FISCAL IMPLICATIONS OF NATIONAL EMISSIONS TRADING SYSTEM (ETS) AND DECARBONIZATION IN BOSNIA AND HERZEGOVINA

Abstract

This paper examines the effects of national Emissions Trading System (ETS) implementation within the framework of the existing fiscal system in Bosnia and Herzegovina (BiH) from the perspective of economic analysis of law. Existing studies analyze the effects of the Carbon Border Adjustment Mechanism (CBAM) on foreign trade and the competitiveness of exporters in BiH, but there is a lack of studies and empirical research on the effects of ETS and CBAM on fiscal stability and on qualitative and quantitative structure of public revenues. Furthermore, most of the studies conducted by the public sector are not publicly available apart from certain results and estimations on CBAM/ETS revenues. However, these studies do not consider the effects of domestic ETS introduction on other existing fiscal revenues and public expenditures. As a result, there is a lack of theoretical basis for further empirical studies on fiscal effects across different administrative levels. This paper examines the influence of ETS and National Energy and Climate Plan (NECP) on public revenues, taxation, and public expenditures in BiH to ensure fiscal stability in the short and medium-term upon domestic ETS implementation. The present analysis contributes to understanding the interconnected determinants of the fiscal system, the causal relationship between the qualitative and quantitative structure of public revenues and expenditures on the one side, and decarbonization as imposed standard in modern climate and energy policies on the other. The discussion of the results of the conducted analysis and considerations for future empirical research on individual segments of the analysis are included in the paper, together with certain political and security considerations in the existing geopolitical landscape.