Business supports the launch of an emissions trading system in Ukraine but calls for extended transitional periods

23/ 06/ 2026

On 15 May 2026, the Ministry of Economy, Environment and Agriculture of Ukraine published for public consultation the draft Law “On the Principles of Functioning of the National Greenhouse Gas Emissions Trading System”. The business community has welcomed the draft Law, noting that its success will depend on taking into account the realities of a wartime economy and Ukraine’s long-term post-war recovery. At the same time, representatives of the European Business Association’s Industrial Ecology and Sustainable Development Committee have submitted a number of proposals and comments for the Ministry’s consideration. Ukraine’s climate reform is entering a new phase, where broad European requirements are being translated into concrete rules for businesses, investment decisions, and public policy. By publishing the draft Law, Ukraine has taken another important step towards European integration through the introduction of a national greenhouse gas emissions trading system (ETS). Businesses are prepared to move towards decarbonisation and EU integration. However, companies are currently expected to invest billions in modernisation without having access to clear financing sources. In practice, Ukrainian industry has yet to see large-scale grant schemes or compensation mechanisms under the Ukraine Facility that would support decarbonisation efforts. If the state and international partners expect the rapid implementation of the ETS and significant emissions reductions, corresponding financial support should also be made available. Put simply, EUR 50 billion for the modernisation of key industrial sectors would be a far more convincing signal than new regulatory obligations without the resources required to meet them. Business representatives emphasise that the effectiveness and viability of the future ETS will largely depend on the following factors: 1. Carbon Pricing A sudden increase in the carbon price will not contribute to the successful implementation of the system. Progression to subsequent stages of the national ETS should reflect the actual progress made by Ukrainian industry in reducing emissions and its readiness to compete in the European market. For Ukrainian exporters, it is particularly important that the system allows for the official recognition of the carbon price paid in Ukraine. This would help companies reduce additional costs when exporting products to the EU. 2. Clear Permitting Procedures The introduction of the new system should facilitate business modernisation rather than create additional administrative and financial barriers. New permitting procedures should be clear, transparent, and predictable. 3. Regulatory Stability and Predictability of Allowance Prices Alongside achieving long-term climate objectives, it is equally important to ensure regulatory certainty. Businesses need a clear understanding of the key parameters of the system, including the pace of emissions reductions and the mechanisms for setting price benchmarks. One of the main prerequisites for business confidence in the national ETS is the predictability of allowance prices. Companies need to understand how their costs will evolve not only next year, but also over the medium and long term. 4. Modernisation Fund The decision to establish a dedicated fund within the framework of the national ETS is a positive step towards European integration. However, the future Modernisation Fund should operate under clear decision-making procedures and governance rules and adhere to the principles of transparency in the allocation of funds. In addition, consideration should be given to creating a mechanism that would allow funds paid by a company to be directed exclusively towards the modernisation of that specific enterprise rather than unrelated projects. 5. Long-Term Transitional Periods The EBA has consistently emphasised that climate reform requires long-term planning rather than rapid solutions. Alignment with the European system should take place gradually and include sufficiently long transitional periods to allow businesses time to adapt to the new regulatory environment and avoid costly mistakes. The EU itself had approximately 15 years to adapt to its emissions trading framework, and Ukraine should take this experience into account. Overall, the success of the national ETS will not be determined merely by the adoption of the Law or the formal launch of the system. Rather, it will depend on whether the future system is predictable, transparent, economically justified, and capable of facilitating business modernisation by attracting investment, rather than becoming merely another financial burden for companies.

The business community has welcomed the draft Law, noting that its success will depend on taking into account the realities of a wartime economy and Ukraine’s long-term post-war recovery. At the same time, representatives of the European Business Association’s Industrial Ecology and Sustainable Development Committee have submitted a number of proposals and comments for the Ministry’s consideration.

Ukraine’s climate reform is entering a new phase, where broad European requirements are being translated into concrete rules for businesses, investment decisions, and public policy. By publishing the draft Law, Ukraine has taken another important step towards European integration through the introduction of a national greenhouse gas emissions trading system (ETS).

Businesses are prepared to move towards decarbonisation and EU integration. However, companies are currently expected to invest billions in modernisation without having access to clear financing sources. In practice, Ukrainian industry has yet to see large-scale grant schemes or compensation mechanisms under the Ukraine Facility that would support decarbonisation efforts. If the state and international partners expect the rapid implementation of the ETS and significant emissions reductions, corresponding financial support should also be made available. Put simply, EUR 50 billion for the modernisation of key industrial sectors would be a far more convincing signal than new regulatory obligations without the resources required to meet them.

Business representatives emphasise that the effectiveness and viability of the future ETS will largely depend on the following factors:

1. Carbon Pricing

A sudden increase in the carbon price will not contribute to the successful implementation of the system. Progression to subsequent stages of the national ETS should reflect the actual progress made by Ukrainian industry in reducing emissions and its readiness to compete in the European market.

For Ukrainian exporters, it is particularly important that the system allows for the official recognition of the carbon price paid in Ukraine. This would help companies reduce additional costs when exporting products to the EU.

2. Clear Permitting Procedures

The introduction of the new system should facilitate business modernisation rather than create additional administrative and financial barriers. New permitting procedures should be clear, transparent, and predictable.

3. Regulatory Stability and Predictability of Allowance Prices

Alongside achieving long-term climate objectives, it is equally important to ensure regulatory certainty. Businesses need a clear understanding of the key parameters of the system, including the pace of emissions reductions and the mechanisms for setting price benchmarks.

One of the main prerequisites for business confidence in the national ETS is the predictability of allowance prices. Companies need to understand how their costs will evolve not only next year, but also over the medium and long term.

4. Modernisation Fund

The decision to establish a dedicated fund within the framework of the national ETS is a positive step towards European integration. However, the future Modernisation Fund should operate under clear decision-making procedures and governance rules and adhere to the principles of transparency in the allocation of funds.

In addition, consideration should be given to creating a mechanism that would allow funds paid by a company to be directed exclusively towards the modernisation of that specific enterprise rather than unrelated projects.

5. Long-Term Transitional Periods

The EBA has consistently emphasised that climate reform requires long-term planning rather than rapid solutions. Alignment with the European system should take place gradually and include sufficiently long transitional periods to allow businesses time to adapt to the new regulatory environment and avoid costly mistakes.

The EU itself had approximately 15 years to adapt to its emissions trading framework, and Ukraine should take this experience into account.

Overall, the success of the national ETS will not be determined merely by the adoption of the Law or the formal launch of the system. Rather, it will depend on whether the future system is predictable, transparent, economically justified, and capable of facilitating business modernisation by attracting investment, rather than becoming merely another financial burden for companies.