On May 6, the Cabinet of Ministers of Ukraine approved the Concept of the State Targeted Program to Support Enterprises Implementing the Best Available Technologies and Management Methods for the Period until 2030.
The text of the relevant Resolution No. 522 was published on the government's official website the next day.
In total, the Concept is set out on 13 pages. 4 of them are devoted to a lengthy definition of the problem, which could have been contained on one page. It also seems that no one has read the final version of the approved document, as there are fragments in different sections that duplicate each other both in meaning and content. For example, the goal of the Program is formulated twice: directly in the section “Program goal” and later in the section “Expected results of the Program implementation, determination of its effectiveness”. Here is the first version.
Program objective: to reduce the negative impact on the environment, to promote the competitiveness of enterprises, energy efficiency and sustainable development of Ukraine through the implementation of the best available technologies and management practices (BAT).
In order to achieve the Program's goals, the Cabinet of Ministers sees two areas of action
- provide enterprises with the necessary financial support;
- to amend legislation.
Solutions to the problem of BAT implementation in Ukraine
The authors of the Concept noted that the European experience of financing the environmental modernization of enterprises is important for Ukraine, since, in addition to the enterprises' own resources and loans, financing for BAT implementation could be obtained from various EU funds, as well as national funds of EU member states.
They considered 2 options for solving the problem of implementing the best available techniques and technologies:
1. Providing financial support to enterprises for BAT implementation. It can be in the form of grants or soft loans for companies that invest in BAT.
It is worth noting here that the option of support in the form of tax benefits, which was in the draft Concept prepared and submitted by the Ministry of Environmental Protection and Natural Resources of Ukraine, has disappeared from the approved Concept.
In addition, in the final version of the Concept, only one of the three disadvantages of this option remained. Thus, in the draft document, the Ministry of Environment noted the following:
- expenditures from the state budget, which may be difficult to fulfill under economic constraints;
- possible difficulties with resource allocation and control over their effective use;
- lack of guarantees that all enterprises that receive financial support will use it for its intended purpose.
The government-approved Concept left out only the second point about difficulties in allocating resources. Here we were thinking that with the filling of the state budget for the fourth year of the war, the difficulties must have suddenly disappeared. As well as concerns that companies might misuse the funds allocated to them.
But no, at the end of the Concept, it turned out that the State Fund for Decarbonization and Energy Efficient Transformation would help companies finance equipment modernization, a budget program that receives funds from environmental taxes. That is, the state budget will still be invested, but its resources are very, very limited compared to the modernization needs of enterprises.
But outside of this budget program, the state will not provide funds for decarbonization of equipment.
2. Amend legislation to encourage companies to implement BAT. Such changes include the development or improvement of environmental standards for the implementation of the best available technologies and management methods by plant operators.
In this paragraph, compared to the text of the draft, there is no mention that amendments to the legislation may include tax and customs benefits. Apparently, the authorities decided that this would be too generous for producers.
The disadvantages of this option include the following:
- legislative changes require a long time to develop and implement, which may delay the results;
- companies may face difficulties in meeting the new requirements due to high modernization costs.
Since each of the options has its advantages and disadvantages, the government believes that a comprehensive approach that combines elements of both options (financial support in the form of grants and soft loans and legislative changes) is optimal.
How the implementation of best available techniques and technologies will be financed
The estimated amount of funds required to implement the Program is UAH 10 billion.
The Cabinet of Ministers acknowledged that one of the main challenges for enterprises is the high cost of modernization and implementation of new technologies and immediately warned that funding from the state budget is not the main source of resources for the Program.
“The state should only co-finance projects to modernize the equipment of enterprises to implement the best available technologies and management methods,” the Concept states.
According to it, the main source of funding for projects to modernize the equipment of enterprises for the implementation of BAT (and here is no surprise) will be the own funds of the enterprises that need modernization.
The government officials listed the following list of possible financial instruments to support enterprises:
- government support for co-financing BAT projects by reimbursing part of the loan;
- loans from international financial organizations;
- grants under international technical assistance projects (programs);
- preferential lending under the state program “Affordable Loans 5-7-9%”;
- financial support from the State Fund for Decarbonization and Energy Efficiency Transformation.
The Cabinet of Ministers noted that Ukraine already has access to many international environmental initiatives and financial assistance programs, such as those of the EU, the UN, and the World Bank. These organizations can provide funding in the following areas
- support for innovative environmental projects;
- financing research and development in the field of energy saving and environmental safety;
- investing in the development of green technologies.
According to the authors of the Concept, the implementation of the Program will stimulate the attraction of private investment for the modernization of enterprises and the introduction of BAT.
“It is necessary to create favorable conditions for attracting private investors, in particular by stimulating public-private partnerships,” the document says.
It also declares that “the Program should include mechanisms for protecting investments and ensuring the profitability of projects, which will help attract the private sector.”
According to the international technical assistance project “Best Available Technologies and Management Practices for Ukraine” implemented by the German Agency for International Development (GIZ), the average size of a bank loan to enterprises for the implementation of projects to modernize enterprise equipment for the implementation of BAT is UAH 48.8 million.
How the effectiveness of the Program will be checked
The Cabinet of Ministers proposes to monitor the reduction of air and water pollution, as well as the reduction of waste generation, based on the reports of plant operators on compliance with the terms of the integrated environmental permit and inspections by the State Environmental Inspectorate. It will also evaluate the improvement of production efficiency, reduction of energy intensity of products, and increase in productivity of enterprises.
“Important indicators will be data on the reduction of energy consumption per unit of production, which will allow us to assess the economic benefits of implementing the best available technologies and management methods,” the Concept states.
The effectiveness of the Program will also be determined by the number of enterprises that have implemented BAT.
The following are the indicators of the Program's implementation:
- attraction of loans from international financial organizations, grants under international technical assistance projects (programs) by at least two enterprises (how to understand this wording is not specified);
- providing access to preferential state lending under the program “Affordable Loans 5-7-9%” to at least 10 enterprises;
- establishment of an environmental protection unit at at least 10 enterprises;
- achievement of the maximum permissible level of emissions set in the relevant BAT conclusions by at least 10 enterprises.
These indicators also raise questions.
As a reminder, in November 2024, the Ministry of Ecology prepared and published a draft resolution of the Cabinet of Ministers of Ukraine “On Approval of the Concept of the State Targeted Program to Support Enterprises Implementing the Best Available Technologies and Management Methods for the Period up to 2030”.
