Supporting the implementation of Serbia’s Green Agenda - Phase 1

Serbia, a European Union (EU) candidate country, is facing significant environmental challenges affecting the quality of life of its people. Climate change creates both a physical and a transition risk for the country, whose economy is highly carbon intensive due to its dependence on coal, with power generation dependent on coal mining and processing. Under the Paris Agreement, Serbia has committed to reduce its greenhouse gas emissions by 33.3% by 2030 compared to 1990 levels, as stated in its revised Nationally Determined Contribution (NDC), from August 2022. In addition, as part of its accession process to the EU, Serbia has also committed to implement a multidimensional Green Agenda roadmap, based on the European Green Deal, adopted by the Western Balkans Heads of State at the EU-Balkans Summit in Sofia on 10 November 2020.

In this context, this budgetary public policy loan supports the implementation of the Green Agenda roadmap in a programmatic and pluriannual approach. This operation is based on reform objectives enabling to develop and strengthen the regulatory and institutional framework of Serbia in three different pillars of the Green Agenda: 

• Support to the Serbian government in its ambitions to increase public investment expenditure directed towards the environment and the fight against climate change. This pillar has three main components: (i) transparency of public expenditure and introduction of a methodology for classifying "green" expenditure; (ii) assessment and management of budgetary risks related to climate hazards; and (iii) estimation of climate co-benefits of public investments.
• Support for reforms in the fields of renewable energy, energy efficiency and the fight against energy poverty. • Development of two critical areas of action for the alignment of Serbian environmental legislation with the EU Acquis, namely (i) the waste sector and (ii) the air quality. 

The first phase of the programme of a maximum total amount of € 389M is co-financed by the World Bank, KfW, and AFD. AFD’s financing will take the form of a multi-tranche facility with a first tranche of an amount of €135M .

This programme will contribute to Serbia’s sustainable development roadmap and, more specifically, to (i) sustainable growth through the implementation of green budgeting and green tagging, (ii) a low-carbon trajectory integrating the development of renewable energies and energy efficiency improvements, and (iii) strengthening governance in the energy efficiency sector, and () the alignment of Serbia's environmental standards with those of the EU, particularly in the fields of solid waste management and air quality.