Ukraine is preparing to launch an emissions trading system

Ukraine is taking another step towards fulfilling its obligations under the EU Association Agreement by starting preparations for the launch of a national emissions trading system (ETS). The system will set limits on CO2 emissions, incentivizing businesses to decarbonize and helping the country meet its climate goals.

The European Business Association (EBA) has addressed the Ministry of Environmental Protection and Natural Resources with a number of proposals to improve the draft CMU decree. In particular, EBA experts emphasize the need to adjust the timeframe for preparing an analytical report and developing a regulatory framework. According to the association, the ambitious deadlines for 2024-2025 are unrealistic due to the complexity of research and consultations. They propose to postpone some of the activities to 2025 and engage specialists with relevant experience.

The EBA recommends gradual implementation of the system in the following stages:

• Restart of monitoring, reporting and verification (MRV): starting in 2025, with at least three years of operation before the pilot launch of the ETS. –
• Development of the regulatory framework: will run in parallel with the first phase and will take 2-3 years.
• Pilot phase of the ETS: starting in 2028.
• Full ETS phase: will start in 2031, subject to the end of martial law and a successful pilot period.

The pilot phase will be a key stage for improving the system, providing the necessary data for its further development. To do this, it is necessary to identify the regulations that need to be adopted before the launch and those that can be adapted later. Experts emphasize the importance of preparing the economy for integration with the European Emissions Trading Scheme (EU ETS) by strengthening interagency cooperation and adapting management platforms. It is also critical to identify the system administrator, which could be one of the ministries or a new institution.

The introduction of the ETS will allow Ukraine to realize its climate ambitions by setting emission prices that reflect changes in the economic and environmental situation.

In 2023, the EBA developed a concept for building an emissions trading system and presented it to the Ministry of Environment. The EBA experts are ready to continue to contribute to the development and improvement of the action plan.

According to the EBA, clear planning and transparent implementation of the ETS will contribute to the achievement of Ukraine’s climate goals, as well as integration with European carbon markets.