Kyoto Protocol: Opportunities for Ukraine

Українська

The goal of the Kyoto protocol is to reduce emissions of greenhouse gases (GHG) by setting up country-level emission quotas and international trade of emission rights. Under this treaty, Ukraine might be one of the main beneficiaries because it can sell large amounts of unused assigned emission rights (with an annual revenue estimated at USD 740 m till USD 2.9 bn from 2008-2012), and because additional reduction of emissions can be achieved at a relatively low cost and sold as further emission rights abroad. This last aspect is of particularly high importance as it potentially stimulates the influx of badly needed foreign direct investment. However, Ukraine's successful participation requires that the necessary institutional infrastructure to measure, monitor and trade emission right certificates is being set up by the time the protocol gets into force (expected for 2008). So far, Ukraine has made only minor progress in ratifying the protocol and is lacking far behind the developments in other Eastern European countries, in particular the EU accession candidates. This is all the more important, as Ukraine has to compete with those countries for such "climate investments," and funds will flow into those countries where institutional conditions are the most advanced (total influx of climate investment into Eastern Europe is estimated to USD 2.4 bn to USD 5.8 bn per year).

The purpose of the round table discussion was to underline the interest of foreign investors into climate investment schemes, and to show the urgent need for fast advances of the ratification process to policy makers.

EBRD researchers ranked Ukraine as the first country in the ranking of Eastern European countries that could potentially reap the most benefits from Kyoto protocol implementation. However, in the list of countries ranked by capacity to deal with the Kyoto protocol mechanisms Ukraine occupies the last place. "Ukraine, after signing the protocol in 1999, slightly decreased its pace in the international negotiation process and implementation of its international responsibilities [within Kyoto process]. Currently, the ratification package is ready and is submitted to the Cabinet of Ministers of Ukraine," said Mr. Semen Kublanov, Head of the ecology monitoring department at the Ministry of Ecology and natural resources of Ukraine. It is expected that the ratification package will soon be transferred to the parliament.

Mr. Zayets, first deputy chairman of the Verkhovna Rada committee on ecological policy, mentioned that Europe should guarantee that only hi-tech equipment, and not an obsolete one is transferred to Ukraine in the joint implementation projects. He also doubted that Ukraine could benefit from trading in emission quotas. Mr. Zayets said that currently Ukraine should carefully consider its participation process.

Even despite the relative slack in Ukraine's performance in Kyoto process Western companies are already looking for opportunities in Ukraine. Ruhrgas (Germany) and Ukrtransgaz (Ukraine) developed a joint project to optimize the work of the Ukrainian gas transit system, which will cut CO2 emissions by 350,000 tons annually and cost approximately EURO 15 mln to the German firm. In return for the investment Ukrainian side would have to provide the German firm with the emission certificates for the achieved GHG reduction. However, the project is currently stalled by the uncertainty of Ukrainian position towards Kyoto protocol as well as lack of necessary institutional infrastructure.

Mr. Glieman, representative of West LB, has described the interest of his organization in financing joint investment projects in return for the emission quotas. Mr. Koch, representing German Emissions Trading Association, stressed the need for early action on the side of Ukraine's government to also benefit from flexible schemes of emission trade, which is possible even before ratification ("Early JI Project Pipeline", "Prototype Carbon Fund"). He also noted slow progress of Ukraine in the Kyoto process and underlined that if Ukraine does not start immediate actions it drastically diminishes its chances to benefit from the Kyoto protocol.

The participants of the roundtable agreed that for Ukraine to benefit from the Kyoto protocol immediate action is to be taken as lots of precious time has already been wasted.

Program (48kb)