The business has presented the concept of operating a market for trading carbon emissions quotas

12/ 09/ 2023

On September 12, members of the Industrial Ecology and Sustainable Development Committee of the European Business Association presented a study titled Concept for Building an Emissions Trading System in Ukraine: A Path to Sustainable Development, a Step Toward the EU. This is the first comprehensive review of existing international practices in implementing an emissions trading system (ETS) as a carbon pricing mechanism, along with an analysis of their potential application in Ukraine. The study is divided into two parts. The first section provides a detailed overview of each phase of the evolution of the emissions trading market in the EU, explaining its advantages over a carbon tax. It also examines the fundamental elements of the ETS, including the scope, market participants, and administrator, the auction mechanism, allocation of free allowances, and the use of proceeds from quota sales, among others. For clarity, each element of the ETS is illustrated with prominent case studies from other countries, demonstrating the diversity and individuality of approaches in selecting an ETS model based on the specific characteristics of each economy. The second section of the study focuses on attempting to analyze how each structural element of the ETS can be implemented in Ukraine in a way that reduces emissions in an economically efficient manner. In particular, assumptions are made regarding the conditions for launching the ETS, the phased approach, the scale of coverage, setting emission caps, quota allocation, governance system, quota duration, carbon pricing targeting, market interventions, and, of course, the targeted use of revenues from quota sales. The main goal of the study is to initiate a public dialogue on creating a greenhouse gas emissions trading market in Ukraine. This is why, among other things, our study includes a list of open questions for discussion, the answers to which will form the basis for building an effective Ukrainian ETS. In the EU, the ETS was primarily created by the government for the purpose of industrial decarbonization, which involves businesses and their active participation. Collaborative consultations and gradual reforms helped establish this market while keeping it open to further transformations, which continue to this day. We believe that the insights presented in the study will be useful for government agencies, the expert community, and businesses on the path to integration into European and international markets.

On September 12, members of the Industrial Ecology and Sustainable Development Committee of the European Business Association presented a study titled “Concept for Building an Emissions Trading System in Ukraine: A Path to Sustainable Development, a Step Toward the EU”.

This is the first comprehensive review of existing international practices in implementing an emissions trading system (ETS) as a carbon pricing mechanism, along with an analysis of their potential application in Ukraine.

The study is divided into two parts. The first section provides a detailed overview of each phase of the evolution of the emissions trading market in the EU, explaining its advantages over a carbon tax. It also examines the fundamental elements of the ETS, including the scope, market participants, and administrator, the auction mechanism, allocation of free allowances, and the use of proceeds from quota sales, among others.

For clarity, each element of the ETS is illustrated with prominent case studies from other countries, demonstrating the diversity and individuality of approaches in selecting an ETS model based on the specific characteristics of each economy.

The second section of the study focuses on attempting to analyze how each structural element of the ETS can be implemented in Ukraine in a way that reduces emissions in an economically efficient manner.

In particular, assumptions are made regarding the conditions for launching the ETS, the phased approach, the scale of coverage, setting emission caps, quota allocation, governance system, quota duration, carbon pricing targeting, market interventions, and, of course, the targeted use of revenues from quota sales.

The main goal of the study is to initiate a public dialogue on creating a greenhouse gas emissions trading market in Ukraine. This is why, among other things, our study includes a list of open questions for discussion, the answers to which will form the basis for building an effective Ukrainian ETS. In the EU, the ETS was primarily created by the government for the purpose of industrial decarbonization, which involves businesses and their active participation. Collaborative consultations and gradual reforms helped establish this market while keeping it open to further transformations, which continue to this day.

We believe that the insights presented in the study will be useful for government agencies, the expert community, and businesses on the path to integration into European and international markets.