12/02/2024

GDU presented its background paper for the High Level Working Group

On February 9th, the High-Level Working Group on the Environmental Consequences of the War presented an Environmental Compact for Ukraine to President Zelenskyy: https://www.president.gov.ua/en/news/mizhnarodna-robocha-grupa-shodo-ekologichnih-naslidkiv-vijni-88869

The Environmental Compact for Ukraine, which contains 50 recommendations, was presented to Volodymyr Zelenskyy by the co-chair of the Working Group, former Deputy Prime Minister and Minister for Foreign Affairs of Sweden Margot Wallström.

Please find the Environmental Compact for Ukraine here (English version) and here (Ukrainian version).

Green Deal Ukraїna prepared a background paper for the High-Level Working Group with six visions of a successful green recovery in critical sectors. Each vision is underpinned by selected proposals for approaching this vision and, at the same time, aligning Ukrainian legislation with EU requirements. The paper consulted with Ukrainian organisations, ministries and independent experts to prioritise policy recommendations that are most timely and feasible for the Ukrainian government.

General content of paper:

The overarching theme is that Ukraine needs a vision on how green recovery policies can address Ukraine’s most urgent challenges. Otherwise not-sustainable investments risk locking-in a pathway that is inconsistent with accession to the EU - the only credible route to security and prosperity for the country. Getting access to, and becoming competitive on the single market requires a profound transformation of the Ukrainian economy. To reach there, Ukraine needs increasing inflows of foreign capital and the development of credible institutions.

Hence, our proposals center around using foreign support to enable investments into sustainable assets, while creating the institutions needed for sustainable economic development.

Selected proposals:

To ensure that Ukrainian industry can be competitive on the European market we call for a credible pathway to gradually align carbon-pricing in Ukraine with that in the EU. To overcome political constraints we suggest that international partners might match Ukrainian carbon-price revenues with grants or loans that are used to support transition-related investments.
Integrating Ukraine’s successful agriculture into the European market is essential for Ukraine’s EU membership and ultimately promises higher incomes for farmers. But it is a challenging task. It, for example, requires phasing out certain pesticides and controlling fertiliser use. To underpin the implementation of the EU’s complex agricultural legislation Ukraine needs an effective rural institutional infrastructure. One concrete way ahead is setting up pilot-schemes to monetize the positive externalities of land restoration through carbon offsetting and sustainable bioenergy production. Such schemes would allow Ukrainian farmers to generate cash flows and attract investment, incidentally fostering the development of rural administrative capacities.
Restoring and modernising the building stock in Ukraine is an arduous task that would massively contribute to the prosperity and energy security of the country. Again, foreign support should be used to catalyse institutional reforms that allow pilot projects to scale. We discuss an external audit mechanism that gives investors a strong trust and credibility anchor.
To ensure the security and modernisation of Ukraine’s energy systems, electricity distribution will have to play a substantial role in a more decentralised and low-carbon system. We recommend reforms to incentivise distribution system operators to restructure their business in order to become eligible for much-needed foreign investments.