Business has identified 4 key conditions for effective climate policy in Ukraine

During the discussion of the draft Strategy for the Implementation of the Greenhouse Gas Emissions Trading System in Ukraine until 2033 and its Operational Plan, Ukrainian business identified 4 key conditions for effective climate policy. This is stated in the press release of the European Business Association (EBA).

«The business community welcomes this and other government initiatives in the field of climate policy, while drawing attention to some points without which they will be ineffective or will remain only on paper,» the statement said.

In particular, the Association calls on the Government not to rush to introduce the ETS and to ensure a regular dialogue with business on the parameters of the launch and operation of the future ETS.

«The ETS is a European obligation of Ukraine, defined in both the Association Agreement with the EU and the Ukraine Facility Plan. At the same time, neither of them sets a timeframe for when the ETS should start operating in Ukraine. According to the business community, the government’s proposed launch of the pilot phase in 2026 is not realistic, as there is no data on actual CO2 emissions from enterprises, which are the basis for building the system and its key elements,» the EBA said.

The introduction of the ETS will not exempt Ukrainian producers exporting to the EU from the need to pay CBAM and will lead to a significant increase in the cost of all products.

«Therefore, the ETS should be considered separately from the ETS, and attempts to implement the ETS in time for the start of the ETS financial obligations in 2026 may lead to a collapse of preparations for both the ETS and the ETS, given the limited resources of government agencies and businesses. This could jeopardize the success of efforts to reduce greenhouse gas emissions and requires careful planning and a balanced approach,» the association emphasizes.

In addition, the introduction of the ETS will lead to significant challenges for further economic recovery, not only because of the increased financial burden on producers, but also because of the rising cost of electricity, cement, steel and a number of other product groups that are critical during the war and recovery.

The third condition is that Ukraine should facilitate the application of CBAM to Ukraine on a declarative basis.

«The current CBAM regulation allows the EU to take into account exceptional and unprovoked events that have caused devastating consequences for the economy and industrial infrastructure of a country exporting goods covered by the CBAM to the EU. One approach could be to apply a declaratory approach to goods imported from Ukraine to the EU and covered by the СВАМ. In other words, it would be essentially the same approach as for other countries, but without charging emission fees,» the EBA notes.

This will reduce the financial burden on business and help companies accumulate resources to partially restore production levels affected by the hostilities.

Fourth, the Ministry of Economy should start developing a Ukrainian CBAM mechanism for imports of products from third countries.

«As Ukraine seeks to implement the European Union’s climate governance architecture, a border carbon adjustment mechanism similar to the one introduced in the EU should be a mandatory element. This will help protect domestic producers and ensure equal conditions for all market participants in Ukraine (producers and importers), as well as speed up and simplify the process of integrating the Ukrainian market into the EU market after Ukraine becomes an EU member state,» the association adds.

Since Ukraine already has a CO2 emissions tax, the implementation of the above mechanism should be carried out as soon as possible, in particular before the introduction of the ETS and before Ukraine’s potential EU membership, given the expected duration of these processes.

The European Business Association hopes that the position of business will be taken into account and will continue to provide expert support to the lawmakers.

As GMK Center reported earlier, the EBA believes that Ukraine is losing the climate trade war. In order to protect the national industry in the context of CBAM implementation, the state needs to take appropriate steps, including the development and implementation of its own mechanism. At the same time, other EU trading partners are actively negotiating CBAM, responding quickly to regular changes and updates issued by the EC.