At least 10 years are needed to establish a CO2 trading system in Ukraine

27/ 02/ 2023

This was announced on February 22 by representatives of the EBA Industrial Ecology and Sustainable Development Committee during the final session of the project Support for the establishment of an emissions trading scheme (ETS) in Ukraine , implemented by GIZ on behalf of the German Federal Ministry for Economic Affairs and Climate Protection (BMWK). As a result of the hostilities, the national economy suffered irreparable losses in key sectors. According to rough estimates, industrial production fell by 70%. This is primarily due to serious damage and destruction of the energy infrastructure, as well as the decline of the metallurgical industry, whose main enterprises have been destroyed, temporarily occupied, or are operating at 50% of their capacity. This effect of hostilities forces a different perspective on the implementation of Ukraines commitments to combat climate change. As noted during the COP27 in Egypt, due to the war, greenhouse gas emissions in Ukraine increased by 23% in 2022 compared to the previous year. At the same time, the share of emissions from the most energy-intensive industrial sectors (energy, metallurgy, chemicals, cement, etc.), which were traditionally considered the main CO2 emitters, is no longer a main problem to Ukraines climate commitments. Despite the challenging economic situation, business continues to support the need to introduce an emissions trading system in Ukraine as a civilized and proven tool for reducing emissions from economic activity. At the same time, there are currently difficulties with the implementation of the first stage of this reform - the monitoring, reporting and verification (MRV) system. As a result, there are fears that Ukrainian exporters will have to undergo additional verification to submit data under the CBA border carbon adjustment mechanism, which will be introduced in the EU as of October 1 this year. In addition, due to the war, we have actually delayed for a year the receipt of the first real data on emissions from enterprises, without which it is impossible to develop a model of the emissions trading system. Its also worth noting that it took European companies an average of 20 years to achieve green modernization, for which they received funding from EU worth more than 600 billion euros. And some of them are still modernizing! Besides, the availability of finance for European enterprises still plays a significant role, namely the ability to take out loans from banks at 2-4%, while in Ukraine before the war the loan rate exceeded 15-20%, and now it is almost impossible to get a loan. To summarize, we emphasize that business supports the idea of creating an emissions trading system similar to the EU, which will ultimately lead to the creation of a common legal framework in this area. At the same time, it is worth focusing on the essence of such a system (sufficient timeframe, availability of funding sources, real transformations, etc.), and not just on the formal implementation of the system without regard to the consequences. The European Business Association thanks the Ministry of Environmental Protection for organizing the meeting and is ready to continue to work on the GHG emissions trading system in Ukraine.

This was announced on February 22 by representatives of the EBA Industrial Ecology and Sustainable Development Committee during the final session of the project ” Support for the establishment of an emissions trading scheme (ETS) in Ukraine “, implemented by GIZ on behalf of the German Federal Ministry for Economic Affairs and Climate Protection (BMWK).

As a result of the hostilities, the national economy suffered irreparable losses in key sectors. According to rough estimates, industrial production fell by 70%. This is primarily due to serious damage and destruction of the energy infrastructure, as well as the decline of the metallurgical industry, whose main enterprises have been destroyed, temporarily occupied, or are operating at 50% of their capacity.

This effect of hostilities forces a different perspective on the implementation of Ukraine’s commitments to combat climate change. As noted during the COP27 in Egypt, due to the war, greenhouse gas emissions in Ukraine increased by 23% in 2022 compared to the previous year. At the same time, the share of emissions from the most energy-intensive industrial sectors (energy, metallurgy, chemicals, cement, etc.), which were traditionally considered the main CO2 emitters, is no longer a main problem to Ukraine’s climate commitments.

Despite the challenging economic situation, business continues to support the need to introduce an emissions trading system in Ukraine as a civilized and proven tool for reducing emissions from economic activity. At the same time, there are currently difficulties with the implementation of the first stage of this reform – the monitoring, reporting and verification (MRV) system. As a result, there are fears that Ukrainian exporters will have to undergo additional verification to submit data under the CBA border carbon adjustment mechanism, which will be introduced in the EU as of October 1 this year. In addition, due to the war, we have actually delayed for a year the receipt of the first real data on emissions from enterprises, without which it is impossible to develop a model of the emissions trading system.

It’s also worth noting that it took European companies an average of 20 years to achieve green modernization, for which they received funding from EU worth more than 600 billion euros. And some of them are still modernizing! Besides, the availability of finance for European enterprises still plays a significant role, namely the ability to take out loans from banks at 2-4%, while in Ukraine before the war the loan rate exceeded 15-20%, and now it is almost impossible to get a loan.

To summarize, we emphasize that business supports the idea of creating an emissions trading system similar to the EU, which will ultimately lead to the creation of a common legal framework in this area. At the same time, it is worth focusing on the essence of such a system (sufficient timeframe, availability of funding sources, real transformations, etc.), and not just on the formal implementation of the system without regard to the consequences.

The European Business Association thanks the Ministry of Environmental Protection for organizing the meeting and is ready to continue to work on the GHG emissions trading system in Ukraine.