Green Investment Scheme in the context of the second commitment period under the Kyoto Protocol in Ukraine. Final Report

Transcription

1 Green Investment Scheme in the context of the second commitment period under the Kyoto Protocol in Ukraine 6 April 2007 Media-Center of Ukrainskii dom, Kyiv, Ukraine Summary: General objective of the workshop was to discuss the Green Investment Scheme (GIS) as a form of the International Emission Trade (IET) under Art.17 of the Kyoto Protocol taking into consideration the current economic situation in Ukraine, the prospects of its further economic growth as well as the country s position in the process of the international climate change negotiations. The workshop participantsrepresentatives of the relevant governmental bodies, international organizations, and civil society discussed the potential of different sectors and the whole economy for the development of the GIS projects, Ukrainian s eligibility to participate in the IET, and challenges ahead from the legal, administrative and economic points of views. The workshop promoted as well the climate change issues in Ukraine as well as raised awareness about the GIS as a cost-effective way to reduce emissions of the greenhouse gases (GHG) among the relevant stakeholders. Final Report Date: 6 April 2007 Place: Media-Center of Ukrainskii dom, 2 European Square, Kyiv Organized: Regional Environmental Center for Central and Eastern Europe in cooperation with Point Carbon Kyiv Funded: Japan Special Fund Participants: governmental officials, international organizations, civil society, local experts Objective: To provide a platform for the inter-ministerial discussion as a step towards the Ukraine s position on the GIS establishment in the context of the second commitment period of the Kyoto Protocol Summary of the presentations and discussions is provided below. Welcome and opening His Excellency Mutsuo Mabushi, Ambassador of Japan to Ukraine welcomed the participants of the workshop and stressed that the government of Japan is exploring various possibilities of implementation of specific projects in Ukraine related to the Kyoto Protocol and wished fruitful work and successful projects in the future. Mr. Svyatoslav Kurulenko, First Deputy Minister of Environmental Protection, Ukraine, greeted all the participants and said that the Ministry has established good relationship with the government of Japan 1

2 through the common work on various environment protection projects. Also Mr. Kurulenko mentioned good working relationship with the REC. In his presentation Mr. Kurulenko indicated the following important milestones in the recent development of the climate change process in Ukraine: The National Action Plan on the Kyoto Protocol Implementation. This document describes specific actions on how to reduce emissions in various economic sectors. Experiences of the European countries that have already entered the EU ETS system are analyzed and conclusions are withdrawn. On 19 December 2006 the Ukrainian government discussed the status of implementation of the National Action Plan, including the topic on the potential Ukraine s role in the IET. On 28 March Cabinet of Ministers of Ukraine has approved another important decision initiating the establishment of the National Agency for Environmental Investments. The Agency is supposed to implement Kyoto Protocol flexible mechanisms, including IET and, hence, the GIS. Mr. Kurulenko has outlined main points that should be addressed in the nearest future [by the ministry]: Finalization of the development of the National GHG Registry; Preparation of the annual National Inventory Report on greenhouse gas emissions by sources and removals by sinks for the UNFCCC Secretariat, Launch of the National Agency for Environmental Investments and coordination of its work with other governmental bodies. Ms. Beata Wiszniewska, Regional Director for EU Member States, REC, Hungary, introduced the REC, it s goals and activities. REC is an international organization based on the Charter signed by the governments of 29 countries and the European Commission with the Headquarters in Hungary and 17 country offices in 17 beneficiary countries. Ms. Wiszniewska indicated that REC works to facilitate political decisions in its beneficiary regions, provides inputs into key international mechanisms and partnerships, and contributes to European and Global Processes. REC has completed over 3500 projects since Climate Change Department of the REC focuses on the capacity-building activities to support the implementation of the UN Framework Convention on Climate Change and the Kyoto Protocol in all beneficiary countries. Ms. Wiszniewska pointed out that the GIS is an instrument to achieve sustainable economic growth, which facilitates foreign investment into the country. The GIS Fund (National Agency for Environmental Investment Ukrainian case) can channel the money towards the projects reducing the GHG directly or indirectly. As a long-term financing mechanism GIS can cover small scale projects as well as nonquantifiable GHG reduction projects. GIS involves less complicated procedures compared to the other flexible mechanism under the Kyoto Protocol, i.e. JI. For instance, the rules for baselines and monitoring can be simplified. Ms. Wiszniewska noted that Ukraine is in the beginning of the GIS establishment facing a number of challenges. Legislative, regulatory, and institutional framework should be set up though the first step is already done. The approach towards the Assigned Amount management over the two Kyoto Commitment 2

3 periods should also be developed since the Assigned Amount Units are an asset of the country. She stressed that REC was happy to support this workshop which hopefully would contribute towards the establishment of GIS, and concluded that funds came through the Japan Special Fund (JSF) established by the Government of Japan within the REC. Session 2: Ukraine s participation in Kyoto protocol: status and perspective beyond 2012 Mr. Heorhiy Veremiychyk, Ministry of Environmental Protection of Ukraine, described the state of affaires within the international climate change negotiation process. Ukraine has to take it into consideration while deciding upon its commitment for the second commitment period and prior to the first GIS transactions. The presenter provided a comprehensive overview of the negotiations at the COP 12/MOP 2 in Nairobi, Kenya. Ukraine should make its decision by the next COP13/MOP3. Mr. Veremiychyk noted that the unilateral decision of the European Union on cutting emissions by at least 20% by the year 2020 and by 50% by the year 2050 had huge influence on the process. China s presentation regarding implementation of alternative energy projects also had resonance. Ukraine has to study both initiatives in detail. There was also a discussion between Annex I countries and G-77+China. Mr. Veremiychyk emphasized that the G-77 position reflects willingness to enforce the Kyoto Protocol s projects only when commitments of the Annex I countries are identified. Mr. Veremiychyk reported the progress achieved by Ukraine in the international climate change process. Ukraine complies with almost all the requirements of the Marrakesh Accords to be Second presentation given by Mr. Vadim Diukanov (FDEEM) focused on the forecasts of Ukraine s economic growth, the connection between GDP and CO2 based on the data/materials of his co-author Dr. B. Muller from Oxford University. Mr. Diukanov described high indices of carbon emissions per capita and carbon intensity of Ukrainian economy. He explained the high carbon intensity was due to the structure of Ukraine s industry, where the heavy industries prevail and are far from efficient. The presenter asserted that other countries importing products of coal, metallurgical, chemical, and cement industries, save on their own carbon emissions by acquiring these products form Ukraine. Mr. Diukanov presented two basic scenarios for the industrial development of Ukraine, where either heavy or light industries prevail. He emphasized, that both scenarios could guarantee the same level of GDP growth for Ukraine, but will differ much in the level of carbon emissions. Discussion followed Mr. Diukanov s presentation that focused on the correctness of the data presented and feasibility of the low-carbon-economy scenario for Ukraine. One of the discussants proposed Mr. Diukanov to distribute the data and meet again to continue the discussion. Mr. Vitaliy Nakhlupin, the Head of the National Agency for Environmental Investments, presented the opportunities for GIS in Ukraine. Mr. Nakhlupin noted that the Ministry of Environmental Protection has moved dramatically towards implementation of the Kyoto Protocol and development of its flexible mechanisms, especially, EIT. The Cabinet of Ministers has already established the National Agency for Environmental Investments. Development of further legislation was indicated as a priority task. The law on 3

4 IET needs to be adopted urgently. Mr. Nakhlupin stressed that the main problem is the definition of the legal nature of AAU since money received by Ukraine from the sales of AAUs will go into the state budget, under which a special fund will be created. Further, the presenter outlined the focus of activities of the newly established Agency. Among its nearest plans is to carry out a small pilot project by the end of the year. The Agency is working on the development of a strategy on AAU sales. Mr. Nakhlupin analyzed the factors influencing the prices under the GIS. According to him, the price of AAU will be lower under GIS than under JI since the risks associated with the implementation of GIS are lower. One more task for the Agency is to formulate the criteria for project selection. These criteria will most likely include: Environmental impact; Timeline of a project; Costs of emission reductions; Economic feasibility of a project (financial criterion). Several questions have followed Mr. Nakhlupin s presentation. Questions have covered such areas as possible future cooperation within the GIS, types of projects that could be implemented, distribution of AAUs. Mr. Nahlupin concluded that there should be a number of professional players, including venture companies, etc. that should be involved in the market of GIS projects to make it successful. Session 3: Discussion Opportunities for sectoral GHG emissions reduction through GIS: NGO viewpoint and Governmental Viewpoint Ms. Iryna Stavchuk, Coordinator of Programs on Climate Change from the National EcoCenter of Ukraine, questioned the existence of projects and programmes, potential recipients of GIS funding, able to comply with buyers perspectives. She arrived at this conclusion by analyzing the major sectors of the economy: energy, transport, industry and agriculture focusing on existing state programmes in these sectors. Her main points were as follows: There is hardly any climate mitigation policy in Ukraine and, therefore, there is nothing to be financed from GIS; In the sectors operating on the market there are opportunities provided by JI mechanism. GIS going to these sectors will only create distortion and corruption; The sectors seriously lacking financing (for instance, housing sector) need reforms and more advanced regulation, but not money. Nevertheless, there are opportunities to finance municipality programs on end-use energy efficiency, smallscale JI projects, renewable energy sources which are not economically feasible under JI. Ms. Stavchuk stressed that AAU buyers are scarce and taking into account that for the second commitment period of the Kyoto protocol Ukraine might not get any AAUs it is necessary for the government to focus on climate change mitigation policies and not only look at GIS. 4

5 Presentation of Ms. Stavchuk was followed by active discussion that included governmental representatives of Ministries of Fuel and Energy, Coal Industry, Transport and Communication, Economy, Agricultural Policy, Housing and Communal Services; Industrial Policy justifying the existing projects in respective sectors are good for GIS. Session 4: GIS architecture and Potential A representative of the World Bank in Ukraine, Mr. Dmytro Glazkov, in his presentation World Bank support to GIS in Ukraine discussed World Bank s Report (2006) Ukraine: Options for Designing a Green Investment Scheme under the Kyoto Protocol which was presented to the Ministry of Environmental Protection of Ukraine last year. Mr. Glazkov stressed that the World Bank is working with the Ministry on the projects related to the operation of the National Agency for Environmental Investments. The World Bank has provided comments on how this agency should function, etc. The World Bank is ready to work with the Ministry more closely by providing WB experts. Mr. Glazkov has mentioned the upcoming workshop on GIS and the Carbon Expo in Koln. Questions have followed Mr. Glazkov s presentation, they were mostly related to the details of the upcoming workshop and the availability of the report. Ms. Olga Gassan-zade, Point Carbon Kiyv, in her presentation Positioning AAUs in the global carbon market provided brief description of the carbon market development, showing the market has grown almost twice each year starting from 2004 with the major driver being CDM projects in the beginning and EU ETS in the last couple of years. Ms. Gassan-zade further explained who the key market players are and various scenarios of carbon credits supply on the carbon market. She also outlined the price formation principles for different carbon units that exist in the market, explaining that CERs and ERUs prices depend on risk sharing arrangements between buyers and sellers. The analysis of the expected supply and demand for AAUs, especially the conclusion that the demand is likely to be much smaller than the supply led to a vivid discussion among workshop participants. Everyone agreed that Ukraine needs to make steps towards increased guarantees for buyers of greened AAUs. Session 5: GIS from the viewpoint of the legal system Ms. Maria Khovanskaya, REC, presented Green Investment Scheme in Romania: lessons learnt and challenges ahead. Ms. Khovanskaya briefly outlined the development of the GIS in CEE, position of Romania vis-à-vis GIS, first problems identified by the legal experts as well as solutions found, challenges and asset management over two Kyoto commitment periods. Ms. Khovanskaya noted that the GIS is developing all over Economies in Transition. In Latvia, for instance, the Law on the GIS is under interministerial consultations till 16 April 2007, in Hungary the Law on the Implementation of the Kyoto Protocol is submitted for the Parliamentary approval, in Romania Governmental Decision on GIS is under preparation. Ms. Khovanskaya listed the priority areas for GIS proposed to the Romanian government by a group of the independent experts. Under so called hard greening projects (activities leading directly to quantifiable 5

6 emission reduction projects) the investments are proposed to be channeled into energy efficiency, renewable energy, specific waste management projects (methane capturing)), non-energy projects: forestry, agriculture, transport. Under so-called soft greening projects the priority areas are proposed to be capacity-building, awareness raising, education and other types of projects where GHG emissions reductions cannot be quantified. Specific attention was devoted to such issues as information dissemination about GIS, projects calls, consultancy on climate change activities, training for public authorities experts, education in schools, and seminars and conferences on climate change issues. Challenges reclining ahead were identified, such as forms of cooperation with potential buyers (should Memoranda of Understanding be signed between buyer and seller), definition of the nature of traded items (goods or rights), contract type and structure, terms which should be included in the contracts, seller s and buyer s obligations. Further, issues to be considered in designing GIS were discussed: What institutional set up is necessary? Can existing institution(s) be utilized to manage the fund?, How to accommodate different AAU purchasers requirements/preferences while satisfying host country s needs? How the whole process can be simplified compared to JI while keeping the environmental integrity? How the proceeds from AAU sale can be managed in a transparent manner? Ms. Maryanna Bulgakova (Ecologia-Pravo-Liudyna) delivered a presentation with a title Legal issues involved in establishing of GIS in Ukraine, focusing on the price of credits, international legislation, legislation related to climate change in Ukraine as a main base for the trading scheme. Ms. Bulgakova noted that currently adequate legislation on GHG emissions reduction processes doesn t exist in Ukraine. There is a question on how money received for selling credits from foreign countries will be divided. Ms. Bulgakova outlined statutes that regulate noncompliance under legislation on trading of credits. For example, governments that have ratified international agreement, environmental protection enterprises and other participants of the credit trading market, could all be sanctioned for noncompliance with the existing trading rules. She noted that public awareness should be raised on the issues of climate change policy of Ukraine, public should be involved in the development of legislative statutes as well as decision making processes. Brief discussion has followed Ms. Bulgakova s presentation, which focused on the development of legislation on emission trading in Ukraine. 6