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EPS faces significant challenges in Serbia’s energy transition and CO2 emission management

Elektroprivreda Srbije (EPS) emits approximately 26 million tons of carbon dioxide annually, leading to significant financial implications under the European emissions trading system (EU ETS), where one ton of CO2 is valued at around 65 euros. This could result in a potential cost of about 1.62 billion euros for EPS, according to Mirko Popović, director of the Regulatory Institute for Renewable Energy and the Environment (RERI), during a presentation on EPS’s role in Serbia’s energy transition.

Currently, EPS is not required to pay these fees, nor are other domestic companies subject to the Cross-Border Carbon Adjustment Mechanism (CBAM) until the deadline at the end of 2026. However, uncertainties remain regarding how Serbia will approach CO2 emissions taxation and how EPS will navigate the energy transition. Popović emphasized that while the costs for EPS could translate into revenue for the government, such fees could be reinvested into the company’s technological advancements and energy efficiency improvements.

Popović pointed out that Serbia is facing compliance challenges with international agreements, particularly regarding directives from the Energy Community. He noted that EPS is operating illegally due to significantly higher emissions of sulfur dioxide and nitrogen oxides, contradicting the National Plan for reducing emissions.

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Both Popović and climate change consultant Danijela Božanić stressed that the state’s plans for EPS within the energy transition remain vague. Božanić remarked, “EPS and decarbonization are intertwined, as this company produces 90% of our electricity. Strategic documents must clearly outline EPS’s path in the coming decades, but the current direction appears chaotic.”

Slobodan Minic from the Fiscal Council of Serbia also raised concerns about financing EPS’s transformation amid the energy transition. He identified around 10 billion euros of investments directly linked to EPS in available documents, with about 5.5 to 6 billion euros earmarked for stabilizing its existing production. However, these investments do not contribute to the energy transition.

Additionally, 4 billion euros are designated for renewable energy capacities, such as wind and solar power plants. Minic questioned EPS’s capability to manage these investments effectively, especially given its historical inefficiency in traditional sources, where it has implemented only about 50% of planned investments.

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Furthermore, the draft of the new Energy Development Strategy indicated that projects in the power sector would require approximately 21.87 billion euros, primarily for solar and wind projects, along with the construction of reversible hydropower plants.

In the meantime, an Agreement on Strategic Cooperation with the USA has been signed. Minister of Energy Dubravka Đedović Handanović highlighted that one key project aimed at enhancing EPS’s green capacity is the development of one gigawatt of solar power plants, including battery storage, to be executed with a consortium led by South Korea’s Hyundai Engineering and its American subsidiary, UGT Renewables.

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