure, underpinned by energy security, is a cornerstone of Serbia’s future prosperity. However, the country’s future growth is threatened by significant challenges stemming from deeply rooted internal and external disruptors. Among the most pressing is a 30% energy output gap. The structure of energy output is the related challenge. Due to climate change, when defining a solution for energy security, both in terms of the volume and structure of energy production, as a key limitation to sustainable growth, the green energy transition should also be considered a factor of influence. Persistent issues such as the widening energy output gap, a high carbon footprint, the dominance of energy-intensive and hard-toabate industries in the economic structure (mining, steel, copper, cement, construction, transportation, ICT, etc.), as well as the low efficiency of end-use sectors, pose serious macroeconomic risks. The good news is that the policy mix implemented in 2024 led to nearly 4% economic growth, successfully curbed inflation, bringing it within the target tolerance band (3% ± 1.5%), and simultaneously reduced the fiscal deficit and public debt as a share of GDP (2.8% and 48%, respectively). Consequently, Standard & Poor’s upgraded Serbia to an investment-grade credit rating (BBB-). However, the dangerous nexus of key disruptors continues to fuel inflation, posing an ongoing challenge to the country’s macroeconomic fundamentals. To make matters worse, a (geo)political malaise that erupted in Q4 2024 has persisted to the present day. The escalating costs of coordinated mediation efforts to mitigate these negative effects have further squeezed the fiscal space available for state-led impact investments. In this deteriorating context, the current energy output gap risks expanding to an uncontrollable level, further aggravating the issue of energy security. An additional factor of concern is the structure of Serbia’s energy production, which is heavily reliant on lignite, accounting for 68% of electricity generation. There is a growing urgency to address this issue, not only to ensure energy security in Serbia but also to align with global climate change mitigation goals. To achieve and sustain energy security in Serbia, three critical goals contribute to solution: energy output expansion, supply diversification, and the shift from fossil fuels to renewable energy sources. Clean Reindustrialization and Green Energy Transition as its part serve as a conceptual framework for achieving these goals. For all goals, compatibility imperative with the EU is critical. In the energy sector, the EU tends to be more explicit, elevated, and sophisticated in its requirements regarding conceptual compatibility with candidate countries. By committing to a net-zero future, Serbia will strengthen its prospects for EU accession. This paper advocates the view that biomass will serve as a key renewable energy source in the medium term. Additional elements of the plan include the development of a regulatory framework for the carbon market, the issuance of thematic securities (green bonds, green credits, etc.), green fiscal subsidies, and the implementation of measures to prevent non-complying behavior (for example, greenwashing). Following the previous line of reasoning, the paper is organized around four fundamental issues. Part 1 is dedicated to explaining a polytransition, colloquially referred to as the “green transition”, as a response to the ongoing polycrisis. Part 2 focuses on clean reindustrialization as a new vision for economic development. Part 3, and the most important one, provides key explanatory insights into the deployment of biomass technology as the center of Serbia’s green energy transition, along with main financial projections. The paper ends with a Conclusion that summarizes the findings and implications.

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