The Government of the Republic of Serbia has adopted a new Regulation on the types, criteria, amounts, elements, conditions, and methods for allocating incentive funds to operators engaged in the reuse and recovery of waste for the period 2026–2028. The Regulation represents a significant shift in the existing system for financing the recycling industry, particularly through the introduction of an auction-based mechanism for the allocation of incentives.
Article 2 of the Regulation stipulates that the incentives aim to improve the system of reuse and recovery of waste in accordance with the principles of sustainable development, the waste management hierarchy, and the principles of the circular economy.
The most significant novelty introduced by the Regulation is the establishment of auctions as the primary mechanism for allocating incentive funds. Operators will compete by offering a lower price per unit of waste mass compared to the maximum prescribed incentive amount. Incentives will be granted to bidders offering the lowest price, while available quotas will be allocated according to a ranking list.
Although European Union waste legislation does not explicitly require the use of auctions for financing the recycling industry, this model is largely based on EU state aid rules, particularly the:
CEEAG
These European Commission guidelines favor competitive procedures and market-based determination of aid levels in order to:
- reduce the risk of excessive state aid,
- increase transparency,
- limit distortions of market competition,
- ensure the proportionality of subsidies.
For this reason, auction-based models have become a dominant approach in numerous areas of EU environmental and energy policy, especially in the energy sector, most notably for renewable energy support schemes.
The new Regulation effectively transfers the logic of competitive auctions from the energy sector to the waste management sector.
Particularly important is the fact that the Regulation:
- prohibits retroactive allocation of aid,
- limits maximum incentive amounts,
- introduces rules on aid cumulation,
- provides for the reduction of incentives if the beneficiary has already received state aid for the same costs.
These solutions represent classic state aid control instruments aligned with European competition rules.
From the perspective of EU law, it is especially important that the aid is linked to actual operational costs and that beneficiaries are required to justify those costs, thereby attempting to prevent overcompensation.
Who is eligible to receive incentives?
The right to participate is granted to operators of waste recovery facilities holding valid permits in accordance with regulations governing waste management and pollution prevention and control.
The Regulation also introduces important restrictions in line with state aid rules. Incentives, except for de minimis aid, cannot be granted to undertakings in difficulty or to beneficiaries subject to recovery orders concerning unlawful state aid.
Incentives are granted for the recovery of:
- waste tyres,
- waste electrical and electronic equipment (WEEE),
- waste oils,
- used batteries and accumulators,
- end-of-life vehicles.
At the same time, the Regulation explicitly excludes recovery operations for energy purposes, thereby favoring recycling and material recovery in line with the EU waste hierarchy.
Article 11 prescribes quotas and maximum incentive amounts by waste stream. The highest quota is allocated to waste tyres (35,000 tonnes), while the highest incentives are prescribed for used batteries and accumulators — up to RSD 40 per kilogram.
It is also particularly important that the Regulation provides for the annual adjustment of quotas and maximum incentive amounts based on market needs and data provided by the Serbian Chamber of Commerce.
Control and supervision system
Article 21 of the Regulation establishes a detailed system for monitoring the proper use of funds, including:
- on-site inspections without prior notice,
- final reports on waste quantities,
- verification of operational costs,
- control of payments to collectors and individuals.
In cases of misuse of funds, the Regulation предусматриes contract termination and repayment obligations with statutory default interest.
Open questions in practice
Although the Regulation represents a significant step toward a more market-oriented and transparent system for financing recycling activities, several important questions remain open:
- whether smaller operators will be able to participate on an equal footing in auctions,
- whether there is a risk of market concentration,
- whether pressure to lower prices could affect the quality of waste treatment,
- and whether institutions have sufficient capacity to implement such a complex control system.
The success of this model will largely depend on the quality of auction implementation, the transparency of procedures, and the ability of the state to ensure effective oversight over the use of public funds.