Business Identifies 4 Key Conditions for Effective Climate Policy in Ukraine

by Roman Cheplyk
Friday, May 17, 2024
Business Identifies 4 Key Conditions for Effective Climate Policy in Ukraine

The business community welcomes the government’s climate policy initiatives but highlights several critical points that need to be addressed for these initiatives to be effective

This was discussed during the review of the draft Strategy for the implementation of the greenhouse gas emissions trading system (ETS) in Ukraine until 2033 and its operational plan, as stated in a press release by the European Business Association (EBA).

"The business community welcomes this and other initiatives of the government in the field of climate policy. However, it draws attention to several points, which, if not considered, will render these initiatives ineffective or leave them merely on paper," the statement reads.

Key Conditions Identified by the Business Community:

  1. Gradual Introduction and Continuous Dialogue:

    • The government is urged not to rush the introduction of the ETS and to ensure continuous dialogue with businesses regarding the parameters for the launch and functioning of the future system.
    • "ETS is a European obligation of Ukraine, defined in both the Association Agreement with the EU and the Ukraine Facility Plan. However, neither specifies when ETS should become operational in Ukraine. According to businesses, the proposed pilot phase launch in 2026 is unrealistic due to the lack of data on actual CO2 emissions from enterprises," the EBA notes.
  2. Separate Consideration of CBAM and ETS:

    • The introduction of ETS will not exempt Ukrainian manufacturers exporting to the EU from the need to pay the Carbon Border Adjustment Mechanism (CBAM) and will significantly increase the cost of all products.
    • "CBAM must be considered separately from ETS. Implementing ETS before CBAM’s financial commitment in 2026 could jeopardize preparations for both, given limited government and business resources," the association emphasizes.
  3. Facilitating CBAM Application to Ukraine on a Declarative Basis:

    • The current CBAM regulation allows the EU to consider exceptional and unprovoked events that have severely impacted a country's economy and industrial infrastructure.
    • "One approach may be to apply a declarative approach to goods imported from Ukraine to the EU and subject to CBAM, effectively treating them the same as other countries but without charging for emissions," the EBA notes.
    • This will reduce the financial burden on businesses and help accumulate resources for partially restoring production levels affected by military actions.
  4. Development of Ukrainian CBAM Mechanism:

    • As Ukraine seeks to align with the EU’s climate governance architecture, a similar border carbon adjustment mechanism should be developed.
    • "This will protect national producers and ensure equal conditions for all market participants in Ukraine, accelerating and simplifying the integration of the Ukrainian market into the EU market after Ukraine attains EU membership status," the association adds.
    • Since an eco-tax on CO2 emissions is already in place in Ukraine, the introduction of this mechanism should precede the implementation of ETS and the potential acquisition of EU membership.

The EBA hopes that the business position will be considered and commits to providing expert support to policymakers.

In conclusion, while Ukraine aims to implement effective climate policies and align with EU standards, the business community stresses the need for careful planning, continuous dialogue, and appropriate measures to support the national industry amidst these changes.

You will be interested