FYR Macedonia Green Growth Country Assessment

Book excerpt: This green growth country assessment for FYR Macedonia defines and assesses the economic costs and benefits of a shift to greener growth for FYR Macedonia, with a focus on climate action. Multi-sector analytic work tied together by macroeconomic modeling generated a detailed green growth path to 2050. While addressing today's economic challenges, policymakers need to keep the long-term in mind, both the likely impact of a changing climate on water, agriculture, and infrastructure and growing obligations to mitigate greenhouse gas emissions. This consideration is particularly important for decisions on long-lived infrastructure such as power supply, irrigation, or urban streets, water distribution, and sewers. Innovative modeling of water as a constraint on growth as the climate becomes warmer and drier quantified the tough tradeoffs that will be needed to balance competing demands from agriculture, the power sector, and municipalities and industry. A greener energy sector needs to aim at increased supply security, reduced greenhouse gas emissions, and increased supply efficiency: more generation to avoid blackouts and expensive imports; lignite and oil replaced by gas and renewables in the supply mix; and aggressive energy efficiency measures in industry, buildings, and households. Providing better transport services while containing accelerating emissions growth will require better fuel efficiency, more use of rail and public transport, and an integrated approach to urban transport that maximizes local cobenefits. Urban areas, especially the capital city of Skopje hold the potential to lead on greener growth. In recent years, urban sprawl, driven by growth in the number of single family houses that use wood for heating and private cars for commuting, has pushed up the energy intensity of urban life as well as the cost of delivering infrastructure services to a less-dense community. The country also needs to plan for the impact of a changing climate on the reliability and quality of infrastructure services. Planners need to decide whether to build infrastructure to be more resilient today or wait to see what happens and spend more on maintenance and rehabilitation (or replacement) later. For FYR Macedonia, the top priorities for infrastructure adaptation over the next decade include urban drainage systems, health and education facilities and municipal buildings. The main local cobenefit of mitigation will be reduction of air pollution, which is among the highest in Europe. Particulate matter pollution from industry, the power sector, and road paving can be abated through better equipment while the other large and unusual source of air pollution--the widespread use of wood for heat by urban households--can be reduced in the near-term by more modern stoves and in the long-term by better heating options. An economy-wide macroeconomic assessment estimates the impact on growth and employment of packages of green growth actions across sectors and provides advice on priorities for public investment. Climate investments pose costs upfront but provide benefits both now and later. Adaptation interventions (which protect tomorrow’s output from climate damage) are found to be less costly to growth and employment in the short-term than mitigation measures (which reduce greenhouse gas emissions) once sector results are integrated into a general equilibrium model. Under a ‘green’ climate action scenario, moderate adaptation measures in agriculture and water and incremental expenses in the climate-proofing of physical infrastructure would amount to the equivalent of around 0.1 percent of annual GDP, while moderate mitigation measures would require the mobilization of resources constituting about one percent of annual GDP. More ambitious climate action, under a ‘super-green’ scenario, would require water sector investments that reach one percent of GDP by 2015 while mitigation investments require two percent of GDP by 2020. Green climate action would together generate short-term losses to national income of more than two percent if financing is mobilized domestically, while super-green action induces even bigger losses. However, both moderate and ambitious climate action promise a medium- to long-term boost in the level of GDP—reaching 1.5 to 2 percent by 2050.