Global Ukraine News

The External Energy Policy of Ukraine: The Past and the Future

Energy Efficiency and Renewable Energy

Energy efficiency and energy saving have become important issues due to the increases in fees for major energy resources for consumers and the extent of state financial support for a large part of industrial production after the Revolution of Dignity.  However, the state has not established pillars for systematic work in this direction in the form of an appropriate legal framework.  Even proposed legislation registered in the Verkhovna Rada is not always submitted for consideration to committees and then for adoption by the Rada.  A state program to support energy efficiency called Warm Loans is hampered by significant underfunding together with rapid growth of interest from private households and condominiums, which form one of the most energy-consuming segments of the national economy.  The depreciation of the currency has undermined the financial capabilities of most people to modernise their housing.  The launching of the energy efficiency fund is still in the stage of discussion and debate.  The efforts of partners from the Visegrad Group, especially Slovakia, to build a systematic approach to energy efficiency have not yielded results, primarily because of the institutional weakness of responsible government agencies.  However, the joint efforts of NGOs and the pressure of international partners from the EU and North America have gradually changed the situation.  Also, the increasing public awareness and motivation of people is starting the process of modernisation from below.  Local authorities are also demonstrating significant activity, which in the process of decentralisation take greater responsibility for the operation of public utilities and energy supply.

For a long time the concept of renewable energy wasn’t widely understood by Ukrainian consumers and producers due to the its relatively high cost and the subsidised prices for non-renewable energy.  The increasing interest solar and wind energy has occurred during the period of rapid price growth for imported gas and the receipt by several politicians, including brothers Kliuyev and Rinat Akhmetov, of preferential “green tariffs” and preferential conditions to link to a common network.  The sharp increase in the number of power plants was accompanied by the creation of legal barriers to independent producers and European companies.  The domestic market for renewable energy has been monopolised and shared among domestic oligarchs similar to other areas of energy sector.  Only after 2014 the development of private solar power plants and of biomass and biogas plants began, while support for mass production at the small so-called «prosumer» was instituted.

Climate Changes and the Struggle for Environmental Protection

Ukraine was actively involved in carbon reduction in the framework of the Kyoto Protocol to the The United Nations Framework Convention on Climate Change (UNFCCC). As a result, Ukraine managed to sell its ERUs (Emission Reduction Units) under Joint Implementation Mechanism (JI) and AAU certificates (Assigned Amount Units) and to encourage “green investment” in the country.

Ukrainian commitments will also emanate from the ratification of the Paris climate agreement and the Association Agreement with the EU.  In particular, the Directive 2003/87/EU is most important, because it provides the Allowance Trading Scheme for carbon emissions in Ukraine for early 2017.  Thus, in line with the Decree of the Cabinet of Ministers of Ukraine № 847-p (17 September 2014) the implementation of the legislation had to take place by August 2016.  However, at this stage there is not even a draft version of law.

It is important to create derivative financial instruments for ensuring the circulation of “green certificates”, the usage of which would be governed by Directives 2004/39/EU and Regulation 600/2014.  The National Commission on Securities and Stock Market of Ukraine is in charge of the implementation of these regulations.  According to the Planning Document of the Cabinet of Ministers of Ukraine, the deadline for its implementation is 2019.  Ukrainian enterprises can use international financial resources for projects of carbon reduction and modernisation of production, under the conditions of their reporting of financial risks, which include environmental, social and governance risks.  Disclosure of such non-financial information is regulated by Directive 2013/34/EU, but the Ministry of Finance of Ukraine and the Ministry of Economic Development, which are responsible for this process, have not yet started to introduce appropriate measures to address the issue of implementing trading systems of greenhouse gases and to provide access for Ukrainian companies to the international climate investments.

Read more: Why Peace Is Impossible with Putin

Ukraine is just beginning to understand its potential and place in the European energy policy, taking the first steps in combating its oligarchs and creating conditions for an active foreign policy.  The approval of the Energy Strategy is ahead, and it should be based on economic development priorities, the implementation of energy diplomacy, and on becoming an influential European energy player.  The next five years will be decisive. GU

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