The EU introduced the Emission Trading System (ETS) in 2005. It is the cornerstone of the EU’s climate policy and has proven to be successful in reducing emissions in a cost-effective manner. In line with the polluter pays principle, it puts a carbon price on emissions from electricity and heat generation, energy-intensive industry, and aviation within Europe. By drawing on market forces (allocation of free allowances, auctioning), the EU ETS creates an incentive to reduce emissions where it costs least to do so. In parallel, it generates significant revenues to invest in climate action and energy transformation. The EU ETS has helped drive down emissions from electricity and heat generation and industrial production by 34.6%. It generated over EUR 140 billion in auction revenues for the EU Member States in 2013-2022, of which over EUR 38 billion was generated in 2022 alone.

There are many advantages to pursuing an EU ETS-like system in the Bosnia and Herzegovina context. Along with securing emission reductions in the country, it would result in further alignment with the EU acquis, contributing to the accession process. The set-up of an ETS could also significantly reduce the impact of CBAM since carbon costs paid in the country are deducted from CBAM. Furthermore, auction revenues can be reinvested into climate and energy-related projects in the country, including measures that would cushion the impacts of the energy crisis for the most vulnerable or address just transition, particularly of the coal regions.

Bosnia and Herzegovina expect that EU ETS and the CBAM implemented by the EU will have high economic impact for the country. It is therefore imperative that BiH takes the necessary steps first to understand the possible model EU ETS to be applied, including MRVA, and prepares for further implementation of ETS in the country. The panel will bring together the key players and stakeholders in BiH as well as the EU to discuss the challenges of ETS introduction in BiH currently faced, lessons learned in the EU and in the region, and the next steps to be done.