Serbia Allocates Majority of Green Bond Funds to Transportation, Water, and Wastewater Initiatives

by Cristian Florescu

All Funds from Serbia’s Inaugural Green Bond Issuance Fully Allocated, with 36.7% Directed to Transportation and 29.3% to Sustainable Water and Wastewater Management, Reveals Final Report

In 2021, Serbia’s inaugural sovereign green bond issuance successfully raised EUR 1 billion, achieving historically low financing costs. The entire sum has been strategically allocated, with a noteworthy allocation of 31.9% to cover the three fiscal years preceding the bond sale. The consulting firm E Co. has presented these figures in their comprehensive second and final official report.

The authors of the report provided a rough estimate, suggesting that the green bond alone is expected to result in greenhouse gas emissions reductions ranging from 60,000 to 70,000 tons of carbon dioxide annually, and a total of 1.5 million tons over its entire lifespan. When combined with contributions from other sources of financing, the cumulative impact exceeds three million tons in total emissions reduction.

Serbia’s Green Bond Framework outlines that the funds generated from these transactions are designated for various purposes, including enhancing the railway and metro network, sewerage systems, water and wastewater management, flood protection, preservation of biodiversity, pollution prevention and control, waste management, as well as promoting energy efficiency and the generation of renewable energy.

Notably, renewable energy investments accounted for a minimal 0.1% of the total allocations. The sole public initiative offering subsidies for households to install rooftop photovoltaic panels yielded a combined capacity of 3 MW, benefiting 500 recipients, as reported in the Serbia Green Bond Report. Additionally, a separate program for solar thermal collectors resulted in the signing of 89 contracts.

In terms of expenses, one of the case studies detailed in the paper illustrated that a 15 kW photovoltaic system was installed at a cost of EUR 23,209. The recipient of this system is the Isa Bajić elementary school located in the town of Kula, situated in the northern province of Vojvodina.

The municipality contributed 30% of the funding, while the remainder was sourced from the proceeds of the green bond issuance. Consequently, the school achieved prosumer status.

Energy efficiency initiatives accounted for 1.6% of the total expenditures. A total of five public solicitations were conducted for public buildings, along with two for private ones. These initiatives facilitated the renovation of 89 public buildings encompassing a combined area of just under 119,000 square meters. Additionally, approximately 20,000 households participated in the program.
The transportation sector secured the largest share of funding, receiving 36.7% of the total allocation. The report further notes that this allocation was directed towards four railway projects, two in the waterway sector, and one for vehicles. Notably, this investment led to the acquisition of three electric trains and the reconstruction of 79.4 kilometres of railway tracks. Additionally, grants were awarded to the owners of 395 environmentally friendly vehicles, primarily passenger cars and light vans, totalling 350 units.

Sustainable water and wastewater management initiatives absorbed 29.3% of the funds, ranking second in terms of allocation. The report highlights that Serbia successfully constructed or rehabilitated reservoir capacity amounting to 70 million cubic meters.

The sector focusing on pollution prevention and control and the circular economy received a significant share, amounting to 21.5% of the total funds. These resources were instrumental in remediating 22 polluted sites, collectively covering an area of 1.6 square kilometres.

The remaining 10.8% was dedicated to environmental and biodiversity preservation and sustainable agriculture. Authorities utilized these funds to support sustainable forest management practices across 279,000 hectares of land and protect, restore, or maintain an additional 30,000 hectares, as indicated in the document.

This report was prepared with the support of the United Nations Development Programme (UNDP).

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