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Ukraine’s climate goals should contribute to the competitiveness of domestic businesses – EBA.

07/ 06/ 2024
  Since 2019, the pace of implementing the environmental bloc of EU integration reforms within the framework of the Association Agreement has been, to put it mildly, unimpressive, and in terms of combating climate change, even modest.Now, as a country, we have been given a second chance. With the adoption of the Ukraine Facility plan, we have specific tasks with clear timelines and degrees of implementation, prioritizing the green transition and its mechanisms. This is precisely what we need to focus on and adopt as a roadmap. At the same time, businesses that continue to operate despite daily shelling, power outages, and increased mobilization measures believe that climate commitments should be realistic but also meet the expectations of our partners. After all, our task is to preserve the economy. This was stated today, June 7, by Olga Boyko, coordinator of the Industrial Ecology and Sustainable Development Committee of the European Business Association, during the round table New Climate Policy as a Challenge and Opportunity for Ukraine, organized by the Environmental Committee of the Verkhovna Rada. On June 23, 2022, the European Council granted Ukraine candidate status for accession to the European Union, and on November 8, 2023, the European Commission recommended that the European Council begin negotiations on Ukraines accession to the EU. This necessitates certain transformations in the Ukrainian economy, taking into account the requirements and standards of the EU, which include, among other things, a green energy transition and achieving carbon neutrality. In this context, the EBAs experts focused primarily on the climate law. On May 31, 2024, the draft law On the Basic Principles of State Climate Policy No. 11310 was registered in the Verkhovna Rada. The EBA participated in the public discussion of this document at the Ministry of Environment and is grateful for the consideration of its proposals. In particular, at our initiative, the text includes the goal of reducing greenhouse gas emissions by 35% by 2030 compared to 1990 data, as enshrined in Ukraines Updated Nationally Determined Contribution to the Paris Agreement (NDC2). In addition, the possibility of providing state aid to business entities has been aligned with the Law of Ukraine On State Aid to Business Entities No. 1555-VII of July 1, 2014, etc. However, the issue of developing a CBAM mechanism for goods imported from third countries into the customs territory of Ukraine is not addressed in any of the aforementioned acts. As noted by the Ministry of Environment, the creation of a mechanism for carbon border adjustment of imports into the customs territory of Ukraine is possible only after a comprehensive analysis of the possible consequences of its implementation and the formation of the necessary prerequisites for its creation, taking into account the experience of implementing the EU CBAM and other relevant global practices. Recently, the Office of Green Economic Transition at the Ministry of Economy of Ukraine held its first webinar for businesses on reporting under the CBAM. Therefore, given the existing expertise, it would be advisable for the Environmental Committee to recommend that the Ministry of Economy propose to the Office to study this issue,especially since the UK, a donor for the creation of the Office, is itself planning to introduce CBAM by 2027. The EBAs representatives also drew attention to the environmental tax on CO2 emissions. Its reform, particularly in terms of the use of revenues, was removed as one of the priorities of the environmental policy of the Verkhovna Rada of Ukraine at the end of 2019. Since then, more than 20 draft laws on revising the concept of the environmental tax have been registered in the parliament, and one so-called resource law was even adopted in 2021. In addition to increasing the environmental tax rate for CO2 emissions by 300% to UAH 30/ton, it established that 70% of the payments made by enterprises in the processing industry and the electricity, gas, steam, and air conditioning supply sectors should be directed towards measures that lead to a reduction in carbon dioxide emissions (decarbonization) in these sectors. For this purpose,a separate draft law amending the Budget Code, which would establish the procedure for using these funds, was to be submitted to the Verkhovna Rada by June 2022, but this has not yet happened. We currently have a similar situation. Amendments to the Budget Code introduced in April 2023 created the State Fund for Decarbonization and Energy Efficient Transformation (Decarbonization Fund) within the special fund of the State Budget of Ukraine, where 100% of revenues from the environmental tax on CO2 emissions are directed from January 1st.It is envisaged that funds from the Decarbonization Fund will be used, among other things, for financial support of measures and state target programs in the field of energy efficiency, increasing the use of renewable energy sources and alternative fuels, and reducing carbon emissions, as well as for financial support of compensation, reimbursement, and reduction of obligations of individuals and legal entities under loan and leasing agreements in these same areas. The use of the Decarbonization Funds funds should be carried out in accordance with the procedure approved by the Cabinet of Ministers. However, as usual, there is no such procedure. In our opinion, it would be advisable for the Environmental Committee to address the Government with a request to clarify the process of developing the procedure for using the Decarbonization Funds funds and to expedite its submission for public discussion. To give you an understanding, in 2021, revenues from the environmental tax on CO2 emissions to the State Budget of Ukraine amounted to UAH 1.183 billion. In 2022, this figure reached UAH 1.639 billion, in 2023 - UAH 1.953 billion,and in the first quarter of 2024, UAH 669.8 thousand were collected. The European Business Association is grateful to the Environmental Committee for the opportunity to express the opinion of the business community and hopes that the provided proposals will be taken into account in further legislative work.

“Since 2019, the pace of implementing the “environmental” bloc of EU integration reforms within the framework of the Association Agreement has been, to put it mildly, unimpressive, and in terms of combating climate change, even modest.Now, as a country, we have been given a second chance. With the adoption of the Ukraine Facility plan, we have specific tasks with clear timelines and degrees of implementation, prioritizing the green transition and its mechanisms. This is precisely what we need to focus on and adopt as a roadmap. At the same time, businesses that continue to operate despite daily shelling, power outages, and increased mobilization measures believe that climate commitments should be realistic but also meet the expectations of our partners. After all, our task is to preserve the economy”.

This was stated today, June 7, by Olga Boyko, coordinator of the Industrial Ecology and Sustainable Development Committee of the European Business Association, during the round table “New Climate Policy as a Challenge and Opportunity for Ukraine,” organized by the Environmental Committee of the Verkhovna Rada.

On June 23, 2022, the European Council granted Ukraine candidate status for accession to the European Union, and on November 8, 2023, the European Commission recommended that the European Council begin negotiations on Ukraine’s accession to the EU. This necessitates certain transformations in the Ukrainian economy, taking into account the requirements and standards of the EU, which include, among other things, a green energy transition and achieving carbon neutrality.

In this context, the EBA’s experts focused primarily on the climate law. On May 31, 2024, the draft law “On the Basic Principles of State Climate Policy” No. 11310 was registered in the Verkhovna Rada. The EBA participated in the public discussion of this document at the Ministry of Environment and is grateful for the consideration of its proposals. In particular, at our initiative, the text includes the goal of reducing greenhouse gas emissions by 35% by 2030 compared to 1990 data, as enshrined in Ukraine’s Updated Nationally Determined Contribution to the Paris Agreement (NDC2). In addition, the possibility of providing state aid to business entities has been aligned with the Law of Ukraine “On State Aid to Business Entities” No. 1555-VII of July 1, 2014, etc.

However, the issue of developing a CBAM mechanism for goods imported from third countries into the customs territory of Ukraine is not addressed in any of the aforementioned acts. As noted by the Ministry of Environment, “the creation of a mechanism for carbon border adjustment of imports into the customs territory of Ukraine is possible only after a comprehensive analysis of the possible consequences of its implementation and the formation of the necessary prerequisites for its creation, taking into account the experience of implementing the EU CBAM and other relevant global practices.” Recently, the Office of Green Economic Transition at the Ministry of Economy of Ukraine held its first webinar for businesses on reporting under the CBAM. Therefore, given the existing expertise, it would be advisable for the Environmental Committee to recommend that the Ministry of Economy propose to the Office to study this issue,especially since the UK, a donor for the creation of the Office, is itself planning to introduce CBAM by 2027.

The EBA’s representatives also drew attention to the environmental tax on CO2 emissions. Its reform, particularly in terms of the use of revenues, was removed as one of the priorities of the environmental policy of the Verkhovna Rada of Ukraine at the end of 2019. Since then, more than 20 draft laws on revising the concept of the environmental tax have been registered in the parliament, and one so-called “resource” law was even adopted in 2021. In addition to increasing the environmental tax rate for CO2 emissions by 300% to UAH 30/ton, it established that 70% of the payments made by enterprises in the processing industry and the electricity, gas, steam, and air conditioning supply sectors should be directed towards measures that lead to a reduction in carbon dioxide emissions (decarbonization) in these sectors. For this purpose,a separate draft law amending the Budget Code, which would establish the procedure for using these funds, was to be submitted to the Verkhovna Rada by June 2022, but this has not yet happened.

We currently have a similar situation. Amendments to the Budget Code introduced in April 2023 created the State Fund for Decarbonization and Energy Efficient Transformation (Decarbonization Fund) within the special fund of the State Budget of Ukraine, where 100% of revenues from the environmental tax on CO2 emissions are directed from January 1st.It is envisaged that funds from the Decarbonization Fund will be used, among other things, for financial support of measures and state target programs in the field of energy efficiency, increasing the use of renewable energy sources and alternative fuels, and reducing carbon emissions, as well as for financial support of compensation, reimbursement, and reduction of obligations of individuals and legal entities under loan and leasing agreements in these same areas. The use of the Decarbonization Fund’s funds should be carried out in accordance with the procedure approved by the Cabinet of Ministers. However, as usual, there is no such procedure. In our opinion, it would be advisable for the Environmental Committee to address the Government with a request to clarify the process of developing the procedure for using the Decarbonization Fund’s funds and to expedite its submission for public discussion.

To give you an understanding, in 2021, revenues from the environmental tax on CO2 emissions to the State Budget of Ukraine amounted to UAH 1.183 billion. In 2022, this figure reached UAH 1.639 billion, in 2023 – UAH 1.953 billion,and in the first quarter of 2024, UAH 669.8 thousand were collected.

The European Business Association is grateful to the Environmental Committee for the opportunity to express the opinion of the business community and hopes that the provided proposals will be taken into account in further legislative work.

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