Environment Sector in Serbia
Serbia estimates that meeting the environmental requirements of EU-membership will cost around 15 billion euros, out of which 2.5 billion is available from EU funding. Significant challenges for Serbia include introduction of renewable energy sources, improving waste and water management, air quality and nature conservation as well as preventing climate change. Serbia is in the process of becoming an EU member, but its current environmental policy is not necessarily adequate to meet the membership requirements. In order to meet the costs of the undertaking, Serbia has set up a Green Fund, which will be financed partly by environmental fees and taxes. However, the capacity of this fund is very limited compared to the number and size of projects that have to be financed in the future. That is why Serbia will have to consider private investments and loans from development banks and other international financial institutions present in the market. Serbia's EU accession Chapter 27, on improving the environmental situation, is one of the most expansive chapters and possibly one of the most difficult ones in the accession process. Because of this, Serbia has, in the near future, a great need for know-how and solutions to address environmental issues.
Energy production plays a great role in bringing about environmental challenges in Serbia but also in solving these challenges. Energy production affects air quality, as well as water and waste management. Energy sector is responsible for 70% of the greenhouse gas emissions produced by Serbia. Serbia is the eighth-largest producer of lignite, and lignite covers 70% of the country's energy sources. Households consume more than half of all the electricity produced in Serbia, and heating homes with electricity is common. There is a great deal of room for improvement in Serbia's energy efficiency, as energy consumption is high as a result of outdated technology. Energy intensity of the country is two to three times as high as that of EU countries.
Serbia has been unwilling to give up lignite in energy production and aims to meet the EU environmental requirements by using clean coal solutions. Serbia has planned, among others, to reduce sulphur dioxide emissions caused by coal plants whose output is over 300 MW. Desulfurization projects in large power plants have already started in Serbia. Serbia will have to increasingly take energy efficiency and environmentally-friendly sources of energy into consideration. The focus will be on modernization of district heating plants (58 overall) and power plants, as well as introduction of renewable energy sources, especially wood biomass. It is estimated that in the energy sector, 700 to 900 million EUR are needed for alignment with the EU standards within Chapter 27.
Use of renewable energy is not very common, although in electricity production, renewable sources are used fairly well compared to EU countries. Based on the agreement with the Energy Community, Serbia has committed itself to using 27% of gross final energy consumption from renewable sources by 2020 (currently that is around 22%). In order to comply with these requirements, some of the coal powered thermal power plants will be closed. On the other hand, hydro power, particularly small hydro and biomass (both agricultural and wood-based), could be used significantly more in energy production. Recently, there are improvements in the renewable energy projects related to wind power. Construction of a couple of big wind farm projects has started and one of them has a Finnish company involved. Late 2017, Taaleri Group signed an agreement with Cibuk Wind Holding regarding the acquisition of a minority interest in the largest wind project in Serbia to date.
Air quality and water and wastewater management
The amount of particle matter in air in Serbia exceeds the recommendations of the EU and WHO. Serbia is the seventh most polluted country in Europe with 21.4 micrograms of fine part particulate matters per cubic meter. Air pollution, such as micro particles and ozone, is estimated to cause as many as 10,000 premature deaths per year. Coal plants, industry, traffic, heating, and agriculture cause the largest amount of air pollution. However, following the EU guidelines, Serbia has striven, among other things, to monitor air quality more efficiently.
When it comes to water management and water protection, shortcomings in the wastewater treatment pose a particular challenge. Problems in this field are mainly due to old technology, lack of pollution reduction facilities, untreated industrial and municipal wastewater, agricultural and landfill wastewater leakage and river navigation pollution. Serbia filters less than 8% of municipal wastewater. Wastewater treatment facilities exist only in 21 municipalities out of 200 registered agglomerations. In order to reach 100% treatment of wastewater, it is estimated that Serbia needs to construct 320 wastewater filtering facilities in the following 25 years. Looking at the industrial facilities, very few of them treat wastewaters before releasing them into sewers, streams, rivers or lakes. Monitoring of industrial wastewater is very weak, too. Only about 5% of industrial wastewater actually undergoes all three stages of treatment. It is estimated that 4.9 billion EUR have to be invested in order to meet the EU requirements within wastewater treatment and water management sector.
Availability and quality of potable water in Serbia is at an adequate level. About 80% of the population has access to public water supply. There are some water treatment plants in the country and more advanced technological solutions are needed in them. Wastewaters are not usually reused before they are returned into the water system. Water quality in the large rivers is relatively good, but several small rivers and waterways are heavily polluted as a result of untreated wastewater and agricultural runoff. As in the other environmental sectors, one of the challenges in the water sector has been the small amount of funding and investments available so far. However, there both international and local interest in water management and water protection has been increasing lately, with several projects already started, as well as some planned for the future.
According to latest information, public waste management companies in Serbia collect around 318 kg of waste per capita, which is fairly low compared to European average. However, there is a great deal of illegal landfills, approximately over 3,500 with around 40% of overall communal waste placed to them. Most of the household waste ends up in landfills, but at the same time most of these landfills do not meet the current standards. There is a plan to have 26 regional sanitary landfills, fulfilling all necessary standards, until 2020, and at the moment there are only 10 of them. The city of Belgrade has signed a public-private partnership contract with international consortia that will manage the Vinca landfill. The project will involve, for example, construction of a new waste treatment facility and use of landfill gas in energy production. The estimated value of this project is 300 million EUR and it is expected to start by the end of 2018. The recycling rate of household waste is low and estimations range between 5 and 15%. Looking at the packaging waste, recycling rate is higher and it is estimated to range between 25% and 40%. Most of the industrial waste is generated by mining activities. Waste management is primarily the responsibility of cities – the share of private waste management companies is slightly over 10%. Private enterprises have had a significant role in developing new practices and facilities.
The situation in the waste management markets in Serbia is, as of yet, challenging when it comes to changing citizens' mindset, but the waste management sector is expected to develop quickly in the near future as a result of EU membership requirements and funding. Additionally, investments and jobs created by the circular economy will be an incentive for the Serbian government to improve and develop waste management. There is a variety of market opportunities, for example, in recycling electronic waste, plastic, paper and tyres.
Finnish companies have growth potential in Serbia
The EU has invested approximately 700 million EUR in solutions to Serbia's environmental issues since year 2000. In addition, Sweden, for example, has provided significant support to environmental protection in Serbia. Serbia has long attracted several international investments on different sectors and environment will hardly be an exception. Foreign cleantech companies have already entered the Serbian market, but there is still room for newcomers, as well as potential for cooperation in various projects. Many Finnish energy and environmental technology companies have not found their way to the Western Balkans but there is currently a demand for cleantech know-how in Serbia.