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Ukraine: tackling climate change amid an armed conflict – what does this mean for a future ‘net-zero Europe’?

Considering Ukraine‘s ongoing response to the armed conflict in its Eastern borders since 2014, the country becomes a unique case study. In terms of renewable energy, the share of this energy source in Ukraine’s energy mix reached 12.4 per cent in 2020. Whilst the renewable sector is relatively small, the Ukrainian government has set a target to increase its share of renewables to 25 per cent by 2035. Around 66 per cent of Ukraine’s energy produced from renewable sources is located in Southern Ukraine, currently at risk due to Russia’s armed escalation since February 2022.

According to the latest analysis by the Organisation for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA), from 2015, a year since the annexation of the Crimean peninsula, until 2020, the government in Kyiv increased its support for fossil fuels by 238 per cent. Whilst tax expenditures decreased by 59 per cent between 2019 and 2020, direct transfers rose by 65 per cent in the same period.

Map of wind farms generating electricity at the “green” tariff, 2021.
Source: The Ukrainian Wind Energy Association

“The conflict in Donbass and the war with Russia have significantly impacted the use of government support for fossil fuels in Ukraine,” explains OECD Environmental Governance and Financing Policy Analyst, Nelly Petkova. “While Ukraine stands out as having significant fossil-fuel subsidies, in 2014-16 the government of Ukraine also put in place an active wide-ranging programme for their reform.”

“Most of the reform measures concerned the phase-out of subsidies to consumers of natural gas and bringing gas prices in line with the price of gas on the international market,” Ms Petkova tells CEENERGYNEWS. “One of the main reasons for this decision was the fact that in April 2014 Russia cancelled the discount at which it was selling gas to Ukraine and the government found it difficult to continue subsidising gas consumption for the population. As a result, natural gas prices increased more than 8 times over this period and electricity tariffs more than 3 times.”

She goes on by recalling that over the last few years, Ukraine phased out many old subsidy schemes, however, new instruments of implicit consumer support were also introduced.

“Before Covid and Russia’s unprovoked and unjustified aggression against Ukraine, launched in February 2022, Ukraine managed to initiate significant energy subsidy reforms. Between 2014 and 2016 alone, Ukraine managed to reduce its fossil-fuel subsidies from 13 per cent of GDP down to 7 per cent of GDP, respectively. However, the price shocks caused by these two crises may lead to a rollback of some of these achievements.”

OECD Environmental Governance and Financing Policy Analyst, Nelly Petkova.

“Europe has committed to achieving carbon neutrality by 2050, Ukraine, by 2060,” highlights Ms Petkova. “Ukraine is the only country in the EaP region to have made such a commitment. Russia’s aggression against it, however, may slow down, at least in the short term, the energy transition in Europe. Due to the sharp increase in energy prices and a reduction of imports from Russia and due to sanctions, many EU countries have already started cutting fuel taxes and subsidising energy costs”.

According to her, given tight supply and energy infrastructure constraints, reducing energy consumption and improving energy efficiency will be of key importance both in the EU and Ukraine.

”The war has reinforced the case for a long-term solution based on shifting away from fossil fuels to renewables and clean energy sources.”

OECD Environmental Governance and Financing Policy Analyst, Nelly Petkova.

Whilst the events following the outbreak of the Russo-Ukraine war in 2014 have undermined Ukraine’s net-zero efforts, with an official scale of such an impact yet unknown, the country’s continued commitment to green policies continues to keep climate optimism alive.

“Ukraine has put in place a number of measures to support energy efficiency and renewables,” says Ms Petkova. “For example, the Energy Efficiency Fund, among others, established with funding from the EU and Germany, aims to support energy-efficiency measures in the residential sector as a way of reducing households’ electricity and heat consumption bills.”

However, Ms Petkova also underlines that in relative terms, State subsidies for fossil-fuel production and consumption remain significant.

“For the sake of comparison, in 2018-19, the pre-Covid years, Ukraine provided about 7 million US dollars for energy-efficiency measures versus more than 2 billion US dollars for fossil fuels in these years,” she points out.

Notwithstanding, Ms Petkova’s views on Ukraine’s commitment to green policies may signal a long-term ambition to tackle the climate crisis, which could potentially result in a decline in support measures for fossil fuels.

“Ukraine’s commitment to align its green and energy policies with EU strategic developments creates an opportunity for the country to phase out fossil-fuel subsidies, increase carbon prices and redirect investments to renewable and alternative energy (for example, green hydrogen) and energy savings instead,” she continues. “The Energy Chapter of the Recovery and Reconstruction Plan, prepared by the Ukrainian government, is an example of the path that the country can take in this direction. The EU and the international community are committed to supporting Ukraine in these efforts and the post-war reconstruction period may open a window of opportunity for the country to embark on a genuine energy transition and achieve its international commitments and energy security goals.”

The case of Ukraine clearly illustrates a desire to tackle climate change whilst balancing its efforts with the need to respond to short-term security threats, placing security considerations arising from the climate crisis on hold.

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