In Ukraine, during the war, the issue of stopping enterprises throughout the country was very acute. The task of the government was to start the economy as soon as possible, because this is not only filling the budget, but also the access of Ukrainians to the necessary goods and services. According to the latest data, almost half of the business operates with restrictions caused by the Russian invasion.
The editors of Ecopolitics decided to find out how the environmentally conscious business feels? After all, before the war in Ukraine, the trend towards environmental friendliness was only gaining momentum. Companies were interested in moving towards zerowaste, ESG and sustainability, because these were, in particular, the requirements of our European partners. To understand the situation with "green" business trends in Ukraine during the war, we talked to the coordinator of the committee on industrial ecology and sustainable development of the European Business Association Olga Boyko .
- Has the war affected the desire of enterprises to move towards sustainable development goals?
From the first days of the war, we in the Association have launched constant surveys to keep abreast of moods, questions and business plans. From what we see, most businesses have supported and continue to support the country, pay taxes and salaries, actively help defenders in the Armed Forces of Ukraine, terrorist defense and medical institutions, provide temporary shelter to internally displaced citizens from other regions, and also provide communities with food, medicine and other essentials. Companies are restoring their economic activity, they understand that it is on their shoulders that the economic front of the country rests.
Such a thirst for life brings us even closer to victory and inspires us to think about the permanent restoration of Ukraine right now, which is what responsible business is doing.
- Is EBA involved in the post-war reconstruction program? What is discussed there? What should we expect? Will environmental norms and standards be taken into account during the post-war reconstruction?
The Association is honored to be invited to participate in the working groups , created under the National Council for the Reconstruction of Ukraine. I am working on the development of the direction "Environmental safety". It consists of nine thematic sub-groups, each of which is dedicated to finding solutions to long-standing problems in the environmental industry. From cross-cutting reforms, such as environmental control and monitoring, combating climate change and the transformation of the ministry, to sectoral ones, in particular, waste management, industrial pollution, sustainable use and conservation of natural resources. All of them are divided into short-term, that is, accepted until the end of 2022, medium-term and long-term with a implementation period until 2032. The main condition is that all proposed reforms or projects must comply with the European integration course of Ukraine. This, probably, became the key to consensus among representatives of various stakeholders - the public, government and business included in the working group.
A preliminary draft of the "Environmental Safety" direction has already been developed, which includes various proposals, but sometimes it is difficult to understand their logic. For example, it is proposed to pass bills No. 3091 and No. 6175 by the end of 2022 as part of the environmental control reform, while the Law Enforcement Committee of the Government of Ukraine sent the latter for revision.
Moreover, the liquidation of the State Environmental Inspectorate and the creation of a new supervisory body instead of it are proposed to be stretched over 2023-2025.
And we remember very well that draft law No. 3091 provides for a significant expansion of the powers of inspectors without establishing liability for abuse and narrows the rights of businesses. That is why these tasks must be carried out in parallel and not lead to the resumption of the “nightmarine” business of the pre-war times.
- In your opinion, what is the role of RES in the post-war economic recovery? What, for its part, should the state do to support the "green" energy industry?
While Ukraine is at war with Russia for its territorial integrity, the world is confronting it in an energy war. To reduce dependence on Russian energy resources, countries are trying to diversify their energy sector, including through the transition to carbon-free technologies.
The European Commission has published the REPowerEU plan, the main goal of which is to increase the share of renewable energy in the EU's electricity mix to 45% by 2030, which is a more ambitious goal than envisaged by the Fit for 55 package.
In the context of strengthening climate policies, in particular the trend towards the introduction of cross-border carbon taxes by the EU or the US, greening the carbon-intensive industry is urgently needed. And it is renewable energy that can become the key to reducing the carbon footprint of products and maintaining its competitive position in international markets.
In addition, renewable energy is directly related to increasing profitability, and, consequently, the availability of "green" hydrogen, which should replace gray hydrogen in those industries where there are no alternatives with low emissions, in particular, oil refining, fertilizer production and heavy industry, for example, the production of steel, which requires high temperatures.
Since 2011, the share of RES in Ukraine has grown from 4% to 14%, and the largest facilities are located in Zaporozhye, Kherson, Mykolaiv and Dnipropetrovsk regions.
Due to hostilities, a significant part of Ukrainian renewable energy facilities is inaccessible, occupied or destroyed. And in addition, the state delays payment for the supplied electricity in 2021 and early 2022.
This situation does not at all correspond to the government's plans for the post-war reconstruction of the country on the basis of decarbonization. That is why, first of all, it is necessary to resolve the issue of debts in the renewable energy market, as well as provide state support for companies to restore damaged capacities. The next steps should be the introduction of "green" auctions and the gradual alignment of the electricity tariff for industry and the population.
- What business is currently suffering from the devastating effects of war on the environment?
Hard to say. Obviously, every business is affected negatively in its own way by hostilities. For example, a heavy impact on the agricultural business. Thus, passing military equipment, destruction of weapons by burning or undermining pollutes the land and destroys crops, landmines and cluster munitions significantly restrict access to agricultural land and pollute soil and water bodies with metals and toxic substances. Separately, there is the issue of spontaneous burial of the remains of the bodies of the killed military and civilians on both sides, which causes irreparable harm to the environment.
- According to your calculations, what losses will Ukrainian business suffer from the introduction of CBAM?
Even despite the abolition of duties for Ukrainian imports, SBAM remains a real threat . According to the latest estimates, at a price of 84 euros per ton of CO2 emissions and taking into account the volume of exports of Ukrainian products to the EU in 2021, domestic producers together will pay more than 1 billion euros annually .
By industry, it looks like this:
- cement products - 3.2 million euros,
- fertilizers – 74.2 million euros,
- organic chemical products - 17.7 million euros,
- polymers - 162.5 million euros,
- metallurgy - 961.3 million euros annually.
The introduction of CBAM incurs additional costs not only for Ukrainian business, but also for European ones, because it involves the reduction of free quotas, which allowed some European industrialists to actually not pay for their CO2 emissions.
Moreover, CBAM is a kind of Pandora's box, because in addition to the EU, the introduction of a similar mechanism is being actively considered in Canada, China and the UK, and the US has even registered a corresponding bill.
Unlike the European one, the American border carbon adjustment mechanism does not have a transitional period, is introduced as early as 2024, has a fixed price of $55 per tonne of CO2 with a projected annual growth, and does not apply to developing countries. To calculate the benchmark, 2 approaches will be used. For countries where there is no clear climate policy, the average carbon content of the country's economy is considered to be the baseline. And for countries that have transparent policies for tracking and verifying CO2 emissions, it will take real emissions data from US businesses in each industry as a basis and allow manufacturers to submit verified emissions data on a case-by-case basis. Thus, importers with higher emissions than their US counterparts will pay the tax.
For Ukraine, the results are sad in any conditions, because we have not yet launched a monitoring, reporting and verification system that would provide reliable data on emissions from enterprises at the country level, and we are not officially included in the list of developing countries. Considering that the carbon intensity of the US economy in 2019 was 269.26 tCO2e/million $GDP, and that of Ukraine was 1439.00, the US border carbon tax on imports could be about $1.3 billion.
- Emissions trading system (ETS) is one of the main components of the EU climate policy. According to Directive 2003/87/EC, most Ukrainian companies are subject to it. How is business preparing for this in the context of Ukraine's European integration?
Our Association warned about a possible disruption in the launch of the monitoring, reporting and verification system, which is the first stage in the creation of a greenhouse quota trading market, on the eve of the war. Then there were problems with constant refusals to approve standard monitoring plans by the Ministry of Natural Resources, an insufficient number of accredited verifiers, etc.
With the introduction of martial law, of course, the processes stopped in principle, and the companies were not able to verify or submit their first reports until March 31, as planned. Separately, it should be said that the estimated cost of report verification starts from UAH 750,000, which is an unbearable amount for most companies.
- How do you assess the work of the Ministry of Natural Resources from the point of view of the Department of Internal Affairs?
To be honest, I hoped that the experience of promptly resolving problems with the EIA procedure during the pandemic, which we had in 2020, would help us. Then, at the end of April, our Association signaled to the authorities about the impossibility of holding public hearings due to restrictions on mass gatherings, and two months later the relevant law was adopted by the Verkhovna Rada. However, the procedure was blocked at the level of the Ministry of Natural Resources until the beginning of August.
This time, the problem is more complex, because enterprises are physically unable to perform various stages of the EIA cedure provided for by law. For example, it is rather difficult to prepare a high-quality EIA report in terms of describing environmental factors in areas where active hostilities have been or are being conducted, because it is potentially dangerous for the life and health of people who will conduct such field studies. The situation is similar for the implementation of post-project monitoring.
But so far there are only clarifications from the Ministry of Natural Resources, which, unlike legislative acts, have no legal force, are informational in nature and do not solve the problem.
- During the three months of your active work with government officials, have the authorities changed their approach to business? Are they ready to hear the position of companies and listen to it?
The President and the team showed the whole world unconditional leadership, demonstrated how motivated and freedom-loving the Ukrainian people are. Now we are all in the same boat - government, business, population.
In the first weeks of the war, Cabinet of Ministers of Ukraine and the VGovernment passed a number of initiatives to deregulate business. In the context of my environmental profile, for example, some permits can be obtained based on the submission of declarations, a moratorium on scheduled and some unscheduled inspections has been established, the provision of administrative services in the field of monitoring, reporting and verification of greenhouse gas emissions has been terminated, therefore, the absence of inspections on this basis and no liability for late submission of such reports.
The Ministry of Economy announced the deregulation of business, and we submitted a lot of proposals from the Association. I really hope that they will be taken into account and, in general, the trend towards qualitative changes will continue. I hope that government and business will be partners and will continue to work on the same side. After all, only together we can stop this shameful war and rebuild the country, guided by the best European practices. Build an even more progressive and cool country!