← All episodes
S1E07

Transposing the Clean Energy Package 2019 in Balkans with Dr. Rozeta Karova - TEB Podcast - S1E7

with Dr. Rozeta Karova· Energy Community Secretariat (former), Independent Consultant· 49m

TL;DR

Western Balkan contracting parties face structural delays transposing the EU's Clean Energy Package and electricity integration rules into national primary and secondary legislation. While market coupling has slipped to late 2026 or early 2027, the impending enforcement of the EU Carbon Border Adjustment Mechanism (CBAM) necessitates rapid implementation of domestic installation-level carbon pricing and robust MRV frameworks to offset export border tariffs.

Synopsis
Former Energy Community legal counsel Dr. Rozeta Karova details the legal and administrative complexities of aligning Western Balkan energy markets with EU directives. The conversation covers the legal divergence between direct-application EU regulations and mandatory national transposition by Energy Community contracting parties, the status of national energy laws in Serbia, North Macedonia, and Montenegro, and the commercial threat posed by CBAM to regional electricity exporters. Karova also analyzes how domestic carbon pricing systems, phasing out coal subsidies under the Sofia Declaration, and shifting from feed-in tariffs to market-based renewables schemes impact investment and accession across Central and Eastern Europe.

Key metrics

by the numbers · 5
  • 10 years
    initial lifetime of the Energy Community Treaty (2006 to 2016)
  • 13 years
    tenure of Dr. Rozeta Karova at the Energy Community Secretariat
  • €24 per ton
    current nominal carbon price in Montenegro per ton of CO2
  • €80 and €100 per ton
    EU ETS carbon allowance price range cited by Karova
  • Q4 2026, Q1 2027
    projected go-live window for regional electricity market coupling

Topics

8 tags
energy lawmarket integrationclean energy packagecbamwestern balkanscarbon pricingmarket couplingenergy transition
Stats
Duration
49m
Words
8.4k
Questions
37
Speakers
3

Rozeta Karova · Daniel Schaub · Rahul Mishra

Timeline

11 chapters

  1. Legal Background and the Energy Community Treaty

    Dr. Rozeta Karova discusses her academic path and the institutional foundations of the Energy Community Treaty.

  2. 13 Years at the Energy Community Secretariat

    Karova describes her experience handling compliance, public service obligations, and cross-border interconnector auctions.

  3. Structure and Role of the Energy Community

    An overview of how the Energy Community extends the EU energy acquis to contracting parties like the Western Balkans, Ukraine, Moldova, and Georgia.

  4. Market Liberalization and Price Regulation

    Karova explains wholesale market opening, unbundling of network operators, and temporary retail price interventions for vulnerable consumers.

  5. Transposing the Clean Energy Package

    Analysis of why non-EU contracting parties must individually transpose EU regulations and network codes into domestic legislation, causing adoption delays.

  6. Decarbonization, Coal Subsidies, and CBAM Exposure

    Karova examines regional coal dependency, commitments to phase out coal subsidies, and the economic impact of the EU CBAM on electricity exports.

  7. Carbon Pricing and MRV Frameworks

    A review of carbon pricing progress in Montenegro and Ukraine, alongside the technical necessity of robust monitoring, reporting, and verification.

  8. Renewable Energy Directives and Market Support Schemes

    The transposition of RED II, the shift from feed-in tariffs to CfDs and PPAs, and rules regarding guarantees of origin.

  9. CBAM Article 9 and Market Coupling Timelines

    How delaying market coupling past 2026 leaves Article 9 carbon pricing deductions as the primary mitigation tool against CBAM export fees.

  10. Donor Coordination and Technical Assistance

    Karova outlines the interplay between international financing institutions, donor programs, and internal administrative capacity.

  11. Career Advice for Energy Lawyers

    Karova advises aspiring energy lawyers on specialized training, regulatory dynamics, and gaining domestic administrative experience.

Key insights

4 takeaways
  • 01

    Transposition disparities cause systematic regulatory lag outside the EU

    While EU member states see EU regulations and network codes directly apply upon passage, Energy Community contracting parties must redraft and transpose every code into national primary and secondary legislation. This procedural requirement, paired with institutional adaptations, creates significant delays between EU legislative adoption and Western Balkan compliance.

  • 02

    Market coupling delays expose regional power exports to CBAM levies

    Although the CBAM regulation allows for an exemption for fully coupled non-EU electricity markets, delays pushing Western Balkan coupling to Q4 2026 or Q1 2027 ensure this exemption window will be missed. Consequently, exporters must rely on CBAM Article 9, which reduces the border tariff only if an equivalent installation-level carbon price backed by compliant MRV has been paid domestically.

  • 03

    Sofia Declaration commitments target coal subsidies rather than plant phase-outs

    The 2020 Sofia Declaration on the Green Agenda explicitly committed Western Balkan signatories to phase out operational coal subsidies rather than mandating binding coal plant phase-out dates. Decarbonization timelines remain governed by broader EU climate alignment, accession conditionality, and the economic viability of thermal generation under carbon pricing.

  • 04

    Domestic administrative capacity is unevenly distributed across ministries

    Energy transition implementation in the Western Balkans is constrained by internal state capacities, where ministries of energy are often relatively advanced while environmental and climate ministries lag behind in handling complex MRV and ETS frameworks. External donor assistance is most effective when demand-driven rather than prescribed by large multinational consultancies.

Pull quotes

5 quotes
  • For instance, because, the EU legislation is adopted in, for instance, the Clean Energy Package, the new electricity market integration package has been adopted in 2019, then in the Energy Community, it came in 2022. Now, already the countries are transposing this, but already the EU has changed the Electricity Directive and Regulation in 2024, so they will need to catch up with that as well.
    Rozeta Karova
  • And the challenging part is really to transpose in national legislation all these technical network codes, guidelines, and so on that in the EU once adopted, they apply, they don't, the countries, so the EU member states don't need to do anything. So, for instance, Netherlands does not need to transpose network codes and guidelines or regulations, so they don't lose time on that.
    Rozeta Karova
  • No, it is a dif- it is different because these countries are aligning with the European ETS, and under the Paris Agreement, they also have different obligations, for also it is a different MRV at country level, and this is about installation level.
    Rozeta Karova
  • So, the first go-live window for market coupling now is set for Q4 2026, Q1 2027. So, obviously, the exemption from CBAM might not be reached.
    Rozeta Karova
  • I mean, as I said, in the Green Agenda, there was no, so the Sofia Declaration on the Green Agenda in 2020 that has been signed, and it has been a political commitment, these countries, promised to phase out the coal subsidies, so there was no word on phasing out the coal.
    Rozeta Karova
Transcript140 cuesClick a timestamp to jump
  1. Rozeta Karova: So, it means, for instance, in Montenegro, there is one thermal power plant called Pljevlja. It produces CO2 and that the producer of CO2, basically the installation, is obliged to pay a certain carbon price in Montenegro. In other countries, so, for instance, you have Macedonia, Montenegro, uh, Bosnia and Herzegovina, Serbia, they also have thermal power plants that also should be liable for paying a carbon price, and they're not yet doing that.
  2. Daniel Schaub: Welcome to a new interview in The Energy Bridge. Today, we have Rozeta Karova. We are very happy to have you here because we are going into the legal perspective from an expert. So, we are very happy to having you here. And, uh...
  3. Rahul Mishra: Yeah. Please, Rozeta, uh, again, uh, thank you for giving us this interview. Uh, we are very glad to have you. Please tell us a bit about yourself, your journey, your study background, how you end up in Vienna. Where are you from, first of all?
  4. Rozeta Karova: Okay, thank you very much for this invitation. I'm, uh, happy to respond to the questions and to, um, go a bit deeper into the legal perspective of energy sectors. Um, I come from Macedonia, so I'm Macedonian myself. I did my bachelor studies there in law,
  5. Rozeta Karova: um, and then in the energy sector, it all started when I went to do my master in the Netherlands. At that time, there was no energy law as a subject, so I was doing LLM in European business law. Uh, and at the time when I was about to select the topic for my master thesis, um, I decided to do it in competition law. It was the time when the Macedonian, um, distribution company and supply were privatized, so I wanted to look whether that brings the liberalization to the electricity market, whether it's the right direction. And at the same time, the Energy Community Treaty was signed. It was not yet even into force. Um, and for me this was interesting, so that is when I started to study energy, and then I decided if I would do a PhD, this would be the topic of my
  6. Rozeta Karova: PhD thesis, because it was very interesting when I learned about the Energy Community Treaty. As a lawyer, I read it, it is a legally binding treaty between the European Union on the one hand, so not the member states, but the EU itself, and the contracting parties, at that time only the Western Balkans, uh, with interesting voting rights. So, everybody has equal voting rights. The EU has one voting right, as much as Montenegro or Macedonia. Of course, different obligations,
  7. Rozeta Karova: and the obligations that these countries undertook was to integrate, not only to establish regional markets among themselves, but to integrate the energy markets with the European one before becoming EU members. And they even undertook obligations that were spanning beyond the lifetime of the treaty, which at that time was for 10 years, 2006 until 2016. They undertook certain obligations to be implemented in 2017, for instance. Yeah. Uh, only 10 years, but now obviously it has been extended. The countries are not yet EU members.
  8. Rahul Mishra: Where did you do your masters and your PhD?
  9. Rozeta Karova: Uh, I did my masters in the Netherlands, in Leiden, and the PhD at the European University Institute. There was, uh, one scholarship for Southeast Europe, which I was lucky to obtain with my topic. I was lucky to have a super nice supervisor, Professor Micklitz, uh, who knew about regulated industries, but he was not an energy lawyer, but he really guided me perfectly well through the thing.
  10. Rahul Mishra: But was there any motivation for you to go more into the energy direction or you went, uh, to general, uh, law and then you found something in, that drive you into the energy policy?
  11. Rozeta Karova: When writing the master thesis, I got interested in the Energy Community, so then I decided to dig deeper and to study the liberalization of electricity markets. And, um, then my- when I completed the PhD in three and a half years, then my book was published. I mean, my doctoral thesis was published as a book as the first monograph ever written about the Energy Community in 2011.
  12. Rahul Mishra: Wow.
  13. Daniel Schaub: Wow.
  14. Rozeta Karova: So, it's, and I think it's still the only monograph about the Energy Community. There are some edited volumes, but not a book like that.
  15. Daniel Schaub: Yeah, we are going to go into this Energy Community, because you have plenty experience and it's is very interesting. So, you were in the right moment with the knowledge and curiosity enough to get in this amazing field.
  16. Rahul Mishra: And you spent a lot of time there. You worked 13 years and then also with a lot of big organization such as World Bank and UNOPS. How do you see, uh, role of such big organization in, in energy transition?
  17. Rozeta Karova: I mean, you put it right. Um, so I was at the right time at the right place. Um, so when I was finishing my PhD, um, there was a call for, uh, for a lawyer at the Energy Community Secretariat. At that time, there was only one legal counsel, and then it was me, the second member of the legal unit. Um, and then I spent 13 years there. Um, the job that I did there and the job that I do now as a consultant is not very different. I mean, it's about applying the same rules, um, to the countries and to, to help them achieve compliance, to align their national legislation and their sector reforms with the European rules. So, that was the objective. At that time, I was more checking the compliance of the countries with these rules. So, for instance, um, during my PhD,
  18. Rozeta Karova: I wrote about the public service obligation, which is a concept, it's an intervention, a temporary intervention by the states in the markets when the markets cannot deliver by themselves. So, I looked into such interventions at wholesale level, so reservation of capacity at interconnectors, and at retail level, uh, regulated prices. So, then when I joined the Energy Community, um, immediately because I knew the problems in the Western Balkans, for instance, the issues, we addressed those at wholesale level through dispute settlements. And then also later on when Ukraine joined the Energy Community, we also, I mean, I worked with them a lot in order to establish a compliant system of auctioning of the interconnectors' capacity,
  19. Rozeta Karova: but also the price regulation. I mean, this is still topical even today. And, um, at that time I was looking to compliance of the countries, and, uh, from the Secretariat side. And now I'm happy to work directly with them, so as a consultant to help them achieve the same compliance, uh, and to explain the benefits of such reforms.
  20. Rahul Mishra: And, Rozeta, if you could tell us what exactly is Energy Community and what it does? How it operates?
  21. Rozeta Karova: Okay, so now it will be the Energy Community will be celebrating its 20th birthday, so I would think that everybody knows about the Energy Community, but...
  22. Daniel Schaub: Yeah, we should know, but now we learn of this 20...
  23. Rozeta Karova: Yeah, exactly. Uh, the Energy Community has been established, as I said, in 2005, uh, by a legally binding treaty by the European Union and at that time the Western Balkans contracting parties. Now, obviously, it has extended its scope also geographically. Ukraine, Moldova, and Georgia are also members of the Energy Community.
  24. Rozeta Karova: And it has extended the legislation, so it is about exporting the European rules not only in the energy sectors anymore, so it's beyond electricity, gas, renewables, energy efficiency, but it's also about climate rules, environmental rules, and aligning them with the European Union legislation even before the countries become EU members, because now all the countries that are members of the Energy Community are also aspiring to become EU members at different level.
  25. Daniel Schaub: And this is one part of the requirements to be part of the European Union, is to fulfill these requirements?
  26. Rozeta Karova: In any case, within the negotiations, the countries have to already align their legislation. So, through the accession process, so there is a process of screening, of aligning the legislation, and then when they join the European Union, they will have to function in the same manner as the EU member states under the same rules.
  27. Rahul Mishra: And, so basically Energy Community act as a bridge right now between the non-EU state and the EU.
  28. Rozeta Karova: Yes, it is actually assisting the contracting parties to already get used to align, to have the same rules, to function under the same rules as the EU member states. But, uh, obviously the EU rules are being adapted to the Energy Community, because, uh, the European directives and regulations are being drafted for EU member states, so they are developed by countries, um, with different market levels, or different development of the markets, um, and they're being adapted to the institutional framework and to the national specifics of the contracting parties.
  29. Rozeta Karova: And they always come with a certain delay. For instance, because, uh, the EU legislation is adopted in, for instance, the Clean Energy Package, the new electricity market integration package has been adopted in 2019, then in the Energy Community, it came in 2022. Now, already the countries are transposing this, but already the EU has changed the Electricity Directive and Regulation in 2024, so they will need to catch up with that as well.
  30. Daniel Schaub: And how have you seen the evolution in these 20 years when it started and how do you see it now?
  31. Rozeta Karova: Uh, the both the countries, I mean, in their national legislation, but also the stakeholders, the energy market, uh, they have undergone a significant reforms. Um, so the countries have progressed with different speed, obviously not all of them at the same time, and the markets are quite different. But there has been, uh, progress in different areas of law differently. So, let's say that electricity markets have maybe been progressing faster, maybe implementation of energy efficiency rules is a bit more difficult, not in all countries the same, but, uh, yeah, there has been a large progress in these 20 years.
  32. Daniel Schaub: Yeah. Wow. And just regarding the liberalization of the energy market, because in in Chile, I've read that we were the first country to have liberalized energy market. But how is the reality here in the Central Eastern Europe or Western Balkans, um, where the, we have heard and we want to understand it, how the, uh, public sector, uh, works with this with this market because the prices are fixed. How is the regulation in the public sector?
  33. Rozeta Karova: No, so that these countries in the Energy Community, the contracting parties that have been following the European model of liberalization. And there was no liberalization at once, even in the EU member states. So, competition has been introduced in generation and supply, but the transmission and distribution services have remained, um, regulated.
  34. Rozeta Karova: Um, it was gradual, so also the EU member states have been gradually, uh, relieving the price regulation, and this is what happened also in the, in the Western Balkans, but also Ukraine, Moldova, and Georgia. Uh, what, and the wholesale markets are fully liberalized everywhere. The retail markets, as well, to a certain level, and the price regulation is only temporary intervention in the prices, and not for all the customers. And this is allowed by the European legislation that, um, the countries, the states, the governments can protect the households, the vulnerable customers, with certain price regulation, and this is what is allowed in the EU and this is what also the member states, uh, the contracting parties of the Energy Community are doing. But they are following the European rules, and this is, uh, yeah, they're progressing with, uh, this price relief as well.
  35. Rahul Mishra: Were there any challenges going, I mean any resistance or any country which has specific resistance coming for that?
  36. Rozeta Karova: Uh, obviously, I mean, also in the EU member states, the liberalization did not go very fast. I mean, there were some new concepts also for the EU member states, but also for the Western Balkans, for instance, the unbundling of distribution and supply, separation of these companies, uh, for instance, the- sorry?
  37. Daniel Schaub: PPAs.
  38. Rozeta Karova: Uh, yeah, that is, that is a different thing, but for instance, the unbundling, the separation of the transmission companies and the ownership within the state to be divided. So, for instance, two public bodies cannot own, uh, generation and transmission at the same time. So, these were a new concept also for the EU member states, but this is also something that the contracting parties had to do. So, resistance, not that much, they, they learned by doing, and it's, it's a process that takes time. Price liberalization takes also time. Took time in the EU, is taking time also here.
  39. Daniel Schaub: Yeah.
  40. Rahul Mishra: And also you you worked a long time for Energy Community. You, you, you studied also about Energy Community and all the laws. What has been the ongoing efforts and your successful cases, as well, in all these years that you, you would like to mention? You can tell us a bit more about?
  41. Rozeta Karova: Um, I mostly worked with electricity markets at the Energy Community. Now, um, as a consultant, I do many various different projects, so I have been working on electricity market reform in all the contracting parties of the Energy Community. Maybe one example, Ukraine since they joined the Energy Community up to the moment that they left. I have been working with them on amending the legislation, changing the electricity market model from a single buyer to a liberalized and competitive market, establishing, as I mentioned before, electronic auctions for capacity allocation. So, there were all sorts of, uh, reforms that have been happening, and I have been a member of a team, so I did not do anything by myself, but as a team of the, of the Secretariat. Whereas now as a consultant, I do these things and I assist the countries applying this knowledge directly by myself, so that's a good thing.
  42. Rahul Mishra: And you could you tell, uh, we were touching upon, uh, you touched upon the Clean Energy Package. What exactly it means for the, uh, for the community and for Western Balkans?
  43. Rozeta Karova: So, the Clean Energy Package is the European legislation that governs the energy markets, uh, and, uh, for instance, the electricity market integration package, which governs, so the Electricity Regulation, Directive, and the network codes and guidelines are, um, to be transposed and implemented in the contracting parties as they are in the EU. And this is, for instance, a precondition for market integration, what we call the market coupling of the different, uh, also of the markets, electricity markets of the Energy Community, uh, to be coupled with the European, the single European electricity market. Uh, but it also includes the rules on renewables, energy efficiency, and so on. So, it's a large package that covers...
  44. Daniel Schaub: Not only energy.
  45. Rozeta Karova: It is energy, but it is renewable energy, energy efficiency, electricity markets, uh, gas, and so on. So, it's different rules and different legislation, which in the EU, for instance, they are as directive and regulations, and, um, the directives are giving the objective, but not the method of how something should be implemented at national level, whereas the regulations in the European Union are directly applying, so they provide rights and obligations directly to the stakeholders, and they apply directly to the EU member states. Whereas in the contracting parties of the Energy Community, they also need to be transposed, so they also need to be part of national legislation.
  46. Rozeta Karova: And this is a particular challenge when speaking about the challenges, because, um, the, for instance, the network codes, the guidelines, the regulations as such, um, they cannot be simply copy-pasted as they should be, because they should apply in the same manner in the EU member states and in these countries, but the national legal techniques are requiring some redrafting, and this poses a particular challenge, so hence the delay with the implementation of the electricity market package in the contracting parties.
  47. Rahul Mishra: And where are we right now in terms of deployment of that?
  48. Rozeta Karova: Uh, so the, so far Serbia has adopted a new amendments to the energy law and has incorporated the electricity integration package in December, um, and now it's in the process of transposing also the network codes and the guidelines. Uh, Macedonia has just adopted the energy law couple of days ago actually, that's pretty new, and Montenegro has partially adopted. They have adopted a new energy law, but not yet a law what they call a cross-border, um, law. So, and the other countries are in the process, so Ukraine also has a draft that is pending in Parliament, so it is an ongoing process. But incorporation of this legislation, it is a precondition for market coupling, so they have to do it.
  49. Rahul Mishra: And I have I just have one, one more thing about that. Because, uh, so I, I come from more from the business side, and, uh, Daniel come more from technical side, and legal side is very important right now in the energy. I want to understand like how laws are exactly adopted by EU members and the non-EU members. When you said Serbia has adopted, what does that mean?
  50. Rozeta Karova: Ah, okay. So, uh, no, the European legislation is something different. It is a supranational law, so it is a legislation that is being adopted by the European institutions. Uh, in the Energy Community, that law, so be it a directive or regulation, uh, that's the name of the laws in the European Union, uh, they are being adapted and become Energy Community rules. They are adopted by the Ministerial Council, which is, uh, one of the institutions of the Energy Community. And once a decision of the Ministerial Council or another institution is being taken, then this legislation is being binding. So, the contracting parties are given certain period of time, usually a year or two, to transpose it at national level. And then at national level, Serbia, Macedonia, Ukraine, uh, they adopt national legislation, so new energy law, primary legislation, and then the secondary legislation adopted by ministry, government, regulators, and so on.
  51. Daniel Schaub: And in the region, which countries are, let's say, a bit behind, and it's a, which learnings have you had in, in this process that they could take?
  52. Rozeta Karova: Uh, so the for different areas of law, different countries are proceeding faster, let's say. The decision-making in Bosnia and Herzegovina has always been a bit more challenging because of the structure of the country, so decision-making is more difficult, uh, but it does not mean that if they decide, they also have projects on working and finalizing these national energy laws. They could also proceed.
  53. Rozeta Karova: Uh, it is important to, and what I have learned, and what I have seen is that with the adaptation of the European rules, not always the national specifics are being taken of these countries. So, of course, the legislation, as I said, the European legislation is being adapted, mostly to the institutional framework of the Energy Community, the deadlines are being changed, but if these countries are to be part of the same European market, they also have to function under the same rules. However, they still require some national specifics to be taken into account. They don't have the same opportunities as the EU member states, so they are, this is the challenging part.
  54. Rozeta Karova: And the challenging part is really to transpose in national legislation all these technical network codes, guidelines, and so on that in the EU once adopted, they apply, they don't, the countries, so the EU member states don't need to do anything. So, for instance, Netherlands does not need to transpose network codes and guidelines or regulations, so they don't lose time on that. They are once adopted in the EU, they apply to them and they are legally binding. They're just being translated, whereas these countries are still drafting. So, this poses a challenge.
  55. Daniel Schaub: Yeah. You mentioned the translation. Would you see or would you say that language is a challenge in the region?
  56. Rozeta Karova: No, more about the substance. No, it's more about the substance. So, I mean, it's, it's more about the substance of this legislation that don't always fit their national characteristics.
  57. Rahul Mishra: And also just I want to understand a bit more about what is the opportunity cost of, uh, them not being integrated, if you can touch upon that?
  58. Rozeta Karova: Um, in which area? So, there are different areas of law and different...
  59. Rahul Mishra: I mean, in, yeah, I mean, we start with the law and, and then we go more into the state of energy transition for these areas, because they, uh, let's face it, they are not as, uh, advanced as, let's say, Nordics, and they have regional challenges as well, but they can leapfrog, but maybe because of laws, they are, they are a bit behind, and that could be accelerated.
  60. Rozeta Karova: Uh, yes, but that's exactly the role and precisely the role of the Energy Community. So, the objective of the Energy Community has always been to prepare nationally the countries to align the national legislations to integrate regionally. And I mean even for electricity market integration in the EU rules, the regional cooperation is very important. So, obviously here in the region, you can see that due to the challenges of the region itself, regional cooperation is not that easy, but that is a precondition then for European integration. So, obviously, um, and these countries have, I mean, as you know also, they have a compatible energy mix, so, for instance, Albania relies mostly on hydro, other countries on thermal power plants. So, the integration among themselves, but also the region is a small, is small and it's, so the Western Balkans, talking about them, they're also a net importer. So, for them also integration and market integration brings obviously benefits.
  61. Rozeta Karova: Uh, at the same time, now speaking about electricity, the carbon pricing is an issue. So, the CBAM, the Carbon Border Adjustment Mechanism, that the European Union has just implemented, so it is a regulation, it will start to apply soon, um, that also poses challenges to these countries, because such a mechanism will be applied to all the electricity exports from the region to the member states. So, this would be a cost to a certain extent.
  62. Daniel Schaub: Yeah, um, we're going to go in in the carbon prices, but about the region, how do you see the decarbonization process and the coal dependency still, is still, is still there?
  63. Rozeta Karova: As I said, different countries rely on coal, others not. So, for instance, also of the Energy Community, I mean, Georgia is also an Energy Community member, and they also rely mostly on hydro. Uh, Ukraine, with all the challenges that it has, has also nuclear. So, it is, it depends. There are indeed certain countries that mostly rely on coal, uh, and, um, national reforms have been taking place for, uh, so even introducing national carbon pricing is putting challenges on the, on the coal functioning. So, there have been some political commitments for phasing out coal, not so explicitly, um, in the Western Balkans, but the commitment to align with the European Union policies, and, the European policy having, the European Union having the commitment for being climate-neutral by 2050, this is more or less also the, the direction in which this region is going. Of course, certain countries, um, are planning, and, the countries are planning also with having some additional alternatives to coal before they close everything and they just remain dependent on imports.
  64. Daniel Schaub: Yeah. And what do you think is the role of, uh, not or to take out the so, the subsidies in coal in this region? Or...
  65. Rozeta Karova: There have been some studies also, um, by the Energy Community on the coal subsidies. Uh, there are still coal subsidies given, uh, in the region, but this is also being phased out slowly. So, that is also a commitment that the Western Balkans did in the Green Agenda to commit to slowly take out the coal, to phase out the coal subsidies. And, uh, I think that is the direction that all of them are going, so they are now looking to alternatives.
  66. Daniel Schaub: But that's a super sign. I mean, for the, I don't guarantee when this will happen.
  67. Rozeta Karova: They all have different timelines.
  68. Daniel Schaub: Yes, of course.
  69. Rozeta Karova: But, uh, yes, that is...
  70. Daniel Schaub: Okay. Uh, so maybe we can go to the scale carbon pricing and how do you see the evolution of, of this, and which prices are now, and what is the goal to have, uh, in this carbon emission prices?
  71. Rozeta Karova: Only very few contracting parties of the Energy Community have national carbon pricing. So, Ukraine has something very small. Um, Montenegro has currently €24 per ton of CO2, uh, but they still have also free allowances for the power sector, which then is not really 24, but something less. And the others are still working on that. In terms of choices, these countries don't have much of a choice. I mean, with the choice to become EU members, they would need to introduce carbon pricing, and they would need to introduce systems of carbon pricing that are compatible with joining the European Emission Trading System. So, once they become new member states, they will need to be part of the European ETS.
  72. Rozeta Karova: Um, that is what the countries are working for. Obviously, there are certain steps before that. So, monitoring, reporting, verification at installation level, so all these rules on MRV, uh, the European rules will have to be transposed and implemented in these countries. For instance, Montenegro is seriously working on reforming its carbon pricing system and aligning fully with the European Union ETS. And this is a project that I'm supporting them through the World Bank. We are working on complete reform of the pricing system, introduction of a high-level MRV, and aligning also the, the timescale and the prices with the European ones, which are between €80 and €100 per ton. So, the difference is, is huge. But, yes.
  73. Daniel Schaub: So, European Union has a minimum?
  74. Rozeta Karova: No, it is a market. It is a market.
  75. Daniel Schaub: Ah, so it's a market.
  76. Rozeta Karova: It is a market, yes.
  77. Daniel Schaub: And ETS, you mean...
  78. Rozeta Karova: It is the Emission Trading System. It is the trading of allowances. So, it is a market price and the market is setting the price of allowances and ton of CO2.
  79. Daniel Schaub: So, the EU requirement is to have a price.
  80. Rozeta Karova: Yes, uh, but these countries can also start, and some of them are planning to introduce, first a carbon tax, which is easier, because it can be part of the national tax system, and it will still put a price on the carbon. But in parallel, they should work on implementing MRV and the basic rules of an ETS. Not necessarily a national ETS make sense, because it is a small market, so it does not necessarily make a sense to introduce national ETS as a market, but to have the rules in place so that once they join the European Union, they could have a system compatible and they could participate to the European ETS. That is the, the objective. But with the CBAM, they will all need to introduce a carbon price, because the nationally paid carbon price will be taken into account and lower the CBAM fee. So, it is not that much about being part of the EU ETS, but it is more about having nationally applied carbon price that would then lower the CBAM fee at the electricity exports.
  81. Daniel Schaub: Okay, so just thinking out loud, just to know if it's related with the fifth article in Paris Agreement, when they are talking about carbon trading? It's part of the same, no?
  82. Rozeta Karova: No, it is a dif- it is different because these countries are aligning with the European ETS, and under the Paris Agreement, they also have different obligations, uh, for also it is a different MRV at country level, and this is about installation level. So, this is about, uh, ton per CO2 produced by certain installations.
  83. Daniel Schaub: Okay. Okay. The, so for Paris Agreement, it is more trading globally, or what's the...
  84. Rozeta Karova: No, so here what these countries through the Energy Community are doing, but also as applying for EU member states, EU membership, and also with the CBAM becoming relevant for them, it is the MRV at installation level. So, it means, for instance, in Montenegro, there is one thermal power plant called Pljevlja. It produces CO2, and that the producer of CO2, basically the installation, is obliged to pay a certain carbon price in Montenegro.
  85. Rozeta Karova: In other countries, so, for instance, you have Macedonia, Montenegro, uh, Bosnia and Herzegovina, Serbia, they also have thermal power plants that also should be liable for paying a carbon price, and they're not yet doing that. So, this is a process this is ongoing, and that will be something that we'll be talking about in the, in the coming years.
  86. Daniel Schaub: Okay.
  87. Rahul Mishra: And what about renewables here? Like what are the, let's say, enabling mechanism for renewables in these countries?
  88. Rozeta Karova: Um, these countries are now transposing the second Renewables Directive, so if you want the RED II from 2018-2001. Uh, the EU has already amended this legislation, so they will also need to catch up. Um, they started with reforms of the renewables framework in this direction, so both on enabling mechanism, so you were mentioning before the PPAs, CFDs, and this is something that the EU has now with the latest amendments of the Electricity Regulation Directive and the new Renewables Directive in 2024. They have introduced also certain rules on that. Um, the countries have also changed the, the support schemes for renewables, so starting from feed-in tariffs that were available for longer period of time, higher feed-in tariffs, now they're moving to market-based mechanisms. They also set the rules for guarantees of origin. Currently, they can only trade guarantees of origin between themselves, but in the future, it is planned to have an EU decision allowing them to trade the guarantees of origin with the EU member states. So, they are working on implementing the renewables framework at home, as well.
  89. Daniel Schaub: And, yeah, there is a concept in in public sector, which is the carrot or the stick, or the stick. How how do you see Europe in in in order to foster renewable energy transition? Is is more focused on the carrot or stick towards these countries or what?
  90. Daniel Schaub: In general.
  91. Rozeta Karova: Different, but also in the EU member states, I mean, they all make their different experience. So, the EU as such is setting the legal framework. So, for them the objective is 2050, climate neutrality, and also there are certain legally binding targets also for the EU member states, the 2030 targets and there will be intermediary 2040 targets. So, the contracting parties as well have set within the Energy Community certain binding targets, legal targets that they need to reach with renewables, um, the stick, and then they're putting the enabling framework, so on permitting, on support schemes, and so on, to scale up on the renewables.
  92. Daniel Schaub: And it's both like a balance.
  93. Rozeta Karova: It's both like a balance.
  94. Daniel Schaub: Good. And, uh, you mentioned briefly the CBAM just to, if you could explain us like, uh, what is exactly and what are the challenges to implement it?
  95. Rozeta Karova: Yeah, when the, the CBAM regulation was still a draft, I wrote an article, I can send that to you later on, analyzing the CBAM and the impact on, um, on the contracting parties. So, it is a mechanism, uh, because, as I said, in the EU there is an EU ETS system, so carbon pricing is being paid on the basis of a market price, um, and the EU is importing certain goods, among the others, the electricity, so from the sector that we are discussing now, from non-EU member states, which are not necessarily, as I said, paying carbon price at home. So, what the EU is doing is they want to align that, what has not been paid in the third country, uh, to prevent carbon leakage, to prevent more import of those cheaper, let's say, electricity, they're establishing a CBAM fee, which the importers in the EU, so it's not these countries to pay, but it is the importers of electricity in the EU will need to pay. Obviously, this makes the electricity being imported from the region more expensive.
  96. Rozeta Karova: But at the same time, the CBAM is giving, so there were a few options when the CBAM regulation has been adopted. Um, the electricity markets have been given an option, if they were coupled and integrated with the European market, they could be exempt. The electricity exports could have been exempted from paying this CBAM fee, provided that certain conditions are being met. But the, no, certain criteria by these countries had to be met in order to get the exemption from CBAM fee. But the market coupling did not happen, so the CBAM regulation is starting in 2026, so the market coupling is a precondition to even apply for exemption. So, that has been delayed. It is going to happen, but maybe not tomorrow. So, the first go-live window for market coupling now is set for Q4 2026, Q1 2027. So, obviously, the exemption from CBAM might not be reached.
  97. Rozeta Karova: But at the same time, there is another article in the CBAM regulation, Article 9, which is allowing for reduction of this CBAM fee. This is what I mentioned before. Provided that at national level, a carbon price is being paid, and provided there is a high-level MRV, so according to the European standards, and this can be proven, then in that case, this nationally paid carbon price, which will remain at national level, and can be used for new national renewables project, decarbonization projects, and so on, this price will be taken into account for lowering the CBAM fee. So, that is what's...
  98. Daniel Schaub: Wow. Very interesting what is coming, I mean, and everything is next year. Everything is '26, yes. It's starting in '26.
  99. Rahul Mishra: And also, I mean, uh, we are touching upon all the heavy topics, then why not one more? What about the Western Balkans' Green Agenda?
  100. Rahul Mishra: How realistic it is by that, that by 2030, there will be coal phased out? I mean...
  101. Rozeta Karova: I mean, as I said, in the Green Agenda, there was no, um, so the Sofia Declaration on the Green Agenda in 2020 that has been signed, and it has been a political commitment, these countries, um, promised to phase out the coal subsidies, so there was no word on phasing out the coal.
  102. Rahul Mishra: Okay.
  103. Rozeta Karova: Obviously, that was the objective, but then with the negotiations, this is the text that came out. This declaration is going to be amended and updated, and there is a decarbonization road map within the Energy Community that these countries are now about to update, hopefully this year. We will see. Political commitment on phasing out coal, it's obviously there with the objective for EU accession, with the acceptance of aligning with the European rules. So, even though the energy mix remains a national competency even in the EU member states, but having the climate rules, the renewables rules, the electricity market rules, and so on that are setting the limits, obviously coal phase-out is something that they're all working on. Um, then the European Union has also developed a Growth Plan and the reform agendas, so basically this countries last year have been drafting reform agendas, committing to take certain steps in, um, and the European Union has promised to provide the, the funding, certain, limited amount, some loan and some grants.
  104. Rozeta Karova: However, this is then an impetus for these countries to start seriously doing the reforms and to deliver, because every country is responsible for itself and for its own reforms, but then every country will receive the funding from the European Union on the basis of the reforms that they take. So, this is certainly not sufficient for doing all the reforms, uh, and decarbonizing fully the markets, but it is a step in that direction.
  105. Daniel Schaub: Wow. And, yeah, this is a huge challenge to help to coordinate too many institutions. So, how how do you see this possible, or or to make it better, this collaboration among institutions to not duplicate efforts in CEE region? You mean the international organizations with whom we work?
  106. Daniel Schaub: Yeah.
  107. Rozeta Karova: Um, I mean, in this last year, I have been cooperating with the World Bank, uh, projects implemented by UNOPS, EBRD, just transition in North Macedonia, GIZ, uh, support to Ukraine. Um, sometimes in the countries themselves, there are, for instance, in Serbia, in the Ministry for Energy, there is a full sector that deals with European integration, project management, uh, and it basically coordinates all the bilateral and multilateral support. Uh, and that is useful. I have been cooperating with them for, for a full year, uh, last year.
  108. Rozeta Karova: But sometimes also, uh, when I notice that there are synergies between different projects, I also make that known. So, for instance, um, on the project with the World Bank that I cooperate on, on reform of the carbon pricing system in Montenegro, I knew about colleagues that were implementing a European-funded project for the Western Balkans on carbon pricing, so instead of duplicating, we have just joined forces and deliver certain deliverables together. It depends. It depends on the people, it depends on the countries, it depends on the process. Uh, there is also a role of the Energy Community on coordinating donors, um, so that's also, I mean the European Commission is the one coordinating donors, and then the, um, Energy Community Secretariat is providing the assistance,
  109. Rozeta Karova: so there are platforms for, for that and, but yes, we see a lot of, um, overlapping, but they are usually the countries, and I know the countries are having, so for instance now North Macedonia established, a separate Ministry for Energy for the first time, and, the minister has been coordinating this different donors with the different support not to be overlapping.
  110. Daniel Schaub: Okay.
  111. Rahul Mishra: And, uh, are they, I mean, mostly, uh, in these countries, uh, not just resistant, but how do they, uh, approach it? Like are they happy with, uh, always coordinating with Energy Community? I mean, of course, on one side, they don't have any other option, but how, how, uh...
  112. Rozeta Karova: But it's not only the Energy Community. I mean, there are different donors and different, uh, international organizations supporting different projects. Um, so, for instance, the program that I was working on last year, implemented by UNOPS, was called Knowledge Reform for the Western Balkans, and this was, uh, Norway funded this program for five years, to support the EU accession of the Western Balkans countries. So, this was demand driven. Now, I'm supporting, for instance, the alignment of the renewables legislation in North Macedonia through another UNOPS-implemented project, but it is on EU accession and it is funded, uh, by Sweden. So, it depends. The countries are coordinating this by themselves, and usually the best, I mean, from my experience, the best support is the one that you can give it to the countries upon demand.
  113. Rozeta Karova: So, you can offer, but everything that is being imposed, it's not always working. So, it should come from them, the need that they have. And what I see is that they don't always need this big consultancy companies, um, and so on. But what I enjoy the most in my current work is working with them directly. So, sometimes they need this personalized approach, this approach of somebody who knows their markets, knows the EU legislation, can provide targeted support, is there for ad hoc consultancy, and from my experience, all the projects that I have been working on, then I keep the contact with the beneficiary, and then I'm being approached even after the, the project is finalized. So, that's...
  114. Rahul Mishra: And how lucrative are the markets, uh, considering all the regulation point of view, how, how attractive are the market for private investors? Western Balkans as a specific case, how attractive are they?
  115. Rozeta Karova: They have their certain problems, and they don't necessarily relate only to energy. I mean, they have different problems in different areas, but let's say, um, having, being part of the Energy Community, and having the obligation to align the legislation, that sets the standard that once the legislation is there, once it's aligned with the European rules, then this gives some confidence to investors, as well.
  116. Daniel Schaub: Mm-hmm. Some certainty.
  117. Rozeta Karova: From the energy perspective, so then obviously there is the financial markets, administrative burdens, and so on. But this is different.
  118. Rahul Mishra: Do you, do you see it in, in a more positive direction going? I mean, we were in Belgrade, uh, a week ago, and we saw a lot of positive momentum being built in, in Serbia, but maybe in other countries...
  119. Rozeta Karova: Of course. No, as I mentioned, I mean, for instance, Macedonia now established this new ministry, which is actually, after not even several months, it adopted the new energy law, which has been an obligation standing there, and now they're drafting the new renewables law, um, there are certain infrastructure projects, and so on. There, I see there has been progress in certain countries, as I said, different levels, different countries, but let's hope they will all progress.
  120. Daniel Schaub: And and what are you working on right now in this the last the last months and in this period?
  121. Rozeta Karova: Yeah, so, um, several projects, so this is also what I enjoy now quite a lot. Um, as I said, I'm cooperating with the World Bank on supporting Montenegro's reform on the carbon pricing system and their ETS, or drafting a new climate legislation. I'm also supporting Georgia through another World Bank project on the Black Sea submarine cable and, alignment with the infrastructure regulation. Um, supporting Macedonia through this UNOPS-related project, on renewables. Uh, and I recently started working with OIC on, um, climate resilience of energy infrastructure, which is also quite a new topic for me, but quite new also in the EU. And, uh, yes, through a GIZ project, I'm supporting Ukraine on, um, preparing them for the screening that comes as part of their EU accession. So, if I have missed something, [laughs] um, yeah, but these are the main ones, yeah.
  122. Daniel Schaub: A lot of things. [laughs]
  123. Rahul Mishra: Yeah, a lot of things happen. And do you think there are any particular, uh, things that need to be done to further accelerate the transition in Western Balkans?
  124. Rozeta Karova: Um, there is still a lot of work to be done. So, even this electricity market integration package has not been, as I said, fully transposed and implemented. And this is a precondition, and it is in the focus, it is a precondition for, uh, market coupling. So, steps are being taken, there have been some processes going on even recently. Then obviously aligning with the renewables legislation. Now, there is a new RED III, um, and that is another project that I actually work on, I forgot mentioning, it's a European-funded project in Serbia for aligning with the new Renewables Directive, especially the permitting and the administrative procedures. Um, that is something. Energy efficiency is a large, um, part of the legislation that still needs to be fully implemented. And as I mentioned, the MRV and the ETS, so establishing carbon price, aligning with the carbon pricing legislation of the European Union, and the high-level MRV, it's a, it's a process that takes time. It is really very detailed and very cumbersome legislation. I see that the countries are lacking capacity for that. So, if the ministries responsible for energy are, let's say, more advanced, the ministries for environment, ecology, climate, are usually lagging behind in terms of, capacity. So, not so much external support, so, for instance, it's not that they need always external support from consultants, but, internal capacity building, so that's something.
  125. Daniel Schaub: So, in in that note, how do you think important is the this bridge that we are trying to to do with Western Europe and this region in terms of knowledge gap that you mentioned or or local capacities? How important you think is the collaboration and the knowledge transfer?
  126. Rozeta Karova: I think it's very important. I think, um, you're appearing in the right time, and I think, I hope you will bring also more of that benefit. Um, teaming up not only between institutions, but also companies, as you said, or investors, and so on, and their knowledge about the region, but also the regional knowledge, I think it's something that they can always learn. I mean, you could always do, um, topical, important things, workshops, conference, like the one coming up, uh, so this is, uh, something that will be useful.
  127. Daniel Schaub: Yeah, next week. We are very happy to have you because it's a, for the next week, May 28th, is our first event ever, and now talking with you, I'm certain that you are the perfect person for the panel and to learn more about the the region.
  128. Rahul Mishra: And also, uh, just on the closing note, uh, you were, you were studying and then you got to know about Energy Community and then, uh, it got you interested. What advice would you like to give young energy lawyers getting into the field of energy, uh, with, with regulation being such a such a hot topic, and it's needed? It needs to be enabled, it needs to be enabling. There are so many other players, uh, and, I mean, we need lawyers to [laughs] to do the coordination, to enable everything.
  129. Rozeta Karova: I mean, now it's very different than when I was studying. So, doing my master in 2005-2006, there was no energy law as a subject. Now, lawyers can really, if they decide to dig into energy, uh, they can do specialized masters on that, they can do specialized trainings, uh, the Florence School of Regulation, which is also at the European University Institute in Florence where I was doing my PhD, it's a great institution. They provide a lot of, uh, specialized trainings. Um, so they first have to get their knowledge. So, the academic background is very important. Um, finishing faculty of law and then starting to work on energy projects, um, may not be that advisable. I mean, of course, you can do that as well.
  130. Rozeta Karova: I would advise them to, beside studying, also do some internships into international organizations. Now, they have a chance to freely move between countries, they can do that. Um, they should also work in national institutions, administration, to learn how that part of the, of the system works, because just having the international perspective, because before going to the to the PhD, I worked for one year in the Ministry for Agriculture in Macedonia, and that's an important insight. That's something that, it's not only that from the international perspective, you don't necessarily understand the national specifics and, and needs. And now as a consultant, I work directly with the countries, but I know how they work, how their system works. So, what I would not like to see, I mean, obviously there are a lot of consultants and everything, but I really believe that having the specialized knowledge, having the expertise before, and having something to share is important, and that's recognized by the beneficiaries.
  131. Rahul Mishra: That's amazing.
  132. Daniel Schaub: Is Is there something that we haven't asked you and you would like to share in this interview?
  133. Rozeta Karova: Not that I can think of now, but, no, I'm very happy to to have been here to discuss with you, and to see you next week at the conference.
  134. Rahul Mishra: Yeah, thank you, Rozeta, for giving your time. It has been very insightful. I wanted to make more notes, but I'm going to re- review the video.
  135. Rozeta Karova: Okay, you can always ask me afterwards. [laughs]
  136. Rahul Mishra: Thank you very much, and it's been a pleasure. Thank you.
  137. Rozeta Karova: Thank you for the invitation.
  138. Daniel Schaub: And thank you for the Energy Bridge community to for watching this video. And, see you next time with other, guest. So, see you.
  139. Rahul Mishra: Next time.
  140. Daniel Schaub: Next time. Bye. Thank you.