Post-war rebuilding of Ukraine’s economy in line with the EU decarbonization goals will cost only 5% more investments than “business as usual” scenario, but it would help Ukraine to eliminate its dependence on fossil fuel imports, which would have a positive impact on the balance of payments. This transition would also decrease deadly emissions of ash dust from coal-fired power plants by 69%. By reducing environmental pollution, the corresponding morbidity and mortality would also decrease by 0.7%-1.3% of GDP, equivalent to USD 1.1-2.1 billion per year.
The path to the development of a low-carbon economy will also save Ukraine and European markets through adjustment to the EU's potential carbon border adjustment mechanism (CBAM) which unequivocally indicates that third countries must commit to achieving carbon neutrality by 2050 at the latest, and comply with EU legislation in the areas of environment, climate, competition and energy.
The energy intensity of the Ukrainian economy is three to four times higher than the European Union average, driven by high demand in residential heating, an industrial structure that is concentrated in capital and energy-intensive activities, and an energy-inefficient industrial, energy, and building infrastructure due to decades of under-investment. This is the main reason why all recovery and reconstruction investments must be aligned with climate and decarbonization goals.
Ukraine should develop the National Energy and Climate Plan (NECP) according to the provisions of Regulation on the Governance of the Energy Union and Climate Action as a EU membership candidate and party to the Energy Community Treaty. NECP should become the main document for directing reconstruction efforts and associated sectoral policies. According to Energy Community requirements - when preparing their NECPs, Contracting Parties should undertake public consultations, establish a multilevel climate and energy dialogues and cooperate with each other and with Member States of the European Union. Each country must submit a progress report every 2 years, according to the structure, format, technical details and process set out in the Implementing Regulation. The Commission obliged, as part of the state of the Energy Union report, to monitor the EU's progress as a whole towards achieving general targets.
As part of the activities within Energy Community - the Governance Regulation lays out the schedule for submitting the draft and the adopted NECPs to the Energy Community Secretariat, as well as for submitting NECP Updates and Integrated Progress Reports. Ahead of the respective deadlines, Contracting Parties are invited to share preliminary drafts or draft chapters of the NECPs with the Energy Community Secretariat for informal comments. Areas covered by the NECPs are: energy efficiency, renewables, greenhouse gas emissions reductions, interconnections, research and innovation.
In Ukraine, the Ministry of Economy has started work on NECP using as its basis the non-public Energy Strategy of Ukraine until 2050, which was adopted by the Cabinet of Ministers this year. This is of considerable concern, as there was no public consultation on the adoption of this document.
Ukraine's NECP is the basis of the country's post-war recovery with the EU frameworks, and the first online meetings at the expert level were supposed to be held before the meetings of the G7+Ukraine coordination group, but they never took place. That is why we emphasize that the creation of the NECP must follow the procedures of the Energy Community without abbreviated procedures with ambitious goals of decarbonizing the economy, involving the public at all stages, from initial consultations to monitoring of implementation.
In December 2022 the European Commission (Directorate General for Energy) published Guidance to Member States for updated NECPs 2021-2030. Member States shall update their national plans for 2021-2030 by June 2023 (draft plans) and June 2024 (final plans). To better develop and implement the plans, the Member States were required to consult citizens, businesses and regional authorities in the drafting and finalization process.
Realizing Ukraine’s potential for energy transition and creation of a circular economy would require an increase in annual investments by EUR 30 billion per year, or approximately 15% of GDP by 2050 across various sectors, including transport, residential buildings, industry, power generation, and renewables. Energy investments would need to reach EUR 9.5 billion annually, with additional investments needed in energy infrastructure (e.g. power grids, heat networks, gas pipelines).
In this context it is also very important for Ukraine to adopt a green taxonomy of using funds for reconstruction from foreign and domestic funds. After all, every dollar or hryvnia invested should bring Ukraine closer to meeting the goals for the development of green energy in accordance with the European Green Deal, Paris Agreement, RePower EU Plan, the New European Bauhaus and other EU policies and international agreements.
