Publisher: World Bank 

Comprehensive analysis of Bosnia and Herzegovina’s (BiH) economic position, with a particular emphasis on three important areas: the macroeconomic environment, the private sector’s productivity and dynamism, and the energy transition. The research topic is presented in the introduction and summary, and the country’s economic growth, variables impacting production growth, and labor market trends are examined in the first section. The productivity and dynamism of the private sector are examined in the second section, which focuses on firm-level analysis, market distortions, and business demographics in Republika Srpska (RS). The third section focuses on the energy transition and covers topics such as electricity supply, decarbonization options for the energy sector, and legal requirements of Bosnia and Herzegovina. Annexes contain other data and analysis that support the primary research findings.

In the section dedicated to the energy transition in Bosnia and Herzegovina (BiH), key aspects necessary for understanding the current state and future challenges in the energy sector are discussed. Firstly, BiH’s legal obligations regarding energy policy are analyzed, including issues related to electricity supply. The role of coal in energy production is particularly explored, as it is the dominant energy source in the country. Additionally, the topic of the Carbon Border Adjustment Mechanism (CBAM) is addressed, including its design and expected effects on production and jobs in BiH. Following that, potential changes in energy production and mining assets are analyzed, with a specific focus on alternatives for long-term decarbonization of the electro-energetic sector in BiH. This section also includes key findings and implications for the decarbonization of the energy sector, as well as strategies for managing transition consequences to ensure a fair transition for all stakeholders. Furthermore, a cost-benefit analysis of this process is conducted, along with an examination of its implications for public debt and a presentation of budget expenditures for the energy transition. Finally, conclusions and policy options that should be considered to successfully implement the energy transition in BiH are outlined.