The recent Country Climate and Development Report – Montenegro, published by the World Bank, examines the country’s path toward achieving climate goals, emphasizing the need for strategic investments and the implementation of effective policies.
Like other Western Balkan countries, Montenegro faces climate challenges despite having the highest GDP per capita among the six countries in the region (WB6) based on purchasing power parity (PPP), primarily thanks to its tourism sector. While tourism and transport drive economic growth, they are also accompanied by increased energy activity and carbon intensity, exceeding the European average. This is largely due to the reliance on the Pljevlja coal-fired power plant and inefficient energy practices across various sectors.
Despite advancements in wind energy development and a significant utilization of hydro potential, Montenegro’s geographical position still leads to a heavy reliance on coal, which, combined with dense traffic, affects the overall air quality.
While the country has reduced its total greenhouse gas emissions since 1990, primarily due to its extensive forest areas, achieving climate targets remains challenging without substantial further investments and reforms.
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According to last year’s data from the Montenegrin Chamber of Commerce, forests cover 802,500 hectares, accounting for 57.64 percent of the territory, while forest land spans 139,500 hectares, making up 10.02 percent of forest-covered areas.
Within the Western Balkans, Montenegro lags in developing a national energy and climate strategy. However, in 2020, it took a pioneering step in carbon management by introducing an emissions trading scheme (ETS). Montenegro is the only country in the region with a CO2 tax, but the prices remain much lower than those under the EU ETS, while the system faces challenges such as market liquidity.
Natural disasters also impact Montenegro’s climate, due to significant climatic variability. Between 1991 and 2013, Montenegro experienced six major floods and several earthquakes, with potential earthquake magnitudes posing a significant threat to 60 percent of the population. Floods alone cause an average annual damage of $90 million, according to the report, while broader economic impacts of natural disasters could potentially reduce GDP by up to 5.1 percent under certain climate scenarios. To address these challenges, billions in investments are required in the coming decade to meet expectations by 2050.
The report forecasts that most of Montenegro’s future electricity production will come from wind and solar energy, complemented by its existing hydroelectric capacity.
It also highlights the need for human and financial capital, as well as more favorable accompanying regulations. Some solutions include green bonds, access to public-private partnerships (PPP), and leveraging EU funding opportunities.
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