Summary decarbonization monitoring ІІ-ІІІ quarter of 2024

The DiXi Group think tank prepares quarterly analytical reviews of Ukraine’s decarbonisation policies. The Decarbonisation Monitoring Q2-Q3 2024 records the main events and trends in three areas that are key to the decarbonisation of Ukraine’s economy: 1) RES and Energy Efficiency, 2) Climate and Environment, and 3) Subsoil Use. The document also contains an analysis of the best international practices that may be relevant and applicable in Ukraine in the respective areas to provide a basis for the development and improvement of national strategies and legislation in the field of energy policy, environmental protection and sustainable development of Ukraine.

RENEWABLE ENERGY AND ENERGY EFFICIENCY

Since the spring of 2024, Russian terrorists have continued to shell Ukrainian energy facilities, destroying more than 9 GW of capacity. The government has focused on rebuilding the energy infrastructure by adopting new regulations, exempting equipment duties and introducing energy management. Plans for the development of smart grids and renewable energy sources, as well as international modernisation projects, have been approved. A strategy has been developed to strengthen the energy system with a focus on decentralisation and energy efficiency, including financial mechanisms for consumers.

Synchronise new RES and energy efficiency support programmes with existing initiatives under the NECP, Energy Strategy and other national plans.
Introduce incentive tariff policies and competitive support systems through auctions or Net Billing for new projects.
Establish government programmes to support small-scale renewable energy sources through the Net Billing mechanism, following the example of the UK, to receive payments for excess electricity.
Introduce flexible quotas to limit the production of renewable energy sources with compensation for underproduction, as in Germany.
Consider additional incentive mechanisms, including subsidies for balcony power
plants, following the German experience.

CLIMATE AND ENVIRONMENT

In the Q2-Q3 2024, Ukraine adopted a number of environmental acts, including new water quality standards, liability insurance for the nature reserve fund, and wastewater treatment rules. The Law on Integrated Prevention of Industrial Pollution was adopted, and bylaws were developed to approve BAT. In June 2024, the National Energy and Climate Plan until 2030 and the draft Greenhouse Gas Emissions Trading Strategy until 2033 were approved. An analysis of the situation indicates that work on certain issues needs to be intensified to ensure the successful implementation of these strategies:

When determining the types of activities for the ETS in Ukraine, they should be as close as possible to the current EU ETS and take into account the CBAM mechanism, and consider the inclusion of maritime transport.
It is recommended to add the production of ceramics, paper, aluminium, metals, acids to the list of activities subject to monitoring, reporting and verification, as these areas are covered by the EU ETS.
When setting emission quota limits, take into account Ukraine’s Nationally Determined Contribution to the Paris Agreement and decarbonisation goals.
Ensure a systematic dialogue between participants in the ETS implementation process through the National Forum and working groups.
Determine the amount and sources of funding for the introduction of the ETS, attract budgetary funds and international assistance.

SUBSOIL USE

In Q2-Q3 2024, the Government of Ukraine improved the monitoring of the geological environment (Resolution No. 685), considered draft law No. 6227 on amendments to the National Programme for the Development of the Mineral Resources Base of Ukraine until 2030, changed the Methodology for determining water massifs and introduced
special permits for subsoil use. The State Service of Geology and Subsoil of Ukraine is working on a strategy for critical minerals, a list of strategic subsoil for auctions, and is strengthening cooperation with the EU and the US. Based on foreign experience, the following recommendations are presented for further improvement of the geological
environment monitoring system in Ukraine and expansion of activities in the field of critical raw materials:

Expand monitoring of the geological environment to include geothermal resources, their identification, monitoring of subsurface temperatures and local use applications.
Intensify research on critical raw materials for the green transition, taking into account EU environmental requirements.
Adapt monitoring to climate change by assessing its impact on geological processes.
Study EU geodata formats for integration with EU information systems.
Expand participation in international geological projects to share experience and technologies.
Implement modern technologies: automated data collection, satellites, UAVs and geographic information systems.

The document was prepared with the support of the International Renaissance Foundation within the framework of the project «Supporting the Decarbonization of Ukraine’s Economy through the Development of New Debt Financing Models. Stage 4».

The contents of this document are the sole responsibility of DIXI GROUP and can under no circumstances be taken to reflect the views of the International Renaissance Foundation.