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

This paper explores the macroeconomic and social implications of the European Union’s Carbon Border Adjustment Mechanism (CBAM) for the Western Balkan countries. The study employs a partial equilibrium sectoral exposure model that estimates potential CBAM related costs in core industries steel, cement, and electricity by comparing projected carbon pricing burdens to sectoral revenues and employment levels. The analysis identifies areas of high vulnerability where CBAM-induced costs could undermine export competitiveness, threaten fiscal stability, and increase the risk of job displacement in carbon intensive sectors. Framed through the concept of development leakage, the paper argues that policies aimed at preventing carbon leakage within the EU may inadvertently constrain industrial modernization and economic convergence in its neighboring economies. The findings suggest that, without transitional financial and technical support, CBAM risks acting as a de facto trade barrier, potentially slowing the Western Balkans’ progress toward EU accession. To ensure an equitable transition, extended implementation timelines, coordinated carbon pricing mechanisms, and just transition measures integrated into EU-Western Balkan climate cooperation frameworks are needed.