Business urges not to delay the launch of greenhouse gas emissions trading

11/ 08/ 2020

This opinion is shared by experts of the EBA Committee on Industrial Ecology and Sustainable Development after participating in the Round Table on the National Greenhouse Gas Emissions Trading System (ETS), initiated by the Verkhovna Rada Committee on Environmental Policy and Environmental Management together with the Ministry of Environment and Nature Resources of Ukraine.

By signing the Association Agreement with the EU in 2014, Ukraine has committed itself to implement some documents on combating climate change, including Directive №2003 / 87 / EC on establishing a greenhouse gas emissions trading system to gradually reduce greenhouse gas emissions by enterprises. The Directive is implemented in 2 stages: launching a system for measurement, reporting, and verification of greenhouse gas emissions (MRV) and the launch of the ETS itself.

This issue is especially relevant in connection with the European Green Deal adopted earlier this year in the EU, the main goal of which is to achieve climate neutrality on the European continent by 2050. One of the tools of this new climate policy is the introduction of the so-called Carbon Border Adjustment Mechanism (СВАМ). The CBAM is a special carbon tax to be applied to products imported into the EU from countries that do not pay due attention to reducing greenhouse gas emissions.

Thus, the delay in launching the ETS damages Ukraine’s reputation as a reliable participant in global climate change processes, as well as increases the risks of the possible application of the above-mentioned border carbon adjustment to products originating in Ukraine.

Business welcomes the intensification of the work of the government and parliament towards the implementation of the first part of the Directive by adopting the Law “On Measurement, Reporting, and Verification of Greenhouse Gas Emissions” №377-IX. This is an important prerequisite for the successful launch and precise operation of the ETS, which will ensure the accuracy and reliability of the information on greenhouse gas emissions.

At the same time, according to the EBA experts, it is critical to adopt and promulgate all bylaws provided by Law №377-IX as soon as possible. Besides, it is necessary to clearly define which structural unit will exercise these powers and develop a procedure for maintaining the Unified Register for Measurement, Reporting, and Verification of Greenhouse Gas Emissions (MRV). Otherwise, the law will not be able to work from January 2021, as planned.

Only after the successful launch of the MRV system, it will be possible to proceed to the implementation of the second part of the Directive – the development and implementation of the ETS. In the EU, the ETS was introduced in 2005 as a pilot, and the system was fully operational only in 2008.

Ukraine should take into account the experience of European countries and, if possible, align its ETS framework with the rules and procedures for the ETS operation in the EU, which will be applied from 2021, as well as take into account the experience of the first phases of ETS implementation in the EU, particularly setting GHG emission targets and free allocation of emission quotas. According to the business, preparation for the full launch of the ETS should include 4 main aspects:

1) the launch of the ETS should be carried out after the end of the pilot period of measurement, reporting, and verification, however, not earlier than January 2025

2) a test regime should be provided when system participants can carry out transactions with greenhouse gas emission quotas without any financial consequences;

3) greenhouse gas emission targets by type of installation/industry (benchmarks), as well as rules for emission quotas allocation (including free quotas) should be based on accurate data from the national MRV system and take into account the current state of development of individual industries in Ukraine, and also the possibility of raising funds for their modernization,

4) the funds to be received by the state as a result of the sale of emission quotas should be distributed transparently with priority for environmental modernization/energy efficiency of those enterprises that will purchase the relevant quotas, as well as to reimburse their costs related to the ETS operation.

We hope that the voice of business will be heard and with joint efforts we will create in Ukraine the preconditions for the introduction of best European practices aimed at combating climate change.


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