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Ukraine may obtain the first financial instrument for decarbonisation in 2021

14/ 12/ 2020
  On November 9, 2020, the Verkhovna Rada registered the draft law №4347 “On Amendments to the Budget Code of Ukraine Concerning the Introduction of the State Decarbonization Fund”. This document envisages the creation of a Decarbonisation Fund, the purpose of which is to implement measures for the reduction of CO2 emissions. The business considers that the draft law can have a positive impact on Ukraine’s industry as it offers a comprehensive solution to the following three issues: - establishing a targeted approach to the use of funds received by the state from the eco-tax paid by companies for their CO2 emissions; - ensuring the creation of the Decarbonization Fund in 2021 as part of the special fund of the State Budget, establishing a safeguard against the misuse of environmental funds by the Cabinet of Ministers on other needs of the state; - contributing to the European Green Deals goals on the achievement of climate neutrality by 2050, as well as accelerating the reduction of carbon dioxide emissions by industrial companies through the eco-modernization of their plants and equipment. Svitlana Mykhailovska. EBA Deputy Director Advocacy. On December 12, at the International Climate Ambition Summit, President of Ukraine Volodymyr Zelensky reaffirmed our country′s intentions to harmonize its climate policy and legislation with the European Green Deal and noted that Ukraine is working to improve the mechanisms of state financial support for climate policy. We at the European Business Association support the government′s desire to address the issue of targeted use of eco-tax funds, namely, in terms of creating financial instruments for decarbonization. At the same time, the EBA experts note that the draft law needs further finalization on the following aspects: Identifying an exhaustive list of projects (measures) to reduce CO2 emissions for which funds will be allocated. Establishing the appropriate amount of financing (co-financing) of projects (measures) to reduce CO2 emissions. Determining the mechanism of financing projects (measures) to reduce CO2 emissions. Thus, it is possible to envisage a reduction of the accrued amounts of the eco-tax for CO2 emissions to 70% for companies that carry out measures on eco-modernization.  Along with the initiative on the creation of a decarbonization fund, there was another draft law №4346 registered to triple the rates of the environmental tax on CO2 emissions. The European Business Association has repeatedly drawn attention to the need to address the issue of targeted use of the eco-tax as a matter of priority. The last increase in the eco-tax for CO2 emissions in 2019 was very significant - from 0.41 hryvnia/ton to 10 hryvnias/ton, thus almost 25 times. According to the State Treasury, in 2019 enterprises paid 951.4 million hryvnias of eco-tax for CO2 emissions. At the same time, expenditures to support measures to reduce greenhouse gas emissions in this period increased by only 60% - to 198.9 million hryvnias, compared to 119 million hryvnias in 2018. Therefore, the business community considers the draft law №4346 to be ill-conceived and does not support it. Thus, we hope that the draft law №4347 will be finalized so that it becomes a truly high-quality and systematic document that will facilitate the start of the long-awaited reform of environmental taxation.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

On November 9, 2020, the Verkhovna Rada registered the draft law №4347 “On Amendments to the Budget Code of Ukraine Concerning the Introduction of the State Decarbonization Fund”. This document envisages the creation of a Decarbonisation Fund, the purpose of which is to implement measures for the reduction of CO2 emissions.

The business considers that the draft law can have a positive impact on Ukraine’s industry as it offers a comprehensive solution to the following three issues:

– establishing a targeted approach to the use of funds received by the state from the eco-tax paid by companies for their CO2 emissions;

– ensuring the creation of the Decarbonization Fund in 2021 as part of the special fund of the State Budget, establishing a safeguard against the misuse of environmental funds by the Cabinet of Ministers on other needs of the state;

– contributing to the European Green Deal’s goals on the achievement of climate neutrality by 2050, as well as accelerating the reduction of carbon dioxide emissions by industrial companies through the eco-modernization of their plants and equipment.

Svitlana Mykhailovska EBA Deputy Director Advocacy
On December 12, at the International Climate Ambition Summit, President of Ukraine Volodymyr Zelensky reaffirmed our country′s intentions to harmonize its climate policy and legislation with the European Green Deal and noted that Ukraine is working to improve the mechanisms of state financial support for climate policy. We at the European Business Association support the government′s desire to address the issue of targeted use of eco-tax funds, namely, in terms of creating financial instruments for decarbonization.

At the same time, the EBA experts note that the draft law needs further finalization on the following aspects:

  • Identifying an exhaustive list of projects (measures) to reduce CO2 emissions for which funds will be allocated.
  • Establishing the appropriate amount of financing (co-financing) of projects (measures) to reduce CO2 emissions.
  • Determining the mechanism of financing projects (measures) to reduce CO2 emissions. Thus, it is possible to envisage a reduction of the accrued amounts of the eco-tax for CO2 emissions to 70% for companies that carry out measures on eco-modernization.

 Along with the initiative on the creation of a decarbonization fund, there was another draft law №4346 registered to triple the rates of the environmental tax on CO2 emissions. The European Business Association has repeatedly drawn attention to the need to address the issue of targeted use of the eco-tax as a matter of priority. The last increase in the eco-tax for CO2 emissions in 2019 was very significant – from 0.41 hryvnia/ton to 10 hryvnias/ton, thus almost 25 times. According to the State Treasury, in 2019 enterprises paid 951.4 million hryvnias of eco-tax for CO2 emissions. At the same time, expenditures to support measures to reduce greenhouse gas emissions in this period increased by only 60% – to 198.9 million hryvnias, compared to 119 million hryvnias in 2018. Therefore, the business community considers the draft law №4346 to be ill-conceived and does not support it.

Thus, we hope that the draft law №4347 will be finalized so that it becomes a truly high-quality and systematic document that will facilitate the start of the long-awaited reform of environmental taxation.

 

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

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