Performance Assessment of Serbia’s Environmental and Climate Institutions: Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions November 2022 © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of the World Bank Group with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set ii forth. 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Cover design: Vladimir Mirzoyev Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Abbreviations and Acronyms APACD Action Plan for Administrative Capacity Development BAT AEL Best Available Technology Associated Emission Level CBAM Carbon Border Adjustment Mechanism CC Climate Change CCDR Climate Change and Development Reports CEA Country Environmental Assessment CSO Civil Society Organization DH District Heating EE Energy Efficiency iii EnC Energy Community ETS Emission Trading Scheme EU European Union FTE Full Time Employee GDP Gross Domestic Product GHG Greenhouse Gas GoS Government of the Republic of Serbia HR Human Resources INECP Integrated National Energy and Climate Plan IPA Instrument for Pre-Accession LCDS Low Carbon Development Strategy LSG Local Self-Government MCP Medium Combustion Plant Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Abbreviations and Acronyms MCPD Medium Combustion Plants Directive MoEP Ministry of Environmental Protection MoAFWM Ministry of Agriculture, Forestry and Water Management MoME Ministry of Mining and Energy MRV Monitoring, Reporting and Verification NAP National Adaptation Plan NAPP National Air Protection Program NAPA National Academy for Public Administration NCCC National Climate Change Council iv NDC Nationally Determined Contribution NEC National Emission Ceiling NERP National Emission Reduction Plan NGO Non-governmental organization PIMO Public Investment Management Office PM Particulate matter PPP Public-private partnership RE Renewable Energy RES Renewable Energy Source SCTM Standing Conference of Towns and Municipalities SEPA Serbian Environmental Protection Agency UNFCCC United Nations Framework Convention on Climate Change VOC Volatile organic compound Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Table of Contents ABBREVIATIONS AND ACRONYMS...............................................................iii ACKNOWLEDGMENTS................................................................................... vi EXECUTIVE SUMMARY...................................................................................1 1. INTRODUCTION......................................................................................... 4 2. OVERVIEW OF REGULATORY, ENFORCEMENT, AND MONITORING FRAMEWORK FOR MITIGATING CLIMATE CHANGE AND ADDRESSING AIR POLLUTION ............................................. 6 2.1. Strategic orientation.......................................................................... 6 2.2. Key national legislation and alignment with the EU acquis................ 7 2.3. Legislation implementation and enforcement.................................... 9 3. ASSESSMENT OF THE INSTITUTIONAL FRAMEWORK........................... 11 3.1. National institutional arrangements ................................................. 11 v 3.2. Local Institutional arrangements - as defined by the regulatory framework ............................................................................ 16 3.3. Coordination ................................................................................... 20 4. ASSESSMENT OF THE INSTITUTIONAL FRAMEWORK FOR INVESTMENTS TO REDUCE POLLUTION AND GHG EMISSIONS............... 22 5. INSTITUTIONAL ASSESSMENT IN PRACTICE........................................ 24 6. KEY FINDINGS AND RECOMMENDATIONS............................................ 28 TABLES Table 1: Inspection capacities in Croatia and Serbia .................................... 10 Table 2: Overview of responsibilities according to the Law on Ministries......... 11 Table 3: Overview of planned and occupied job positions in MoEP and SEPA..............................................................................................12 Table 4: Overview of the number of positions in the relevant sectors of the Ministry of Mining and Energy........................................................................13 Table 5: Number of additional full-time employees for Air Quality and Climate Change according to APACD...................................................... 14 Table 6: Decentralization in air quality, climate change, and energy..............17 Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Acknowledgments This Report was prepared by a team of experts from the World Bank and GFA South-East Europe, with significant contributions from a number of stakeholders in the Government of the Republic of Serbia. The World Bank core team was led by Maja Murisic and included Ivana Novakovic, Sameer Akbar, Arno Behrens, and Anita Hafner. The GFA South- East Europe team was led by Zoran Kapor. The extended World Bank team that provided input included Verena Maria Fritz and Abdoulaye Gadiere. Linh van Nguyen, and Grace Aguilar provided project management support. Nigara Abate, Demetra Aposporos and Vladimir Mirzoyev prepared the manuscript for publication. The team is grateful for the overall guidance of Linda Van Gelder (Country Director for the Western Balkans), Nicola Pontara (Country Manager for the vi Republic of Serbia) and Kseniya Lvovsky (Practice Manager, Environment, Natural Resources and the Blue Economy, Europe and Central Asia). The team also wishes to sincerely thank the staff of the Ministry of Environmental Protection for their contributions and valuable feedback throughout the preparation of this report, and the experts from various ministries, departments, and agencies of the Government of the Republic of Serbia for sharing their insights through meetings and interviews. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Executive Summary Policy credibility and effectiveness and Capacity Development (APACD) submitted to the strong institutional capacities are essential EU as part of Chapter 27, a significant gap remains to achieving a green and just transition in the staffing needs the government plans to in Serbia. Poor air quality is a decade-long fill.  Furthermore, recently adopted legislation, problem in the country, and the Government of such as the Law on Climate Change, Law on the Republic of Serbia (GoS) recently recognized Energy Efficiency and Rational Use of Energy, improving air quality as one of its priorities, and Law on Use of Renewable Energy Sources, following an increasing demand from the public still are not fully implemented due to needed for action. At the same time climate change development of the secondary legislation as well mitigation, in the energy sector in particular, is as appropriate institutional structures, including crucial for Serbia’s transition to green growth at the local level. and for fulfilling commitments in the context of The mechanisms for monitoring and the Paris Agreement and the European Union enforcement need to be reinforced as a (EU) accession process. Moreover, the need for prerequisite for effective and systematic reducing energy consumption and deployment of implementation of policies and regulations. renewable energies has become a more pressing 1 Poor enforcement is often the result of  weak issue with the current energy crisis and rising regulations (those setting the system of penalties cost of fossil fuels. and controls), but also an inadequate institutional Serbia has the means to further address some capacity. In most cases the penalty levels are of the key institutional weaknesses impeding quite low, while the capacities for the inspection effective green action across sectors. As an are equally insufficient both at the national and upper middle-income country with numerous local levels. close links to highly developed countries in its Given the links between climate change and neighborhood, Serbia’s tertiary education levels air quality, multi-sectoral coordination is are relatively high, giving policy makers a pool necessary for a well-functioning institutional of talent to draw from. As such, human capital is framework that will achieve progress in one of Serbia’s major assets, and one that could specific sector policies. An effort has been be further utilized. Therefore, strengthening the made in this direction through the establishment institutional framework presents an opportunity of the National Climate Change Council (NCCC) to create new jobs for dedicated professionals under the 2021 Law on Climate Change, which interested in working in the public sector.  could have a more prominent role in terms of Effective policies and regulations can help coordination and advisory capacity and could the GoS meet the challenges related to the be placed under a sufficiently high level of transition to green growth—however their Government oversight (e.g. the Prime Minister’s implementation requires institutional capacity Office). This would also allow for embedding the and the availability of secondary legislation. green agenda more explicitly across sectoral As noted in the Action Plan for Administrative strategies and plans, helping to scale-up Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions analytics, policy-making and implementation and pollution taxation, in order to enable the capacities, leadership by core institutions such as creation of sustainable financing mechanisms the Ministry of Finance on the one hand, and the for both loans and grants. Going forward, it Ministry of Environmental Protection on the other, will be important to ensure there are policies and ensuring transparency and opportunities for in place to enable investment and strengthen engagement with businesses and citizens.   market incentives for green investments, as The implementation of air pollution and climate well as implement appropriate institutional and change mitigation policies and regulations capacity strengthening efforts to accompany requires coordination not only on the national them (including those addressing innovation, level, but also between the ministries and the monitoring, and enforcement). local level. Although the regulatory setting does The introduction of new policy reforms not position the local level as the key agent of and measures will impact the institutional change, with the right incentives and support frameworks needed for their implementation. local governments can also be catalysts for green While introduction of the Carbon Border growth solutions. For instance, pursuant to the Adjustment Mechanism (CBAM) was not Law on Air Quality, local governments have a considered at the time the APACD was prepared variety of responsibilities, including preparation of and a related capacity needs assessment was the Air Quality Plan, establishment and operation not carried out, an increase in staff will certainly of the local network for air quality monitoring, be needed to monitor and report emissions regular reporting on collected data to the Serbian as stipulated by the Climate Change Law and Environmental Protection Agency (SEPA), and related monitoring, reporting, and verification enactment of short-term action plans, among (MRV) requirements. As the introduction of 2 others. However, even with a decentralized CBAM will require switching from sector-based and prescriptive regulatory framework, several emissions / product-based emissions reporting, institutional challenges hinder its implementation. SEPA’s capacity will have to be enhanced both Among them are weak or insufficient capacities in terms of quantity and quality or some other at the local level and a lack of communication arrangements and reliance on collaboration will and coordination on the national level. Improving have to be pursued with technical institutes and these implementation and governance issues will faculties. Likewise, should Serbia pursue the be critical for achieving the most cost-effective environmental fiscal reform options, it would have option for supporting air quality and related to adapt its institutional framework accordingly. investments. Required changes would include an increase in Effective institutions can play a catalytic role capacities for the design of targeted measures in facilitating green investments and related and dissemination of financial support schemes, market mechanisms. While many measures management of reporting and calculation of fee that require investments in pollution reduction levels to be paid (including through improved technology are not yet in place, the draft National IT systems), and improved local enforcement of Air Protection Program (NAPP) and the draft Low polluters’ reporting on their emissions, among Carbon Development Strategy (LCDS) and others. Action Plan foresee several such measures that Serbia needs to strengthen the institutional need to be put in place and will require policy / framework to flexibly pursue a policy regulatory and institutional support (details in reform agenda that supports a green Chapter 5). Additionally, there is a need for an transition.  Meeting multiple development, institutional mechanism to support environmental environmental and climate objectives will fiscal reforms, such as those related to energy require  not only  coherent policy incentives Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions and measures, but also strong  institutional support public policies, regulations and future and governance frameworks that enable their market mechanisms and investments will be implementation. As such, strengthening an critical for fostering sustainability and green institutional framework in Serbia that can actively growth going forward. 3 Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions 1. Introduction This assessment focuses on the performance of “Serbia’s underlying drivers of policy - mapping institutions at both the national and subnational institutions and stakeholders for environment and levels (limited to a selection of exemplary climate change” (2021). municipalities) and is aimed at addressing Serbia’s In terms of sectoral focus, this assessment air pollution and climate change mitigation examines the institutional framework needed challenges to prepare these institutions for the to address air pollution and climate change transition to a low-carbon and green economy. mitigation in Serbia. This narrow focus is due to In this assessment, the term ‘institutions’ refers the importance both issues have for Serbia’s effort to public institutions. Their performance is to transition to green growth models. A number of analyzed in several ways; including by assessing cities throughout Serbia regularly report poor air the overall institutional set-up, related capacities, quality during the winter months, yet air quality gaps, and coordination mechanisms; presenting has been a neglected topic for years, due to a regulatory framework in these areas and in terms lack of capacity and investment in low-polluting of strategic orientation and alignment with key equipment. That said, in recent years, improving EU acquis; and analyzing the role of institutions monitoring as a basis for planning policies and 4 as part of an enabling environment for fostering investments came into focus with the expansion investments. However, this assessment does not of the monitoring network. Increased interest on provide an analysis of the regulatory or investment air quality in national and local politics initiated framework itself, but examines its implementation the development of planning documents for through an institutional lens. improving air quality. In addition to the overall institutional framework In addition to the persistent issue of air quality in for air pollution and climate change mitigation, Serbia, many businesses in the Serbian economy the analysis also includes four case studies have high CO2 emissions. According to World that further illustrate the findings of the Bank data, while the per-capita CO2 emissions are overall analysis and identify possible gaps in on a par with the EU average, Serbia’s low GDP the institutional framework relevant for their and the high CO2 intensity of its economy result implementation. in CO2 emissions more than three times higher The methodology for this assessment was a per unit of GDP than Croatia’s, four times higher combination of desk research and interviews, than Slovenia’s, and more than five times higher and was informed by other analytical work than the EU average. To shift towards low-carbon prepared by the World Bank, including its development and a green transition, climate change mitigation action will need to be scaled up. Country Environmental Assessments (CEAs) and Climate Change and Development Reports Lastly, though the analysis of institutional (CCDRs). This assessment was also informed framework in the areas of air quality management by and greatly benefitted from previous work and climate change mitigation was conducted as conducted, including the unpublished note a standalone assessment, it is complementary Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions to the environmental fiscal reform paper, and and climate change mitigation. Likewise, the provides recommendations for the institutional findings of this analysis also informed “Supporting performance needed so that taxation is a more Serbia’s Transition to Greener and More Resilient efficient instrument for addressing air pollution Growth: Policy and Institutional Reforms.”1 5 Growth: Policy and Institutional Reforms.”1 1 The World Bank. “Supporting Serbia’s Transition to Greener and More Resilient Growth: Policy and Institutional Reforms” (2022), https://openknowledge.worldbank.org/bitstream/handle/10986/38271/P17641306e85c00100a145093af447ee1fa.pdf?sequence=7&isAllowed=y Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions 2. Overview of Regulatory, Enforcement, and Monitoring Framework for Mitigating Climate Change and Addressing Air Pollution 2.1. Strategic orientation the final date for the plan’s enactment. Serbia has also ratified the Paris Agreement and has The overall strategic framework for air quality periodic revisions of the Nationally Determined and climate change mitigation in Serbia remains Contribution (NDC) as a related obligation. The incomplete. Although Serbia is meeting its GoS approved the revised NDC in August 2022 obligations towards international commitments, and submitted it to the United Nations Framework national strategic documents in these areas are Convention on Climate Change (UNFCCC). The not yet enacted. With respect to climate change revised NDC was based on the modeling results and air pollution in particular, there has been from the draft Low Carbon Development Strategy a significant gap in strategic documents with and aims for a 33.3% emissions savings by 2030, no medium- to long-term policy outlook and as compared to the 1990 level. incorporation of these topics into the country´s 6 overall development strategies. Reflecting on the two draft documents, while the measures are aligned (for instance, the For both air quality and climate change mitigation, recommended mitigation scenario from the Low while there has been a number of strategic Carbon Development Strategy is taken as the documents enacted as part of Serbia’s international basis for the projection of future fuel emissions commitments, the overarching national strategic in the NAPP), one critical discrepancy is the policy documents are missing. In the case of air different treatment of heating with firewood. quality, the National Air Protection Program passed While this practice is a major source of PM2.5 a public consultation which, after more than five emissions, an air quality pollutant, it is considered years of delay, is pending enactment. As part of as being carbon-neutral, and is therefore favored its obligations as a contracting party of the Energy in the climate policy scenarios. Community, Serbia adopted the National Emission Reduction Program (NERP), which applies to old Furthermore, in the case of climate change, an combustion plants with thermal capacity equal alignment needs to take place with relevant sector to or greater than 50 MW. The expected impact strategies, as stipulated by Article 9 of the Law is a significant reduction of emissions by 2027,2 on Climate Change, which requires that sector since all existing plants will need to comply with strategies align with Low Carbon Development emissions limit values. Strategies. Namely, public policy documents “must contain a quantitative assessment of In the case of climate change, the national Low impact on change of greenhouse gas (GHG) Carbon Development Strategy and Action Plan emissions from sources and carbon sinks, passed public consultations in early 2020 and calculated using an internationally recognized the Law on Climate Change sets March 2023 as 2 NAPP estimates that by 2027 the SO2 emissions at the national level will be reduced by 84%, NOx by 34% and dust by 1% as compared to 2015. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions methodology.” The wording of the article itself is also lacking up-to-date overall development can lead to difficulties in implementation due to planning documents and strategies, as defined the need to define “internationally recognized by the Law on Planning System of the Republic methodology,” however, the proposed principle of Serbia, which also has implications on the two requiring alignment is crucial for an integrated areas. A Development Plan of the Republic of approach to climate action. The application of Serbia does not exist, while the Spatial Plan of this principle will become an important driver for the Republic of Serbia 2021-2035 passed public cooperation between ministries and prioritizing consultations and is pending enactment. climate change on the government’s agenda only These strategic documents are crucial for setting after the Low Carbon Development Strategy is each sector’s long-term path and objectives, which enacted. Based on the discussion with MoEP, the should be achieved through the implementation of intention is to incorporate a compliance cross- sector legislation. For instance, the draft Spatial check as part of the Strategic Environmental Plan is based on the existing Energy Development Assessment. Strategy up to 2025, with projections until 2030 That said—and despite critical gaps in terms of and stipulates development of new fossil-fuel strategic documents to guide Serbia’s efforts based thermal power plants. Considering the at reducing air pollution and mitigating climate commitments under the Sofia Declaration on the change—there have also been some positive Green Agenda, as well as other public policy work developments. For instance, with regard to the for reducing GHG emissions in the energy sector, Sofia Declaration on the Green Agenda for the enacting the Spatial Plan based on an outdated Western Balkans,3 Serbia has committed to align strategy undermines upcoming decarbonization the Action Plan with the EU Emissions Trading efforts as well as the implementation of the climate System and / or introduce other carbon pricing change and air pollution agenda in general. 7 instruments by 2024 as well as the design of an Action Programme for Coal Phase-out by 2024. While alignment with the EU Emissions 2.2. Key national legislation and alignment Trading Scheme (ETS) is progressing with the with the EU acquis implementation of the Law on Climate Change, The key national legislation related to air quality the Action Programme for Coal Phaseout needs to includes the Law on Air Quality (Official Gazette build upon key strategic documents in the energy of the Republic of Serbia, No. 36/2009; 10/2013) sector, including: the new Energy Strategy until and related laws. This Law and its relevant laws 2040, the Outlook until 2050, and the Integrated regulate air quality management and determine National Energy and Climate Plan (INECP). the measures, method of organization, and The documents are under preparation and are control of the implementation of air quality anticipated to be adopted in 2022. The Integrated protection and improvement. In addition, there National Energy and Climate Plan and the Low are other related pieces of legislation, including Carbon Development Strategy need to be aligned. the Law on Integrated Pollution Prevention and Keeping the timelines in mind, MoEP will proceed Control (Official Gazette, No. 135/2004; 25/2015; with the enactment of the Strategy only after the and 109/2021), the Regulation on Limit Values adoption of INECP. of Emissions of Air Pollutants from Stationary In addition to the specific gaps in terms of strategic Pollution Sources (Official Gazette, No. 111/2015; climate change and air quality management 83/2021), and the Regulation on Motor Vehicles documents, it is important to note that Serbia and Their Trailers Classification and Technical 3 Regional Cooperation Council, Western Balkans. “Sofia Declaration on the Green Agenda for the Western Balkans” (2020) https://www.rcc.int/docs/546/sofia-declaration-on-the-green-agenda-for-the-western-balkans-rn Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Conditions for Vehicles in Road Traffic. While the of legislation on monitoring, reporting, and limit values for emissions are also set for small verification of GHG emissions in line with the combustion plants and even for households, EU emissions trading system and Effort Sharing the operational monitoring of emissions is not Regulation. However, to ensure full alignment, defined, which means emission limits are not secondary legislation is needed. The MoEP, enforced. Sulphur content in solid fuels is not supported by the development partners, is regulated, however, the content in liquid fuels is working on enacting the relevant secondary regulated through the Rulebook on Technical and legislation. Six pieces of secondary legislation Other Requirements for Liquid Fuels of Petroleum are to be enacted by the end of 2022, as follows: Origin (Official Gazette, No. 150/2020). Finally, 1. Regulation on types of activities and the Eco Design Directive (Directive 2009/125/ greenhouse gases (enacted); EC of the European Parliament) was transposed 2. Rulebook on monitoring and reporting of GHG to Serbian legislation with the enactment of the emissions from installations (pending); decree on eco-design of energy related products (Official Gazette, No. 133/2021). 3. Rulebook on verification and accreditation of those verifying GHG emissions reports In terms of climate change, the key national (enacted); legislation is the Law on Climate Change (Official Gazette, No. 26/2021). The key provisions of the 4. Rulebook on the content of GHG inventory and Law include setting the GHG emission level on a report on GHG inventory (pending); ten-year and annual basis (Art. 11); development, 5. Regulation outlining the national system for monitoring and implementation of the Low Carbon compiling the GHG inventory and system Development Strategy (Art. 7) and its Action Plan for the reporting of policies, measures, and 8 (Art. 10); development of the National Adaptation projections (pending); Program (Art. 13); and setting the system for GHG 6. Rulebook on availability of data on fuel emission permitting. economy and CO2 emissions related to the In addition, the Law on Energy Efficiency and sale of new passenger cars (pending). Rational Use of Energy (Official Gazette, No. There is a similar situation with the energy 40/2021) and the Law on Renewable Energy legislation enacted in 2021 — the secondary Sources (Official Gazette, No. 40/2021) are of legislation for the Law on Use of Renewable primary importance for mitigation measures in the Energy Sources (RES) and the Law on Energy energy sector. Efficiency and Rational Use of Energy remains Following the 2021 EU Progress report, the level of under development. The Law on Use of RES alignment around air quality is good. The biggest partially transposes the renewable energy gap is the lack of transposition of the National directive (RED II, Directive 2018;2001;EU). Emission Ceilings (NEC) Directive 2016/2284/EU. In case of energy efficiency, the new law Also, the alignment on volatile organic compound provides a high level of alignment, with some emissions has not been completed, nor has revisions needed to comply with the Directive alignment with the industrial emissions directive on the Energy Performance of Buildings and the (IED). The Law on Air Quality will need to be Directive on Energy Labeling. revised to ensure full alignment with the above- Looking at the existing and forthcoming mentioned directives. legislation, the legislative framework to address In the case of climate change, alignment is at air pollution and climate change is well advanced. the early stages. The adoption of the Law on In the case of climate change, the legal framework Climate Change provides a basis for alignment is in place, with key pieces of primary legislation Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions enacted in 2021: the Law on Climate Change, Protection Program has been delayed for more the Law on Use of RES, and the Law on Energy than five years given the initial timeline. Also, Efficiency and Rational Use of Energy. This holds the development and implementation of local true provided the remaining laws and regulations air quality plans is lagging. Based on the draft are adopted and full implementation is achieved. National Air Quality Program, by March 2021, out The overall level of alignment with the EU acquis of the 16 LSGs obligated by law to have approved is also relatively high, though further revisions Air Quality Plans, seven have done so, three are in- are needed. For instance, the Law on Air Quality process, and six have not yet begun. Furthermore, has a high level of alignment with the acquis, the plan quality varies, and in some cases is even however, changes are needed for transposition of unsatisfactory. For instance, the relation between the NEC directive 2016/2284/EU, volatile organic the sources of pollution and emissions is often not compound emissions and the IED. properly elaborated, and the scope of proposed measures is limited. Although the main sources The path for further alignment for Chapter 274 of air pollution are heavy industry, thermal power is set in the negotiation process with agreed plants and heating in individual households, most benchmarks for closure. However, to achieve of the local air quality plans target the transport the benchmarks the capacities need to be sector. MoEP and SEPA provide their opinion on strengthened. the local air quality plans prior to their enactment, and offer guidance to increase their quality. 2.3. Legislation implementation and However, in terms of implementation, monitoring enforcement responsibility lies with the LSGs. Based on An implementation’s effectiveness is determined feedback from stakeholders, the implementation by the adoption of a strategic policy framework level appears to be poor and without proper monitoring. 9 and secondary legislation, enforcement mechanisms, and related capacities for In addition to gaps in the legislation coverage implementation, among others. The recently and scope (both vertical and horizontal), poor adopted Law on Climate Change, Law on Energy level of enforcement also results from the weak Efficiency and Rational Use of Energy, and Law penalty and control systems. For example, in the on Renewable Energy Sources are not fully case of non-compliance by LSGs, the penalties implemented due to the delays in development are either not stipulated by the legislation of the secondary legislation. In the case of the or are set low, e.g. from 100,000 to 150,000 Law on Climate Change, the introduction of the RSD 5 (in the case of Law on Use of RES, which Monitoring Reporting Verification (MRV) system is includes a fine of up to 150,000 RSD when the pending the enactment of the relevant secondary responsible party does not provide conditions legislation as well. Also, the obligations of local for the energy distributors to prescribe actions self-governments (LSGs) according to the Law on for the producers of RE to connect to the grid, Climate Change will be implementable only when or in case of the Law on Energy Efficiency and the strategic documents and relevant regulations Rational Use of Energy for non-compliance with are adopted (see Chapter 4.2). the energy management obligation, the fine can In the case of air quality, the implementation be up to 1,000,000 RSD). is impacted by delays and deficiencies in Likewise, inspection capacities are insufficient development of national and local planning due to a lack of equipment and human resources. documents. The enactment of the National Air Based on APACD, the inspection capacities need 4 The chapters of the acquis (presently 35) form the basis of the accession negotiations with the EU. Chapter 27 covers environment and climate change. 5 Exchange rate 117.5 RSD/€. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions to be increased by 28 positions in MoEP, 17 The table below, compares the number of positions in the Ministry of Agriculture, Forestry inspectors per 100,000 inhabitants in Croatia and and Water Management (MoAFWM), 12 positions Serbia. Croatia was selected for comparison due in the Ministry of Health, more than 60 positions to previous institutional similarities and since it in the Ministry of Interior, and 24 positions at the was the last country to join the EU. In this respect, provincial level. the inspection capacities reflect the efforts for the implementation of the EU acquis. Table 1: Inspection capacities in Croatia and Serbia (number of inspectors: total and per 100,000 inhabitants) Number of inspectors Total Number per 100,000 inhabitants Croatia Serbia Croatia Serbia Environmental protection inspection 52 73 1.3 1.0 Water inspection 24 17 0.6 0.2 Sanitary inspection 147 133 3.7 1.9 Source: Croatia State Inspectorate (2021)7 and the Republic of Serbia Ministry of Public Administration and Local Self-Government (2019).8 10 Inspection capacities on the local level are in the legislative framework, with both strategic also insufficient. Based on the annual report of and secondary legislation being incomplete, as environmental protection inspection for 2017, well as the lack of or insufficient capacities. The 11 out of 145 local self-governments have no lack of administrative capacities hampers the inspectors. Further, one inspector is often legislation’s enactment, as well as monitoring responsible for several areas. its implementation. Ineffective enforcement is another constraint to the implementation of Considering the situation at both the national and regulations, as noted in the example of insufficient local levels, the implementation and enforcement inspection capacities. level is lagging. This is due to a combination of gaps 7 Source: Croatia State Inspectorate (2021)6 and the Republic of Serbia Ministry of Public Administration and Local Self-Government (2019). 6 Based on consultations between the World Bank staff and Croatia State Inspectorate. 7 Republic of Serbia Ministry of Public Administration and Local Self-Government. 2019. “The Functional Analysis of Republic Inspection with Analysis of Capacities,” http://mduls.gov.rs/wp-content/uploads/Funkcionalna-analiza-republika.pdf. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions 3. Assessment of the Institutional Framework The institutions are responsible for both responsibilities in the areas of climate change and air development and implementation of the quality according to the Law on Ministries (Official legislation. Their efficiency is conditioned by the Gazette, No. 128/2020). The main stakeholders overall framework, division and coordination of involved are the ministries for (1) environmental responsibilities, as well as by the existence of protection; (2) energy and mining; (3) agriculture; human capacities, in terms of sufficient staff and and (4) construction, traffic, and infrastructure. their training and knowledge. Contrary to some other countries, as yet there is no central ministry or institution (such as finance or 3.1. National institutional arrangements the prime minister’s office) involved in these policy The table below presents an overview of areas, which is discussed further below. Table 2: Overview of responsibilities according to the Law on Ministries (Official Gazette, No. 128/2020) 11 Responsible Ministry Sub-area ി Air Protection. Ministry of Environmental Protection ി Ozone layer protection. ി Cross-border air pollution. Air Quality ി Implementation of state monitoring of Ministry of Environmental Protection air quality, including implementation of (Environmental Protection Agency) prescribed and harmonized programs for air quality control. Republic Hydrometeorological Institute (subordinated to the Ministry ി Climatological measurements and of Agriculture, Forestry and Water observations. Management) Climate Change Ministry of Environmental Protection ി Climate Change issues. Ministry of Mining and Energy ി Climate Change in the energy field. Ministry of Construction, Traffic and ി Operation of public utility companies Infrastructure providing district heating Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions In the case of air quality, the key role in policy The Serbian Agency for Environmental Protection setting lies with the Ministry of Environmental (SEPA) has the key role for nationwide monitoring Protection. However, as energy production is on air quality and climate change. SEPA is in one of the main sources of pollution, efforts charge of monitoring air quality, maintenance and from the Ministry of Mining and Energy (MoME) management of the state monitoring network, are indispensable. The situation is also similar reporting on pollutant emissions, managing the in the case of climate change mitigation. Here national registry of sources of pollution, as well the overall responsibility is under the auspices as the GHG inventory. In this respect, SEPA is of the Ministry of Environmental Protection, supplied by data from polluters obliged to report but important policy areas are within the to the national registry of sources of pollution, responsibility of the Ministry of Mining and Energy local self-governments (LSGs) and future GHG and the Ministry of Agriculture, Forestry and emission permit holders. Water Management. Due to the energy sector’s importance in Serbia’s GHG emissions profile, this However, while the clear division and definition of division of responsibilities means the Ministry of roles and responsibilities is critical for having an Mining and Energy plays a critical role in climate effective institutional framework, the execution of change mitigation efforts, being in charge of the roles requires adequate human capital. MoEP and leading on climate change-related policy is the lead institution for both areas, as noted developments and implementation in the energy above, and it is working with slightly more than sector, while the Ministry of Agriculture, Forestry 50% of the planned capacities. A comparison and Water Management plays an important role in of the planned and occupied job positions is climate change adaptation policy. provided in the table below. 12 Table 3: Overview of planned and occupied job positions in MoEP and SEPA Planned Occupied MoEP 427 235 Sector for International Cooperation, 27 plus 2 on fixed-term contract, 68 Projects and Climate Change the plan will also need to be revised SEPA 79 54 As shown in the table above, slightly over half responsible for the GHG inventory. Because of this the positions are occupied. In the Sector for limited capacity, only Tier 1 methodology is being International cooperation, projects and climate used, and with the current capacity there are likely change, the level of occupancy is even lower, to be challenges to implementing improvements around 40%. In the case of SEPA the level to the inventory. of occupancy is higher, but the increase of According to the workforce plan from October responsibilities with progress in alignment with 2021, the Ministry of Mining and Energy has the EU acquis will require a new workforce plan. a dedicated Sector for Energy Efficiency and For example, there is currently only one person District Heating and a Sector for Green Energy. In Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions the first, there is a department for improvement of area of RES and capacity improvement in the area energy efficiency (EE) and group for sustainable of RES. development and climate change in energy. The The Directorate for Financing and Supporting EE department consists of three units: energy Energy Efficiency has one department for the management, the improvement of energy implementation of programs and projects for efficiency in consumption sectors, and improving energy efficiency in the energy production sector financing activities and that combines measures with high and efficient cogeneration. for energy efficiency improvements and another unit for legal and financial affairs. The Sector for Green Energy has one department for planning projects in the area of RES and Based on the latest work force plans, the overview another unit for legal affairs in this area. The of planned positions within the Ministry of Mining department consists of two units: projects in the and Energy is provided below. Table 4: Overview of the number of positions in the relevant sectors of the Ministry of Mining and Energy Ministry of Mining and Energy Number of positions Sector for Energy Efficiency and District Heating 1 Assistant Minister Department for improvement of energy efficiency 1 Head of Department Improvement of energy efficiency in consumer sectors 4 advisors 13 Energy Management 3 advisors Improvement of energy efficiency in energy production sector and high 3 advisors efficient cogeneration Sustainable development and climate change in energy 2 advisors Sector for Green Energy 1 Assistant Minister Department for planning of projects in the area of RES 1 Head of Department Projects in the area of RES 2 advisors Improvement of capacities in the area of RES 2 advisors Legal affairs in the area of RES 3 advisors Directorate for Financing and Supporting Energy Efficiency 1 Director Department for the implementation of programs and projects for financing 1 Head of Department activities and measures for improving energy efficiency Preparation and implementation of programs and projects of energy efficiency realized in cooperation with international financing institutions 3 advisors and donors Preparation and implementation of programs and projects for financing energy efficiency activities and measures in households, public, 3 advisors commercial and SME sectors Legal and financing affairs 2 advisors Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions The work force plan from October 2021 introduced necessary on all three levels of authority the formation of the Directorate for Energy (national, provincial and local). This is especially Efficiency. A look at the planned number of positions relevant in the case of SEPA and the LSGs who compared with the overall number of staff shows lack capacities in terms of staff, budget for less than one-third of professionals at the MoME are accreditation and maintenance of monitoring working on the topics related to RES and EE. systems, development and implementation of air In order to achieve an integrated approach quality plans, etc. for increasing capacities, the Action Plan for The Action Plan for Administrative Capacities Administrative Capacities Development was Development estimates the following need for prepared, providing an assessment of available additional working places for the transposition and capacities and needs for successful transposition implementation of air quality directives, namely: and implementation of Chapter 27 of the ambient air quality and cleaner air for Europe; Acquis. APACD was prepared in 2019 and to directive relating to arsenic, cadmium, mercury, date, no information exists on the status of its nickel and polycyclic aromatic hydrocarbons in implementation. ambient air (Fourth Daughter Directive); NEC Based on APACD, the reinforcement of and Volatile Organic Compounds (VOCs) Petrol administrative capacity for air quality is directives. Table 5: Number of additional full-time employees for Air Quality and Climate Change according to APACD 14 Number of additional FTE Institution Air Quality Directives Climate Change Ministry of Environmental Protection 3 17 Ministry of Agriculture, Forestry and Water 2 Management, Forestry Directorate Provincial Secretariat for Urban Planning and 2 Environmental Protection Ministry of Mining and Energy 1 3 SEPA 13 13 In the case of climate change, the estimated In addition to the observed capacity constraints need for additional capacities for the when it comes to existing legislation noted above, transposition and implementation of the acquis it is important to note that the introduction of is even higher with 17 new positions in MoEP, new policy reforms and measures will have an 2 at the Forestry Directorate of MoAFWM, 3 at impact on the institutional frameworks needed MoME and 13 at SEPA. for their implementation. Even though the Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions introduction of CBAM was not considered at the above, institutional framework would have to be time of the preparation of APACD, and therefore, adapted accordingly. Required changes will range no assessment of related capacity needs was from an increase in capacities for the design of carried out, it is certain that increase in staff will targeted measures and dissemination of financial be needed in terms of monitoring and reporting of support schemes, and management of reporting emissions. In particular, the introduction of CBAM and calculation of fee levels to be paid (including will require switching from sector- to product- through improved IT systems and coordination with based emission reporting, SEPA’s capacity will local registries) to improved local enforcement have to be enhanced both in terms of quantity of polluters’ reporting on their emissions, and quality, or some other forms of collaboration among others. The text boxes below summarize will have to be pursued with technical institutes institutional implications for the introduction of and faculties. Likewise, should Serbia pursue the CBAM and various environmental fiscal reform environmental fiscal reform options as presented options Serbia may explore pursuing. The introduction of CBAM was not considered at the time of the preparation of APACD so no assessment of needed capacities is available. Noting that the introduction of CBAM will affect the competitiveness of Serbian industry, the institutions will need to be able to respond properly and mitigate negative impacts. Even though a detailed assessment is yet to be carried out, it is certain that an increase of staff will be needed for the additional efforts in terms of monitoring and reporting. The introduction of CBAM will require switching from sector- to product-based emission reporting. SEPA, which is responsible for emissions reporting, will need 15 to engage additional capacities. Since product-based emission reporting requires specialized knowledge of industrial processes covered by CBAM, and since SEPA has difficulty recruiting experienced staff, one potential option would be to outsource the assessment per product to technical institutes and facilities. SEPA, with support from international technical assistance, could establish the procedures for the assessment and reporting and outsource the work. The estimation of SEPA is that in addition to the technical support, they would need 3 full time positions to set up such a system. Under the Environmental Fiscal Reform (repurposing subsidies and broadening the tax base on polluting activities and products while removing ill-targeted taxes), there are several implementation options which would require additional institutional capacities. All three options analyzed build upon existing schemes and therefore do not require setting up any new systems. The three proposals are: Proposal 1: Align fossil fuel taxation with revised EU Energy Taxation Directive (ETD), including phasing out direct coal subsidies. This proposal requires changes in the Law on Excise Duties. The system for the collection of excise duties is in place, and no institutional set-up changes are required. However, if the collected revenues are to be used for mitigation of negative impacts of an energy price increase, an increase in capacities for the design of targeted measures and dissemination of financial support systems will be needed. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Proposal 2: Revise the fee for emissions of SO2, NO2, and particulate matter (PM). Currently, emitters report their emissions to an online system administered by SEPA. Based on the reports, SEPA calculates the fee to be paid and provides it to the Ministry of Environmental Protection. The Ministry issues an administrative order for payment to the polluters / emitters. The first two aspects of the revision are the abolishment of the correction factors and an increase of fee levels, which do not require any institutional changes. The third aspect, broadening the tax base to all polluters reporting to national or local level pollution registries, will lead to an increase of efforts needed for the management of reporting and calculation of fee levels to be paid. Since local pollution registries, if they exist, are often not up to date, SEPA started the extension of their IT system with the aim of integrating the local registries and enabling a direct submission of emission levels by local polluters. In this way the need for increasing the capacities on a local level is largely avoided. Nevertheless, SEPA will need additional capacities to administer the system and monitor and report emissions. Finally, the option to introduce a fee-based system for NO2 to enable higher fees without harming affected sectors’ competitiveness will require SEPA to have additional resources to manage fees. This option would include deduction of an administration fee, to compensate for the costs of additional staff. Proposal 3: Abolish the fee for the protection and improvement of the environment. Currently, all companies and entrepreneurs pay a fee for the protection and improvement of the environment. The fee level is not related to the level of pollution, but to the company’s size 16 and type of activity. As such, it is not based on the polluters pay principle and has no impact in reducing pollution. Therefore, under this scenario, fee abolishment is recommended. The lack of capacities in Serbia’s institutional 3.2. Local Institutional arrangements - as framework in the areas of air quality and climate defined by the regulatory framework change mitigation slows both the development Like the need for multi-sectoral coordination and implementation of legislation. In addition among different ministries and agencies, effective to the lack of resources for recruitment and a green policies also require coordination, action complex hiring procedure, MoEP and SEPA are and implementation at the sub-national level. struggling to compete with the private sector The national government alone cannot ensure a and attract the needed talent and expertise. green transition; local governments, too, can be Also, continuous migration of a qualified labor catalysts for green growth solutions. force has a negative impact on the labor market. In order to overcome this situation, there is a The engagement of the local level is framed by need for a comprehensive Human Resources their obligations and jurisdiction (function) in the strategy aimed at attracting young professionals areas analyzed. These are defined by the relevant to the public sector, to gain experience and have legislative framework, namely the five pieces of a clear professional perspective for a long-term primary legislation, Law on Air Quality, Law on engagement and professional development. Climate Change, Law on Energy, Law on Use of RES and Law on Energy Efficiency and Rational Use of Energy, provided in the table below. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Table 6: Decentralization in air quality, climate change, and energy Law Relevant obligations of local self-governments ി Prepare the Air Quality Plan in zones and agglomerations in their territory where the air quality is in the 3rd category. The plan must comply with the National Program for Air Quality ി Establish and operate the local network for air quality monitoring ി Enact and implement the program for air quality monitoring in the local network ി Regularly report to SEPA on collected data Law on Air ി Enact a short-term action plan in case the level of emissions reaches one dangerous for Quality human health. ി Ensure financing for the protection and improvement of air quality Based on the responsibilities mandated to the local level, the importance of decentralization for air quality is estimated as high. By March 2021, out of the 16 LSGs obligated by law to have approved Air Quality Plans, 7 do, 3 are in process, and 6 have not yet started. The quality of the plans is also under question as they usually focus only on transport measures. ി Ensure alignment of public policies in climate change, vulnerable sectors, and planning documents with the Program for Climate Change Adaptation. ി Report on an annual basis, starting from the second year after enactment of the Program for Climate Change Adaptation, about climate change adaptation measures taken, as well as on the occurrence of drought, floods, extreme temperatures and their consequences. Law on ി Local administration in charge of environmental protection is responsible for estimating the Climate impact of policies and measures on GHG emission levels, and reporting accordingly to the Change Ministry. 17 The impact of decentralization is identified only in the case of climate change adaptation and not mitigation. In terms of implementation, the Law foresees the enactment of by-laws further regulating these obligations, however, these have not yet been enacted. The Adaptation Program is also under development. Several LSGs obtained donor support for the enactment of Local Climate Change Adaptation Plans. ി Provide data to the Ministry of Mining and Energy for the Republic of Serbia’s energy balance ി Issue licenses for performing energy activities, production, distribution and supply of heat energy and maintain a registry of licenses issued ി Issue regulations on the conditions of producing and supplying heat to customers in its area ി Acts as founder of companies for the production and distribution of thermal energy, approves plans, reports on the implementation and price of services for the production and distribution of thermal energy ി Issues an act on the necessary conditions for exercising the right for the price category for Law on vulnerable users of heat energy Energy The decentralization is focused on the heat energy market and has an impact on both air quality and climate change mitigation. This is due to the high pollution and emissions from the heat energy supply, either from individual heaters or through district heating plants. Although the centralized heating approach has advantages in terms of efficiency, years of neglecting the pipelines and equipment has led to high losses and pollution. Furthermore, consumption-based metering as a precondition for tapping the energy efficiency potential in final consumption is only available in more recent or renovated heating areas. In recent years, donor-driven activities for increasing efficiency and reducing pollution and CO2 emissions have been initiated, with a number of DH plants switching to gas or biomass. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Law Relevant obligations of local self-governments ി The Law defines use of RES as public interest and invites LSG in preparing local strategic documents, programs and plans for the achievement of the objectives of this Law ി Option for LSG to become a member of a RES Community ി Prescribe incentive measures for RES-based heat production and keeps a registry of energy entities that received the incentives ി Prescribes mandatory conditions for connection to the distribution network of producers and distributors of thermal energy produced from renewable energy sources, highly Law on Use efficient cogeneration, or waste heat of RES ി Ensures that heat distribution companies provide the information to end users about the share of RES ി Defines support through incentives measures or co-financing of RES investments Law on Use of RES recognizes the responsibility of LSGs for regulating the heat market and sets the framework for LSGs to promote RES in heat supply. In this respect, the relevance of decentralization for both air quality and climate change is high. The relevant obligations are to be further elaborated in by-laws which are not yet elaborated, so the implementation is pending. ി LSGs with more than 20,000 inhabitants implement the energy management system ി Development of three-year EE Programs and EE Action Plans ി Use of the SEMIS database and regular submission of the annual report in the planned period (up until March 31 for the previous year) 18 Law on ി Appoint an appropriate number of licensed energy managers Energy ി Use ISEM to collect data on energy consumption in the public sector Efficiency and ി Finance EE measures envisioned by the EE program Rational ി Optional financing of EE measures in households Use of Energy The Law on Energy Efficiency and Rational Use of Energy sets high impact on decentralization for climate change mitigation with the introduction of energy management system for all LSGs with more than 20,000 inhabitants. The Ministry has also imposed the minimum target of 3 % energy savings for the three-year period. The approach for achieving the target is to be elaborated in the EE Program, with annual reporting about whether the implementation is on track. This system was introduced in 2013 9 and provides valuable experience on transferring climate change mitigation targets from the national to the local level. As shown in the table above, LSGs have important system introduced an obligation for all LSGs with functions delegated in the area of air quality. more than 20,000 inhabitants in 2013. Although8 As presented in chapter 3.3 there are related full implementation remains lagging, the system implementation challenges. In the case of climate showed that local level contributions are important change mitigation in the energy sector, LSGs to reaching national targets. In the case of RES, also play an important role, and in terms of there is still no experience in implementing implementation, the most relevant is experience in obligations delegated to LSGs. In where the Law energy efficiency. Here, the energy management on Climate Change is concerned, their role puts a 8 The Law on Efficient Use of Energy was enacted in 2013, however, the system only became operational a few years later after enactment of the by-laws and introduction of the certification scheme for municipal energy managers. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions stronger emphasis on climate change adaptation under preparation. However, the previous local than on mitigation. There is also no experience air quality action plan for 2016-2021 was not with implementation due to the lack of strategic implemented, and its objectives not achieved. In documents and secondary legislation. terms of energy efficiency, the energy manager In terms of capacity needs for the local level, is also engaged in other tasks, and lacks time for APACD estimates that overall capacities for the energy management. The decision makers are implementation of environmental legislation not aware of the importance of energy efficiency are less than 50% of what is required. APACD and RES or its relation to air pollution. The city also provides the following minimum employees lacks any permanent mechanism for inter-sector needed based on the LSG size: coordination. The environmental protection department was established just 3.5 years ago, ി LSGs with less than 15,000 inhabitants with a capacity of 3 people, two of which are on should have at least 1 employee for permanent contracts. horizontal; 2 for waste-related legislation; 1 for air- and noise-related legislation; 2 for Uzice recognized an issue with air quality a water-related legislation; 1 for other needs. long time ago. The city has been doing air LSGs with 15,000-50,000 inhabitants should quality monitoring for more than 30 years. As have at least 2 employees for horizontal; 3 individual households are the major source of for waste-related legislation; 2 for air- and pollution, in 2015 the city started subsidizing the noise-related legislation; 3 for water-related replacement of inefficient and fossil-fuel powered legislation; 2 employees for other needs.9 equipment. To date some 2,000 households have participated in this program. Continuity is crucial ി LSGs with 50,000-100,000 inhabitants should so that households can plan their investments. have at least 3 employees for horizontal; 4 Support is available from the ministries, however 19 for waste-related legislation; 3 for air- and the publication of several calls on the same topic noise-related legislation; 4 for water-related to the public from different ministries has led to legislation; 3 for other needs. increased administration efforts (for application, ി LSGs with more than 100,000 inhabitants monitoring, and reporting). The local air quality should have at least 4 employees for horizontal; plan exists and is regularly monitored, and there 5 for waste-related legislation; 4 for air- and is a registry of local polluters. The environmental noise-related legislation; 5 for water-related protection department consists of 5 people legislation; 4 employees for other needs. (including the energy manager), out of which 3 The analysis addressed air pollution and GHG are on permanent contracts. In addition, the city emissions in institutional settings in two selected recently employed 3 environmental inspectors. cities. Uzice and Valjevo were selected as both Although the two cities are of similar size and have cities have had high level of air pollution for years. a long-term history of poor air quality, it’s clear that Based on stakeholders’ feedback, financial environmental protection and energy efficiency and personnel capacities were the key are high on the political agenda in Uzice, visible bottlenecks for the implementation of air from both the capacities and the results. Per the quality and energy efficiency measures.10 recommendations provided in APACD, both cities In the case of Valjevo, the legal obligation of would need to increase their capacities three to having a local air quality plan is fulfilled, and the five times, showing the magnitude of their current new 5-year action plan for 2022-2027 is currently capacity gap. 9 Such as nature protection, climate change, etc. 10 Both cities reported that: they are preparing their local low carbon development plans; their climate change mitigation action is focused on energy efficiency and use of RES for own consumption. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions There are a number of obstacles to filling vacant Institutional challenges remain to hinder positions. The six-year ban on employment in the implementation, including the weak or insufficient public sector, as an instrument for controlling capacities at the local level and the lack of expenditures, was lifted in 2021. However, the communication and coordination at the national competition for experienced qualified resources level. Improving these implementation and proves to be a challenge, now more than before governance issues will be critical for achieving the ban, with the labor market more active due to the most cost-effective option in attaining green increase economic activity, continuous migration growth, particularly in the areas of air quality and of qualified people to EU states, and private sector related investments. salaries still an issue. Based on the interview with MoEP one of the strategies for overcoming these 3.3. Coordination challenges is to focus on young professionals and help them develop knowledge. At the same time, The horizontal division of responsibilities the public sector needs to provide development (between the ministries) and vertically (between opportunities in order to maintain young the national and local level) requires efficient professionals. Also, the capacities for recruitment coordination, including through coordination are limited and the selection process lengthy and mechanisms and institutional set-ups, where time consuming. MoEP relies on project support appropriate. Though the regulations envision to enable professional development of young and prescribe a certain level of decentralization professionals. and coordination (both vertical and horizontal), challenges remain. The training provision for public officials is organized under the auspices of the National The Government has recognized the need 20 Academy for Public Administration (NAPA). The 11 for multi-sector coordination in both areas. general program for training public servants does However, the usual is the formation of working not include classes on environmental protection, groups, either dedicated for the development climate change or other related sectors. The of specific public policy documents or working general program for training public servants on concrete topics which have a cross-sector in LSGs includes lessons on environmental impact (e.g. Green Agenda, CBAM, etc.). In order protection, but only at a very general level, to facilitate the coordination between MoEP and without reference to air quality. There is no MoME, a special coordination working group training for climate change mitigation or was established with high-level representatives adaptation. The LSGs are also obliged to prepare from both ministries. However, this working their own capacity building plans, however these group is not permanent, and its existence is reflect the programs of NAPA and do not include subject to political arrangements and changes any training on topics related to air quality or within the government. Also, there is a working climate change. group for Chapter 27 headed by MoEP with more than 100 members. Based on interviews In addition to the capacity deficiencies, the with relevant stakeholders, MoEP is recognized procedures are often nonexistent. The chain of by other stakeholders as the lead for Chapter command is not always clear, and managerial 27 negotiation, which is a positive signal and a accountability is missing. For example, mid-level confirmation of their capacities. positions have no decision-making power, as decision making is centralized. This has a negative In the case of climate change, the Law on Climate impact on the level of commitment. Change introduced the formation of the National 11 National Academy for Public Administration annual training programs; https://www.napa.gov.rs/tekst/49/godisnji-programi-obuka-naju.php Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Climate Change Council as a government advisory As presented in Table 6, these two areas have body. This ensures participation of a greater a number of mandates transposed to the local group of stakeholders with participants from non- level. Vertical coordination between the national governmental organizations (NGOs) and academia and local level is therefore crucial for efficient as well as the public. Since its foundation, two implementation, especially in the case of air quality. sessions have taken place, in September 2021 and In the case of climate change, while the Law on 2022, respectively. The Council has 30 members, Climate Change puts the local action on adaptation of which 2 representatives are from NGOs, 3 from in focus, the Law on Energy Efficiency and Law on academia, 1 is Commissioner for the Protection Use of RES prescribe LSGs active role in climate of Equality, and the remaining represent 12 change mitigation. Looking at the experience from ministries, provincial secretariats, and public the implementation, there is a clear link between agencies and institutes. The chairwoman is the the level of guidance and instructions provided Minister for Environmental Protection. The rules and the level of implementation. As mentioned of procedure for the Council and the Law do not earlier, LSGs are expecting clear instructions define on which occasions the advisory opinion or even templates from the national level. This of the Council is requested, and whether and practice is common in legislation and specific how it should be taken forward. Based on the secondary legislation is prepared for this purpose, feedback from MoEP, the Council is an important as elaborated in Chapters 3.3 and 4.2. In this instrument for the integration of climate change way a lack of capacities on the local level can be in other sectors. Also, the Council is relevant for overcome. However, this practice can also have a obtaining opinions for strategic decisions and negative impact on local level capacities, becoming potential problem solving at the highest level. “dependent” on central level instructions even In order to reach its full potential, the NCCC for decisions and functions delegated to LSG. 21 should be consulted on sector policies beyond An important role is played here by development the ones under the jurisdiction of MoEP, with partners’ funded projects, developing manuals the Council opinion attached to the proposal or other template documents and demonstrating for the Government. While the Council does not how instructions from the central government are comply with the Element – Independent expert to be applied. The availability of financial support advice, under the pillar of Accountability from from the national level is also a driver for budget the Climate Change Institutional Assessment, 12 allocations at the local level, so LSGs deviate from a permanent coordination mechanism to foster the implementation of their planning documents integration of climate change in all relevant to benefit from the support. sectors and provide advice to the Government is As noted above, though some coordination a significant improvement in lateral coordination. mechanisms exist among different ministries and Although the number of mechanisms for vertical agencies, as well as with the LSGs, their features coordination have increased in the past years, could be improved by making them permanent, including continuous dialogue between MoEP and clearly outlining roles and responsibilities, and MoME, the key instruments are ad-hoc working fostering an active exchange between national groups. Bearing this in mind, there’s a need for and local self-governments and among local self- more permanent mechanisms for coordination governments themselves. Improved coordination and exchange. Such mechanisms would ensure (both vertical and horizontal) will be critical for that coordination is provided regardless of the making Serbia’s institutional framework effective politics and persons involved. for air quality and climate change mitigation. 12 The World Bank, “Climate Change Institutional Assessment, (2021) https://openknowledge.worldbank.org/bitstream/handle/10986/35438/Climate-Change-Institutional-Assessment.pdf?sequence=1 Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions 4. Assessment of the Institutional Framework for Investments to Reduce Pollution and GHG Emissions Making the Serbian economy low polluting and grants, and most recently by the issuance of the low carbon will require investments in cleaner first green bond in September 2021. technologies and decarbonization of the energy Finally, there is insufficient institutional capacity sector and an enabling regulatory framework to for mobilizing investments. On the supply side, facilitate investments. However, for investments the lack of capacities and complex and time- to take place, a favorable regulatory framework consuming administrative procedures lead to will have to be coupled with an appropriate delays in the disbursement of funds. If the public institutional framework and capacities. sector is the target group for investments, the This assessment finds, based on desk research lack of capacities results in insufficient quality and interviews, that the institutional and regulatory of project proposals and design documents. This framework are in principle enabling investments to often leads to payment of penalties for withdrawal reduce air pollution and climate change mitigation. of international loans.13 Following feedback from However, the pace and level of investments stakeholders, clarity of procedures and continuity remains low. There are several drivers for this. are crucial. The experience from the Public 22 Investment Management Office (PIMO) shows First, many regulatory instruments requiring that after seven years of supporting energy investments in pollution reduction technology efficiency investments in the public sector, (alignment with limit values of emissions, technical raising capacities takes years, especially on the standards regarding energy efficiency and eco- local level. Support provided by PIMO is not only design, sector emission targets / ceilings, etc.) are financial, but also in contracting, payment, and not in place yet. The National Air Protection Program monitoring of the work of the service providers. and the Low Carbon Development Strategy and In this way, PIMO solves the bottlenecks with low Action Plan stipulate a number of such measures, capacities at the local level. but they have not yet been enacted. Another example is the use of energy services as In addition, the gaps in the framework hamper an instrument to mobilize private sector knowledge large scale private sector involvement. While the and financing for energy efficiency investments. new Law on Use of RES provides mechanisms to Because such contracts are implemented as a incentivize the production of electricity for RES, public-private partnership (PPP), improvements the first auctions have been delayed. Also, on in the institutional framework are needed for this the fiscal side, the energy pricing and pollution instrument to achieve its full potential. Namely, taxation policy is not incentivizing investments. the PPP Commission is set up as an inter- Second, there is a lack of sustainable mechanisms ministerial body providing approvals to all PPP for financing investments, as well as a lack projects. Considering the Commission has only of domestic financial resources. This gap is one full-time employee, the capacities are not compensated for by international loans and sufficient to provide guidance, capacity building, 13 There is no available information on the amount spent for penalties from delays with loan withdrawals, however, in the budget report for 2020, the amount allocated for penalties and fines amounts to €190 Million; more than the budgets of both Ministry of Mining and Energy and Ministry of Environmental Protection (Fiscal Council: http://www.fiskalnisavet.rs/doc/ocene-i-misljenja/2021/FS_Ocena_ZR_budzeta_za_2020.pdf). Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions and advice for all areas in which there is private additional financing. MoEP allocated some € 3.4 sector interest in engaging in PPP. million in subsidies for reducing air pollution from individual sources by replacing boiler rooms in In 2021, both MoEP and MoME allocated funds public facilities and supporting afforestation. supporting climate change investments. In Because of substantial interest, MoEP is planning the absence of national funds with delegated to allocate additional funds in 2022. capacities, these funds were managed by relevant technical departments in the two ministries. While The Model applied by MoME is of special interest there is a lack of professional fund management since it achieves a 4x multiplier effect, mobilizing capacities, both ministries have some previous individual household investments in mitigation fund management experience, with the previous measures. Also, the Law on Energy Efficiency and existence of the Eco and Green Fund under the Rational Use of Energy stipulated the formation MoEP and the Budget Energy Efficiency Fund of the Directorate for Energy Efficiency. This under MoME. Experiences from the disbursement recently established directorate will take over of these funds proved to be valuable in terms fund management for financial mechanism such of institutional challenges. In the case of both as this one. Details about the financial mechanism ministries, these funds were allocated to local are presented in the text box. self-governments with the aim of mitigating The Ministry of Mining and Energy (MoME) launched the Model for Financing EE Projects for Households in June 2021. The Model provides financial support to LSGs, where the amount allocated from the local budget is matched by MoME. The final recipients are households which apply for financial support from their local self-governments (LSGs). 23 The LSGs responded positively to the first public call for subsidies, and 67 were selected, with a 230 million RSD allocation contributed by MoME. The assessment of MoME is that more than 4,000 households will benefit from the support. The Model was expanded by MoME for co-financing solar photovoltaic (PV) panels through a second public call. A total of 37 LSGs were selected for co-financing solar PV with a total investment in solar PV amounting to 390 million RSD (around 200 million RSD was provided from the central and local budgets, and the general public invested the remaining). Because of great interest, MoME launched the third call in February 2022, with a budget of 1 billion RSD. The third call offers co-financing of both energy efficiency measures and solar photovoltaic panels for households, and is aiming to trigger investments in the amount of 4 billion RSD. LSGs are responsible for monitoring and reporting. The energy savings assessment is based on templates provided to LSGs, which are aligned with the official methodology of MoME. Even though Serbia’s institutions are making up climate change mitigation, but the pace and advancements in terms of enabling green level of investments remains low. Going forward, it investments, they can play a more prominent role in will be important to ensure that there are policies facilitating and catalyzing green investments and in place to enable investment and strengthen related market mechanisms. The institutional and market incentives for green investments and regulatory frameworks in Serbia are to a certain investments in relevant institutional and capacity extent enabling green investments, including strengthening efforts (including those related to those aimed at reducing air pollution and scaling- innovation, monitoring, and enforcement). Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions 5. Institutional Assessment in Practice In an effort to apply the overall institutional combine regulatory and financial interventions assessment approach presented above and in order for the assessment to comment on further demonstrate its findings, four specific the institutional changes needed for their measures were selected from the draft National implementation. Also, measures which include Air Protection Program and Action Plan and action on both the national and local level are draft Low Carbon Development Strategy and included, and the need for increased institutional Action Plan. This part of the analysis looks capacities on both levels is addressed in the into implementation gaps from the institutional assessment. A brief summary of the selected perspective for the four selected measures. measures and related institutional and regulatory Selection of the measures included those which gaps and recommendations is presented below. Draft National Air Protection Program and Action Plan Measure 1.1.7 Replacement of existing domestic Measure 1.1.2: Enforcement of the EU MEASURE 24 heating appliances with new Eco-Design compliant Directive 2015/2193 on the limitation of appliances and heat pumps due to financial incentives, emissions of certain pollutants into the air with a larger share of replacement in the cities of from medium combustion plants Kragujevac, Beograd, Nis, Valjevo and Užice This regulatory measure from the draft This measure is a combination of regulatory framework National Air Protection Program and Action intervention and financial support for compliance. The Plan has the objective of full alignment measure includes four activities, including finalization of the with the EU Directive 2015/20193 work for full alignment of the national legislation with the Medium Combustion plants (MCPD). The Eco-design directive and work in order the two following measure includes four activities, including regulations to be transposed (Regulation 2015/1189 of finalization of the work program for full 28 April; 2015 implementing Directive 2009/125/EC; and alignment of the national legislation with Regulation 2015/1185 of 24 April 2015 implementing Directive the MCPD, establishment of a reporting 2009/125/EC), implementation of an awareness building DESCRIPTION system and database for medium and education campaign across the country for promoting combustion plants (MCPs), and increase efficient domestic heating appliances, use of boilers and of human resources of Serbian institutions space heaters in the best combustion conditions and use of in order to deal with the MCPD (but also dry wood, establishment and implementation of a mechanism other size of installations such as SCP for financial incentives for replacement of existing domestic and domestic appliances) and compliance heating appliances with new appliances that are Eco-Design of medium combustion plans with Best compliant, and heat pumps and facilitation of the mechanism Available Technology Associated Emission of financial incentives by ensuring additional 15 full-time Levels (BAT AELs). employees (FTE) with the goal of informing the public on how to reduce emissions from domestic heating appliances and facilitate the access to financial support. Out of 15 FTE at least 2 could be located in Beograd, in Nis and 1 each in Kragujevac, Valjevo and Užice Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Measure 1.1.7 Replacement of existing domestic Measure 1.1.2: Enforcement of the EU MEASURE heating appliances with new Eco-Design compliant Directive 2015/2193 on the limitation of appliances and heat pumps due to financial incentives, emissions of certain pollutants into the air with a larger share of replacement in the cities of from medium combustion plants Kragujevac, Beograd, Nis, Valjevo and Užice The first priority action is to ensure that the The first priority action is finalization of the regulatory regulatory framework changes in the Air framework for Eco Design. In December 2021, MoME Quality Law are carried out and the adoption enacted the Decree on the Eco Design of Energy takes place of regulation on emission limit Related Products (Official Gazette, No. 132/2021). The REGULATORY FRAMEWORK values of pollutants in the air from MCPs. implementing measures have been drafted, and are The second action relates to monitoring pending enactment. and reporting to be done by SEPA. Based on the stakeholders’ feedback, the inventory of MCPs is available, but the reporting system is not in place. SEPA is currently extending its IT system for reporting of emissions from pollution sources to the local level. SEPA´s intention is for monitoring and reporting on MCPs´ emissions to be done through these local pollution registries. In terms of the institutional framework, In terms of the institutional framework, MoME is the an increase of institutional capacities responsible agency for this measure; their capacity for the is necessary for enforcement and implementation of the Eco design regulation have been compliance. The increase in capacities increased through the Instrument for Pre-Accession (IPA) 25 is needed, as follows: (1) MEP: 1 position project. In addition to MoME, the IPA project supported with specialization in MCPD (but also SCP an increase of technical capacities at the Ministry of and domestic appliances; (2) Autonomous Trade, Tourism and Telecommunications (targeting Province of Vojvodina (Provincial market inspection), as well as the Conformity Assessment Secretariat for Urban Planning and Bodies for the application for accreditation of their testing Environmental Protection): 1 position with capacities. These can also be useful for the implementation INSTITUTIONAL FRAMEWORK specialization in MCPD (but also SCP and of this measure. That said, the capacities for awareness domestic appliances); and (3) SEPA, MCPD: raising activities are not available at MoME. However, this 1 position to deal with MCPs (but also SCPs role is delegated to the Directorate for Energy Efficiency and domestic heating appliances) which is currently in the process of staffing. The Law on These positions are not yet budgeted. In Energy Efficiency and Rational Use of Energy foresees order to enforce compliance as of 2025, the the enactment of the Program for raising awareness in additional capacities need to be factored energy efficiency and the Directorate will be involved in its into the work force planning and be in place enactment and implementation. as soon as possible. The mechanisms for the placement of financial support are already available, as presented in chapter 5 of this report. However, significant staffing additions are needed both on the side of MoME, as well as in selected local self- governments (LSGs) to the target values set in NAPP:  In Kragujevac, at least 58% of the appliances shall be replaced with Eco-label appliances of which at least 25% will be pellet appliances;  In Belgrade, at least 58% of the appliances will be replaced with Eco-label pellet; Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions Measure 1.1.7 Replacement of existing domestic MEASURE Measure 1.1.2: Enforcement of the EU heating appliances with new Eco-Design compliant Directive 2015/2193 on the limitation of appliances and heat pumps due to financial incentives, emissions of certain pollutants into the air with a larger share of replacement in the cities of from medium combustion plants Kragujevac, Beograd, Nis, Valjevo and Užice  In Valjevo and Nis, at least 74% of the appliances shall be replaced with Eco-label appliances (up to 50% pellet appliances and 50% or more heat pumps);  In Užice at least 80% of appliances will be replaced with Eco-label appliances (85% or more heat pumps, and up to 15% pellet). In terms of technical knowledge, the staff at MoME is very well trained. However, trainings on other relevant aspects are needed, such as public finance, public procurement and economics. The Directorate needs to be staffed up with experienced professionals with knowledge about the INSTITUTIONAL FRAMEWORK financing sector and communication and awareness raising. The estimation is that 7 additional FTEs are needed. As noted above, at the local level, the need for capacities is even greater. Although all LSGs with more than 20,000 inhabitants are obliged to appoint an energy manager, this role is often outsourced or engaged only during certain time periods in a year. Also, this position is not included in the local administration work force plan, and they are usually 26 subordinated to the environmental protection department and also working on other tasks. For example Uzice, the city with the longest experience with such issues, reported that they have no capacity to engage with more households due to the lack of staff for the selection of suppliers, households, on site verifications, monitoring, and reporting towards the Ministry. In order for the successful implementation of this measure, LSGs need to strengthen this position and establish relevant teams, including staff from other departments. The estimated number of additional full-time employees is: three in Belgrade; two in Nis; one in Valjevo; one in Uzice; and one in Kragujevac. Draft Low Carbon Development Strategy and Action Plan MEASURE Measure nr. 3: Improving energy efficiency Measure 8 Energy efficiency, improvement and increasing use of CHP and RES in of heating and cooling infrastructure, and promotion district heating systems of use of RES in households This measure is a combination of regulatory This measure is a combination of regulatory and financial DESCRIPTION framework and financial incentives. framework and aims to replace inefficient equipment with Eco-Design compliant boilers and heaters, further extend DH consumers and create a greater use of RES in buildings. It is very similar to Measure 1.1.7 from the NAPP. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions MEASURE Measure nr. 3: Improving energy efficiency Measure 8 Energy efficiency, improvement and increasing use of CHP and RES in of heating and cooling infrastructure, and promotion district heating systems of use of RES in households In terms of regulatory framework, the Foreseen regulatory framework changes under this measure measure foresees the full alignment with are partially completed, with the Eco Design Framework the Energy Efficiency Directive in relation Directive transposed in December 2021 (Decree on the to cogeneration and district heating Eco Design of Energy Related Products Official Gazette, provisions, such as enactment of the Law No. 132/2021) and the implementing regulations pending on Energy Efficiency and Rational Use enactment. The definition of minimum requirements for of Energy. The incentives for the use of use of RES for heating in new and renovated buildings is combined heat production are foreseen yet to be included in the legislation on energy efficiency in by the Law on RES, however these are buildings. not yet available. Also, the Law on RES In terms of the institutional framework, MoME as the lead foresees the possibility for subsidies for agency is well positioned with the most recent work force the purchase of technology for RES-based plan from October 2021. The IPA Project provided training heat generation. However, the secondary on the implementation of the Eco Design for MoME, legislation providing instructions on this the Ministry of Trade, Tourism and Telecommunication provision is still to be enacted. (market inspection) and Ministry of Economy. In order In terms of the institutional framework, to facilitate the substitution of old, inefficient solid fuel MoME is well positioned for the boilers, this measure foresees financial incentives. The implementation of this measure with the disbursement mechanism on incentives from MoME to REGULATORY FRAMEWORK existence of a unit for improving energy LSGs with households as final beneficiaries was tested in efficiency in the energy production sector 2021. However, the disbursement of financial support to a and high efficient cogeneration, under the large number of households requires additional resources Sector for Energy Efficiency and District 27 both on the national and local level. On the national level, Heating Group for RES Projects, in the the key role is to be taken by the Directorate on Energy Sector for Green Energy. Efficiency. The Directorate only recently started staffing For more details on the systematization of and is expecting technical assistance support from KfW MoME, see Chapter 4.3. and EBRD for development of financing mechanisms and The next step is filling out the positions capacity building. foreseen under the systematization from Although the target number for equipment to be replaced 10/2021 and training the new staff. is not provided in the Action Plan, the estimated need On the side of LSGs, capacity building is for additional capacities can be taken from the measure needed for planning and implementing 1.1.7 from NAPP: with some seven additional full-time support schemes for deployment of RES employees in MoME (incl. Directorate) and one or two full- in heat supply. In the case of district time employee positions in cities (depending on the size heating plants, training and capacity and number of households not connected to the DH or gas building is needed for deployment of RES supply). In addition to these needs in funds management, technologies. The training can benefit from the Directorate needs additional communication and the experience from pilot activities in DH awareness raising capacity on the importance of replacing plants with regard to the use of biomass inefficient equipment to ensure interest from households. and solar. With DH plants as one of the The LSGs should have a multiplier role for the dissemination biggest air polluters, there is a need for of awareness raising activities, and most LSGs do not have increasing capacities through alignment designated capacities for communication on the topics of with the best available technologies. climate change and energy. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions 6. Key Findings and Recommendations Though Serbia has made significant progress of several ministries leads to fragmentation in recent years, it still needs to strengthen its of scarce capacities and requires additional institutional framework to flexibly pursue a coordination efforts. Even though the need for policy reform agenda that supports a green coordination was recognized, no permanent transition.  Meeting multiple development, mechanisms for coordination exist. In the case of environmental, and climate objectives will the energy and agriculture sectors, the need for require  not only  coherent policy incentives integration of climate change in sector policies and measures, but also strong  institutional was recognized, and structures dealing with and governance frameworks that enable their climate change were included in their institutional implementation. The key findings of this analysis set-up. The re-establishment of NCCC is an are summarized below. They include the overview important instrument for coordination and of the regulatory framework and its gaps in order cooperation across all relevant sectors. to anticipate the needs on the institutional side, In terms of capacities, there are significant gaps as well as the institutional framework itself and in MoEP, operating with barely 50% of positions related capacities that are limiting investments 28 occupied compared to the work force plan. The in the areas of air quality and climate change system’s efficiency is limited, with centralized mitigation. Strengthening Serbia’s institutional decision making and a lack of managerial framework so that it can actively support accountability on lower administration levels. public policies, regulations, and future market mechanisms and investments will be critical for Under the regulatory framework, LSGs have an fostering sustainability and green growth moving important role to play in the case of air quality, forward. as well as in the implementation of climate change mitigation measures in the energy sector. Regulatory Framework However, the implementation of this role is There are significant gaps in the strategic hampered by insufficient capacities, estimated orientation with key pieces of public policy not at less than one third of those recommended by yet enacted. On primary legislation level, the APACD. framework is well advanced with a relatively high Investments level of alignment with the EU acquis. However, the development of the secondary legislation Even though the regulatory framework enables remains ongoing and presents a barrier for full investments, it does not drive investments. scale implementation. In general, implementation There is an overall positive trend in increasing and enforcement are lagging due to insufficient investments, driven mainly by financial support capacities and weak enforcement mechanisms. under grants. National financing is insufficient, and there is significant dependency on Institutional Framework international donors and financing institutions. The division of responsibilities in the institutional The level of investments is also limited by framework is clear. However, the involvement insufficient institutional capacities, both on Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions the side of supply, where the public sector is alignment with the EU acquis. providing support, as well as on the demand side, ി Enact secondary legislation under the Law on where the public sector is the recipient. To date, CC, Law on Use of RES and Law on Energy there are no sustainable financing mechanisms Efficiency and Rational Use of Energy. for air pollution or GHG emission reduction. The PPP mechanism for attracting private sector ി Install a market support mechanism for financing remains underused. renewable energy sources to drive investments in green energy. This assessment provides concrete actions and recommendations for improving the framework ി Strengthen the penalty system for non- for green growth. The recommendations are enforcement. divided into three categories: regulatory, The overarching recommendations for the institutional, and investments. The regulatory improvements in the institutional framework framework recommendations anticipate the include the introduction of permanent needs for the institutional framework. In the case coordination mechanisms between ministries of investments, recommendations are provided and increase of capacities on the national for attracting investments that foster air quality and local level in terms of the number of improvement and climate change mitigation. staff and required knowledge and skills. Also, more intersectoral working groups are needed In the case of the regulatory framework, the on the local level, as well as continuous overall recommendation is to finalize the strategic exchange between LSGs under umbrella framework and set a clear path towards cleaner organizations, such as the Standing Conference and low carbon development. Also, further of Towns and Municipalities (SCTM). Specific alignment with the EU acquis is necessary as is recommendations are as follows: 29 the enactment of missing secondary legislation to ensure the legal framework’s full implementation. ി Introduce permanent coordination mechanisms Specific recommendations include: between relevant ministries. ി Enact strategic decisions to complete the ി Define the role of NCCC to ensure that it provides strategic regulatory framework, including: advice to the Government and opinions for strategic decisions from all relevant sectors and ി National Air Protection Program that advice is attached to the policy proposal ി Low Carbon Development Strategy when sent to the government. ി Integrated National Energy and Climate ി Introduce clear responsibilities in the chain of Action Plan (aligned with the Low Carbon command, define managerial accountability, Development Strategy) and deviate from centralized decision making. ി Initiate a broad stakeholder dialogue on ി Revise recruitment processes to enable an the policies relevant for energy transition, earlier compliance check, thus increasing including the CSOs and the private sector, efficiency. ensuring transparency of the process and ി Define a system approach for capacity building increasing awareness about the benefits of and develop HR strategies. Offer long-term and decarbonization. clear professional development opportunities ി Ensure that instruments of social policy are with MoEP and SEPA in order to be competitive available to avoid the negative impact of energy with the private sector. prices on vulnerable groups. ി Support development of young professionals ി Revise the Law on Air Quality to ensure full by engaging them in the implementation of Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions technical assistance. monitoring and reporting, and overriding the issue with lack of staff. ി Provide the needed long-term technical assistance to enable knowledge transfer from Noting that the challenges and gaps in the the EU countries and support building capacities institutional framework limit the investments among MoEP staff. needed in the areas of air quality and climate change mitigation, the overall recommendation ി Offer additional training on climate change and is to increase capacities for fund management environmental protection (including air quality) and introduction of sustainable financing under NAPA. mechanisms. Continuous availability of financing ി Engage more staff in line ministries for support will incite the increase of institutional communication and cooperation with LSGs: capacities, greater dissemination, and enable provide continuous guidance in the form of achieving a multiplier effect. In this regard, manuals and templates to LSGs, etc. additional recommendations include: ി Increase the capacities on the local level to ി Strengthen financial management and control meet APACD recommendations. in administrative units that manage funds. ി Promote establishment of permanent ി Improve capacities for fund management, intersectoral working groups or committees including engagement of professionals with in LSGs on environment, climate change, and experience in banking, project finance, public energy finance management, etc. Promote cooperation, exchange, and Avoid ad-hoc support schemes, introduce ി ി coordination between LSGs, in cooperation with continuous financial support mechanisms and SCTM. 30 ensure sustainability of financing. ി Revise work force plans in LSGs to ensure that ി Develop and disseminate financing schemes new job positions are included, mirroring in with a multiplier effect. scope the requirements of the Green Agenda. ി Apply a phased approach for the provision of ി Ensure that the energy manager position in financial support, providing the opportunity LSGs is a full-time position. for more experienced end-users to increase ി Expand the use of IT systems supporting benefits. Performance Assessment of Serbia’s Environmental and Climate Institutions: CONTENTS Focus on Addressing Energy-Sector Air Pollution and Greenhouse Gas Emissions