Opening accession negotiations with Ukraine will further advance reforms in line with the European Green Deal

The project ‘Mainstreaming sustainable development in Ukraine in line with the European Green Deal’ implemented by a coalition of independent think-tanks and NGOs, supported by the European Commission, has been closely monitoring the process of implementing the European Green Deal (EGD) policies and priorities in Ukraine since 2022, providing constant support to Ukrainian and international stakeholders in delivering the necessary reforms.

We welcome the conclusions of the Commission’s 2023 Enlargement Package Report on Ukraine and the recommendation for the Council to open the accession negotiations. We also find the observations and recommendations made by the Commission relevant for further consideration and ensuring progress in the EGD-related reforms.

In particular, we acknowledge the key reforms to be undertaken in terms of ensuring the independence of NRA, providing better transparency of energy markets, transition to cost-reflective pricing, developing Ukraine’s National Energy and Climate Plan (NECP), updating the strategic documents and efforts in achieving better energy efficiency, as well as adopting new climate legislation and strengthening the environmental policy.

The project has been systematically supporting the Ukrainian authorities in delivering these reforms and tracking the progress achieved in our monitoring reports. We are committed to facilitate this workstream in 2024 to stay in line with the Commission’s recommendations and to make sure that the identified priorities are duly progressed in Ukraine.

The expert team also recommends focusing on some specific areas covered in the Report to facilitate efficient path of the reforms and to solve the most urgent issues the Ukrainian citizens and entities face, providing additional comments and recommendations based on our monitoring and technical assistance activities. 

Energy Markets

With respect to market reforms, we fully support all of the proposed measures. The centerpiece in this regard, in our opinion, is the completion of the Regulator’s reform to establish a fully independent and strong NRA. It is essential not only for qualitative and efficient market regulation and monitoring but also for pursuing other reforms such as wholesale energy market integrity and transparency. REMIT implementation should be completed as soon as possible, irrespective of war circumstances.

Cost reflective energy pricing is crucial to improve liquidity of the gas and electricity markets, which are both experiencing severe debt crises. Yet this step may prove ill prepared without efficient market oversight and a redesigned system to support vulnerable customers, which should be undertaken earlier. 

The Commission rightly identified a steep decrease in transparency of the sector, which we will seek to reverse through advocacy and analytical activity. In these efforts we will aim to balance the considerations of national security and necessity to inform qualitative decision-making through effective information disclosure.      

Energy efficiency

We fully agree that despite facing the challenges of Russia’s war of aggression, Ukraine has made substantial progress aligning its energy efficiency policies with EU acquis. Noteworthy achievements include the adoption of legislation, such as the Energy Efficiency Law and laws related to buildings and commercial metering. Ukraine has established the Energy Efficiency Fund, contributing to the renovation of residential buildings.

However, certain areas require attention, such as updating the 2030 NEEAP to reflect current needs and challenges while ensuring it remains a robust guide for policy initiatives, identifying priority investments in energy efficiency for electricity and gas transmission, and implementing mandatory energy efficiency criteria for public procurement. Also, we continue to promote speeding up the implementation of bylaws for the implementation of the Energy Efficiency Law and taking into account the 2023 recast of the EU directive, as well as appropriate policies in the residential sector.

Renewable energy

In line with the Report, we fully agree with the recommendations for the upcoming period for the development of the renewable energy sector. By collectively addressing these recommendations, Ukraine has the opportunity to strengthen its standing as a resilient and reliable partner and become a green energy hub for the EU.

It is necessary to recognize Ukraine’s commitment to align with the 2030 Energy Community RES targets, emphasizing the importance of green energy transition. Further enhancement of legal frameworks include continued work on the guarantees of origin mechanism and ensuring the free circulation of guarantees, as provided for by the European market model. Yet, to achieve new ambitious annual targets for RES until 2030 as to be set by the NECP, additional support mechanisms should be developed.

We will continue to support by analysis and advocacy the efforts to develop support schemes for RES-based mechanisms distributed generation and thus the local energy resilience.

Climate

The Commission has acknowledged limited progress in reforming Ukraine’s climate policy and law. Main achievements in this area were demonstrated in previous years – in 2019, Ukraine adopted laws on monitoring, reporting and verification of greenhouse gas emissions, and management of ozone-depleting substances and fluorinated greenhouse gases. Additionally, in 2021, it updated its Nationally Determined Contribution (NDC). However, over the past two years, there has been a stagnation in the development of climate legislation, with Ukraine failing to enact any special laws.

The significance of the Report lies in outlining the expectations to adopt a climate law (defining legally binding climate goals and climate governance architecture), develop the NECP, an implementation plan for the updated NDC, and revision of low-carbon development strategy. It is worth noting that Ukraine is at varying stages of implementing these reforms. In particular, the Ministry of Environment is set to draft the climate law, the Ministry of Economy is working on the NECP, and the Ministry of Environment held public discussions on the action plan for the updated NDC implementation in 2023. At the same time, the transition from planning relevant measures to the approval and implementation of necessary documents is deemed critical.

Environment

We are satisfied with the Commission’s assessment of the overall good progress in the environment area. We share the Commission’s assessment of the level of preparation and weak administrative capacity being the key bottleneck for enforcement and implementation. In this context, we note some discrepancies in the 2023 report, in particular with regard to chemicals (REACH and CLP) alignment.

Similarly, Ukraine should continue practical implementation of the water sector reforms, and speed up waste management reform. We encourage the Ukrainian government to adopt a comprehensive approach to implementation of the industrial emissions legislation, as well as enforcement and inspection reform capable of delivering the expected results.

Links to reconstruction

We note the Commission’s view that the Green Agenda and Sustainable Connectivity cluster and the related reforms are intricately linked to Ukraine’s reconstruction during and after the war.  It is indeed crucial to ensure cross-sectoral mainstreaming of environment and climate action in the reconstruction plans of the country, identify green reconstruction strategy for key sectors and prioritize relevant EU legislation and standards in its National Programme for the Adoption of the Acquis (NPAA).

The Commission’s Communication and Report also highlight the importance of providing additional support to Ukraine in ensuring the green post-war recovery, including the Ukraine Facility to provide 50 billion EUR support. The project has been following the discussion around the draft Ukraine Facility Regulation and submitted its proposals for improving the transparency and accountability instruments provided. In addition, we support the systematic steps in enabling more financial support of the green recovery in Ukraine, which includes the access to EU funds and the reform of state aid in Ukraine.

Conclusions and key recommendations

In our opinion, a pivotal approach for Ukraine to achieve progress, which will be assessed in 2024, is to define priorities that should be a necessary step for an effective design of the NPAA. The proposed approach encompasses following key elements:

• completing ongoing reforms taking into account changes in the EU regulations (on ozone-depleting substances and fluorinated greenhouse gases, on further REMIT implementation);
• continuing initiated reforms (especially in the areas of monitoring, reporting and verification of greenhouse gas emissions and the establishment of a national emissions trading system; transition to transparent and cost reflective energy pricing, ensuring independent NRA); 
• launching new reforms (particularly in light of the updated acquis under the European Green Deal, namely the Fit for 55 package). 
• The verification of the energy efficiency and RES goals as a part of the national NECP process shall also be accomplished with the development of efficient support mechanisms and further improvement of the primary and secondary legislation.

These reforms should be comprehensive and cross-cutting, integrating environment and climate considerations into all areas of public policy and law in Ukraine, as well as within plans for the reconstruction and recovery from the consequences of the war. The adoption of NECP in line with the EU requirements where realistic and clear goals are to be set is also expected to outline the path forward to Ukraine’s green recovery and modernization of the sector. 

We also encourage the Government of Ukraine to develop a capacity-building programme for all key stakeholders, including local self-governance and administrations, to urgently address the gap in the awareness, knowledge and skills to design, implement and enforce the acquis.

Olena Pavlenko, DiXi Group

Nataliia Andrusevych, Resource-Analytical Center «Society and Environment»

Svyatoslav Pavlyuk, Association «Energy Efficient Cities of Ukraine»

Evgeniya Mateichuk, Ukrainian Leadership Academy

Valentyna Beliakova, Women’s Energy Club of Ukraine

Olesya Kramarenko, DZYGA

Mykola Ryabyka, PLATO