CO₂ Emissions, Carbon Intensity, and Sustainable Economic Growth in the Western Balkans: A Systematic Literature Review

The twenty-first century is marked by the interconnected challenges of climate change, decarbonization, and sustainable economic development. Increasing trends of carbon intensity cause the environmental degradation, thus underscoring the need for a green transition with a main focus on environmental protection. In this regard, sustainable environmental practices and low-carbon emissions have been gaining increasing attention at a global level. A growing body of research has examined, the determinants of carbon intensity, CO₂ emissions and green practices. Over the past few years, Western Balkan countries, including Kosovo, North Macedonia, Albania, Montenegro, Bosnia and Herzegovina, and Serbia, have been facing growing pressure to accelerate their green transitions and harmonize their environmental and economic policies with those of the European Green Deal and the Green Agenda for the Western Balkans. Even though much progress has been achieved, the countries are still confronted by many structural, institutional, and energy problems related to their high carbon dependency, reliance on fossil fuels and limited decarbonization progress. The current literature on carbon intensity and sustainable development places growing emphasis on identifying the determinants of carbon intensity at macroeconomic, environmental, technological, and institutional levels. This furthermore implies the need for a green and sustainable growth model that reduces carbon intensity. In this regard, reducing CO₂ emissions and carbon intensity highlights the need for innovation in production systems, investment, labour-market transformation, and technological progress. The World Bank’s World Development Indicators report total CO₂ emissions as the aggregate quantity of carbon dioxide emissions, commonly expressed in million tonnes of CO₂ equivalent, while per-capita emissions measure the emissions of an economy relative to its population (W​o​r​l​d​ ​B​a​n​k​,​ ​2​0​2​4​a). The World Bank further defines the carbon intensity of GDP as the amount of CO₂ emissions produced per unit of an economy’s gross domestic product, measured using either constant 2015 US dollars or 2021 purchasing-power-parity GDP (W​o​r​l​d​ ​B​a​n​k​,​ ​2​0​2​4​b). The carbon intensity of an economy or a production process is a measure of its efficiency of emissions, while the CO₂ emissions show the overall extent of environmental pressures. The decrease in carbon intensity does not always mean the decrease in the total CO₂ emissions, especially in case the economy, production, and energy consumption keep increasing. The total CO₂ emissions can be decreasing simply due to the decrease in the economy’s productivity. Therefore, in this systematic review, the environmental performance will be considered as two distinct yet interrelated dimensions of CO₂ emissions and carbon intensity. The European Climate Law makes the European Union’s (EU’s) commitment to climate neutrality by 2050 binding, establishing a target to reduce greenhouse gas emissions by at least 55% by 2030, with the proposed reduction of 90% by 2040 (E​u​r​o​p​e​a​n​ ​C​o​m​m​i​s​s​i​o​n​,​ ​2​0​2​6). Furthermore, the European Green Agenda developed by the EU outlines concrete strategies to support individual countries towards the green transition. The Western Balkans region, remains largely dependent on fossil fuel energy and is characterized by high carbon intensity, mainly due to limited investment in renewable energy, insufficient institutional capacities, and outdated energy infrastructure (E​u​r​o​p​e​a​n​ ​C​o​m​m​i​s​s​i​o​n​,​ ​2​0​2​0; R​e​g​i​o​n​a​l​ ​C​o​o​p​e​r​a​t​i​o​n​ ​C​o​u​n​c​i​l​,​ ​2​0​2​0​a). The existing body of literature, reflects broad academic debate on the relationship among economic growth, energy use, carbon intensity, CO₂ emissions climate change, and the transition toward the green economy. These literature evidence present different methodological and empirical approaches, with many studies focusing on developed countries or the EU, attempting to shed light on the impact of foreign direct investment, international trade, renewable energy, and CO₂ reduction (S​a​r​k​o​d​i​e​ ​&​ ​S​t​r​e​z​o​v​,​ ​2​0​1​9; S​h​a​h​b​a​z​ ​e​t​ ​a​l​.​,​ ​2​0​2​1).

In addition, I​ş​ı​k​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​a​) have revealed that the contribution of the consumption of renewable energy is positive to the achievement of the Sustainable Development Goals, while the insignificant effect of climate policy uncertainty on carbon intensity may reflect insufficient international climate policy coordination (I​ş​ı​k​ ​e​t​ ​a​l​.​,​ ​2​0​2​5​b).

K​a​s​m​a​n​ ​&​ ​D​u​m​a​n​ ​(​2​0​1​5​) found an inverse U-shaped relationship between environment and income, consistent with the Environmental Kuznets Curve (EKC) hypothesis. While contrary to this finding, Z​i​b​e​r​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​) found an inverted U relationship between economic growth and environmental degradation in the case of Western Balkan countries. The study concluded that the EKC hypothesis is not universal and depends on the countries stage of development and the econometric conditions under investigation. Furthermore, the evolving global economic and environmental conditions has intensified the need for transition towards a low-carbon economy and requires policy action and substantial investment in cleaner products, production processes, and technologies, particularly in carbon-intensive sectors such as energy and transport (L​i​n​n​e​n​l​u​e​c​k​e​ ​e​t​ ​a​l​.​,​ ​2​0​1​9).

These theoretical approaches indicate that the determinants of carbon emissions vary across countries and that the green transition does not follow a uniform path. Instead, its trajectory and speed depend on each country’s economic structure, institutional capacity, and policy framework. Furthermore, it is important to identify the key determinants of CO₂ emissions and carbon intensity in order to design effective policies that reduce environmental degradation while supporting sustainable economic growth. One of the primary concerns during this transition is the complex relationship between environmental sustainability and economic growth, particularly in developing and emerging economies. Economic growth, energy consumption, industrialization, and trade openness are broadly acknowledged as important determinants of CO₂ emissions and carbon intensity. Changes in economic structure, together with technological progress, therefore play a central role in supporting the transition towards a sustainable and low-carbon economy. This perspective is closely aligned with the main aim of this systematic literature review, which examines how economic, energy-related, institutional, and technological factors influence CO₂ emissions and carbon intensity in the Western Balkans. Nevertheless, the majority of research has focused on the relationship between GDP and carbon intensity or CO₂ emissions, frequently neglecting other crucial macroeconomic factors that may be crucial to the low-carbon transition such as: foreign direct investment (FDI), (ii) trade openness, (iii) government spending, (iv) public debt, (v) labor market conditions, and the (vi) the renewable energy consumption. In light of this, it is important to examine how these factors, together with economic growth, influence CO₂ emissions and carbon intensity over time in the Western Balkan countries.

Although the literature on decarbonization and environmental sustainability in the Western Balkans has expanded, the existing review evidence remains fragmented, with most studies focusing on individual sectors rather than providing a broader integrated perspective. Earlier review-oriented studies have focused on specific dimensions, including the relationship between climate change and agriculture, environmental and development finance, and the decarbonization of the energy sector. While these studies provide valuable insights, still do not provide a comprehensive review of the evidence in question in regard to CO₂ emissions, carbon intensity, and sustainable economic growth in the case of Western Balkans. Different geographical regions, environmental measures, time spans, variables, and methodology used also complicate the formulation of definitive conclusions. In the context of this study, using the Scopus search strings, there were several studies that combine all six of these aspects in a unified framework under the context of the Western Balkans. In an effort to bridge this gap, the present study makes use of the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) approach to find, categorize, and synthesize 30 relevant studies under six thematic area. In this systematic review, the distinction is made between absolute CO₂ emissions, CO₂ emissions per capita, and carbon intensity; the similarities and differences in the geographic and methodological settings of the selected studies are analyzed, and, convergence, divergence, and knowledge gaps are determined. Therefore, the main value of this study lies in its systematic review and in recognizing the methodological geographical, and thematic diversity that should be considered in future research.

The main aim of this study is to assess the systematic literature review based on PRISMA guidelines, on CO₂ emissions, carbon intensity, and sustainable economic growth in the case of the Western Balkans from the perspective of sustainable economic growth. Specifically, this study tends to highlight the key macroeconomic, structural, environmental, institutional, and energy-related determinants associated with carbon intensity and CO₂ emissions. Furthermore, the study also tends to analyze how the transition toward renewable energy, industrialization, trade liberalization, urbanization, and sustainability-related policies contribute to reducing carbon intensity and improving environmental outcomes in the long term. Using a systematic literature review methodology based on PRISMA guidelines, this study synthesizes the existing literature, identifies key knowledge gaps, and enhances understanding of the challenges associated with sustainable and low-carbon economic development in the Western Balkans.

Based on the identified gaps in the literature and the need for a systematic synthesis of the factors influencing the carbon intensity in the Western Balkans, the following research questions guide this study. These questions were developed to examine the key economic, energy-related, institutional, urban, industrial, and sustainable development factors identified in the reviewed literature.

RQ1: What insights does the existing literature provide on CO₂ emissions and carbon intensity in the Western Balkan countries?

RQ2: What macroeconomic determinants, such as economic growth, GDP, financial development, FDI, inflation, and trade openness, are commonly associated with CO₂ emissions in the Western Balkans?

RQ3: What effect do energy structure, fossil fuel dependence, renewable energy use, energy consumption, and energy efficiency have on CO₂ emissions and carbon intensity in the Western Balkans?

RQ4: What role do governance quality institutional quality, environmental regulations, carbon taxation, carbon pricing, the EU Green Agenda, and carbon border adjustment mechanism (CBAM) play in shaping the decarbonization outcomes in the Western Balkans?

RQ5: How do urbanization, industrialization, the construction sector, manufacturing, and value-added industries affect CO₂ emissions and carbon intensity in the Western Balkans?

RQ6: What relationship among CO₂ emissions, carbon intensity, green growth, sustainable development, and decarbonization are identified in the reviewed literature on the Western Balkan countries?

Carbon intensity is affected by economic activity, energy composition, trade openness, consumption patterns, and demographic characteristics.

Figure 1 presents the theoretical conceptual framework employed in this study to examine the determinants of CO₂ emissions, carbon intensity, and sustainable economic growth in the case of the Western Balkans. It draws on key theoretical and policy frameworks, including the EKC, Green Growth Theory, Energy Transition Theory, Structural Change Perspectives, the European Green Deal, and the Green Agenda for the Western Balkans. The six themes surrounding the framework represent the main analytical dimensions of CO₂ emissions and carbon intensity in the Western Balkans. These dimensions encompass macroeconomic factors, energy structure, governance, urbanization, industrial development, and green growth.

The contribution of this study lies in providing a structured thematic synthesis of the existing literature on the factors associated with CO₂ emissions and carbon intensity in the Western Balkans. Rather than examining these factors in isolation, the review considers how six analytical dimensions—macroeconomic conditions, energy systems, governance quality, urbanization, industrialization, and green-transition policies—interact in shaping carbon-related outcomes across the region.

This section covers the theoretical approaches, empirical evidence, and relevant insights regarding the determinants of carbon intensity in the context of the Western Balkan countries. The green economy has been positioned as a framework for balancing economic development, environmental protection, and social well-being within key policy frameworks including: (i) towards a Green Economy (U​n​i​t​e​d​ ​N​a​t​i​o​n​s​ ​E​n​v​i​r​o​n​m​e​n​t​ ​P​r​o​g​r​a​m​m​e​,​ ​2​0​1​1); (ii) green Growth (O​E​C​D​,​ ​2​0​1​1); (iii) and inclusive Green Growth (W​o​r​l​d​ ​B​a​n​k​,​ ​2​0​1​2). The 2030 Agenda for Sustainable Development (U​n​i​t​e​d​ ​N​a​t​i​o​n​s​,​ ​2​0​1​5​a), the Paris Agreement (U​n​i​t​e​d​ ​N​a​t​i​o​n​s​,​ ​2​0​1​5​b), and the European Green Deal (E​u​r​o​p​e​a​n​ ​C​o​m​m​i​s​s​i​o​n​,​ ​2​0​1​9) together strengthened this agenda by making climate neutrality a key policy objective. Furthermore, the I​n​t​e​r​n​a​t​i​o​n​a​l​ ​L​a​b​o​r​ ​O​r​g​a​n​i​z​a​t​i​o​n​ ​(​2​0​1​8​) highlighted the significance of green jobs and labor markets as important drivers of the green transitions. By examining the definitions, instruments, and mechanisms of the green economy, scholarly research has further developed and complemented these institutional frameworks. L​o​i​s​e​a​u​ ​e​t​ ​a​l​.​ ​(​2​0​1​6​) examined a variety of approaches, showing how they contribute differently towards to strong and weak sustainability. The green economy improves resilience and mitigates reliance on fossil fuels (M​u​s​a​n​g​o​ ​e​t​ ​a​l​.​,​ ​2​0​1​4). Whereas, X​u​ ​e​t​ ​a​l​.​ ​(​2​0​2​2​) emphasized that emphasized that, while green technology innovation accelerates the low-carbon transition, local government competition may impede progress. Furthermore, W​a​n​g​ ​(​2​0​2​3​) noted that Intergovernmental Panel on Climate Change emphasizes the need for a global response to ensure sustainable development, reduce the risks of poverty and climate change, and stabilize greenhouse gas (GHG) emissions. Several studies have addressed the determinants of the green transition alongside carbon emissions in Western Balkan countries from different perspectives, including the EKC hypothesis (Z​i​b​e​r​i​ ​e​t​ ​a​l​.​,​ ​2​0​2​5) and the green finance.

The Green Agenda for the Western Balkans, a regional initiative developed to complement the European Green Deal, underscores the Western Balkans’ commitment to sustainable development (E​u​r​o​p​e​a​n​ ​C​o​m​m​i​s​s​i​o​n​,​ ​2​0​1​9). The region’s nations recognized the significance of shifting to a competitive, resource-efficient, and climate-neutral economy in November 2020 with Sofia Declaration, which formalized this commitment (R​e​g​i​o​n​a​l​ ​C​o​o​p​e​r​a​t​i​o​n​ ​C​o​u​n​c​i​l​,​ ​2​0​2​0​b). In order to promote carbon neutrality and sustainable economic growth, the Western Balkans have committed to integrating environmental priorities into all sectors and policies through the implementation of the Green Agenda. Each pillar sets out specific objectives and strategies to support socioeconomic and environmental progress across the region. These commitments were further operationalized through adoption 2021–2030 Action Plan for the Green Agenda, which sets out seven roadmaps and 58 specific measures to support pollution control, carbon pricing, coal phase-out, and alignment with EU environmental policies, including the EU Emissions Trading System (ETS) (R​e​g​i​o​n​a​l​ ​C​o​o​p​e​r​a​t​i​o​n​ ​C​o​u​n​c​i​l​,​ ​2​0​2​1). The Western Balkans aim to achieve several objectives through these initiatives, including reducing greenhouse gas emissions, promoting renewable energy use and circular economy practices, enhancing biodiversity conservation, and creating green jobs. Alignment with the European Green Deal help ensure that regional policies are consistent with broader international commitments, such as the Paris Climate Agreement and the Sustainable Development Goals (E​u​r​o​p​e​a​n​ ​C​o​m​m​i​s​s​i​o​n​,​ ​2​0​1​9). The Green Agenda for the Western Balkans represents an important first step toward integrated sustainability into regional development plans. In line with EU regulations and international climate goals, the region is striving to strengthen both economic resilience and environmental stewardship by implementing the Sofia Declaration and the Action Plan. However, the implementation of the Green Agenda remains challenging due to limited institutional and regulatory capacity, insufficient funding, and limited understanding of the interconnected activities and guiding principles required to achieve the established objectives. Efficient transportation, infrastructure, and communication networks are essential for the economic development of the Western Balkans region and must be maintained and extended to meet evolving demands in a safe, cost-effective, and environmentally sustainable manner (K​n​e​z​ ​e​t​ ​a​l​.​,​ ​2​0​2​2). Furthermore, Z​i​b​e​r​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​) used the EKC to analyze the implications of the European Green Agenda legal framework for the green economy in the case of the Western Balkan countries. The study applies the EKC hypothesis and uses data from the World Bank Indicators for the period 1990 to 2024. The findings indicate a U-shaped relationship between GDP per capita growth and CO₂ emissions, suggesting that higher GDP per capita growth is associated with higher CO₂ emissions. The study concludes that, the implications of the EKC hypothesis may vary across different stages and periods of a country’s economic development and therefore may not be universally applicable. In addition, M​i​t​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​2​) demonstrate that CO₂ emissions are positively correlated with GDP, with each additional increase in GDP above the average leading to a 0.08% increase in CO₂ emissions. These findings indicate that over the past six decades, economic expansion has negatively affected the environment in the Western Balkans. Similarly, M​u​s​t​a​f​a​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​) highlighted the importance of the green economy in the case of Kosovo, a Western Balkan country. The study investigates the role of green promotion in business success with particular emphasis on sustainability challenges, institutional support, and strategic priorities. Based on a survey of 397 businesses, the most powerful predictor of green promotion success is the perceived significance of the green transition. The findings suggest that organizations and policymakers can increase the effectiveness of green transition initiatives by providing targeted assistance to smaller businesses. Furthermore, it is worth noting that education plays an important role in promoting sustainable economic growth (Z​i​b​e​r​i​ ​e​t​ ​a​l​.​,​ ​2​0​2​2). In the new era of economic development, there is a need to update study programs (V​e​h​a​p​i​ ​&​ ​Z​i​b​e​r​i​,​ ​2​0​2​6) in order to equip the younger generations with the skills required to strengthen future economic resilience.

V​r​a​n​j​a​n​a​c​ ​e​t​ ​a​l​.​ ​(​2​0​1​8​) examined the differences in per capita CO₂ emissions between Western Balkan countries and developed EU countries between 2006 and 2014. In contrast, M​e​s​f​u​n​ ​e​t​ ​a​l​.​ ​(​2​0​1​8​) investigated a power distribution system that uses low-carbon generation units, such as wind, solar, and biomass, accros the EU and the Western Balkans. The findings indicate that, within a carbon price range of 0–200 €/tCO₂, renewable electricity can account for 9%–39% of the total generation mix. However, the optimal generation mix allows only a limited contribution from bio-electricity. Lower installed renewable energy capacity could increase reliance on natural gas as a result of the expansion of cross-border transmission capacity expansion. According to I​g​n​j​a​t​o​v​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​4​), Western Balkan countries should adopt a strategic approach to the green transition, emphasizing the restructuring and reform of the energy sector. They have improved energy efficiency but have not fully realized the potential of renewable energy. Because the circular economy generates less waste and improves resource productivity, it can accelerate the green transition. It is also suggested that cross-sectoral governance should be coordinated. Energy intensity continues to be a major source of environmental pressures, as evidenced by a recent study on Western Balkan countries that finds a negative correlation between GDP per capita and CO₂ emissions, a positive correlation with energy consumption, and no significant link with industrial production (Z​h​i​g​o​l​l​i​ ​&​ ​F​e​t​a​i​,​ ​2​0​2​4).

A thorough and reliable research methodology is required to address the cross-country heterogeneity and the multidimensional nature of the carbon intensity of GDP. A review of the existing literature reveals mixed and context-specific findings regarding the relationship between economic growth, energy use, and environmental outcomes. Thus, the primary research gap does not arise from a lack of evidence on the relationship between economic growth and environmental impacts in the Western Balkans, but rather from the absence of a systematic review that would enable the existing evidence to be interpreted on a comparable basis. The current body of literature remains fragmented with respect to definitions and indicators, the methodologies employed, and the units of analysis used to assess carbon intensity, absolute CO₂ emissions, environmental quality, and the carbon footprint. This inconsistency makes comparisons across studies and countries particularly challenging and makes it difficult to determine allow one to discern whether the differences found are truly country-specific or are attributable to methodological variation. This systematic review contributes to the literature by synthesizing the existing evidence through six different analytical perspectives and by identifying specific areas of consensus, divergence, methodological inconsistencies, and underrepresentation. Thus, while the review contributes to the existing knowledge base by synthesizing existing research findings, it also provides a new integrative analytical framework for interpreting the decarbonization literature on the Western Balkans. In doing so, it lays the groundwork for future research, especially through the standardization of environmental indicators, the distinction between carbon intensity from absolute carbon emissions and the application of comparable country-level and sectoral models capable of explaining the heterogeneous environmental effects of economic growth across the region. The following section presents the research methodology, including the search strategy, the PRISMA-guided review framework, and the eligibility criteria applied to the inclusion and exclusion of studies.

This study is based on a PRISMA-guided systematic literature review that aims to synthesize empirical evidence on the factors that influence CO₂ emissions, carbon intensity and sustainable economic growth in the Western Balkans as well as on regional disparities within the broader context of sustainable economic development across the region. This systematic review approach was chosen to ensure transparency and replicability through a systematic database search, predefined inclusion criteria, and structured data extraction. In accordance with the PRISMA guidelines (P​R​I​S​M​A​,​ ​2​0​2​0), the studies were screened for inclusion into the review based on their alignment with the research questions. This synthesises the existing literature on the field of carbon intensity, CO₂ emissions, macroeconomic factors, energy balance and transition, governance and environmental policy, urbanization and industrial structure, green transition, renewable energy, decarbonization, and sustainable development. In order to supplement the qualitative synthesis, a network visualisation was created through the VOSviewer software. The data used to create this visualisation were obtained through the systematic coding of the 30 studies included in this systematic review. Each source was coded according to its area of interest, the key themes influencing the outcomes and the outcomes itself. The 30 studies retained after the PRISMA screening process are presented in Appendix A, Table A. The information extracted from these studies also served as the coding basis for the construction of the VOSviewer network. The following subsection describes the literature search strategy including the Scopus search strings and the strategies and the inclusion criteria used in this systematic review.

A search strategy was implemented in the Scopus database to identify relevant literature on CO₂ emissions, carbon intensity, and sustainable economic development in the Western Balkans. Scopus was chosen because it was the only multidisciplinary database available to the authors, whereas the Web of Science database, which could not be accessed at that time. Therefore, the use of a single database is acknowledged as a limitation of the study. In addition, relying solely on the Scopus database may have affected the inclusion of relevant articles related to CO₂ emissions, carbon intensity, and sustainable economic growth in the Western Balkans. This is particularly important because the scope of the review was geographically limited to the region. This means that there may be studies focusing on individual Western Balkan countries that are published in regional journals not indexed in Scopus. Hence, the selected number of studies may not capture the full body of literature on this subject. Future systematic reviews could incorporate additional bibliographic databases, such as Web of Science and Google Scholar to enhance literature coverage and reduce the potential risk of database-related selection bias.

The process of identification, screening, eligibility, and selection of articles was concluded in accordance with PRISMA 2020 guidelines, as shown in the PRISMA flow diagram. For transparency and reproducibility, the full search strings, Boolean terms, and thematic keywords utilized for all six themes are provided in Table 1. The data from the 30 selected articles were then manually extracted into an Excel spreadsheet containing the following elements: author and year, country or region, study design, period, outcome examined, main variables, main research focus, key findings, main contribution, and DOI. During the full-text screening process, the 30 studies were grouped into six themes based on their main research focus and the key ideas found in the literature. Articles covering multiple aspects were allocated to the theme they primarily addressed, while all the relevant results were considered during the synthesis. The extracted data were also used as the basis for constructing the two VOSviewer maps presented in the paper.

Table 1 presents the key Scopus search strings developed in accordance with the PRISMA guidelines for this systematic review. The literature search strategy of this study was guided by six research questions. First, the review sought to identify relevant evidence on general issues related to CO₂ emissions and carbon intensity in the Western Balkan countries. The study also examined literature focusing on the macroeconomic factors influencing CO₂ emissions, carbon intensity and sustainable economic growth. including economic growth, GDP per capita, financial development, inflation, FDI, and trade openness. Furthermore, the review examined issues related to energy structure and energy transition, including renewable energy, energy consumption, electricity consumption, fossil fuels, energy efficiency, and decarbonization. In addition, the study reviewed literature on governance and environmental policy, including institutional quality, environmental policy, carbon taxation, carbon pricing, the EU Green Agenda, and CBAM. The review also sought to identify studies related to urbanization and industrial structure, including industrialization, construction, manufacturing, and industrial value added, as well as studies addressing green growth and sustainable development.

Table 2 presents the PRISMA-informed search strategy employed in conducting the systematic literature review. The literature search was conducted using the Scopus database following the PRISMA 2020 guidelines to enhance transparency throughout the screening and selection process. The search strategy focused on relevant studies addressing carbon intensity, CO₂ emissions intensity, sustainable development, urbanization, environmental policy frameworks, and green growth. Journal articles, conference papers, and book chapters retrieved from Scopus were considered for inclusion based on the predefined eligibility criteria. Conference papers and book chapters were included only if they explicitly addressed the Western Balkan region or provided relevant regional data and information regarding the research objectives, methodologies, variables, environmental impacts, and key findings. Studies were excluded if they lacked sufficient methodological or empirical details, were unrelated to the research question, or did not provide relevant evidence on CO₂ emissions, carbon intensity, decarbonization and sustainable economic growth.

The literature search was conducted using search for the literature was carried out via the Scopus database in July 2026 following a systematic literature review approach in accordance with PRISMA guidelines. The search process was based on six related Boolean search strings that covered different thematic aspects of the review, namely, general evidence on CO₂ in the Western Balkans, macroeconomic determinants of CO₂ emissions, carbon intensity, energy transition and transformation, governance and environmental policies, urbanization and industrial structure, and green growth and sustainable development. In the identification stage, the first search string, TITLE-ABS-KEY ((“CO₂” OR “carbon dioxide” OR “carbon emissions” OR “CO₂ emissions”) AND (“Western Balkans” OR Albania OR Kosovo OR Serbia OR Montenegro OR “North Macedonia” OR “Bosnia and Herzegovina”)), generated 486 documents in Scopus. This broad search was designed to capture general evidence on CO₂-related research in the Western Balkan region. The second search string, TITLE-ABS-KEY((“CO₂ emissions” OR “carbon intensity” OR “carbon emissions”) AND (“economic growth” OR GDP OR “GDP per capita” OR “financial development” OR inflation OR FDI OR “trade openness”) AND (“Western Balkans” OR Albania OR Kosovo OR Serbia OR Montenegro OR “North Macedonia” OR “Bosnia and Herzegovina”)), generated 35 documents and focused on macroeconomic drivers of CO₂ emissions. The third thematic search, focusing on energy structure and transition, yielded 149 documents, while the fourth search, focusing on governance and environmental policy, yielded 17 documents.

The fifth search string, TITLE-ABS-KEY ((“CO₂ emissions” OR “carbon intensity” OR “carbon emissions”) AND (urbanization OR industrialization OR “industrial structure” OR construction OR manufacturing OR “value added”) AND (“Western Balkans” OR Albania OR Kosovo OR Serbia OR Montenegro OR “North Macedonia” OR “Bosnia and Herzegovina”)), generated 37 documents and focused on urbanization and industrial structure. Finally, the sixth search string, TITLE-ABS-KEY((“green growth” OR “sustainable development” OR “sustainable economic growth” OR “green transition”) AND (“CO₂ emissions” OR “carbon intensity” OR “carbon emissions” OR decarbonization) AND (“Western Balkans” OR Albania OR Kosovo OR Serbia OR Montenegro OR “North Macedonia” OR “Bosnia and Herzegovina”)), generated 66 documents related to green growth, sustainable development, green transition, decarbonization, and carbon-related outcomes. In total, the six Scopus searches yielded 790 records before duplicate removal and screening. Due to the expected overlap between different search strings, the initial result represents the gross number of records retrieved and does not reflect the number of unique studies included in the review. The records were screened according to predefined eligibility criteria. Only studies that addressed the Western Balkans or at least one of the selected countries, examined CO₂ emissions, carbon intensity, carbon emissions, decarbonization or other carbon-related environmental outcomes, and provided information relevant to at least one of the six review themes were considered eligible. Studies that fell outside the scope of this systematic review or lacked sufficient scientific or empirical information were excluded from further consideration.

Figure 2 illustrates the PRISMA flow diagram, outlining the systematic process of identifying, screening, assessing eligibility, and selecting studies on carbon intensity and sustainable economic growth. The literature search was conducted using Scopus database and six Boolean search strings developed in accordance with the thematic scope of the review. The literature search yielded 790 records, while no records were identified through registers (n = 0). Due to the similarities and partial overlaps between the search strings, duplicate records were identified among the search results. Before the screening process, 330 duplicate records were removed. No records were removed using automation tools or for other reasons before screening (n = 0). Thus, 460 records remained for title and abstract screening.

During this stage, 340 records were excluded because they lacked relevant information regarding the regional focus, carbon-related outcomes, or the thematic dimensions of the review. Following title and abstract screening, 120 reports were sought for retrieval. All reports were successfully retrieved, with no reports remaining unretrieved (n = 0). Consequently, 120 full-text reports were assessed for eligibility. Of these 120 reports, 90 reports were excluded for the following reasons: 24 reports did not specifically address the Western Balkans region; 20 reports did not focus on CO₂ emissions, carbon intensity, carbon emissions, or decarbonization; 16 reports lacked sufficient empirical or methodological information; 14 reports were not aligned with the six thematic dimensions of the review, 10 reports were conceptual, descriptive, or policy papers that lacked analytical relevance; and 6 reports were duplicate or alternative versions of other included reports. The study selection process, conducted in accordance with the PRISMA 2020 guidelines, resulted in the inclusion of 30 studies in the final qualitative synthesis. These studies provided the basis for synthesizing evidence on the determinants of carbon intensity, the environmental effects of CO₂ emissions, regional disparities, and sustainable economic development in the Western Balkans. The following section presents the findings derived from the systematic synthesis of the 30 studies included in the analysis, as reported in accordance with the PRISMA 2020 guidelines.

The findings of the systematic review were derived from 30 studies that met the predefined eligibility criteria and were selected through the PRISMA-guided screening process. The selected studies vary in geographical scope, research methodology, period of analysis, environmental measures, explanatory factors and analytical methods employed. To present the findings in a structured manner, the evidence was categorised into six main themes corresponding to the key economic, energy, institutional, financial, sectoral and sustainability dimensions identified in the literature. It is important to note that the findings are distinguished according to whether the studies examine absolute CO₂ emissions, CO₂ emissions per capita, carbon intensity or other related environmental outcomes.

Table 3 presents an overview of studies examining the relationship between CO₂ emissions, carbon intensity, economic growth and sustainable development. The reviewed literature indicates that economic growth alongside energy consumption and urbanization, influences the long-term dynamics of carbon emissions in the region. These factors also represent key determinants of environmental degradation in the Western Balkans.

The relationship between economic growth and environmental degradation in the Western Balkans is nonlinear, context-dependent, and sensitive to the environmental indicators and methodologies. Z​i​b​e​r​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​), using panel data from six Western Balkan countries covering the period 1990–2024, identified a U-shaped relationship between GDP per capita growth and CO₂ emissions. Based on their findings, economic growth beyond the estimated threshold of 4,259.69 is associated with an increase in carbon intensity. In contrast, M​i​t​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​4​) provided empirical evidence supporting the traditional inverted-U EKC hypothesis for Serbia over the period 1995–2019. According to their long-run estimates, economic growth, electricity consumption, and trade openness significantly influence CO₂ emissions, whereas the relationship between electricity consumption and emissions is also supported by short-run causality tests. Further supporting evidence at the regional level is provided by O​b​r​a​d​o​v​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​), who emphasized the importance of energy consumption and urbanization as long-term determinants of environmental degradation. Their study, employing panel cointegration and pooled mean group autoregressive distributed lag (PMG-ARDL) methods for the Western Balkans over the period 2001–2022, demonstrates that economic growth, energy consumption, and urbanization significantly affect environmental quality in the long run, whereas only economic growth has a significant effect in the short run. These findings suggest that the environmental impacts of urbanization and energy consumption may emerge gradually over time.

Additional evidence of temporal heterogeneity in Serbia is provided by O​p​r​e​a​ ​&​ ​B​â​r​a​ ​(​2​0​2​6​). Using a vector error correction model (VECM), they identify a short-run trade-off between economic growth and environmental sustainability, while long-run relationships are shaped by factors such as trade openness, urbanization, and renewable energy consumption. Their finding that CO₂ emissions are independent of trade openness and urbanization in some model specifications contrasts with long-run relationships reported by O​b​r​a​d​o​v​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​). This discrepancy may be partly explained by differences in methodological approaches, particularly the use of a single-country time-series analysis rather than a regional panel-data approach. The broader comparative findings of M​e​t​h​m​i​n​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​), whose study included Albania alongside 20 other major emitting countries, further support the role of energy consumption as one of the primary determinants of carbon emissions.

Energy consumption emerges as the factor most consistently associated with higher levels of CO₂ emissions and environmental degradation. The impact of economic growth is not universal; the relationship between economic growth and environmental sustainability may follow an inverted-U-shaped or U-shaped pattern or exhibit dynamic characteristics, depending on the country examined, the time period considered, the environmental outcome variable, and the analytical method employed. In addition, the effects of urbanization and trade openness may operate through indirect and longer-term mechanisms, with their environmental impacts depending on energy efficiency. Consequently, the principal research gap in this context is not the lack of evidence on the relationship between economic growth and the environment, but rather the limited availability of comparable evidence based on harmonized concepts and indicators. Existing studies adopt different definitions and measurements of CO₂ emissions, environmental quality, and carbon footprint, making cross-study comparisons challenging. Future research should prioritize the harmonization of environmental indicators, distinguish carbon intensity from absolute emissions, and apply comparable country-level or sectoral models to explain differences in the environmental consequences of economic growth.

Theme Two, presented in Table 4, highlights that energy structure is one of the most important factors influencing CO₂ emissions and carbon intensity in the Western Balkans. The reviewed literature provides substantial dependence on fossil fuels remains high in the Western Balkans due to the region’s reliance on coal-based electricity generation. However, the findings also indicate increasing opportunities for investments in renewable energy, solar photovoltaic systems, solar thermal power, hydropower, and energy efficiency improvements. The reviewed studies focusing on Bosnia and Herzegovina, Kosovo, North Macedonia, and Albania, suggest that renewable energy use contributes to emissions reductions and decarbonization efforts. Furthermore, the reviewed literature indicates that although technical potential exists, energy transition also depends on investment capacity and long-term planning.

The studies reviewed in this paper generally identify renewable energy use, energy efficiency, and technological advancement as key factors driving the decarbonization process in the Western Balkans. Nevertheless, the evidence indicates that the feasibility, financial implications, and environmental impacts of the energy transition vary considerably across countries, sectors, and technologies. These differences reflect variations in the existing energy mix, dependence on coal and hydropower, infrastructure, investment availability, regulatory readiness, and renewable energy potential.

At the regional electricity system level, Ć​o​s​i​ć​ ​&​ ​D​u​i​ć​ ​(​2​0​2​5​) demonstrate through their modelling results that rapid integration of variable renewable energy sources could significantly reduce dependence on fossil fuels and the CO₂ emissions associated with electricity generation in the interconnected electricity systems of Croatia and Bosnia and Herzegovina. Under the high-renewables scenario, CO₂ emissions from electricity generation in Bosnia and Herzegovina are projected to decline substantially by 2035. However, the authors also identify significant challenges, as renewable energy curtailment is projected to reach 24.2% in 2035. These findings suggest that the environmental benefits of rapid renewable energy deployment may be constrained by the electricity system’s limited capacity to integrate variable renewable generation.

The findings of H​a​s​o​v​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​1​5​) further highlighted the importance of structural characteristics and energy investments. Based on scenarios developed using the EnergyPLAN model, Bosnia and Herzegovina may face challenges in meeting its renewable energy commitments, given its continued investment in coal-fired power generation and substantial dependence on hydrological conditions. Despite its considerable hydropower and biomass potential, the country’s reliance on large-scale hydropower plants creates vulnerability to variations in hydrological conditions between wet and dry periods. Taken together, the findings of H​a​s​o​v​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​1​5​) and Ć​o​s​i​ć​ ​&​ ​D​u​i​ć​ ​(​2​0​2​5​) suggested that Bosnia and Herzegovina must address two interrelated challenges: decarbonization and diversification of its energy mix.

Country-specific evidence from North Macedonia provides further support for the relationship between renewable energy investment and emissions reductions. According to M​u​s​t​a​f​a​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​), renewable energy capacity development is negatively associated with CO₂ emissions, suggesting that investments in renewable energy contribute to the country’s decarbonization efforts. This is an important finding, as it highlights the environmental benefits of renewable energy investments while leaving their broader macroeconomic implications less clearly established. This does not imply that such investments lack economic significance; rather, it indicates that their effects on employment, productivity, industrial development, energy dependence, and overall economic performance require further investigation using more detailed and comprehensive analytical models.

This empirical evidence offers a different perspective from the policy-oriented analysis of Z​a​k​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​), which presents Serbia–China cooperation in renewable energy as a potential driver of economic development and innovation. The authors argue that Serbia’s dependence on fossil fuels, high energy and carbon intensity, and limited access to EU cohesion funds increase the importance of foreign investment. In this context, cooperation with China may support renewable energy deployment and technology transfer, provided that such investments remain consistent with Serbia’s EU accession commitments. The differences between the findings of M​u​s​t​a​f​a​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​) and Z​a​k​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​) may therefore be explained, at least partly, by differences in research design and analytical perspective.

At the project and technology level, G​j​u​k​a​j​ ​e​t​ ​a​l​.​ ​(​2​0​2​4​) demonstrated that land degraded by coal-mining activities in Kosovo can be repurposed for solar photovoltaic electricity generation, while Š​p​a​g​o​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​) provided further evidence of the technical and economic feasibility of decentralized solar energy applications in Bosnia and Herzegovina. Solar thermal systems for households are estimated to meet 30%–60% of domestic hot water demand in the central and northern parts of the country and more than 80% in the south. The greatest environmental benefits are expected when solar thermal energy replaces coal-based or electricity-based water heating, whereas estimated household cost savings and payback periods indicate economic feasibility. At the same time, substantial geographical variation in energy availability and system performance suggests that the efficiency and economic benefits of renewable energy technologies depend on location-specific conditions.

B​e​l​u​s​s​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​1​) provided further evidence from the construction sector by assessing the feasibility of improving the energy performance of a public-school building in Albania to meet nearly Zero-Energy Building (NZEB) standards. Albania’s favorable electricity mix, largely based on hydropower, which is a relatively low-carbon energy source, supports the transition towards more energy-efficient building operations. Thus, the study demonstrates the importance of suitable retrofitting technologies, improved thermal performance, and accurate calculations of primary energy factors in meeting European energy efficiency standards. Unlike the previously reviewed studies focusing on electricity generation, this study emphasizes the role of reducing energy demand in achieving decarbonization. The literature consistently indicates the environmental benefits of renewable energy deployment and improvements in energy efficiency. These benefits include lower greenhouse gas emissions, reduced dependence on fossil fuels, and improved energy performance. Nevertheless, the reviewed studies also emphasize that renewable energy potential alone does not guarantee successful decarbonization, as grid congestion, energy curtailment, hydrological variability, continued investment in fossil fuels, financial and regulatory constraints, geographical conditions, and technological availability may influence the extent of environmental benefits.

The principal research gap is the limited integration of technological, economic, institutional, and broader socioeconomic dimensions of the energy transition within a unified analytical framework. Most studies focus on individual technologies, specific countries, or particular scenarios. However, few studies systematically compare the costs, implementation barriers, and emissions reductions associated with renewable energy deployment across all Western Balkan countries. Moreover, the existing literature primarily comprises modelling studies, feasibility assessments, case studies, and policy analyses, with limited empirical evidence from completed renewable energy projects. Therefore, future research should evaluate the actual operational performance of these projects, including energy storage requirements and the electricity grid flexibility necessary for their effective integration.

Table 5 presents Theme 3, which examines the role of governance and environmental policies in shaping decarbonization outcomes. The reviewed studies exhibit considerable methodological diversity, employing panel data models, time - series analysis, dynamic estimation methods, linear programming models, energy systems modelling, risk index analyses, techno-economic analyses, and policy analyses. It is important to note that the reviewed studies ado not focus on a single type of environmental outcome. While some studies directly examine carbon intensity, others focus absolute or per capita CO₂ emissions, emissions from energy systems decarbonization performance, environmental quality, transition risks, abatement costs, or the economic impacts of climate policies.

Research on topics such as the CBAM, carbon taxation, institutional quality, EU membership, and environmental regulation provide evidence suggesting that environmental policy is an important determinant of decarbonization outcomes and the mitigation of transition risks. The literature synthesis indicates that Western Balkan countries are vulnerable to EU climate policy instruments, particularly because of the carbon intensity and export orientation of certain economic sectors. Nevertheless, stronger institutional capacity, improved regulatory quality, and greater alignment with the EU Green Agenda may contribute to climate change mitigation efforts. The literature synthesis also reveals mixed findings regarding the role of institutions: while some studies suggest that stronger institutional quality is associated with lower greenhouse gas emissions, others indicate that institutional and financial development may stimulate economic activity and, consequently, increase pollution.

Overall, the reviewed evidence suggests that decarbonization in the Western Balkans is shaped by the interactions among energy structure, economic development, financial development, institutional quality, and external climate-policy pressures. The findings generally suggests that renewable energy use, energy-efficiency measures, carbon taxation, and environmental regulation can contribute to reductions in CO₂ emissions. However, the magnitude and direction of these effects may vary across countries depending on their economic, institutional, and energy-related characteristics. In coal-dependent economies such as Kosovo, Serbia, and Bosnia and Herzegovina, carbon pricing and the EU CBAM may impose additional adjustment costs and increase economic transition risks. Regarding institutional quality and financial development, the evidence remains mixed. On the one hand, some studies indicate that improvements in institutional quality and regulatory frameworks contribute to better environmental outcomes. On the other hand, other studies suggest that institutional and financial development may stimulate economic growth and consequently increase emissions through higher investment, infrastructure development, energy consumption, and economic activity.

The literature further indicates that carbon intensity and decarbonization processes cannot be explained by a single factor. These processes depend on countries’ energy profiles, their degree of dependence on coal, institutional capacity, the level of EU integration, access to green finance, and the environmental policies implemented in each country. Taken together, these findings highlight the need for a holistic and country-specific approach to the energy transition that accounts for differences in economic structure.

Theme 4, presented in Table 6, highlights the importance of the financial sector in shaping the green transition process and carbon emissions. The literature focusing on North Macedonia, Albania, and the broader region of the Western Balkans suggests that factors such as carbon taxes, green loans, banking sector development, and financial intermediation may influence CO₂ emissions reductions and transition risks. The reviewed studies suggest that green finance could facilitate emissions reductions by channeling credit towards sustainable investments. However, financial development more broadly may contribute to higher emissions by financing carbon-intensive activities. It is worth emphasizing that the key issue is not financial development itself, but rather the environmental orientation of financial activities.

This distinction is reflected in the reviewed literature, which suggests that green finance can support decarbonization through targeted credit allocation and effective management of climate-related risks. According to T​u​r​a​n​ ​&​ ​T​o​t​o​ ​(​2​0​2​5​), financial development may help mitigate the environmental impacts of economic growth and energy consumption by directing credit towards more environmentally sustainable activities, while L​i​k​a​ ​&​ ​L​l​e​s​h​a​j​ ​(​2​0​2​6​) found that larger green loans are positively associated with reductions in CO₂ emissions; however, higher interest rates may weaken their environmental benefits. In contrast, K​o​v​a​c​h​e​v​s​k​a​-​S​t​e​f​a​n​o​v​a​ ​&​ ​G​o​c​k​o​v​ ​(​2​0​2​5​) demonstrated that emissions-intensive sectors do not necessarily present the highest transition risks for banks, suggesting that carbon footprints and financial risks do not always coincide. Taken together, these findings indicate that the effectiveness of green finance depends on factors such as credit allocation, financing conditions, and climate-related risk assessment. However, the lack of harmonized regional data remains a significant limitation for cross-country comparisons in the Western Balkans.

Theme Five, presented in Table 7, highlights the contribution of various sectoral activities to carbon emissions in the Western Balkan region. Research on thermal power plants, construction, embodied carbon, real estate development, and urbanization indicates that carbon emissions are closely associated with material consumption, coal-fired electricity generation, and the expansion of construction activities. Findings from studies conducted in Serbia and Albania suggest that improvements in technical efficiency, cleaner production methods, and sustainable construction practices can help mitigate environmental pressures. However, the environmental benefits of such measures may remain limited without broader policy support and investment. Based on the reviewed literature covering Albania and the wider Western Balkan region, carbon emissions appear to be influenced by interactions among economic growth, construction activities, material consumption, urbanization, and environmental regulation. V​r​a​n​j​a​n​a​c​ ​e​t​ ​a​l​.​ ​(​2​0​1​8​) provided a broader comparative perspective by examining CO₂ emission indicators across selected EU member states and Western Balkan countries. Their findings indicate that reductions in per capita CO₂ emissions were greater in the selected EU countries, including Austria and France, than in the Western Balkan countries examined.

In this context, environmental regulations, the adoption of cleaner technologies, improvements in energy efficiency, and appropriate environmental policies can help mitigate the adverse environmental impacts of economic development. At the sectoral level, S​e​f​a​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​) highlighted the significant contribution of construction materials and design to carbon emissions, while D​o​r​r​i​ ​&​ ​S​h​a​h​i​n​i​ ​(​2​0​2​4​) identified positive correlations among construction activity, energy consumption, and carbon emissions in Albania. These findings suggest that environmental pressures depend not only on the scale of construction activities but also on the materials and technologies employed. Furthermore, K​i​r​i​ ​&​ ​S​u​l​a​ ​(​2​0​2​3​) indicated that unplanned urbanization contributes to increased consumption of land, energy, and water resources, as well as higher levels of pollution and waste generation. Taken together, these findings suggest that carbon-related environmental challenges in Albania and the wider Western Balkan region are shaped by interconnected elements of construction, urbanization, technology, and institutional factors.

Table 8 presents Theme 6, which examines the interrelationship between decarbonization and sustainable development and green growth. Research on sustainable development efficiency, innovation systems, and environmental sustainability indicates that Western Balkan countries lag behind EU member states in terms of sustainable development. Innovation capacity, institutional readiness, and sustainability-oriented policies are identified as key factors that may support decarbonization and green growth. The findings suggest that the green transition should not be viewed solely as an environmental challenge, but rather as a broader development strategy encompassing innovation, governance, financing, and regional alignment with EU standards and requirements. Following the narrative synthesis of the six thematic areas, a VOSviewer keyword co-occurrence analysis was conducted to provide an integrated overview of the key concepts identified across the 30 studies included in the review. Figure 3 illustrates the thematic structure of research on carbon intensity in the Western Balkans and the relationships among its main research themes.

Figure 3 reveals that carbon emissions and economic growth constitute the central themes of the reviewed literature. These themes are closely linked to energy consumption, renewable energy and decarbonization, EU integration, climate change mitigation, carbon pricing, and the CBAM. Environmental sustainability, institutional quality, financial development, construction, green growth, and trade openness represent additional interconnected themes. Larger nodes indicate a higher frequency of term occurrence in the selected studies, while stronger links and shorter distances reflect greater thematic relatedness. While Figure 3 illustrates the overall network of thematic associations, Figure 4 provides a more detailed representation of the relationships among individual studies, geographical contexts, investigated mechanisms, and reported findings. Collectively, the six thematic areas indicate that research on carbon intensity in the Western Balkans is multidimensional, characterized by strong interconnections among economic, energy-related, institutional, technological, and policy variables. To complement the narrative synthesis and visualize the relationships among the identified research dimensions, a VOSviewer network was constructed using manually coded data extracted from the 30 studies included in the PRISMA-guided systematic review, as detailed in Appendix A (Table A1). Figure 4 illustrates the relationships among the included studies, their geographical coverage, the key mechanisms examined, and the outcomes reported.

Source: Authors’ elaboration using VOSviewer, based on the manually coded terms extracted from the 30 studies included in the systematic review (see Appendix A, Table A1).

Figure 4 illustrates the relationships among the 30 reviewed studies, their geographical scope, the thematic mechanisms examined, and the findings reported by the researchers. Based on the analysis, the main themes identified in the literature on carbon intensity in the Western Balkans can be summarized as follows: economic growth, energy consumption, renewable energy, trade and EU integration institutional quality, green investment, and technological transition. The reported outcomes encompass increases and decreases in emissions, as well as broader sustainable development outcomes.

Notably, the six thematic dimensions indicate that CO₂ emissions and carbon intensity in the Western Balkans are shaped by interactions among economic, energy, institutional, financial, technological and sectoral determinants. Economic growth, industrialization, trade, investment, and urbanization may contribute to increased economic activity and energy demand, but their environmental impacts depend on the energy mix, energy efficiency, technology, and sectoral composition. Renewable energy, innovation, and technological advancement may contribute to reducing carbon intensity; however, institutional quality, environmental governance, climate policies, green finance, and effective policy implementation may determine the extent to which these environmental benefits are realized. Therefore, the findings suggest that the determinants identified across the six thematic dimensions should not be examined in isolation, as they are interconnected and may jointly influence environmental outcomes.

The reviewed literature provides important insights into the interactions among economic growth, institutional effectiveness, innovation capacity, and environmental performance that shape the prospects for green growth in the Western Balkans. According to M​i​m​o​v​i​ć​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​), Western Balkan countries are characterized by relatively low sustainability efficiency compared with former socialist EU member states. S​t​a​n​k​o​v​i​ć​ ​&​ ​R​a​d​u​k​i​ć​ ​(​2​0​2​6​) highlighted the importance of eco-innovation adoption, artificial intelligence readiness, and supportive innovation ecosystems in accelerating decarbonization and green growth. Finally, B​y​t​y​q​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​) reported on the existence of bidirectional relation between CO₂ emissions and GDP per capita growth. Despite the general agreement that institutional and policy-related factors influence environmental performance in the Western Balkans, reported effects remains inconsistent. According to K​r​a​s​n​i​q​i​ ​&​ ​G​a​r​a​ ​(​2​0​2​5​), institutional quality, renewable energy use, and carbon taxation are negatively associated with CO₂ emissions, while regulatory quality contributes to reducing energy consumption. Similarly, T​r​i​a​r​c​h​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​5​) found that EU accession and improved governance structures are associated with positive outcomes in climate change mitigation and emissions reductions.

However, B​i​l​a​l​l​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​) reported a positive correlation between institutional quality and CO₂ emissions. One possible explanation is that improvements in institutional quality may stimulate investment, economic growth, and infrastructure development, thereby increasing energy demand before environmental benefits become apparent. This suggests that improvements in institutional quality do not necessarily lead to immediate reductions in emissions. Rather, the environmental effects of institutional development may depend on additional economic, structural, and policy-related factors. Differences in findings across these studies may also reflect variations in environmental outcome measures, model specifications, geographical coverage, and periods of analysis. While some studies examine absolute CO₂ emissions, others assess environmental quality or climate change mitigation performance. Therefore, the relationship between institutional quality and environmental outcomes should not be interpreted as uniformly positive or negative, but rather as context-dependent and influenced by the indicators and methodological approaches employed.

Based on reviewed literature, carbon pricing and the CBAM offer potential environmental benefits while also imposing significant economic adjustment costs on the region. P​a​v​l​o​v​i​ć​ ​&​ ​T​r​t​i​c​a​ ​(​2​0​2​4​) demonstrated that introducing an ETS in Serbia’s coal-dependent electricity sector may slow GDP growth in the short term, while increased investments could support economic recovery and stronger growth by 2030.

Furthermore, studies examining the CBAM provide additional insights into these challenges. E​i​c​k​e​ ​e​t​ ​a​l​.​ ​(​2​0​2​1​) highlighted that vulnerability to the CBAM depends on ta country’s level of exports to the EU, its emissions intensity, degree of trade diversification, carbon lock-in, and institutional capacity for monitoring, reporting, and verification. L​o​b​a​n​o​v​ ​&​ ​L​o​b​a​n​o​v​a​ ​(​2​0​2​6​) further confirmed that the effects of the CBAM differ across Western Balkan countries and product categories depending on carbon intensity, exposure to the EU market, industrial structures, embedded emissions, and the development of carbon pricing policies. Taken together, these findings suggest that the consequences of carbon pricing and the CBAM should not be assessed solely in terms of emissions reductions. Their implications for production costs, export competitiveness, institutional readiness to implement carbon pricing mechanisms, and the adaptive capacity of firms and governments should also be considered when evaluating these policies.

Overall, the reviewed evidence suggests that renewable energy use, improvements in energy efficiency, and technological development are associated with reduced CO₂ emissions. However, the economic and technical feasibility of these approaches varies considerably across countries and sectors. P​e​t​t​e​r​s​s​o​n​ ​(​2​0​0​7​) reported that marginal abatement costs per ton of CO₂, under a 15% emissions reduction target, ranged from €4 to €90 in the Eastern European countries examined. These differences reflect variations in the availability of renewable energy resources, electricity generation technologies, learning effects, and production costs.

These findings further support the argument that the region is characterized by considerable heterogeneity. Thus, countries with abundant renewable energy resources, diversified energy systems, and well-developed institutions may be better positioned to achieve emissions reductions at relatively lower costs. In contrast, countries with coal-dependent economies may face higher adjustment costs, greater transition risks, and increased exposure to carbon pricing policies. Consequently, environmental outcomes may also differ depending on the policy instruments adopted and the initial technological conditions of each country. The relationship between financial development and environmental quality also remains mixed. According to B​i​l​a​l​l​i​ ​e​t​ ​a​l​.​ ​(​2​0​2​6​), domestic credit to the private sector is positively associated with CO₂ emissions, suggesting that financial development may support carbon-intensive investments, infrastructure expansion, and increased energy consumption when green lending requirements are insufficiently developed or enforced.

B​e​k​a​ ​e​t​ ​a​l​.​ ​(​2​0​2​4​) highlighted that financial, economic, and institutional variables are among the key determinants of CO₂ emissions, while emphasizing that their effects differ between OECD and Western Balkan countries. In other words, the environmental impact of financial development may depend more on the allocation of credit than on the total volume of lending. Loans that finance the conventional infrastructure and energy-intensive production may contribute to higher CO₂ emissions, whereas environmentally friendly lending, financing for renewable energy projects, and green lending requirements may support decarbonization. The main limitation of the existing literature is the limited number of studies that distinguish between conventional financial development and environmentally sustainable financing.

Several key research gaps can be identified from the synthesis presented in this review. First, only a small proportion of the reviewed studies explicitly examines carbon intensity, while most focus on absolute CO₂ emissions or broader environmental indicators. Second, the literature exhibits uneven geographical coverage, with limited evidence on the impact of carbon taxation and the CBAM in Kosovo and Montenegro, while a greater number of studies focus on Serbia, Bosnia and Herzegovina, and regional panels. Third, existing research is predominantly based on aggregate national-level analyses, whereas sector-specific evidence remains limited, particularly in the energy, construction, and financial sectors. Fourth, relatively few studies jointly assess the environmental effectiveness and socioeconomic costs of carbon taxation, the CBAM, and other decarbonization policy instruments. Fifth, the existing literature does not adequately distinguish green finance from broader financial development.

The differences identified across the reviewed studies may be explained by several factors. First, the studies employ different environmental and economic outcome measures, such as carbon intensity, total CO₂ emissions, per capita emissions, environmental quality, transition risks, and abatement costs. Second, the studies apply a wide range of econometric approaches and analytical methods, including pooled ordinary least squares (OLS), fixed-effects models, random-effects models, generalized method of moments (GMM), two-stage least squares (2SLS), ARDL models, vector autoregression (VAR), VECM, inverse probability weighting (IPW), linear programming, and energy system simulations. These approaches rely on different assumptions and are designed to capture short-run, long-run, dynamic, or scenario-based relationships.

Third, Western Balkan countries differ considerably in terms of energy structure, institutional capacity, economic development, trade exposure, and progress towards EU integration. In particular, Serbia, Kosovo, and Bosnia and Herzegovina face greater exposure to coal-related transition risks. Furthermore, differences in renewable energy capacity, governance quality, and access to green finance may contribute to the heterogeneity observed across the reviewed studies. Therefore, the conflicting findings do not necessarily indicate methodological inconsistencies but rather reflect the heterogeneity of the existing literature and the diverse economic, institutional, and energy-related characteristics of the Western Balkan countries.

The synthesis of the reviewed literature provides valuable insights into determinants of carbon intensity in the context of sustainable economic growth in the Western Balkans. However, these implications should be interpreted with caution, as the existing evidence remains fragmented across countries, methodologies, and research themes. At the regional level, the reviewed studies suggest that policy efforts should prioritize improvements in energy efficiency, renewable energy production, sustainable infrastructure development, low-carbon transportation, and stronger alignment with EU climate-policy instruments. Investment and capital formation should increasingly be directed towards low-carbon industries, as investments concentrated in fossil-fuel-dependent or energy-intensive sectors may contribute to higher carbon intensity.

At the same time, country-specific approaches remain essential, particularly given the differences among Western Balkan economies in terms of energy structures, institutional capacities, financial development, and exposure to carbon-intensive production. Accordingly, carbon pricing, green-finance instruments, renewable-energy priorities, and institutional reforms should be adapted to national conditions. The literature also highlights the need to reduce energy intensity and integrate urban and industrial policies with decarbonization strategies. Overall, carbon intensity in the region is shaped by economic, energy, institutional, and structural factors, while comprehensive evidence from PRISMA-guided systematic reviews remains limited. This review contributes to addressing this research gap by systematically synthesizing and organizing the existing evidence into six analytical dimensions associated with carbon intensity and sustainable economic development in the Western Balkans.

This systematic literature review has several limitations. First, the literature search was conducted exclusively using the Scopus database because the authors had institutional access to Scopus but not to other databases, such as Web of Science. Consequently, relevant studies indexed exclusively in other databases may have been omitted. Second, the search strategy was based on the Scopus search strings reported in this study and was designed to identify relevant publications across six thematic areas. These search results formed the basis for the selection of the 30 studies included in the PRISMA-guided systematic review. Another limitation concerns the manual screening and classification process. The studies were selected following full-text assessment, and those considered relevant t to the predefined themes were included. No specialised digital or automated screening tools were used, whicht may have introduced some degree of subjectivity and affected the degree of the reproducibility of the study selection process. Data extraction was performed manually using an Excel spreadsheet. The extracted information included the main findings, geographical coverage, methodological characteristics, and thematic classification of the 30 studies. These data were subsequently used to construct the bibliometric network visualization. Therefore, the reliance on manual screening, data extraction, and thematic coding constitutes an additional limitation of the study. Future studies could build on the evidence base established by this review by expanding the literature search to additional academic databases and scholarly search platforms, such as Web of Science, ScienceDirect, and Google Scholar, thereby reducing database-related selection bias and identifying potentially relevant studies not indexed in Scopus. Future systematic reviews could employ specialized electronic screening and reference management tools to improve the transparency, consistency, and reproducibility of study selection and data extraction. Future empirical studies are needed to address the methodological heterogeneity identified in the reviewed literature and to examine Western Balkan economies that remain underrepresented in existing research. Future research could employ harmonized environmental indicators, consistent observation periods, and comparable econometric approaches to facilitate cross-country comparisons within the region. Further research could investigate sector-specific carbon intensity, the effects of renewable energy adoption, green innovation, environmental policies, institutional quality, and EU integration on decarbonization and sustainable economic growth. Studies employing longitudinal, panel-data, and comparative approaches covering all Western Balkan countries could provide deeper insights into the long-term dynamics of the green transition. Furthermore, future reviews could combine systematic literature review approaches with bibliometric analysis, meta-analysis, or qualitative content analysis to provide a more comprehensive assessment of the relationships among carbon emissions, carbon intensity, and sustainable economic growth.

This systematic literature review synthesized evidence from 30 studies identified through the Scopus database and selected according to predefined eligibility criteria, with the review process reported in accordance with the PRISMA 2020 guidelines. The reviewed evidence was classified into six thematic categories: (1) general CO₂ emissions, carbon intensity, and sustainable growth; (2) energy transition, renewable energy, and decarbonization; (3) environmental governance, institutions, and climate policy; (4) green finance, banking, and financial transition; (5) industrial sectors, construction, and eco-efficiency; and (6) green growth, sustainability, and innovation. Unlike approaches that treat these categories as independent research areas, the reviewed literature suggests that environmental outcomes in the Western Balkans are shaped by interactions among these dimensions. The synthesis further highlights that CO₂ emissions and carbon intensity should be distinguished as related but conceptually different indicators. While absolute CO₂ emissions represent the total quantity of carbon dioxide released, carbon intensity measures emissions relative to economic output, energy consumption, or production, depending on the indicator used. Consequently, improvements in carbon intensity do not necessarily translate into proportional reductions in absolute emissions, particularly when economic activity and energy demand continue to increase. Differences in the environmental indicators employed may therefore partly explain the inconsistent findings reported across studies.

The relationship between economic growth and environmental degradation also remains contested in the reviewed literature. Some studies provide evidence supporting an inverted-U-shaped EKC, while others identify a U-shaped relationship or report statistically insignificant effects. These divergences should not necessarily be interpreted as direct contradictions; rather, they may reflect differences in country samples, stages of economic development, energy structures, observation periods, environmental indicators, variable definitions, and methodological approaches. The integrated synthesis indicates that economic growth and industrial development influence production levels and energy demand, whereas ttheir environmental consequences depend on the energy mix, technology, sectoral composition, and resource-use efficiency. Institutional capacity, environmental governance, alignment with EU climate policies, green finance, and regulatory compliance may act as enabling or moderating factors. Effective institutions and consistent policy measures may enhance the environmental benefits of renewable energy deployment, technological innovation, and sustainable investment, whereas weak policy implementation may limit these benefits. Therefore, carbon intensity and CO₂ emissions in the Western Balkans should be understood as outcomes of interconnected economic, energy-related, institutional, financial, technological, and sectoral processes rather than as consequences of isolated determinants.

Furthermore, the review identifies significant geographical and methodological research gaps. Existing studies predominantly focus on absolute or per capita CO₂ emissions rather than carbon intensity, while relatively few provide comparative empirical evidence covering all Western Balkan countries. Uneven geographical coverage, differences in environmental indicators, observation periods, sectoral scope, and methodological approaches limit cross-study comparability. Future research should therefore prioritize harmonized environmental indicators, consistent observation periods, sector-specific analyses, and comparative approaches encompassing the entire Western Balkan region. Greater attention should also be devoted to examining the interrelationships among institutional development, green finance, innovation, energy transition, and sectoral transformation within the regional context.