Ukraine

Critically Insufficient4°C+ World

NDCs with this rating fall well outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would exceed 4°C. For sectors, the rating indicates that the target is consistent with warming of greater than 4°C if all other sectors were to follow the same approach.

Highly insufficient< 4°C World

NDCs with this rating fall outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach between 3°C and 4°C. For sectors, the rating indicates that the target is consistent with warming between 3°C and 4°C if all other sectors were to follow the same approach.

Insufficient< 3°C World

NDCs with this rating are in the least stringent part of a country’s “fair share” range and not consistent with holding warming below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach over 2°C and up to 3°C. For sectors, the rating indicates that the target is consistent with warming over 2°C and up to 3°C if all other sectors were to follow the same approach.

2°C Compatible< 2°C World

NDCs with this rating are consistent with the 2009 Copenhagen 2°C goal and therefore fall within a country’s “fair share” range, but are not fully consistent with the Paris Agreement long term temperature goal. If all government NDCs were in this range, warming could be held below, but not well below, 2°C and still be too high to be consistent with the Paris Agreement 1.5°C limit. For sectors, the rating indicates that the target is consistent with holding warming below, but not well below, 2°C if all other sectors were to follow the same approach.

1.5°C Paris Agreement Compatible< 1.5°C World

This rating indicates that a government’s NDCs in the most stringent part of its “fair share” range: it is consistent with the Paris Agreement’s 1.5°C limit. For sectors, the rating indicates that the target is consistent with the Paris Agreement’s 1.5°C limit.

Role model<< 1.5°C World

This rating indicates that a government’s NDC is more ambitious than what is considered a “fair” contribution: it is more than consistent with the Paris Agreement’s 1.5°C limit. No “role model” rating has been developed for the sectors.

1.5°C Compatible< 1.5°C World

Economy-wide

Between 1990 and 2000, emissions in Ukraine dropped by 55% from 936 MtCO₂e to 426 MtCO₂e excl. LULUCF. From 2001 to 2007, emissions started to increase again moderately, followed by a steep decline during the financial crisis in 2009 and further declines in recent years as a result of the conflict in eastern Ukraine. Between 2015 and 2016, emissions increased by 5% to 335 MtCO₂e, but decreased again by 4% to 321 MtCO₂e in 2017.

Currently implemented policies are expected to lead to an emissions level of 367-368 MtCO₂e excl. LULUCF in 2020 and 462-491 MtCO₂e excl. LULUCF in 2030, i.e. Ukraine is likely to overachieve its NDC targets.

Since 2011, Ukraine has a carbon tax which applies to CO₂ emissions from stationary sources in the industry, power, and buildings sectors. In November 2018, the Ukrainian parliament decided to steadily increase the carbon tax rate (currently 0.02 USD/tCO₂) from January 2019 onwards. But even with the planned increase the rate would remain below 1USD/tCO₂ in 2020 and still be the lowest carbon price in the world to date (Ministry of Finance of Ukraine, 2018; World Bank Group and Ecofys, 2018).

In July 2018, Ukraine published its 2050 Low Emission Development Strategy. This strategy provides emission reduction pathways for the energy and industry sectors based on four scenarios containing different ambition levels of decarbonisation measures and policies. If fully implemented, Ukraine could significantly overachieve its NDC target with emission levels of 24% to 45% below the 2030 target.

Following Ukraine’s national elections in July 2019, Oleksiy Orzhel, head of the Ukrainian Association of Renewable Energy, was appointed Minister of the newly established Ministry of Energy and Environmental Protection, which sends a positive signal (Chemnik, 2019; Government of Ukraine, 2019). Following his appointment Orzhel has laid out his priority areas for the near future, including a "significant" increase in imports of gas via Poland and a renewed focus on energy efficiency and renewable energy to reduce the demand for gas in power generation (Elliot, 2019). Further, Ukraine is looking to attract international investments for untapping natural gas reserves in its onshore blocks and in the Black Sea. While locally produced gas would lower Ukraine’s dependence on Russia, the country should rather focus on increasing its renewable energy generation to move towards a Paris-compatible pathway.

Energy supply

The energy supply sector is responsible for 68% of Ukraine’s total emissions excluding LULUCF. In 2008, Ukraine introduced a feed-in-scheme with fixed prices, called the "green" tariff for electricity. The green tariff also guarantees grid connectivity to all renewable power generated from the project. The feed-in tariffs (FiT) were initially established at relatively high rates: 0.47 USD/kWh for rooftop solar PV under 100 kW and 0.12 USD/kWh for wind projects with capacity greater than 2 MW (International Energy Agency, 2017). The tariffs were updated in 2012, 2015, and 2017 and adjusted to market levels. The International Energy Agency (2017a) reports FiT rates of 0.18 USD/kWh for roof-top solar and 0.11 USD/kWh for large wind projects (greater than 30 kW capacity).

The amendment in 2015 removed the “local content requirement” previously introduced in 2013. This was replaced by a “local content premium,” which provides an additional premium to plants using components produced domestically. A 5% premium on top of the regular feed-in tariff is provided for 30% local content, while a 10% premium is provided for 50% local content (International Energy Agency, 2017). In the case of a wind turbine, the blade and tower are each considered to be 30% of the plant, while the main frame and nacelle are each considered to be 20% of the plant (International Energy Agency, 2017a).

Due to concerns about the financial sustainability of the existing support scheme, a law introducing a new scheme based on competitive capacity auctions for renewables was submitted to parliament in June 2018 and signed into law in May 2019 (Mykhailenko et al., 2019; Savitsky, 2018). Investors can still secure the “green tariff” if their projects have obtained land use rights, a grid connection agreement, a construction permit and a power purchase agreement (PPA) by 31 December 2019 (KPMG Ukraine, 2019).

In 2017, Ukraine updated its energy strategy through to 2035 (Government of Ukraine, 2017a). The strategy sets new targets for electricity generation from different energy carriers. Although hydropower dominates the country’s renewable capacity (averaging 4.6GWp), wind, solar and bioenergy capacity increased by 54% to 2.1GWp in 2018, with an additional 4.6GWp of capacity in the pipeline (KPMG Ukraine, 2019). In 2035, 25% of electricity generation is projected to come from renewable energy sources including hydropower (2015: 4%), 25% from nuclear power (2015: 26%), and 50% from coal, natural gas and oil products (2015: 70%) (KPMG Ukraine, 2019). However, a step-by-step implementation plan has not yet been developed. As there are no clear supporting policies tabled or discussed, except the feed-in tariff and auction mechanisms, we have not further quantified the energy strategy.

In April 2018 the national transmission system operator Ukrenergo announced—following an earlier announcement in June 2017 on full integration with the European Network of Transmission System Operators Electricity (ENTSO-E) by 2025—the support of full-scale deployment of renewables in Ukraine and investments in grid modernisation (Savitsky, 2018).

Ukraine’s Electricity Market Law of June 2017 aims at aligning Ukraine’s national legislation with the regulation from the European Union’s Third Energy Package on the European gas and electricity markets through which Ukraine’s national electricity market will be liberalised (Government of Ukraine, 2017b; IEA, 2017). This includes separating companies according to distribution and transmission of electricity (Kiyv Post, 2017).

The nation opened its electricity wholesale market in July 2019. Market regulations continue to adjust financial flows in the system, requiring the big energy companies to provide more electricity at low prices to the Guaranteed Buyer (GB) so that the GB can use increased profits to finance renewable support costs from the transmission tariff (Mykhailenko & Temel, 2019). Renewables support could, however, be put at risk if the currently discussed decrease in price caps was to be implemented. In general, more electricity is traded at regulated prices which undermines the very idea of a market opening (Mykhailenko & Temel, 2019).

Industry

The industry sector is responsible for 16% of Ukraine’s total emissions excluding LULUCF. However, a significant part of the emissions in the energy sector are also related to industry. In January 2018 Ukraine’s environment ministry published a draft law that will require big emitters to audit their emissions as an initial step towards Ukraine developing a functioning Emission Trading System (ETS) by 2020 (Carbon Pulse, 2018). The draft law contains no information on the emissions threshold for installations, but sets out plans for a government registry, third party verification, and a process for companies to devise emissions monitoring plans. As this policy is still under development, we have not taken it into account in our analysis.