The investment appeal and competitiveness of Ukrainian businesses may suffer as a result of inconsistencies in the legislation governing the establishment of the National Emissions Trading System (NETS). Ukrainian businesses see such risks in the provisions of draft law No. 15386, which was registered on the Verkhovna Rada’s website in July.
These concerns were raised by member companies of the European Business Association’s (EBA) Committee on Industrial Ecology and Sustainable Development.
The draft law ‘On the National Greenhouse Gas Emissions Trading System’ was not subject to any consultation with the business community or experts, so its provisions came as a surprise to industrialists. The EBA notes that document No. 15386 differs significantly from the version drafted by the Ministry of Economy, Environment and Agriculture, which had taken on board comments from the business community and the European Commission.
Key observations
The business community has highlighted the main shortcomings that could hinder the effective, transparent and fair operation of the NSTV:
- the absence of legally defined guidelines for setting the price of allowances;
- the accelerated reduction in the free allocation of allowances;
- the narrowing of mechanisms to support decarbonisation and the reduction in financial support for investment projects;
- the channelling of the NSTV’s revenues into the existing state fund rather than the creation of a separate Fund for the Modernisation of Ukraine;
- the concentration of regulatory and financial-management functions within a single body.
The draft bill proposes introducing a mandatory carbon price for companies exporting their products to the European Union. In the Association’s view, this provision requires further legal assessment. It could introduce the risk of double carbon taxation into the legislation, given the payments made under the Carbon Border Adjustment Mechanism (CBAM).
“In view of the above, the Association does not support draft law No. 15386 in its current form. At the same time, the business community considers it appropriate to ensure further refinement of the legislative framework for the National Carbon Trading System, taking into account the comments of the business community, the recommendations of the European Commission, and the approaches set out in the draft developed by the Ministry of Economy, Environment and Agriculture of Ukraine,” the European Business Association emphasised.
It should be noted that the ministerial draft bill has disappeared without trace from the Ministry of Economy’s portal. Instead, three alternative versions are available on the Verkhovna Rada’s website, which were registered by MPs quietly and without discussion. You can find out more about these draft bills here.
