94 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 44 | 2026 ane leaks at every active site visited, including illegal flaring and venting, and documented one unlit flare 50 meters from the nearest residence that was among the largest ever observed in the EU (CATF & Greenpeace, 2025; Greenpeace Croatia, 2025). Deteriorating storage facilities, weak enforcement, and measurement methodologies that do not rely on active monitoring mean that emissions are likely consistently underestimated (CATF & Greenpeace, 2025; Greenpeace Croatia, 2025; Spasić, 2025). Croatia is not close to meeting the Global Methane Assessment target of 40% reduction in methane emissions by 2030 (United Nations Environment Programme, 2022). The transition fuel promise also remains unrealized domestically. Despite increasing LNG imports, Croatia has not proportionally displaced oil, petroleum, or coal. It continues to operate coal-burning electricity plants, importing coal entirely from the Czech Republic. Instead of substituting dirtier fuels, Croatia re-exports most of its LNG surplus: Re-exports grew from 126M m3 in 2021 to 1088M m3 in 2023 (Croatian Energy Regulatory Agency, 2024). Oil and petroleum products still constitute 46.9% of the national energy mix, followed by gas at 26.9% (Jensen & Meinardi, 2025). The potential emissions benefits of full LNG substitution, estimated at a 97.41 million tonnes CO2 reduction for Croatia alone (Smajla et al., 2020), remain hypothetical. Climate welfare impact To quantify these climate risks, a social cost analysis estimated lifecycle methane leakage from the terminal’s average throughput of 2.79B m3 annually, from 2021 to 2023, under three scenarios: 2% leakage (optimistic), 4% (midrange), and 6% (pessimistic). Emissions were monetized using EU emissions trading system prices (€85/tonne CO2) and the European Commission’s social cost of carbon (€100/tonne CO2), calculated for 100-year and 20year global warming potential (GWP) horizons— GWP100 and GWP20—using multipliers of 25 and 72, respectively. Under midrange assumptions (4% leakage, GWP100), climate costs offset approximately 28% of welfare benefits, leaving net gains of €1.65B. Based on the more policy-relevant GWP20 horizon, climate costs rise to €1.83B, reducing net benefits to €460M, an 80% reduction. Under pessimistic assumptions (6% leakage, GWP20), climate costs of €2.75B exceed the €2.29B in welfare benefits, yielding net losses of €460M and rendering the terminal’s net social value negative. The break-even leakage threshold occurs at approximately 6.1% under GWP100 or 4.2% under GWP20, each within the range of academic estimates for shale gas (Howarth et al., 2011). Under optimistic assumptions, the terminal’s methane impact is negligible, but the conditions necessary for that result are increasingly difficult to defend given Croatia’s documented LNG infrastructure failures and the policy community’s broader shift toward near-term methane accounting. Under midto-high leakage estimates evaluated for the 20-year horizon, the terminal’s net social benefit turns negative. Whether Croatia’s LNG investment ultimately helps or harms the climate depends less on the terminal itself than on enforcement, infrastructure maintenance, and the domestic energy substitution that so far has not occurred. The path dependency trap Although LNG Hrvatska is undoubtedly a good investment for energy security in CEE and the Balkans, the gap in policy alignment between the EU environmental vision and Croatia’s own policy will create future problems. Croatia’s goals are modest: reducing emissions by only 19.5% from 2005 to 2023, compared to an EU average of 30.5% (Jensen & Meinardi, 2025). In November 2024, the European Commission opened infringement proceedings against Croatia for failing to submit a final updated NECP by the June 2024 deadline. The most recent plan sets a 42.5% renewable share in gross final energy consumption and a 42% reduction in total greenhouse gas emissions by 2030 relative to 1990 (Ministry of Economy…, 2025). It also uses data that differ from European Economic Area data, underestimating the timeline that 2050 goals can be achieved (Accelerate Climate Action Network Europe, 2024). The Commission’s assessment of Croatia’s draft updated NECP notes that the country appears to be postponing coal phase-out, with no timeline laid out for phasing out fossil fuel subsidies, contributing to Croatia dropping five places between the 2024 and 2025 versions of the Climate Change Performance Index (Jensen & Meinardi, 2025). The current, overoptimistic energy plan continues to expand gas infrastructure while gas and nuclear dominate renewables in policy discussion (Gulan & Kelava, 2025). The contradiction between implicit national energy policy, where investments actually occur, and explicit policy goals published in the NECP requires strategic reconciliation. The energy trilemma is the core tension, and Croatia’s singular investment focus on LNG may detract from early adoption of renewables, leading to EU policy inco-
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