Business expects the Government to take real action to reduce CO2 emissions under the Paris Agreement

10/ 08/ 2021

Listen to online Stop   On July 30, the Cabinet of Ministers approved an updated National Defined Contribution of Ukraine to the Paris Agreement (NDC-2). The document stipulates Ukraine’s commitment to reduce greenhouse gas emissions by 35% by 2030 (a reduction of 65% from 1990 levels). To achieve this goal, a number of measures are envisaged, including eco-modernization of the industrial and energy sectors, development of RES, the energy efficiency of buildings, transition to electric transport, waste management reform, dissemination of organic and resource-efficient agriculture practices, and forest management reform. The estimated cost of implementing such measures is 102 billion euros. The European Business Association welcomes the inclusion of an alternative emission reduction target of 37-42% in the absence of the necessary investment in measures to combat climate change and failure to meet other conditions set out in NDC-2. Meanwhile, the business community continues to insist on the implementation of real mechanisms for the decarbonization of the economy and therefore draws attention to the next steps that need to be taken to ensure the implementation of NDC-2 in Ukraine: The target of reducing emissions to 35% compared to 1990 is the average between the one proposed in Scenario 1 (43%) and Scenario 2 (26%). Therefore, there are no clear guidelines on the indicators that the economy should reach in order to achieve the goals of NDC-2. For example, according to Scenario 1, the share of RES should be 14% in 2030, and according to Scenario 2 - 30%. Meanwhile, the information-analytical review sets an indicator of 17% to 30%. At the same time, in 2020 the share of RES in the economy was 7%. Thus, it is necessary to clearly plan the development of RES in accordance with the development of the regulatory environment, the state of settlements in the electricity market, and the establishment of tariffs for it. Besides, it is important to prevent the introduction of excise duty on RES and ensure the repayment of debts to RES producers. The likely impact of the introduction of a system for monitoring, reporting, and verification (MRV) of greenhouse gas emissions is not included as the possible reasons for adjusting the targets. According to the EBA experts, already in 2022 data on emissions from companies may increase in accordance with the MRV, which will require adjustment of the National Inventory of Greenhouse Gas Emissions. Therefore, the development of sectoral emission reduction plans will be critical, taking into account the economic growth trends of the post-COVID period, as well as the necessary state support measures. The € 102 billion investment envisaged by NDC-2 does not contain sufficient detail. According to the information-analytical review, detailed recalculations are needed for such sectors as heavy industry, transport, and the energy supply sector. At the same time, energy, and heavy industry account for 63% of the total funding needs. In addition, according to NDC-2, these funds are planned to be attracted through the private sector and international financial investments. Meanwhile, the method of attracting these investments, as well as the mechanism of state financial support are not specified. Therefore, the business draws attention to the importance of creating a regulatory framework for attracting public funds for projects of eco-modernization of companies, in particular, through the targeted use of eco-tax funds. The development of mechanisms for attracting funds from international financial organizations for such purposes will also be crucial. We hope that the voice of business will be heard and Ukraine will receive a realistic and effective action plan to achieve the goals of NDC-2 in the near future.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

On July 30, the Cabinet of Ministers approved an updated National Defined Contribution of Ukraine to the Paris Agreement (NDC-2). The document stipulates Ukraine’s commitment to reduce greenhouse gas emissions by 35% by 2030 (a reduction of 65% from 1990 levels).

To achieve this goal, a number of measures are envisaged, including eco-modernization of the industrial and energy sectors, development of RES, the energy efficiency of buildings, transition to electric transport, waste management reform, dissemination of organic and resource-efficient agriculture practices, and forest management reform. The estimated cost of implementing such measures is 102 billion euros.

The European Business Association welcomes the inclusion of an alternative emission reduction target of 37-42% in the absence of the necessary investment in measures to combat climate change and failure to meet other conditions set out in NDC-2.

Meanwhile, the business community continues to insist on the implementation of real mechanisms for the decarbonization of the economy and therefore draws attention to the next steps that need to be taken to ensure the implementation of NDC-2 in Ukraine:

1. The target of reducing emissions to 35% compared to 1990 is the average between the one proposed in Scenario 1 (43%) and Scenario 2 (26%). Therefore, there are no clear guidelines on the indicators that the economy should reach in order to achieve the goals of NDC-2. For example, according to Scenario 1, the share of RES should be 14% in 2030, and according to Scenario 2 – 30%. Meanwhile, the information-analytical review sets an indicator of 17% to 30%. At the same time, in 2020 the share of RES in the economy was 7%. Thus, it is necessary to clearly plan the development of RES in accordance with the development of the regulatory environment, the state of settlements in the electricity market, and the establishment of tariffs for it. Besides, it is important to prevent the introduction of excise duty on RES and ensure the repayment of debts to RES producers. The likely impact of the introduction of a system for monitoring, reporting, and verification (MRV) of greenhouse gas emissions is not included as the possible reasons for adjusting the targets. According to the EBA experts, already in 2022 data on emissions from companies may increase in accordance with the MRV, which will require adjustment of the National Inventory of Greenhouse Gas Emissions. Therefore, the development of sectoral emission reduction plans will be critical, taking into account the economic growth trends of the post-COVID period, as well as the necessary state support measures.
2. The € 102 billion investment envisaged by NDC-2 does not contain sufficient detail. According to the information-analytical review, detailed recalculations are needed for such sectors as heavy industry, transport, and the energy supply sector. At the same time, energy, and heavy industry account for 63% of the total funding needs. In addition, according to NDC-2, these funds are planned to be attracted through the private sector and international financial investments. Meanwhile, the method of attracting these investments, as well as the mechanism of state financial support are not specified. Therefore, the business draws attention to the importance of creating a regulatory framework for attracting public funds for projects of eco-modernization of companies, in particular, through the targeted use of eco-tax funds. The development of mechanisms for attracting funds from international financial organizations for such purposes will also be crucial.

We hope that the voice of business will be heard and Ukraine will receive a realistic and effective action plan to achieve the goals of NDC-2 in the near future.

Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.