Dokić: Emission permits are the first step in systemic emissions reduction

Serbia has issued its first emission permits, introducing a monitoring, reporting, and verification system for greenhouse gases. This will enable the government to plan and implement measures to reduce emissions. Sandra Dokić, State Secretary at the Ministry of Environmental Protection, spoke to Balkan Green Energy News about the significance of the permits, the issuance procedure, and the next steps and options for reducing emissions.

The permit for greenhouse gas (GHG) emissions is an important regulatory mechanism that establishes a system for monitoring and reporting emissions from key sources, primarily energy and industrial plants that significantly contribute to the overall level of GHG emissions. The introduction of permits for greenhouse gas emissions establishes a monitoring, reporting, and verification (MRV) system for greenhouse gases in the Republic of Serbia.

“Thanks to this system, plant operators are now required to submit precise data on their emissions, providing the state with a reliable basis for planning and implementing measures to reduce emissions, in accordance with national and international climate commitments,” says State Secretary at the Ministry of Environmental Protection Sandra Dokić.

Establishing an MVR system, Dokić explains, is a key obligation of all contracting parties to the Energy Community Treaty, including Serbia, and it also represents one of the most important reforms under the Reform Agenda adopted by the Government of the Republic of Serbia in October this year.

The MRV system lays the foundation for further planning of measures to reduce greenhouse gas emissions at the national level

“These reforms are crucial because they will serve as an indicator for accessing funds under the European Union’s Growth Plan for the Western Balkans. By implementing these reforms, the Republic of Serbia further strengthens its position in the European integration process and ensures significant support from the EU for accelerating the process of decarbonization and green transition. The establishment of this system is not only significant in terms of meeting international obligations, but it also lays the foundation for the further planning of measures to reduce greenhouse gas emissions at the national level, including the potential introduction of an emissions trading system or carbon pricing in line with the Green Agenda for the Western Balkans,” Dokić points out.

All plants emitting GHGs must obtain a permit

All facilities whose activities lead to GHG emissions are required to obtain a permit. A government decree adopted in 2023 defines greenhouse gases as well as the activities that lead to their emissions. The decree applies to thermal power plants, heating plants, facilities for the production and processing of iron and steel, aluminum, cement, paper, and ceramic and plaster products, as well as oil refineries and other facilities.

The validity of the permit does not have an expiration date. However, the Ministry of Environmental Protection, in accordance with the Law on Climate Change, is obliged to review the issued permits every five years, explains Dokić.

Also, facilities have the obligation to inform the ministry of any intended change in the type of activity or the capacity of existing facilities, the construction of new ones, and changes of fuel or raw materials used in production. This means that permits will be reviewed as necessary, in line with the operator’s requirements.

The entire permitting process is digitalized

Belgrade Nikola Tesla Airport was the first company to complete the procedure for obtaining a permit, followed by HBIS Serbia, the owner of the Smederevo steel mill. The entire permitting process is digitalized, greatly accelerating and streamlining the procedure.

The procedure is as follows: the plant operator submits a request for a permit through the e-GHG platform, available on the ministry’s website. Along with the GHG permit application, operators must submit a monitoring plan, detailing how they will track their emissions. After reviewing the submitted documentation, if all legal requirements are met, and after the Environmental Protection Agency submits an assessment that the plant operator is able to ensure monitoring and reporting on GHG emissions, the ministry issues a GHG permit.

“This new, digitalized process is part of efforts to make it easier and faster for the Serbian economy to adapt to new obligations in accordance with the adopted climate change regulations, as well as the requirements of the Green Agenda for the Western Balkans. It is also an important element of the ministry’s commitment to more efficient and more transparent work, which further encourages companies to do business responsibly in line with Serbia’s and the EU’s climate goals,” says Dokić.

Introducing a national ETS is not a viable option

Dokić points out that the government is considering two options for emissions reduction – introducing a carbon tax or establishing an emissions trading system (ETS). The European Union’s EU ETS is its key instrument for reducing greenhouse gas emissions, covering about 10,000 plants across the bloc. Both options are in line with Serbia’s Low Carbon Development Strategy and the recently adopted Integrated National Energy and Climate Plan.

The ministry is working on an implementation plan for the EU ETS directive

“The Ministry of Environmental Protection is currently preparing the Specific Plan for the Implementation of the EU Emissions Trading System Directive. It will become part of Serbia’s negotiating position in the talks with the EU. For this purpose, a detailed financial analysis is being conducted to assess the impact of an ETS on the Serbian economy. The document is being jointly drafted by representatives of relevant institutions, including the Ministry of Finance, the Ministry of Mining and Energy, the Serbian Chamber of Commerce and Industry, and others. As for the introduction of a carbon tax, the Ministry of Finance has a key role and is leading this process. Certainly, what’s important is that, by introducing a system for monitoring and reporting on GHG emissions, we have laid the foundation for the further development of these measures,” says Dokić.

However, the state secretary points out that preliminary analyses conducted by the Ministry of Environmental Protection have shown that the introduction of a national ETS is not a viable option for several reasons. First of all, there would be a very small number of plants trading with each other, making it difficult to ensure the liquidity of the market. At the same time, it would require developing the complete infrastructure, including those elements of the ETS that are centralized in the EU, which would put an additional financial and administrative burden on the institutions.

Dokić stresses that since the adoption of the Decarbonization Roadmap in 2021, the Energy Community contracting parties have made significant progress in its implementation. The next key step under the roadmap is to reach an agreement on a carbon pricing system, and possibly apply the EU ETS directive, should the contracting parties decide to do so.

Technical negotiations on a regional ETS are envisaged for the second half of 2024

“At the informal meeting of the Ministerial Council in June 2023, options were discussed to create a regional emissions trading system instead of separate national systems. The European Commission highlighted the advantages of such an approach, and it was agreed to continue technical discussions in the second half of 2024, with a special focus on identifying the key elements and flexibility of a regional ETS, comparable to the EU ETS. Further analyses and consultations were planned until the informal meeting in 2024, with the aim of developing a draft proposal for a regional ETS, which the European Commission would then present to the Ministerial Council for adoption in December 2024,” says the state secretary.

However, preliminary findings indicate that even this option may not be suitable for Serbia, given that the country has a significantly larger number of plants compared to other economies in the region, placing it in a unique position in terms of required capacities and implementation costs. Discussions on this proposal, along with the feasibility and potential benefits of a regional ETS, will continue at the next ministerial meeting of the Energy Community.

Access to EU funds would speed up decarbonization, especially in the energy sector

Full decarbonization often requires significant investment in new technologies and infrastructure, which can be challenging for the economy in the absence of state support.

Dokić points out that Serbia can receive support from EU funds through various financing programs focused on climate action and sustainable development, such as the IPA and the Growth Plan for the Western Balkans.

“However, Serbia still doesn’t have access to EU funds such as the Modernisation Fund or the Just Transition Facility, which are aimed at supporting decarbonization in less developed European regions that rely on coal, as well as assisting sectors that need additional time to implement the decarbonization process. Access to these European funds would be a significant step forward, as it would speed up the decarbonization process, especially in the energy sector, which requires large infrastructure investments,” explains Dokić.