Ukraine has as many as four alternative versions of draft legislation on the launch of the National Emissions Trading System (NETS). The differences between them are, in some cases, fundamental and may have varying impacts on the viability of the carbon market. Ukrainian businesses, together with the EU Delegation to Ukraine, are convinced that the state needs a phased transition, a separate fund for the use of revenue from the emissions trading market, and the development of institutional capacity in order to implement all planned measures in accordance with EU requirements.
These conclusions were reached at a meeting between the European Business Association’s Committee on Industrial Ecology and Sustainable Development and the Delegation of the European Union to Ukraine.
No abrupt transition
In the view of business representatives, a phased transition to the introduction of a carbon market is the most balanced approach. The version of the draft law proposed by the Ministry of Economy is considered the most suitable for this purpose.
"The system should ensure a gradual transition for Ukrainian industry, predictable rules for carbon price formation, sufficient transitional periods, and the ability to direct NETS revenues toward the decarbonization and modernization of enterprises," emphasized the European Business Association.
Revenues for Decarbonization
The financial management model for the carbon market became a separate subject of discussion. The position of business is unequivocal: for effective and transparent use of funds, Ukraine needs a separate fund and a clear mechanism.
The EBA is confident that NETS revenues should be returned to Ukraine's economy. The most optimal way to utilize these funds initially is to support the businesses that paid them by financing decarbonization and environmental modernization projects at enterprises.
Harmonization with EU Standards
The Ukrainian Emissions Trading System must comply with the European Union Emissions Trading System (EU ETS), which Ukraine should join after acceding to the European Union. Business also believes that the implementation of NETS should adhere to the recommendations of the European Commission. Among other points, the EU executive authority emphasized the following:
- gradual introduction of the system;
- preservation of the competitiveness of Ukrainian industry;
- avoidance of double financial burden due to CBAM.
Institutional Capacity of the State
NETS is a large-scale mechanism that requires the state to have sufficient human resources and expertise. The relevant authorities must have enough specialists who have undergone proper training.
"Without established institutional capacity and the necessary expertise, ensuring effective administration of a complex quota trading system will be difficult," noted the Association.
The EBA emphasized that discussions on the reform will continue. Next time, the discussion regarding NETS will take place on the platform of the Ukrainian Climate Office.
Let us recall that in Ukraine, back on May 15, the Ministry of Economy published a working version of the draft law on the National Emissions Trading System (NETS). However, on July 31, the document disappeared.
Instead, during July, as many as three alternative documents were registered on the website of the Verkhovna Rada, none of which have undergone the public consultation process:
- July 7 – Draft Law No. 15386 “On the National Greenhouse Gas Emissions Trading System”;
- July 21 – Draft Law No. 15386-1 “On the Fundamentals of Functioning of the National Greenhouse Gas Emissions Trading System”;
- July 23 – Draft Law No. 15386-2 “On the National Greenhouse Gas Emissions Trading System”.
As EcoPolitic has found out, one of these versions is already being presented to parliamentary committees, although officially all still hold the status “submitted for review.” The document in question is No. 15386-2.
