Co-authors: Dr. Popi KONIDARI, Anna FLESSA M.Sc. National and Kapodistrian University of Athens - Energy Policy and Development Centre

Transcription

1 PROMITHEAS 4 Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios (Contract No ) Mitigation / Adaptation scenarios and Climate Change policy portfolios for Ukraine Author: Mariia KOKORINA, Prof. Evgenij INSHEKOV Institute for Energy Saving and Energy Management National Technical University of Ukraine Kiev Polytechnic Institute Co-authors: Dr. Popi KONIDARI, Anna FLESSA M.Sc. National and Kapodistrian University of Athens - Energy Policy and Development Centre Kiev, 2013

2 2

3 This document is part of the relevant report prepared for the FP7 funded project PROMITHEAS-4: Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios, coordinated by Prof. Dimitrios MAVRAKIS, Energy Policy and Development Centre (Greece). The whole report contains twelve (12) documents for each one of the emerging economies that participate in the project: Albania, Armenia, Azerbaijan, Bulgaria, Estonia, Kazakhstan, Moldova, Romania, Russia, Serbia, Turkey and Ukraine. 3

4 4

5 CONTENTS Contents...5 List of Tables...6 List of Figures...6 Abbreviations...8 Introduction...11 Objectives of the Ukrainian climate change policy Spectrum of climate change mitigation options for Ukraine Spectrum of adaptation needs in Ukraine References Business As Usual Scenario ( )...30 BAU scenario description References Key assumptions Energy Demand Transformation Global warming potential (GHG emissions) References Optimistic Scenario ( )...67 References Energy Demand Transformation Global warming potential (GHG emissions) References Pessimistic Scenario ( )...90 References Energy Demand Transformation Global warming potential (GHG emissions) References Results of Long Range Energy Alternatives Planning System (LEAP) Energy Demand Transformation

6 LIST OF TABLES Table 1: JI project priorities (Source: Ukrainian Registry Carbon Units) 22 Table 2: United Nations projections for the Ukrainian population (UN, 2010). 39 Table 3: Projections for the Ukrainian GDP (IMF, 2011). 40 Table 4: Projections for the GDP of Ukraine from different sources. 41 Table 5: Tariff rates for RES-E. 48 Table 6: Total emissions for the country. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 7: Emissions per sector for the country. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 8: Other environmental effects for the country under each scenario, Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 9: Water use for cooling (Energy sector). Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 10: Mean CEI for each sector depending on the policy instruments of the BAU scenario. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 11: Mean CEI for each sector depending on the selected policy instruments of the OPT scenario. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 12: Mean CEI for each sector depending on the selected policy instruments of the PES scenario. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 13: Overall cost efficiency for the three scenarios. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 13: Equity measurement. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Table 15: AMS results for each scenario. Σφάλµα! εν έχει οριστεί σελιδοδείκτης. LIST OF FIGURES Figure 1: Population in BAU scenario...39 Figure 2: Economy: GDP current prices...41 Figure 3: Economy: Average annual household income Figure 4: Precipitation Figure 5: Temperature...46 Figure 6: Final Energy Demand per sector...51 Figure 7: Final Energy Demand per fuel...51 Figure 8: Energy demand for the household sector...52 Figure 9: Energy demand for the agricultural sector...53 Figure 10: Final energy demand in industrial sector by type of industry Figure 11: Final Energy Demand in Industrial Sector by type of fuel...54 Figure 12: Energy demand for the transport sector...55 Figure 13: Energy demand for non-energy use sector Figure 14: Transmission and distribution losses of electricity and heat...57 Figure 15: Electricity generation...58 Figure 16: Heat production Figure 17: Coal trasformation...61 Figure 18: GHG emissions...62 Figure 19: Precipitation Figure 20: Temperature...76 Figure 22: Flash floods...76 Figure 23: Energy demand for the household sector...79 Figure 24: Energy demand for the agricultural sector...80 Figure 25: Energy demand for the industrial sector Figure 26: Energy demand for the sector of services Figure 27: Energy demand for the transport sector...82 Figure 28: Energy demand for the non-energy use sector Figure 29: Transmission and Distribution losses of electricity and heat Figure 30: Electricity generation...84 Figure 31: Heat production Figure 32: Coal trasformation...85 Figure 33: Coal trasformation...85 Figure 34: GHG emissions

7 Figure 35: Precipitation Figure 36: Temperature...95 Figure 37: Flash floods...95 Figure 38: Energy demand for the household sector...98 Figure 39: Energy demand for the agricultural sector...99 Figure 40: Energy demand for the industrial sector Figure 41: Energy demand for the services Figure 42: Energy demand for the transport sector Figure 43: Energy demand for non-energy use sector Figure 41: Transmission and distribution losses of electricity and heat Figure 42: Electricity generation Figure 43: Heat production Figure 44: GHG emissions Figure 45: Primary Energy Demand for three scenarios for period Figure 46: Final Energy Demand for Ukraine for the period Figure 47: Electricity generation output for Ukraine for the period Figure 48: Total GHG emissions for Ukraine for the period Figure 48: ClimAMS Σφάλµα! εν έχει οριστεί σελιδοδείκτης. Figure 49: Environmental performance of the scenarios...σφάλµα! εν έχει οριστεί σελιδοδείκτης. Figure 47: Political acceptability...σφάλµα! εν έχει οριστεί σελιδοδείκτης. Figure 48: Feasibility of implementation...σφάλµα! εν έχει οριστεί σελιδοδείκτης. Figure 49: Final grades....σφάλµα! εν έχει οριστεί σελιδοδείκτης. 7

8 ABBREVIATIONS AAU ARENAECO ARES BAP CEC CIS CM CSPES EPC ERU GDP GHG GIS GVA EBRD EIB EITI ENPI ESCO FAO FFVs HPP IAEA IEA IISD IMF JI LED LULUCF MECI MoAP MoU NAP NEIA NERC NIF OECD PDD PTL RCP RES RES-e SEIA SES SSC TAIEX TFC T.o.e TPES UAH UCTE UKEEP UN Assigned Amount of Units Agency for Rational Energy Use and Ecology Alternative Renewable Energy Sources Biomass Action Plan Commission of the European Communities Commonwealth Independent States Cabinet of Ministers Comprehensive State Program of Energy Saving Energy Performance Contracts Emission reduction units Gross Domestic Product Greenhouse Gas Green Investment Scheme Gross Value Added European Bank of Reconstruction and Development European Investment Bank Extractive Industries Transparency Initiative European Neighbourhood and Partnership Instrument Energy Services COmpany Food and Agriculture Organization of the United Nations Flexible fuel vehicles Hydroelectric Power Plant International Atomic Energy Agency (IAEA) International Energy Agency International Institute for Sustainable Development International Monetary Fund Joint Implementation Light-emitting diode Land Use, Land Use Change, Foresty Ministry of Energy and Coal Industry of Ukraine Ministry of Agrarian Policy Memorandum of Understanding National Adaptation Plan National Environmental Investment Agency of Ukraine National Electricity Regulation Commission of Ukraine Neighbourhood Investment Facility Organisation for Economic Co-operation and Development Project Design Documents Power Transmission Line Representative Concentration Pathways Renewable Energy Sources Electricity production from RES State Environmental Investment Agency Solar Energy Systems State Statistics Committee of Ukraine Technical Assistance and Information Exchange Instrument Total final consumption Ton of oil equivalent Total Primary Energy Supply Ukrainian hryvnia, the national currency of Ukraine Union for the Coordination of the Transmission of Electricity Ukraine Energy Efficiency Programme United Nations 8

9 UNDP UNFCCC USD WPP United Nations Development Programme United Nations Framework Convention on Climate Change United States Dollar Wind Power Plants 9

10 10

11 INTRODUCTION Objectives of the Ukrainian climate change policy The Verhovna Rada of Ukraine ratified the United Nations Framework Convention on Climate Change (UNFCCC) on October 29, According to UN regulations, the country became party to it on September 11, 1997 (Ministry of Environmental Protection of Ukraine, 2007). The Ukrainian Parliament ratified the Kyoto Protocol on February 4, 2004 (Ministry of Environmental Protection of Ukraine, 2007; Ministry of Environmental Protection of Ukraine, 2006). According to the Ukrainian Kyoto Protocol obligation, the country should not exceed its 1990 level 1 of GHG emissions (Assigned Amount of Units (AAU)) which corresponds to a 0% reduction target 2 (Ministry of Environmental Protection of Ukraine, 2006). According to the Report on demonstrable progress under the Kyoto Protocol prepared by the Ministry of Environmental Protection of Ukraine in 2006, the emission forecasts for 2012 indicated that the level of emissions of year 1990 will not be exceeded. The latter in conjunction with the fact that the Ukrainian emissions declined due to the deep economic recession of the 90s justified the decision of the country at that time not to undertake any specific measures to fulfill its commitments to the Kyoto Protocol (Ministry of Environmental Protection of Ukraine, 2006). However in 2012, the country is willing to proceed with a new target of 20% GHG emission reduction compared to 1990, but under the following conditions that (UNFCCC, 2012): (a) developed countries have an agreed position on the quantified emission reduction targets of Annex I Parties; (b) Ukraine maintains its status as a country with an economy in transition and the relevant preferences linked with such a status; (c) the existing flexibility mechanisms under the Kyoto Protocol are kept; (d) 1990 remains as the single base year for calculating Parties commitments; (e) the provisions of Article 3, paragraph 13, of the Kyoto Protocol are used for the calculation of the quantified emission reductions of Annex I Parties under the Kyoto Protocol for the relevant commitment period. The objectives of the Ukrainian climate change policy are expressed through the following Programs, Strategies and Plans 3 : - "Energy Strategy of Ukraine until 2030" - Decree of Cabinet of Ministers of Ukraine No. 145-p - Resolution of March 15, 2006 (Ministry of Environmental Protection of Ukraine, 2006; EBRD, 2009). The document was updated on June 7, The key policy objectives of the strategy include reducing import dependence, improving efficiency and pursuing renewable energy resources (IEA, 2006). According to this document the country aims to: ensure reduction of annual energy consumption by 318mtce 4 until year 2030 (Ministry of Environmental protection of Ukraine, 2006). This is expected to be achieved through structural energy saving (198mtce) and technological energy saving (120mtce) (Ministry of Environmental protection of Ukraine, 2006). 1 In 1990 GHG emissions (with account of CO 2 removal in LULUCF) were 891,5MtCO 2 eq (Ministry of Environmental Protection of Ukraine, 2006) The Comprehensive State Programme on Energy Saving of Ukraine ( ) was completed and that is why it was not mentioned (Ministry of Strategy and Finance, the Republic of Korea, 2010). This session refers to the active Strategies, Plans or Programs. 4 Conversion from tons of coal equivalent (tce, Ukrainian standard) into oil equivalent (toe, IEA standard) is done at the factor 1 tce = 0,7 toe (UNDP, 2007). 11

12 increase the percentage of coal in the energy balance from 22% (43.5 mn tons of equivalent fuel) in 2005 to 33% (101 mn of equivalent fuel) by 2030 (National Ecological Centre of Ukraine, 2010). The country intends to support domestic coal extraction and maximize its use in the electricity production and transformation industries (coking) (UNDP, 2007). In absolute terms, this implies that coal consumption will increase more than double during the period (UNDP, 2007); decrease the share of the imported fuels in the energy balance from 54,8% of the total primary energy supply to 11,7%. In particular, the share of gas imports is intended to be reduced from 31,3% to 3,6% of total primary energy supply (TPES) (IISD, 2008); reduce natural gas consumption both in absolute terms and as a share of the primary energy needs in The objective is to reduce consumption to 49,5 bcm (or 42,9 Mtoe) corresponding to 18,8% of primary energy needs (UNDP, 2007); to increase by 7,26 times (9,5 Mtoe) the share of renewables during the period and 173% for the period (corresponding to 26,1 Mtoe). By 2030, the share of renewables in Ukraine s primary energy needs shall amount to 12% (UNDP, 2007); Other estimations refer to an increase of the use of renewable energy, waste and non-traditional energy sources nearly four times from 15,5 mtce in 2005 to 57,7 mtce in 2030 (Institute for Economic Research and Policy Consulting, 2006). This would require investing approximately 60.4 billion UAH in the sector (Institute for Economic Research and Policy Consulting, 2006). The highest growth is expected in the use of solar energy, coal-bed methane and low-potential heat, although from a very low base (Institute for Economic Research and Policy Consulting, 2006). Electricity production from RES (RES-e) will reach the amount of 50 million kwh in 2010, 0,8 billion kwh in 2015, 1,5 billion kwh in 2020 and 2 billion kwh in 2030 (Institute for Economic Research and Policy Consulting, 2006). reduce losses in the transmission and distribution of electricity in relative terms from 12,8% to 9% of its electricity consumption; - The Updated energy strategy until (draft of ) includes measures for increasing coal extraction by Ukraine can increase production of coal for approximately 50% compared with the level in 2010, reaching the amount of 75 million tons (56 million of end coal products). This will completely satisfy the need for coal even at maximum development of the coal electricity generation plants. Total target capacity of the alternative and renewable energy sources until the year 2030 will be approximately 10% of installed capacity or 5,7 GWh (10-12 GW including large hydro), and the volume of output TWh (23-28 TWh including large hydro). - Biomass Action Plan for Ukraine, (BAP, version on September 2009). The target of this plan is to achieve a contribution of biomass to the total primary energy consumption by 5% in 2020 and 10% in 2030, including 10% target for the share of biofuels in transport by The latter is in line with the recent Renewable Energy Directive of the European Commission (2009/28/EC, June 2009). - Resolution of the Cabinet Ministers of Ukraine, March 1, On approval of the State Target Economic Program on energy efficiency and the development of energy production from renewable energy sources and alternative fuels for The tasks and activities of the State Target Economic Program on energy efficiency and the

13 development of energy production from renewable energy sources and alternative fuels for are the following: - reduction of energy consumption by 30,95 million tons of equivalent fuel in This reduction will be achieved by: updating, upgrading energy-intensive industrial process equipment Sanation of facilities, which are fully funded from the state budget, including the development of design and estimate documentation; modernization of gas transmission system; modernization of heat power plants and CHP's equipment; construction and reconstruction of electric networks. Construction of substations and electric networks for connection of the electric generation facilities that produce energy from renewables in AR Crimea and Odessa region; modernization of municipal objects, transfer of heat plants that serve social sphere objects for renewable and alternative energy sources use. - substitution of primary energy consumption by 22,84 million tons of equivalent fuel in 2015 by the following actions: introduction of cogeneration technologies in municipal ownership enterprises in the thermal energy sphere; introduction of technologies that include the use of heat pumps, electric thermal accumulating heating and hot water supply for municipal enterprises and budgetary institutions. - Reduction of the energy consumption in the public sector at least by 20% of the 2009 level by 2014 (Ministry of Strategy and Finance, the Republic of Korea, 2010). Programs that concern adaptation are the following: - National Programme Forests of Ukraine for (Degree of Cabinet of Ministers of Ukraine No April 2002 On confirming the State Programme Forests of Ukraine for ) (Ministry of Environmental Protection, of Ukraine, 2006). This programme: supports and promotes options for the GHG removal through reforestation, expansion and management of forest lands. Ukrainian forest areas are expected to increase by 0,5 million hectares, which corresponds to an increase from 15,6 to 16,1%, and of total wood stock by 16,7% (Ministry of Environmental Protection of Ukraine, 2006). encourages the improvement of forest eco-systems resistance against climate change (Ministry of Environmental Protection of Ukraine, 2006). - Draft of Resolution of CM of Ukraine of , "On approval of the National Plan of adaptation to climate change for the period until 2020" 7. According to this plan adaptation measures need to be implemented in the following directions: - Adaptation to extreme meteorological phenomena of nature and natural disasters; - Water resources; - Coast line; - Agriculture; - Fishery; - Forestry; - Healthcare; - Construction and residential sector; 7 rt_id=127645&cat_id=

14 - Energy industry; - Ecosystems. The Ukrainian climate policy is expected to follow the European Union climate policy due to the following facts: i) the country was obligated to comply its environmental legislation with the EU standards when it signed the EU Partnership and Cooperation Agreement in 1994, (Ministry of Environmental Protection of Ukraine, 2007); ii) The EU- Ukraine energy cooperation falls under the European Neighbourhood Policy for which an EU-Ukraine Association Agenda replaced the previous European Neighbourhood Policy Action Plan 8 (Market Observatory for Energy, 2010; SEC(2009) 515). Two of the 90 priorities for action include energy and climate change 9. In March 2008, in the context of the MoU on Energy, EU and Ukraine signed a roadmap on energy efficiency, renewable energy sources and climate change (SEK(2009) 515); iii) Ukraine is participating in the Black Sea Synergy Initiative 10 iv) is an Energy Community member. Particularly for the last fact, a sequence of actions defined some of the future steps of the Ukrainian climate change policy. The Ministerial Council of the Energy Community on November 17, 2006 accepted as observers Moldova, Norway, Turkey and Ukraine 11. On June 29, 2007, the Ministers of the Energy Community launched the negotiation process for the accession of Ukraine as a full Energy Community member 12. In 2008, official negotiations were launched by the European Commission with Ukraine and Moldova, while two rounds of discussions followed. In 2009 the technical negotiations on full membership for both countries were concluded and the Ministerial Council approved on December 18 th of the same year their accession to the Energy Community on the conditions of Decision 2009/04/MC- EnC (Energy Community, 2010). These conditions concerned the incorporation of specific Directives into the Ukrainian legislation about the electricity and natural gas market in compliance with EU relevant rules, renewable energy sources and biofuels, nuclear safety of power pants in accordance with the IAEA requirements 13 (Energy Community, 2010; European-Ukrainian Energy Agency, 2011). The new Ukrainian gas law was set into force and published in July 2010, allowing the signature of the Energy Community Accession Protocol in September The Verkhovna Rada (Parliament) of Ukraine adopted on December 15, 2010 the Law on Ratification of the Protocol on Ukraine's accession to the Treaty establishing the Energy Community and Ukraine became an Energy Community member on February 1, 2011 (European-Ukrainian Energy Agency, 2011). As an Energy Community Member its indicative 2020 RES target is 8% which means that this is the expected proportion of energy from RES in the electricity, heat and transport sectors (IPA Energy + Water Economics, 2010). Spectrum of climate change mitigation options for Ukraine The majority of carbon dioxide (CO 2 ) and methane (CH 4 ) emissions is attributed to the energy sector which accounted for approximately 74,3% of total emissions in 1990 (Ministry of Environmental Protection of Ukraine, 2006; IEA, 2006). The carbon dioxide (CO 2 ) and methane (CH 4 ) emissions represented in 2006 the 69% of the total Greenhouse Gas (GHG) emissions while 24% of the total CO 2 emissions concerned electricity and heat plants alone (IEA, 2006). Combustion of fossil fuels, particularly of coal, accounted for 57% of total GHG emissions (IEA, 2006)

15 In 2003 the key sources for CO 2 emissions from coal were 54,68 Mt CO 2 due to the production of electricity and heat, 51,32 Mt CO 2 due to manufacturing industries, 10,99 Mt CO 2 from unallocated autoproducers and 8,03 MtCO 2 from the residential sector (125,02 MtCO 2 in total) (UNDP, 2007). In 2003, CO 2 emissions from oil were in total 27,44 Mt CO 2. Out of these 12,51MtCO 2 were from transport, 7,65MtCO 2 from manufacturing industries and 7,28MtCO 2 from other sectors (UNDP, 2007). In 2003, key sources for CO 2 emission from gas was 129,41 MtCO 2 (producing electricity and heat 60,71 MtCO 2, residential sector 28,14 MtCO 2, manufacturing industries 24,85 MtCO 2, non-specified other sectors 15,71 MtCO 2 ) (UNDP, 2007). 12% of total domestic GHG emissions are fugitive CH 4 emissions (IEA, 2006). Results of the 2004 GHG inventory showed that in that year the emissions had reached approximately the 45% of the 1990 level (while in 1999 they were 43% of the 1990 level) (World Bank, 2006; Ministry of Environmental Protection of Ukraine, 2006). In 2006 Ukraine ranked 20 th for CO 2 emissions from fuel combustion and 8 th for energy-related CH 4 emissions (IEA, 2006). In 2004, primary consumption of coal in Ukraine was 24% of the total primary energy supply (UNDP, 2007). The two main uses for coal are heat and electricity production, coke transformation and steel production (UNDP, 2007). The estimated amount of coal reserves of operating mines is 8,7 billion tons (including 6,5 million tons of industrial coal), with 54% of power-generating coal (National Ecological Centre of Ukraine, 2010). Approximately 15% of coal is lost in the production process due to complicated mining and geological conditions and deficient technologies (National Ecological Centre of Ukraine, 2010). Estimations of the Ukrainian Government refer about the duration of the coal reserves of operating mines from 40 to 90 years (National Ecological Centre of Ukraine, 2010). Heating power plants are the main coal consumers with 27,4 million tons or 46% followed by the by-product coke plants (17 million tons or 28,5%), utility companies (2 million tons) and mines (1,6 million tons) (National Ecological Centre of Ukraine, 2010). By the end of 2010, 81% of thermal power-station modules exceeded their planned life span of hours of operation and need to be modernized or replaced (Ministry of Energy and Coal Industry of Ukraine, 2012). Initially they were intended to work as baseload capacities, but have worked on the margin and operated under extreme regimes leading to the degradation of their existing capacity (IISD, 2008). The majority of the electric thermal power plants is single-cycle, while cogeneration is not a widely used technology (IISD, 2008). Grid losses have been decreasing during the last years, but constitute more than the 14% of the electricity produced (IISD, 2008) MW of these plants will be commissioned and refurbished between 2010 and 2020, while MW will have to be made available by 2030 (UNDP, 2007). These developments should result in fossil-fired power achieving a load factor of 55% by 2030, in line with international industry standards (UNDP, 2007). A number of nuclear units are close to the expiry of their designed time of operation, while more than 70% of nuclear units will require and extension of time of operation within the next 10 years (Ministry of Energy and Coal Industry of Ukraine, 2012). 35 % of overhead power transmission lines in the voltage range of kv, are operating for more than 40 years (Ministry of Energy and Coal Industry of Ukraine, 2012). 55% of the main equipment of transformer substations is reaching the end of their planned service life; 31% of electricity networks and 32% of transformer substations are in need of reconstruction or replacement (Ministry of Energy and Coal Industry of Ukraine, 2012). The transport network is technically reliable with a slowly expanding capacity, but major investments are required for refurbishing the system, reducing losses and meeting environmental standards (UNDP, 2007). Ukraine is heavily dependent on imported fossil fuels. It is indicative that for the time period , the energy dependence of the country on imports of organic fuels, including conventionally primary nuclear fuel, was 60,7% compared with an average of 51% for the EU countries (Ministry of Fuel and Energy, 2006). The country is the largest net 15

16 importer of gas in the CIS (University of Oxford, 2011). The primary energy consumption pattern is dominated by natural gas (41% in 2006 and 39% in compared with the average of 21% for other world economies) (Ministry of Fuel and Energy, 2006). Domestic natural gas extraction covers approximately 25% of the demand and imports are from Russia and Turkmenistan (IISD, 2008). In 2006, the average oil consumption was 19%, coal - 19%, uranium - 17%, and the consumption of hydro- and other renewable energy sources was in total 4% (Ministry of Fuel and Energy, 2006). The domestic oil extraction covers roughly 15% of the demand in 2004; the rest is imported mainly from Russia (IISD, 2008). The priorities of the national energy policy are: i) the reduction of natural gas consumption since its cost increased by more than two times in 2006 and imported gas accounts for three fourths of the national gas consumption (Institute for Economic Research and Policy Consulting, 2006; Ministry of Environmental Protection of Ukraine, 2006). As a result, a number of branches of the national economy found themselves on the edge of viability. ii) Options for alternative energy sources and introduction of energy saving technologies. Wide application of renewable energy technologies, mainly biomass, can be one of the ways for the reduction of natural gas consumption (Institute for Economic Research and Policy Consulting, 2006). Opportunity for reducing CO 2 emission is using new technologies deep mining, methane from coal mines, clean coal technology, modernization gas transport system, increasing energy efficiency and saving in energy sector, using renewable sources (UNDP, 2007). Exploitation of Renewable In 2004, renewable energy that was produced in Ukraine accounted for 0,91% of the total energy balance, according to the Energy Strategy until 2030, out of which 0,72% was from hydropower, 0,19% from combustibles renewables and waste and 0,0014% from solar and geothermal power (UNDP, 2007). In 2006 the situation was the same since approximately 0,9% of the Ukrainian Total Primary Energy Supply (TPES) or 1,3 Mtoe was renewable energy, including large hydro (IEA, 2006). Large hydro accounted for 80% of the total amount while the remaining percentage comes from other types of renewable energy sources (IEA, 2006). According to estimations of the Ukrainian Renewable Energy Agency the annual renewable energy use can increase to 100 TWh by year 2030 and to more than 200 TWh by 2050 (Institute for Economic Research and Policy Consulting, 2006). This increase will allow the substitution in 2030 of 22 mtce/year coming of fossil and nuclear energy (7,3% of total energy supply) and in 2050 up to 42 mtce/year (Institute for Economic Research and Policy Consulting, 2006). The estimated annual technically achievable potential of non-traditional and renewable energy sources in Ukraine is approximately 79mtce, including 63mtce from RES and 16mtce from waste energy (Ministry of Environmental Protection of Ukraine, 2006). Hydro Hydro power is the most developed type of RES in Ukraine. Large hydro is considered as mature technology, while hydro power is the least expensive power source on the wholesale market (Institute for Economic Research and Policy Consulting, 2006). In 2006 the majority of the 4700 MW of the Ukrainian hydro power capacity, was in large-scale hydro (Institute for Economic Research and Policy Consulting, 2006). In 2007 the average annual hydropower production was approximately 10,2 billion kwh (EIA, 2007). In 2009 the estimated total potential of the Ukrainian hydropower generation was close to 20 billion kwh of electricity per year (EBRD, 2009). For small hydro alone, the estimated potential was approximately 2500 million kwh, out of which only 170 million kwh were utilized (EBRD, 2009). In 2009, Ukraine had an operating capacity of approximately 16

17 4880 MW. About 3170 MW of capacity had been delayed after construction, and another 675 MW was planned (EBRD, 2009). Major equipment of many of the Hydroelectric Power Plants (HPPs) has been operating for approximately 40 years and needs upgrading (EBRD, 2009). Projections by Ukrainian environmental organizations refer to hydropower production of approximately 15,1 TWh/year by 2030 (including 3,7 TWh/year of small hydro) and up to 25 TWh/year in 2050 (Institute for Economic Research and Policy Consulting, 2006). The economic potential for small-scale hydro is 13 TWh/year (Differgroup, 2012). Wind The country has significant potential for wind energy development. The most promising regions for its development are located in the southern and southeastern parts of the country, with average wind speed of more than 5 m/s (Updated Energy Strategy, 2012). The installed capacity of wind power plants reached 57,4MW in 2003 (Ministry of Environmental Protection of Ukraine, 2006). In 2009, there were 12 state Wind Power Plants (WPPs) with a total installed capacity of 94 MW, representing only 0,2% of the total generating capacity in Ukraine (Updated Energy Strategy, 2012). The WPP equipment does not satisfy the modern standards of efficiency, because most of it is produced using technology 80 years old (Updated Energy Strategy, 2012). The potential according to estimates, may reach GW. The economic potential for wind power is estimated at 42TWh/year (Differgroup, 2012). However, the construction of so many wind plants requires significant investments - more than 200 billion (Updated Energy Strategy, 2012). The objective for the amount of installed capacity of wind power in Ukraine in 2030 is 4,3 GW, resulting to 7-9 TWh (Updated Energy Strategy, 2012). Biomass One of the most promising RES of the country is biomass (Institute for Economic Research and Policy Consulting, 2006; Ministry of Environmental Protection of Ukraine, 2006; IEA, 2006). In 2001, the energy production from biomass (use of wood or wood waste and agricultural residues (straw, stems and ears of maize, stems and husks of sunflower)) was equivalent to 8,1TWh/year, while in 2006 it increased approximately to 38 PJ/yr (or 10,6 TWh, only heat) corresponding to 0,65% of total primary energy consumption (IEA, 2006; Institute for Economic Research and Policy Consulting, 2006). Most of this energy was generated at the expense of wood residues combustion (Institute for Economic Research and Policy Consulting, 2006). Energy production from biomass is expected to satisfy about 13% of the Ukraine s energy demand (Biomass Action Plan of Ukraine, 2009). The total potential for biomass was estimated at 86,300 GWh per year in Later on the majority of this potential (coming from cereal crops straw (wheat, barley, oat, etc.)) was estimated at 29,500 GWh annually (EBRD, 2009). Approximately GWh per year came from animal manure, and another GWh per year came from wood wastes (EBRD, 2009). The estimated 14 theoretical potential of biomass is at approximately 50 mtce; the technical potential is at 36 mtce and the economic potential at 27 mtce/yr (Biomass Action Plan of Ukraine, 2009). According to more recent estimations of the Institute of Renewable Energy (National Academy of Science Ukraine) in 2010, the theoretical potential for biogas production from animal waste in Ukraine is 3,5 Mtce (103 PJ) and an economic potential of 0,35 Mtce (10,3 PJ) (Black & Veatch, 2011). Wood residues have a theoretical potential of 2,5Mtce (74PJ), a technical potential of 21 Mtce (60 PJ) and an economic potential of 1,7Mtce (49PJ) (Black & Veatch, 2011). Agricultural residues have a theoretical potential of 38,5Mtce (1,128PJ), a technical potential of 22,6 Mtce (663 PJ) and an economic potential of 14,2Mtce (416PJ) 14 based on 2007 data 17

18 (Black & Veatch, 2011). Energy crops have a theoretical potential of 12,1Mtce (354PJ), a technical potential of 10,3 Mtce (302 PJ) (Black & Veatch, 2011). According to the Biomass Action Plan of Ukraine, 2009 contribution of biomass to the total primary energy consumption till 2020 will account 81,4 TWh and 162,8 TWh in The economic potential for biogas is 28TWh/year (Differgroup, 2012). The different estimations are due to different methodologies used for evaluating the biomass potential. Most of the existing biomass installations are for heat production which will remain the key use of biomass (IEA, 2006). Additional projects are being considered for biogas power generation, straw and wood combustion for combined heat and power production (IEA, 2006). Biofuels are mainly used in boilers for hot water supply and as gasoline additives in the transport sector (UNECE, 2010). There are also companies that produce equipment for the manufacture of pellets from biomass. Some of them use domestic equipment, while others prefer foreign because they believe it is of better quality (Martyniuk Andriy, Ogarenko Yulia, 2012; UNECE, 2010). Solar Solar radiation in Ukraine is of middling intensity. The average amount of solar energy received annually in Ukraine is about 1200 kwh/m 2 (4300 MJ/m 2 ), but only less than 1% of this energy belongs to the resources that are economically appropriate to be used (Update Energy Strategy, 2012; EBRD, 2009). This fact justifies why the current use of solar energy in Ukraine is minimal (EBRD, 2009). However, the southern part of the country is more promising for developing solar heating, since the annual solar radiation intensity is there at approximately 1450 kwh/m 2 (Institute for Economic Research and Policy Consulting, 2006). Solar heating can be considered suitable for areas with low population density, where district heating is not economically justifiable (Institute for Economic Research and Policy Consulting, 2006). In 2002 there were about 1000 installed collectors (10000 m 2 ) (Institute for Economic Research and Policy Consulting, 2006). Ukrainian environmental organizations project that the installation of solar collectors will be able to provide heat of 23TWh/year in 2050 (Institute for Economic Research and Policy Consulting, 2006). According to the National Agency for Energy Saving and Energy Efficiency (former NAER) the solar potential of the country is much higher than that of Germany and it is technically possible that the share of solar energy will reach the 10% of Ukraine s energy balance till 2030 (European- Ukrainian Energy Agency, 2011). The possible economic potential of solar generation is about 4 GW (Updated Energy Strategy, 2012). For Solar PV the respective economic potential is 16 TWh/year (Differgroup, 2012). Taking into account the declining cost of solar power stations due to technological development, the objective of installed capacity in SES in 2030 will be 1,5-2,5 GW, and their level of development - to 2-3,3 TWh per year for a significant drop in the cost of construction of this type of generation (Updated Energy Strategy, 2012). Geothermal The country has considerable geothermal resources that can be used mainly for heat supply. The geothermal energy is supplied to nine different systems. Two of the systems are associated with power plant co-generation producing 0,16 MW e and 1,8 MW e (EBRD, 2009). Thermal water is used for municipal heat supply and in agriculture in the western and central part of Crimea (EBRD, 2009). There is potential for binary geothermal power plant creation based on existing wells at abandoned oil and gas fields (UNECE, 2010; EBRD, 2009; Institute for Economic Research and Policy Consulting, 2006). Such a 1,5 MW pilot project in Poltava was being installed in 2005 (Institute for Economic Research and Policy Consulting, 2006). 18

19 In 2009 the total thermal installed capacity of Ukraine was estimated at 10,9 MW t generating 119 TJ of energy per year (EBRD, 2009). There are plans to increase geothermal use for district heating to 250MW th by (Institute for Economic Research and Policy Consulting, 2006). The economic potential for geothermal is 97TWh/year (Differgroup, 2012). Energy efficiency The Energy Strategy of Ukraine 15 provides an estimation of 318,4 Mtce (222,9Mtoe) by 2030 for the energy saving potential which is more than 1,5 times the primary energy consumption of 200,6 Mtce (140,4 Mtoe) in 2005 (Updated Energy Strategy, 2012). The required energy intensity reduction rate is estimated at 4 to 6% per year for The energy saving potential in 2030 consists of 198,1 Mtce (37,8%) due to technical factor and 120,3 Mtce (62,2%) due to structural factor (Updated Energy Strategy, 2012; Arzinger, 2009). The energy savings refer to certain sectors depending on their consumption in electricity, heat and natural gas. The main sectors of electricity consumption are industry, agriculture, commercial and residential sectors, and the distribution and transmission of electricity and export. They are expected to reach consumption of 282 TWh per year by year 2030 (Updated Energy Strategy, 2012). The main heat consumers (population, commercial sector and industry) are expected to reach the amount of 271 million Gcal for their total heat consumption in 2030 (Updated Energy Strategy, 2012). The main gas consumers are industry, population, heat, electricity and gas sector (expenditures on transport and distribution costs). They are expected to achieve total gas consumption in 2030 at 49 billion m 3. These amounts correspond to reduction of the gas consumption by approximately 40% and heat by approximately 25% (Updated Energy Strategy, 2012). In case of no energy efficiency measures, the total volume of gas consumption in 2030 will be at about 82 billion m 3 and of heat at about 366 million Gcal per year (Updated Energy Strategy, 2012). Heat and electricity need to reduce gas consumption by 27% (16 billion m 3 compared to 22 billion m 3 ) (Updated Energy Strategy, 2012). Transportation, distribution and loss of gas need to reduce gas consumption by 10% (2,8 billion m 3 compared to the expected amount without measures of 3,1 billion m 3 ) (Updated Energy Strategy, 2012). The energy saving potential is the following per sector: Transport sector Estimations of the Ministry of Transport refer to approximately 50% emission reductions for the road transport sector (World Bank, 2006). Estimations of the Energy Strategy until year 2030 refer to an energy saving potential (per year) for the transport sector that is: - up to year 2015 at 10,88 million tones of coal equivalent (in terms of fuel saving), 0,67 HV th (in terms of saved electricity) and 0,21million Gcal (in terms of saved thermal energy) (Martyniuk Andriy, Ogarenko Yulia, 2012). - That up to year 2030 at 17,24million tones of coal equivalent (in terms of fuel saving), 1,24 GW th (in terms of saved electricity) and 0,73million Gcal (in terms of saved thermal energy) (Martyniuk Andriy, Ogarenko Yulia, 2012). Industrial sector Estimations for this sector refer to: 40% reduction of heat consumption (57 million Gcal compared with 95 million Gcal without measures) and 53% reduction in gas consumption (18 billion m 3 compared to 38 billion m 3 without implementing energy efficiency measures) 15 Decree of Cabinet of Ministers of Ukraine No. 145-p - Resolution of March 15, 2006 (Ministry of Environmental Protection of Ukraine, 2006; EBRD, 2009) 19

20 (Updated Energy Strategy, 2012). Estimations of the Energy Strategy until year 2030 (published in 2006) refer to an energy saving potential (per year) for this sector that is: - up to year 2015: 26,16 Million tones of coal equivalent (in terms of fuel saving), 25,27 HV th (in terms of saved electricity) and 45,47 million Gcal (in terms of saved thermal energy) (Martyniuk Andriy, Ogarenko Yulia, 2012). - up to year 2030: 52,66 million tones of coal equivalent (in terms of fuel saving), 47,39 GW th (in terms of saved electricity) and 138,52 million Gcal (in terms of saved thermal energy (Martyniuk Andriy, Ogarenko Yulia, 2012). Electricity consumption in the industrial sector is expected to increase due to increased production of steel products (1,4% annually) and their related industries: mining (iron ore and coal), chemical and coke production (Updated Energy Strategy till 2030, 2012). In total, these industries will form more than 50% of industrial electricity consumption (about 71 TWh in 2030) (Updated Energy Strategy till 2030, 2012). Energy sector Estimations of the Energy Strategy until year 2030 (published in 2006) refer to an energy saving potential (per year) for this sector that is: - up to year 2015: 8,64 million tones of coal equivalent (in terms of fuel saving), 4,46 HV th (in terms of saved electricity) and 0.50 million Gcal (in terms of saved thermal energy) (Martyniuk Andriy, Ogarenko Yulia, 2012). - up to year 2030: 18,50 million tones of coal equivalent (in terms of fuel saving), 6,80 GW th (in terms of saved electricity) and 1,40 million Gcal (in terms of saved thermal energy (Martyniuk Andriy, Ogarenko Yulia, 2012). Agriculture For the year 2015 the expected GHG emission reductions will be 18,4MtCO 2eq and for year 2020 these will be 22,2 MtCO 2eq (Ministry of Environmental Protection of Ukraine, 2006). Estimations of the Energy Strategy until year 2030 (published in 2006) refer to an energy saving potential (per year) for this sector that is: - up to year 2015: 11,33million tones of coal equivalent (in terms of fuel saving), 0,72 HV th (in terms of saved electricity) (Martyniuk Andriy, Ogarenko Yulia, 2012). - up to year 2030: 17,97million tones of coal equivalent (in terms of fuel saving), 1,29 GW th (in terms of saved electricity) (Martyniuk Andriy, Ogarenko Yulia, 2012). Energy consumption in agriculture is expected to grow by an average of 2% per year and by 2030 to reach 4.8 TWh (Updated Energy Strategy till 2030, 2012). Construction Estimations of the Energy Strategy until year 2030 (published in 2006) refer to an energy saving potential (per year) for this sector that is: - up to year 2015: 0,64million tones of coal equivalent (in terms of fuel saving), 0,10 HV th (in terms of saved electricity) and 0,14million Gcal (in terms of saved thermal energy (Martyniuk Andriy, Ogarenko Yulia, 2012). - up to year 2030: 1,02million tones of coal equivalent (in terms of fuel saving), 0,18 GW th (in terms of saved electricity) and 0,40million Gcal (in terms of saved thermal energy (Martyniuk Andriy, Ogarenko Yulia, 2012). Housing and communal services 20

21 The household energy consumption is expected to increase by 2030 compared to that of year 2009 by more than 65% (annual growth rate 2,5%), as a result household consumption will be approximately 57 TWh (Updated Energy Strategy till 2030, 2012). This increase is attributed to the improvement of the Ukrainian population welfare, which will lead to improved living conditions to a level close to the level of developed countries in 2009 (Updated Energy Strategy till 2030, 2012). Consumption in the residential sector is expected to be reduced by 15-20% (which corresponds to 161 million Gcal compared with the 195 million Gcal without the introduction of energy efficiency measures) (Updated Energy Strategy, 2012). Heat consumption in the commercial and residential sectors is expected to be reduced by 30% (53 million Gcal compared with 76 million Gcal) (Updated Energy Strategy, 2012). Gas consumption is expected to be reduced by 33% (12 billion m 3 compared to 18 billion m 3 ) (Updated Energy Strategy, 2012). Energy savings for commercial buildings and transport are expected to reach a 30% (58 TWh compared with 76 TWh), using energy efficient technologies for heating, air conditioning (for example, the use of heat pumps) and lighting (eg, LED applications) (Updated Energy Strategy, 2012). Through the promotion of the energy-efficient household appliances and energy-saving lamps use the household electricity consumption is expected to be reduced by 11% (57 TWh compared to 63TWh), (Updated Energy Strategy, 2012). Estimations of the Energy Strategy until year 2030 (published in 2006) refer to an energy saving potential (per year) for this sector that is: - up to year 2015: 9,53 million tones of coal equivalent (in terms of fuel saving), 7,88 HVth (in terms of saved electricity) and 18,88 million Gcal (in terms of saved thermal energy) (Martyniuk Andriy, Ogarenko Yulia, 2012). - up to year 2030: 15,12 million tones of coal equivalent (in terms of fuel saving), 14,68 GW th (in terms of saved electricity) and 63,62 million Gcal (in terms of saved thermal energy) (Martyniuk Andriy, Ogarenko Yulia, 2012). Mitigation through JI and GIS JI The country considers the flexible mechanisms of the Kyoto Protocol as an opportunity to intensify investments for: i) modernization of the economy (Ministry of Environmental Protection of Ukraine, 2006); ii) raising significant funds to finance environment-friendly investments in energy, industry, transport, housing, forestry, agriculture and education (World Bank, 2006). Until November 1, 2010 the electronic data base of the National Environmental Investment Agency of Ukraine (NEIA) included 184 JI projects that had received Letters of Endorsement (National Environmental Investment Agency of Ukraine, 2010). 56 of these projects had developed Project Design Documents (PDDs), passed through determination procedure and were issued Letters of Approval (National Environmental Investment Agency of Ukraine, 2010). From these projects 33% concerned energy-fuel combustion, 21% energyfugitive emissions from fuels, 24% industrial processes, 20% waste and 2% agriculture (National Environmental Investment Agency of Ukraine, 2010). For the same time period 40% 16-50% of all ERUs 17 were of Ukrainian origin (National Environmental Investment Agency of Ukraine, 2010). 16 Statement from the Ukrainian representative in COP16 - Cancun (Mexico) in 2010, 17 about 26 million of ERUs issued in the world (National Environmental Investment Agency of Ukraine, 2010) 21

22 Table 1: JI project priorities (Source: Ukrainian Registry Carbon Units 18 ) 1 Energy industries (renewable - / non-renewable sources) 2 Energy distribution 3 Energy demand 4 Manufacturing industries 5 Chemical industries 6 Construction 7 Transport 8 Mining/mineral production 9 Metal production 10 Fugitive emissions from fuels (solid, oil and gas) 11 Fugitive emissions from production and consumption of halocarbons and sulphur hexafluoride 12 Solvent use 13 Waste handling and disposal 14 Afforestation and reforestation 15 Agriculture GIS Ukrainian surplus AAUs are estimated by the Ministry of Economy to be approximately 2,225 billion for the period , while experts put it at 1-2 billion for the first commitment period (World Bank, 2006). The Ministry of Economy proposes that 50% of this amount is held in reserve during the first commitment period (World Bank, 2006) 19. According to the Ministry of Fuel and Energy of Ukraine the priorities for projects under the GIS are (World Bank, 2006): - Modernization and improvement of the efficiency of gas compressor units in strategically important gas transport networks such as UPU, Progres, Souz, EKKR; - Facilitation for the use of unexploited energy sources like waste energy from thermal energy exhausts of gas compressor units, surplus pressure at gas distribution stations, and ill-conditioned (wasted) gas at oil-and-gas wells. - Improvement of combustion of fossil fuels at thermal generation plants. In 2008, the priority areas for GIS investments were energy efficiency, district heating, and forest management (Tuerk A. et al, 2010). A list of projects to be financed through the revenues from AAU sales was under preparation in 2009 in cooperation with the buyers (Tuerk A. et al., 2010). In spring of year 2009, 44 million AAUs were sold to the Japan s government and to a Japanese company, while in December of the same year, 3 million AAUs were sold to Spain (Tuerk A. et al., 2010). Additional AAUs were under negotiations to be transferred to companies in Switzerland, New Zealand and Japan. Furthermore, the country has signed MoUs with Italy and the Worldbank (Point Carbon, 2009a) and was discussing additional sales with the EBRD and the EIB (Tuerk A. et al., 2010) Ukraine holds an amount of 4,164 million AAUs for the first Kyoto commitment period, while the commitment period reserve is 2,067 Mt (Tuerk A. et al., 2010). As the national reserve is 1,400 Mt, the amount that may be sold under a GIS in the first commitment period is around 1,000 million AAUs (Tuerk A. et al., 2010). 22

23 Ukraine had by December 2010 about 550 GIS projects registered 20 and ready for implementation. The country was in the process of making some of them operational from January 2011 and to ensure successful cooperation with the Governments of Japan and Spain 21. Up to April 27, 2012 NEIA had reviewed and approved 1668 projects for GIS in 24 regions of the country. These projects are expected to lead to the GHG reductions of 385,4 tons CO2-equivalent/year 22. Other mitigation options Labour safety Through the implementation of the Programme of enhancement of labour safety at coal mines 23 methane emissions from operating mines were reduced by 10% in 2006 (Ministry of Environmental Protection of Ukraine, 2006). Industrial extraction and use of coalbed methane along with supplementary measures for coal-bed de gasification led to this reduction (Ministry of Environmental Protection of Ukraine, 2006). Spectrum of adaptation needs in Ukraine A. Energy Over 95% of the Ukrainian electricity generation stations are or were reaching the end of their production lifetime (Herasimovich and Tsarenko, 2008). According to this the energy sector can pose significant challenges and opportunities in the face of climate change. In general, the aging infrastructure, unless replaced or modernized, will come under increasing stress in urban areas. Changes in precipitation patterns and reduced river flows will have a direct impact on hydropower generation and cooling capacity of both nuclear power and traditional systems (UK Met Office 2010). According to of the National action plan on climate change adaptation to the period till 2020 the future plans for energy sector include: - Strengthening of the surface transmission lines and energy distribution infrastructure, use of underground lines (NAP 2020 project, 2011); - Increase energy efficiency to help offset increases in energy consumption; - Protection of energy production facilities to withstand increased flood, wind, lightning, and other storm-related stresses; - Diversification of energy supply facilities in case of failure (Potapenko V., 2011). B. Agriculture Agriculture is one of the main economic activities of the country. The farm land area decreased from 27,2 million hectares in 2000 to 26,1 million hectares in 2007 (Ministry of Strategy and Finance, the Republic of Korea, 2010). In 2010 the arable land was estimated at 42,9 million hectares (71% of the total land) (Ministry of Strategy and Finance, the Republic of Korea, 2010). For the year 2007, 15,1 million hectares (58% of the total farm land) was used for grain crops (wheat, rye, barley, oats, corn, millet, buckwheat, rice, legumes and peas), 5,9 million hectares (23% of the total farm land) for industrial crops (sugar beets, sunflower, rape, soya and flax), and 2 million hectares (8% of the total farm land) for Degree of Cabinet of Ministers of Ukraine No July 2002 On confirming the Programme of enhancement of labour safety at coal mines 23

24 potatoes, vegetables and cucurbits crops (Ministry of Strategy and Finance, the Republic of Korea, 2010). Potential impacts of the climate change could be positive since winter temperatures rise and the number of frost days decrease allowing to winter crops such as wheat to expand in production and growing area. On the other hand, decreased rainfall and warmer days in summer could impose the need of increased irrigated agriculture and diversified crop production (Eric E. Massey, 2012). Increase in extreme events such as intense rainfall or incidence of drought may affect crop production (UK Met Office, 2010). Rising sea levels are expected to reduce the available area of agricultural land in southern Ukraine (AEA Energy & Environment, 2007). Adaptation needs for this sector include: - Introduction of agricultural technologies for maximum efficient use of contemporary climate favorable conditions (NAP 2020 project, 2011); - Technical upgrading of agro-meteorological observation networks (NAP 2020 project, 2011); - Usage of effective environmentally friendly plant protection products considering also possible conditions for development of pests, pathogens, weeds (NAP 2020 project, 2011); - Research, development, and deployment of new technologies for improving efficiency in agriculture. Furthermore, new plant varieties more resistant to climate change need to be investigated 24 (NAP 2020 project, 2011); - Creation of incentives for wide introduction of insurance risks in agriculture (NAP 2020 project, 2011); - Improvement through upgrading of the low (often anti-ecological) level of techniques and technologies that are used for land cultivation and manufacturing agricultural production; (Ministry of Environmental Protection of Ukraine, 2007); - Protection of livestock from higher summer temperatures by providing more shade and improving air flow in barns (NAP 2020 project, 2011); - Development of detailed national adaptation plans including agriculture and assurance of the necessary financial resources for their implementation. Adaption of legal frameworks to promote innovation in agriculture (NAP 2020 project, 2011); - Underdeveloped agricultural niches need to be explored further, such as organic farming or focusing on certain agricultural areas to increase productivity (Potapenko V., 2011). C. Forests This sector is important for the Ukrainian economy because: i) in rural areas where unemployment is high, it provides jobs and maintains rural communities, ii) the country is a net exporter of wood products and a net importer of pulp, paper and particleboard (World Bank, 2006b). It provides also essential environmental services. Approximately 2 million ha of degraded and abandoned arable land that are under the jurisdiction of village councils has been identified as more suitable for reforestation than for agriculture (World Bank, 2006b). Investment in their reforestation is desirable for stemming the physical and economic impacts of land degradation, and also for enhancing economic productivity and environmental services of the land (World Bank, 2006b). It is possible part 24 Breed in the future crop varieties more tolerant to heat, drought and water logging from heavy rainfall or flooding (NAP 2020 project, 2011); Revision of specialized seed areas distribution, where high sowing qualities seeds should be obtained (NAP 2020 project, 2011). 24

25 of the reforestation cost to be covered under Joint Implementation or Green Investment Schemes (World Bank, 2006b). Forests are unevenly distributed across Ukraine s geographical zones (World Bank, 2006b). Most of Ukraine has a temperate continental climate and is covered by steppe and mixed forests (IEA, 2006). Forests are almost completely state owned and managed (>99%) (World Bank, 2006b). 69% of them are under the authority of the State Forestry Committee (SFC), which is responsible to the Ministry of Environmental Protection, and about 18% fall under the authority of the Ministry of Agrarian Policy (MoAP) (World Bank, 2006b). Warmer temperatures and changing patterns of precipitation may create water stress for forests leading to soil aridity, degradation, and the potential for incidences of forest fires (Eric E. Massey, 2012). There are about 3,000 forest fires annually resulting in the loss of 3000 ha of forest (World Bank, 2006b). Losses during high fire years are greater (1994, ~10040 ha and in 1996 ~12670 ha 25 ) (World Bank, 2006b). Changes in forests would also alter the diversity of fauna. Climate change could also lead to increase in invasive species including pests (Eric E. Massey, 2012). The density of forest roads (national average 12,6 m/ha, and 7,7 m/ha for the Carpathian region) is less than optimal for environmentally responsible harvesting and sustainable forest management, and is significantly lower when compared with other countries (Austria 36 m/ha and France 26 m/ha) (World Bank, 2006b). The existing network is in poor condition since almost 70% of it needs rehabilitation (World Bank, 2006b). The country needs to decide on the overall objectives of forest management, to clarify institutional responsibilities, to establish transparent systems for budgeting and accountability, and then agree on clear benchmarks to monitor results and progress in achieving objectives (World Bank, 2006b). Adaptation needs for this sector include: - improvement of forest protection methods against wildfires; application of more advanced measures for forest protection against pests; introduction of resistant tree species, supporting the highest productivity in the forecast climatic conditions (FAO, 2012); - Implementation of the forest resources inventory monitoring and assessment comprehensive program to obtain estimates of the climate change impact (NAP 2020 project, 2011); The Introduction of such a program will allow: i) the development of forest condition diagnostic and forecasting methods; ii) the updating of the information support system allowing forest management decisions; iii) the development of the scientific and methodological knowledge base for forest protection against pests and diseases; iv) increased scientific research work dealing with the selection and introduction of new forest species, resistant to forecasted climate changes (FAO, 2010). - Promote land and wildlife management practices that enhance ecosystem resilience (Potapenko V., 2011) such as: i) Protection and increase migration corridors to allow species to migrate due to climate changes; ii) Creation of protective forest plantations and forest shelter belts. - Development of regulatory mechanisms that: i) adopt principles of the forest management system and considering effects of climate change; ii) increase the forest user responsibility for forest preservation; iii) create a stimulus system for supporting forest management activity oriented towards the social and ecologically important functions of forests (FAO, 2010). - Establishment of insurance and reserve funds to be used for compensation of forest management activity expenses under climate change needs (FAO, 2010). - Conduction of personnel training and support for sustainable forest management systems. For this purpose, forest certification can be used as a practical tool (FAO, 2010). 25

26 D. Water resources The average multi-year Ukrainian water resources are 87,1 km 3 (without considering the flow of the Danube on the Kiliyskiy branch, which is 123 km 3 /year) (Ministry of Environmental Protection of Ukraine, 2007). The water resources that are formed within Ukraine are 52,4km 3 in an average water-volume year (Ministry of Environmental Protection of Ukraine, 2007). Water resources are distributed in a very unequal way within the territory of Ukraine. Resources are higher in the north and less in the south, where the bigger waterconsumers are located (Ministry of Environmental Protection of Ukraine, 2007). Ukraine has also unevenly distributed underground water reserves that are forecasted to be 57,2 million m 3 per day, of which 15,7 m 3 per day are confirmed. Taking into consideration the amount of water per Ukrainian citizen and the international standards, Ukraine is considered to be among those countries insufficiently supplied with water resources (Ministry of Environmental Protection of Ukraine, 2007). Due to the limited water resources and to the uneven distribution, river flow is widely regulated. Reservoirs and ponds have a total of approximately 58 billion m 3, which exceeds the local river flow of all the country s rivers (Ministry of Environmental Protection of Ukraine, 2007). This regulation has drastically decreased and often completely destroyed rivers capacity to purify them. Furthermore, because of the many reservoirs (over 1100) and ponds (around 28 thousand) there were increases in underground water levels in large areas, and changes in underground water systems (Ministry of Environmental Protection of Ukraine, 2007). The situation will worsen due to changes in precipitation and temperature because of climate change. Water stress is expected to become severe with increasing periods of drought (Eric E. Massey, 2012). This could increase the vulnerability of both the agriculture and hydropower sector (especially for the Dnieper). River flows are expected to decrease over the long-term significantly impacting inland shipping and navigation. A decrease in river flows will also translate into less flooding (Eric E. Massey, 2012). The adaptation needs in this sector are the following: - implementation of integrated water basin management through improved legal and regulatory framework (NAP 2020 project, 2011); - Implementation of monitoring system for surface water and of a water inventory aiming at certification and management of water resources (NAP 2020 project, 2011); - Improvement of water use efficiency and establishment of additional water storage capacity (NAP 2020 project, 2011); - Protection and restoration of stream and river banks to ensure water quality and safe guard water quantity (NAP 2020 project, 2011); - Promote shore protection techniques and open space preserves that allow beaches and coastal wetlands to gradually move inland as sea level rises (NAP 2020 project, 2011); - Identify and improve evacuation routes and evacuation plans for low-lying areas, to prepare for increased storm surge and flooding; - Identification of new and alternative sources of fresh water, for instance wastewater treatment or desalinated seawater (Potapenko V., 2011). - Improvement of economic, administrative and technical regulations of water supply (Ministry of Environmental Protection of Ukraine, 2007). 26

27 References AEA Energy & Environment, Adaptation to Climate Change in the Agricultural Sector - AGRI G4-05. AEA Energy & Environment and Universidad de Politécnica de Madrid. Available at: Arzinger, Energy Law Guide - Traditional Energies, Renewable Energies, Carbon Trading. Available at : %20Guide%20book(engl)NEW.pdf Biomass Action Plan of Ukraine, Available at: Climate Group, June 20, Position on International Emission Trading. Available at: Dan Milstein, Aleh Cherp, Energy Security And The Environment In Eastern Europe: The Case Study Of Ukraine. Available at: 8_16 Differgroup, The Ukrainian electricity system - a brief overview. Available at: EBRD, Ukraine - Country profile. Available at: ECEEE Green investment schemes: financing energy-efficiency in CEE and a model for post climate mitigation finance? Available at: Energy Community, Protocol concerning the Accession of Ukraine to the Treaty establishing the Energy Community. Available at: Eric E. Massey, Experience of the European Union in Adaptation to Climate Change and its Application to Ukraine. Available at: European-Ukrainian Energy Agency, Market Overview Ukraine s Solar Energy: Current Status. Available at: files/solar%20energy%20market%20overview_nov%2025_2011_eng_final.pdf FAO, Forests and Climate Change Working Paper 7, Climate change impacts on forest management in Eastern Europe and Central Asia, Dimensions, impacts, mitigation and adaptation policies. Dr. Csaba Mátyás, Editor. Available at: Geletukha G., Zhelyezna T., and other. Ukraine: outlook to Available at: Herasimovich, V. and Tsarenko, A., Overview of electricity market in Ukraine, for CASE, (Centre for Social and Economic Research). Available at: IISD, Clean Energy Investment in the Former Soviet Union (Ukraine and Kazakhstan) - The domestic context. Available at: Institute for Economic Research and Policy Consulting, Overview on Renewable Energy in Agriculture and Forestry in Ukraine Available at: International Energy Agency (IEA), Ukraine, Energy Policy Review Available at: IPA Energy + Water Economics, Study on the Implementation of the New EU Renewables Directive in the Energy Community Final report to Energy Community Secretariat. February 2010, available at: and Maria Nijnik, Arie Oskam, and Anatoliy Nijnik, Research Article. Afforestation for the provision of multiple ecosystem services: a Ukrainian case study. Available at: Market Observatory for Energy, Country file Ukraine. April Available at: 27

28 Martyniuk Andriy, Ogarenko Yulia, Resource Efficiency Gains and Green Growth Perspectives in Ukraine. Available at: Ministry of Energy and Coal Industry of Ukraine, Statement on security of energy supply of Ukraine. Kyiv, January Available at: PDF Ministry of Environmental Protection of Ukraine, Ukraine s report on demonstrated progress under the Kyoto Protocol. Available at: Ministry of Environmental Protection of Ukraine, National Environmental Policy of Ukraine: assessment and development strategy. Ministry of Environmental Protection of Ukraine, United nations Development Programme, Global Environmental Facility. Available at: National Ecological Centre of Ukraine, Problems of Ukraine s coal sector and greenhouse gas emissions from coal mining and consumption. Available at: http: //climategroup.org.ua/wpcontent/uploads/2010/06/ukraine_coal-sector_web pdf National Environmental Investment Agency of Ukraine, Joint Implementation Projects in Ukraine. Available at: NAP project. Cabinet of Ministers of Ukraine, Project of the National action plan on climate change adaptation for , 13925/5/1-11, (in Ukrainian language). Available at: National Plan for Adaptation to climate change (NAP 2020 project), Cabinet of Ministers of Ukraine, Project of the National action plan on climate change adaptation for the period till 2020, Available at: 05D0BEA?art_id=127645&cat_id= NECU, Review of funds expenditure obtained under the international emissions trading in Ukraine. Available at: Ukraine_2012_eng.pdf Potapenko V., National Institute for Strategic Studies. Presentation: Strategy of adaptation to global climate change. UK Met Office. Impacts of climate change Ukraine, Available at: Ukraine Carbon Market Facilitation, Guidelines for the development of JI projects in Ukraine Version 2. Prepared for the European Bank for Reconstruction and Development. Available at: _development_of_ji_projects_ pdf UNDP, Comparative Analysis EU and Ukraine Security of Energy Supply. Conducted by UNDP Blue Ribbon Analytical and Advisory Centre Energy Policy Team. Available at: UNECE, Financing Energy Efficiency Investments for Climate Change Mitigation Regional Analysis of Policy Reforns to promote energy efficiency and Renewable energy investments. Available at: UNFCCC, Quantified economy-wide emission reduction targets by developed country Parties to the Convention: assumptions, conditions, commonalities and differences in approaches and comparison of the level of emission reduction efforts - Technical paper. UNFCCC/TP/2012/2 8 May Available at: Simon Pirani, Elusive Potential: Natural gas consumption in the CIS and the Quest for Efficiency. University of Oxford. Available at: Tuerk Andreas, Frieden Dorian, Sharmina Maria, Schreiber Helmut, Ürge-Vorsatz Diana, Working Paper Green Investment Schemes: First experiences and lessons learned. At: pdf and 28

29 Updated energy strategy of Ukraine until 2030, (In Ukrainian). Available at: World Bank, Ukraine, Forestry Sector Note Status and Opportunities for Development. Available at: World Bank, Ukraine - Options for Designing a Green Investment Scheme under the Kyoto Protocol. Report No.: Available at: /Rendered/PDF/379490WP0UA0Ky101PUBLIC10Box334131B.pdf 29

30 BUSINESS AS USUAL SCENARIO ( ) BAU scenario description General comments In 2009 Ukraine had already published the GHG emissions inventory for the time period and was proceeding with the preparation of the inventory for year 2007 (CEC, 2009). Simultaneously, laws were adopted for Green Investment Scheme projects, the national climate commitments, Joint Implementation (JI) procedures the registration of anthropogenic emissions and the absorption of GHGs (CEC, 2009). The establishment of a domestic emissions trading scheme, the preparation of the third national communication, studies on vulnerability and on emissions reduction potential, the development of mitigation and adaptation measures, accreditation of independent expert organizations, regulations on emissions and absorption of GHGs were planned (CEC, 2009). The National Environmental Investment Agency was assigned as the Ukrainian designated focal point (CEC, 2009). Furthermore, Ukraine was supported by the European Commission for implementing the Kyoto Protocol. The EU-Ukraine Working Group on Climate Change met in October On the other hand, Ukraine continued to support the EU efforts for a global and comprehensive post-2012 agreement by 2009 (CEC, 2009). The country is proceeding in its energy policy with the implementation of the: - Plan of reconstruction and modernization of thermal power plants and combined heat and power plants until 2020 (approved by an Order of the Ministry of Fuel and Energy of Ukraine of , No. 236) (Ministry of Energy and Coal Industry of Ukraine, 2012) and - Sector programme for the reconstruction of hydro power plants and the construction of new facilities in hydro power generation until 2020 (approved by an Order of the Ministry of Fuel and Energy of Ukraine of , No. 337). (Ministry of Energy and Coal Industry of Ukraine, 2012). The industrial share in the total final consumption was 41,5% in 2007, which is very high due to a high share of energy intensive industries such as iron and steel and chemicals (Ministry of Strategy and Finance, the Republic of Korea, 2010). The household share is also relatively high because of the extremely low prices of electricity, natural gas and district heating for households. The shares of transportation and commercial sectors in the total final consumption are very low (Ministry of Strategy and Finance, the Republic of Korea, 2010). Energy prices (tariffs) in Ukraine are lower compared to those in OECD countries. There are no specific energy taxes except for the Value Added Tax (VAT) of 20% (Ministry of Strategy and Finance, the Republic of Korea, 2010). Energy prices for households are very low energy prices compared again with those for OECD countries because energy is considered as basic social service (Ministry of Strategy and Finance, the Republic of Korea, 2010). Additionally, the household gas tariffs are low, because households and heating companies are supplied with gas extracted in Ukraine so its cost is lower than the imported gas price (Ministry of Strategy and Finance, the Republic of Korea, 2010). The National Electricity Regulation Commission of Ukraine (NERC) regulates the electricity and natural gas tariffs, while the district heat tariffs were subject to the local authorities approval according to the Law on Heat Supply until 2010 (Ministry of Strategy and Finance, the Republic of Korea, 2010). In July 2010, the Parliament of Ukraine passed a law on the National Commission for the Regulation of the Utilities Market in Ukraine. While the Commission was being formed, the National Electricity Regulatory Commission served as the DH sector regulator. In July 2011, the President of Ukraine signed a decree creating the National Commission on the Regulation of the Utilities Market (World Bank ESMAP, 30

31 2012). The prices of petroleum products are determined by the market (Ministry of Strategy and Finance, the Republic of Korea, 2010). Policy portfolio for this scenario The policy instruments that were implemented before 31 December 2010, concern mitigation/adaptation activities and form the policy portfolio of the BAU scenario. Mitigation Laws for RES Degree of the President of Ukraine of No. 159 On construction of wind power plants 25 Degree of Cabinet of Ministers of Ukraine No February 1997, On the complex programme on construction of wind power plants 26 Law of Ukraine of No. 575 On Electricity This Law regulates relations arising in connection with production, transmission, supply and use of energy, state control over safe execution of works at objects of the electric power industry irrespectively their ownership form, sate operation of energy equipment and state control over regime of consumption of the electricity and heat energy. 27 Law of Ukraine of No XIV On alternative types of liquid and gas fuel 28 The law defines legal, social, economic, ecological, and organizational grounds for production and consumption of alternative types of liquid and gas fuel on the basis of involving untraditional sources and types of energy raw materials. The Law aims at establishing the necessary conditions for expanding production and consumption of these types of fuel in Ukraine. Law of Ukraine of No.1682 On Natural Monopolies This law defines the legal, economic and organizational principles of state regulation of natural monopolies in Ukraine. The purpose of this Law is to ensure the functioning of markets which are natural monopolies, based on balancing the interests of society, natural monopolies and consumers of their products. 29 Law of Ukraine of No.1775 On Licensing of Certain Types of Economic Activities This law defines the types of economic activities, which are subject for licensing procedure, establishing state control in the field of licensing, liability entities and licensing authorities for violation of legislation on licensing. 30 Law of Ukraine No , 8 June 2000 On amendment of some Laws of Ukraine with respect to stimulating the development of wind power plants (Ministry of Environmental Protection of Ukraine, 2006)

32 The Law introduced targeted 0,75% surcharge to tariffs on electricity sold on wholesale electricity market in Ukraine (Ministry of Environmental Protection of Ukraine, 2006). Law of Ukraine of No.555-IV, On alternative sources of energy This law establishes legal, economic and organizational principles for the utilization of alternative energy sources. The law defines legal, economic, environmental and organizational framework for the use of alternative energy sources and promoting their use in energy complex. 31 Law of Ukraine of , No On Heat Supply This Law defines the legal, economic and organizational principles on the heat supply objects and regulates the relations connected with production, transportation, supply and use of thermal energy to: i) ensure energy security of Ukraine, ii) improve energy efficiency of heating systems, iii) establish of heat energy market and iv) protect the rights of consumers and workers in the heat supply sector. 32 Law of Ukraine of No IV On combined generation of heat and electricity (cogeneration) and use of waste energy potential This Law stipulates legal, economic and organizational principles of activity of relationships subjects in the sphere of energy-saving regarding use of co-generation plants; regulate relationships connected with peculiarities of generation, transfer and supply of electrical and heat energy from co-generation plants. The aim of this Law is creation of legal principles for increasing of efficiency of fuel use in the process of energy generation or other technological processes, development and application of technologies of combined generation of electrical and heat energy, increasing of reliability and safety of energy supply at the regional level, attraction of investments for creation of co-generation plants. 33 Law of Ukraine of No. 601-VI. On Amendments to Certain Laws of Ukraine Concerning the Introduction of a Green Tariff and its amendment Law of Ukraine of No VI On Amendments to the Law of Ukraine "On electricity" to encourage the use of alternative energy sources 34 This Law introduces the green tariff, which is a special tariff for purchase of electricity produced at power plants using alternative energy sources (except for blast-furnace and coke gas, and using hydro energy produced by small hydro power plants). Electricity produced in such way can be sold directly to consumers, and the Wholesale market is obliged to pay green tariff for electricity produced by this way and not sold at contractual prices directly to consumers or energy supplying companies, which conduct economic activity in sphere of electricity supply as per regulated tariff. 35 The law also defines a minimum share of raw materials, fixed assets, works and services necessary for the construction of the power plant that must be of Ukrainian origin. Starting from year 2012 this share of national material and labor must be more than 30% of the total construction costs, and starting from year 2014 this share must exceed 50%. For solar power plants the national component in the production of solar modules needs to exceed the 30% starting in year The exact procedure for the determination and control of these shares has not been approved to date

33 Law of Ukraine of No VI On Amendments to Certain Laws of Ukraine as to Support of Production and Use of Biofuel Types This Law supports development of different types of biofuel. One of the principles of the state policy in the sphere of biofuel types is the stage-by-stage increase of obligatory volume of production and use of bio and mixed motor fuel. 37 Laws for energy efficiency Law of Ukraine of No 74/94- VI On energy conservation 38 The law defines the legal, economic, social and ecological basis for all citizens and energy companies, associations and organizations, located in the country. It aims to regulate relations between economic entities, state and legal entities and individuals in the field of energy, associated with extraction, processing, transportation, storage, production and use of energy resources, and also providing incentives for enterprises, organizations and citizens in energy conservation, energy-saving technologies, developing and manufacturing less energyintensive machinery and technological equipment, fixing the liability of legal and individuals in the field of energy. 39 Policy instruments for JI-GIS Resolution of the CM of Ukraine of No. 206 On approval of the preparation, review, approval and implementation of projects aimed at reducing anthropogenic emissions of greenhouse gases 40 (Ministry of Environmental Protection of Ukraine, 2006). The procedure includes two stages of JI project approval: i) letter of endorsement and letter of approval of project and ii) subsequent monitoring and verification of the project results (Ministry of Environmental Protection of Ukraine, 2006). This Resolution was followed by: - Order No June The Order provides methodological guidelines concerning the development and submission of JI projects (Ministry of Environmental Protection of Ukraine, 2006). - Order No July It defines the requirements for the documents to be submitted along with the application for the letter of endorsement (Ministry of Environmental Protection of Ukraine, 2006). - Order No July 2006 It defines the requirements for the full project documentation to be submitted along with the application for the letter of approval (Ministry of Environmental Protection of Ukraine, 2006). Resolution of the CM of Ukraine of No. 221 On adoption of the Procedure for review, approval and implementation of targeted GIS projects during the continuance of the obligations of the party to the Kyoto Protocol to the UN FCCC on climatic changes 41 Resolution of the CM of Ukraine of No. 392 On fulfillment of Ukraine's international obligations under the UN Framework Convention on Climate Change and the Kyoto Protocol %D0%B2%D1%80?test=4/UMfPEGznhhmnf.ZiFYDdaHHI44ws80msh8Ie

34 Resolution of the CM of Ukraine of , On Amendments to the Procedure for review, approval and implementation of targeted environmental (green) investments in the commitment period of the Kyoto Protocol to the UNFCCC 43 Resolution of the CM of Ukraine of p On operations with units (parts) of the assigned amount 44 Resolution of the CM of Ukraine of On approval of the state budget money use in the year 2009, from the sale of units (parts) of the assigned amount of greenhouse gas emissions under Art. 17 of the Kyoto Protocol to the UN Framework Convention on Climate Change 45 Policy instruments related to climate change policy issues Law of Ukraine On Unified Customs Tariff of Ukraine 46, 47 (No V, dated on Amendement issued on 1 st January 2008 Amendement No. 273 VI 48 ) It provides exemptions from customs duties for certain goods imported into Ukraine, such as: Equipment for the production of electricity from RES; Materials, raw materials, equipment and components which are used in the production of alternative fuel types or production of electricity from RES. The list of goods is stipulated by the Resolution of the CM of Ukraine of «On import to the customs territory of Ukraine of energy-saving materials, equipment and component parts» 49. Regulation of the Cabinet of Ministers of Ukraine On Approval of the Regulations on Establishing the Charges for Environmental Pollution and its Collection (No. 303, issued on modified regulation No. 1236, issued on ) 50 This regulation sets a fee for Environmental Pollution (tax) levied by: air emissions of pollutants (GHG) from stationary and mobile sources of pollution. More specifically it concerns emissions from diesel fuel, gasoline (leaded, unleaded), liquefied petroleum gas, compressed natural gas. Main characteristics of this policy portfolio Ukraine was considering being very close in meeting the energy consumption targets of although they were too optimistically as quoted in the Energy Strategy - due to the high natural gas prices in the world market and the financial crisis (Ministry of Strategy and Finance, the Republic of Korea, 2010). Two facts justified this argument: i) The annual growth rate of energy consumption in TPES was -2,1% for the time interval against the planned annual growth rate of 1,1% from 2005 to 2010 (Ministry of Strategy and Finance, the Republic of Korea, 2010). ii) Natural gas consumption decreased annually by cc67cb204cf/SJohnson_WindEnergy_Mar12.pdf %D0%BF?test=4/UMfPEGznhhxt..ZiuYPVUzHI4pgs80msh8Ie6 34

35 8,8% from 2005 to 2007 against the planned annual consumption reduction of 2,4% (Ministry of Strategy and Finance, the Republic of Korea, 2010). The Energy Strategy until year 2030 that was published in 2006 had the following weaknesses: - It had rather low official status since it was approved by the Cabinet of Ministers of Ukraine (Directive N p from 15 March 2006) but not adopted by the Verkhovna Rada (the Ukrainian Parliament) (Biomass Action Plan of Ukraine, 2009). The Strategy was not a law and it is not clear whether its targets are finally reached (Biomass Action Plan of Ukraine, 2009). Therefore, there is lack of a working (not declarative) state program with the status of law (Biomass Action Plan of Ukraine, 2009). - It did not take into account the economic crisis and therefore its energy consumption forecasts are now outdated (Martyniuk Andriy, Ogarenko Yulia, 2012). - It laid special stress on the development of nuclear energy and to the increase of coal consumption on power plants (Biomass Action Plan of Ukraine, 2009). This may create problems with JI and GIS since when combusted, coal emits roughly double the carbon dioxide emitted by natural gas for the same amount of energy. - It had very optimistic targets such as the rise in biomass energy use by 9,2 mtce until 2030 (50% of all RES) which is approximately 9 times more than present volume of utilization (Ministry of Strategy and Finance, the Republic of Korea, 2010; Biomass Action Plan of Ukraine, 2009). That is why this document is considered of not having a clear and justified target on the share of biomass in the total primary energy consumption (Biomass Action Plan of Ukraine, 2009). Additionally, achievement of the RES targets is difficult because of (UNDP, 2007): i) their high cost since the amounts of required investment and externalities 51 were not taken into account, providing fossil fuels with an artificial advantage; ii) administrative problems because of installation procedures and the decentralized nature of most RES applications; ii) opaque and/or discriminatory rules governing grid access. The following comments are quoted for the policy portfolio of this scenario regarding the penetration of RES: - Law of Ukraine No , 8 June 2000 was considered as successful in contributing to wind energy power development since the installed capacity of wind power plants reached the amount of 57,4MW in 2003 (Ministry of Environmental Protection of Ukraine, 2006). - The first two laws for RES were of declarative nature and without financial support for their development. The law on the green tariff provided real support for RES, but there are still uncertainties regarding the procedure for application of the green tariff to concrete RES power plants. (BAP, 2009). - The law on biofuels - adopted on offers inititives to producers and consumers of biofuels, but it does not cover all relevant issues in this sector, allowing for gaps in the existing legislation for bioenergy (BAP, 2009). - The - introduced in Green Tariff was a good incentive for attracting foreign investors' interest despite the financial downturn (Black & Veatch, 2011; Updated Energy Strategy, 2012). Simultaneously, customs duties and value added tax for the energy efficient and renewable energy generating equipment import were cancelled in The enterprises selling such equipment are relieved from paying corporate profit tax for 5 years. Also the land lease for the wind and solar farms could be lowered to the "external" cost of the different energy sources, particularly their long term impact on health or the environment 35

36 % of its market value (UBSCE, 2011). According to Ukrenergo, over 14,000 MW of wind projects were proposed with 1150 MW of them having received technical requirements from Ukrenergo (Black & Veatch, 2011). It was also a powerful incentive for the development of the solar power equipment market, which today is represented by the manufacturers of monosilicon, polysilicon, ingots, wafers, solar cells and module (Martyniuk Andriy, Ogarenko Yulia, 2012). Domestic production of PV-panels is approximately 90 MW per year with almost two-thirds of the output being exported (Martyniuk Andriy, Ogarenko Yulia, 2012). Ukraine is considered as the leader in implementing Joint Implementation Projects (Martyniuk Andriy, Ogarenko Yulia, 2012). The practical efficiency of the national legislative framework for JI projects until year 2006 was considered as adequate since the Ministry of Environmental Protection issued that year 43 letters of endorsement and 4 letters of approval for such projects (Ministry of Environmental Protection of Ukraine, 2006). Until 13 October 2011, there were 240 JI Ukrainian projects at various stages of implementation, resulting to 252 million of emission reductions or equivalently to 40% of the total Emission Reduction Units (ERUs) in the world (Martyniuk Andriy, Ogarenko Yulia, 2012). This situation is also promising for GIS, although the Ukrainian Green Investment Scheme was introduced in In , Ukraine received approximately 450 million euros from the sale of 47 million AAU to Japan and Spain at a price of 9,5 10 euros per unit (Martyniuk Andriy, Ogarenko Yulia, 2012). 871 projects were under consideration by the State Environmental Investment Agency (SAEI) concerning thermal insulation of buildings (replacement of windows, doors, facades), building and reconstruction of heat supply (advancement of efficiency and use of alternative fuels) and mine water purification (Martyniuk Andriy, Ogarenko Yulia, 2012). Finally, in September 2011, 365 projects were approved for implementation, but by 1 November 2011, only one project for reconstruction and insulation of the facade and replacement of windows in the clinical hospital for handicapped and war veterans in Simferopol was completed (Martyniuk Andriy, Ogarenko Yulia, 2012). Regarding energy efficiency, only approximately 30% of the planned actions of the Comprehensive State Energy Saving Programme for the period up to 2010 were implemented (Martyniuk Andriy, Ogarenko Yulia, 2012). The main reason for this low percentage is the low energy tariffs. Low DH prices have provided little incentive for investment in energy efficiency. As a result, Ukraine is one of the highest energy intensive countries in the world (World Bank- ESMAP, 2012). Ukrainian households pay less for electricity compared to the industrial consumers, while households in OECD countries pay more than the industrial consumers. The prime energy policy concern in Ukraine is the adjustment of the existing energy prices to cost-reflective price levels (Ministry of Strategy and Finance, the Republic of Korea, 2010). If the Ukrainian energy prices are not adjusted in the near future to those of international levels, it will be difficult to attract sufficient internal and external investments in the national energy sector (Ministry of Strategy and Finance, the Republic of Korea, 2010). Additionally, the fund raising plan of the Energy Strategy is not specific (Ministry of Strategy and Finance, the Republic of Korea, 2010). Due to the lack of an available implementation plan, it is not clear how the targets of the Energy Strategy will to be achieved (Ministry of Strategy and Finance, the Republic of Korea, 2010). The government needs to reexamine its policy of using the funds coming from emissions trading for converting district heating (with heat plants) into electric heating. It might be more effective to use the funds to enhance energy efficiency which has not been sufficiently financed in Ukraine (Ministry of Strategy and Finance, the Republic of Korea, 2010). The ESCO market is not developed in the utilities sector for the following reasons (UNECE, 2013): i) absence of a clear definition of ESCO and Energy Performance Contracts (EPC) in legislation; ii) inconsistency of legislation and public procurement procedures for the implementation of EPC; iii) inconsistency of the budget code for implementing EPC: annual budget planning is horizontal; there is no possibility of redistribution of budgetary 36

37 expenditure (energy costs and capital investments); iv) their own funds are insufficient to carry out projects, unless they are financed from outside, but loan funds have high interest rates which hamper profitability; v) Lack of legislative incentives, such as tax exemptions which could assist Ukrainian companies that are often in a difficult financial position and consider investments as risky; vi) Lack of a liberalized energy market with market-driven prices affects profitability of energy efficiency projects; vii) information on ESCOs is very scarce and thus the concept is little known. 37

38 References Black & Veatch, Ukraine Sustainable Energy lending Facility (USELF) Strategic Environmental Review: Scoping Report. Prepared for EBRD. Available at: bfile.pdf Martyniuk Andriy, Ogarenko Yulia, Resource Efficiency Gains and Green Growth Perspectives in Ukraine. Available at: Ministry of Environmental Protection of Ukraine, Ukraine s report on demonstrated progress under the Kyoto Protocol. Available at: Ministry of Energy and Coal Industry of Ukraine, Statement on security of energy supply of Ukraine. Kyiv, January Available at: Ministry of Strategy and Finance, the Republic of Korea, Energy Efficiency Improvement and New and Renewable Energy Development Strategies for Ukraine. The document was prepared for The Government of Ukraine. The National Agency of Ukraine on Ensuring of Efficient Use of Energy Resources Management (NAER) also cooperated for its preparation. Available at: Union of Black Sea and Caspian Confederation of Enterprises (UBSCE), Green Business Support Strategy for Ukrainian Private Business organizations Focusing on metal and mining industry. Available at: World Bank - ESMAP, Modernization of the District Heating Systems in Ukraine: Heat Metering and Consumption-Based Billing. Available at: UNECE, Economic Commission for Europe - Committee on Sustainable Energy Steering Committee of the Energy Efficiency 21 Programme Twenty-fourth session, Geneva, 17 April 2013 Item 4 (a) of the Provisional Agenda, Financing Energy Efficiency and Renewable Energy Investments for Climate Change Mitigation. UNECE/ENERGY/WP.4/2013/4. Available at: df 38

39 Key assumptions The key assumptions used for the development of scenarios are similar to those used in previously published studies and papers for Ukraine. The categories of the key parameters are common for all scenarios and are divided as follows: Demographics According to the 2010 World Population Prospects of the United Nations the population of 49 countries is expected to decrease for the period , while 44 of them are expected to continue decreasing for the period Among these countries are: Bulgaria, Moldova, Romania, Russia, Serbia and Ukraine. The average annual rates of changes for the Ukrainian population regarding three variants are presented in Table 1. The version medium variant of the population projections will be used for this report. Table 2: United Nations projections for the Ukrainian population (UN, 2010). Average annual rate of change (%) Variant Medium -0,64-0,55-0,54-0,58-0,64-0,55-0,55-0,56 High - -0,36-0,27-0,27-0,33-0,04-0,07 Low - -0,73-0,82-0,91-0,98-1, ,23 Economy Figure 1: Population in BAU scenario. Gross Domestic Product The country experienced a crisis during the transition at the beginning of the 1990s, which was followed by a period of steady growth during the time period , with an annual average real GDP growth more than 7% (Martyniuk Andriy, Ogarenko Yulia, 2012). More specifically, according to the State Statistics Committee (SSC), the real GDP growth for years 2006 and 2007 was 107,3% and 107,9%, respectively (3 rd, 4 th and 5 th NC of Ukraine to 39

40 UNFCCC, 2009). The increase in global demand for steel, chemicals and agricultural products contributed to this increase (Martyniuk Andriy, Ogarenko Yulia, 2012). Ukraine entered a sharp economic downturn in late 2008 (CEC, 2009). GDP declined by 15,1% in 2009 (UKRSIBBANK, 2011). The recovery in Ukraine s economy was slowed during 2012 (Swedbank, October 2012). Manufacturing in particular had a difficult year; industrial production and steel manufacturing both shrunk at mid-year compared with the same period in 2011 (Swedbank, October 2012). Forecasts for the Ukrainian GDP of the next years are presented in Tables 4 and 5. The International Monetary Fund (IMF) provides projections for the Ukrainian GDP until 2017 (Table 3) (IMF, 2012) 52. Table 3: Projections for the Ukrainian GDP (IMF, 2011). Year Annual percent change of GDP (%) 5,2 3,0 3,5 3,5 United Nations in their 2012 report about the World Economic Situation and Prospects forecast for Ukraine a 4,4% growth rate for 2011, 3,8% for 2012 and 4,3 % for 2013 (UN, 2012) 53. In the latest National Communication of the country submitted to UNFCCC in 2009, there are estimations that the real GDP for the time interval will be growing at rates above the potential GDP growth (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009)). It is expected that during GDP growth rate will gradually decline to levels of the potential growth (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). BSTDB expected for 2011, an increase of approximately 4,5% of the annual real GDP growth. For the period real GDP growth rates are expected to remain stable at 4,5% or so (BSTDB, 2011). The figures depend upon developments in: - Russia, the main economic partner of Ukraine. Russia is the largest single trade partner of Ukraine for both exports and imports Ukraine s (BSTDB, 2011). It accounted for 31,8% of Ukraine s total international trade turnover, followed by Germany and China, which accounted for 5,4% of Ukraine s trade, Poland (4,1%), Turkey (3,9%) and Italy (3,4%). Among BSEC Members, Azerbaijan (1,39%) and Romania (1,24%) are the next two largest trade partners for Ukraine, with others accounting for less than 1% of Ukraine s international trade (BSTDB, 2011). - EU, from where most investment and other forms of financing originate (BSTDB, 2011). Continued economic weakness in the EU will further affect Ukraine s exportdependent economy (SEB, 2012; World Bank, 2012b). According to European Bank for Reconstruction and Development Ukraine s economy is very much exposed to the eurozone (EBRD 2012a, 2012b). Developments in the EU are expected to remain an important factor for the country s growth and economic stability (EBRD, 2012a, 2012b). Eurozone crisis affected the country, with the most recent industrial production data already indicating reduction. Part of the conditions under the 2010 IMF programme (including parametric pension reform), critical measures necessary for the stabilization of the gas sector, including household tariff increases have been implemented by the National authorities implemented, but still face political resistance (EBRD, 2012a, 2012b). In Table 4 forecasts for the Ukrainian GDP are presented. The most optimistic GDP growth rate is 9% at 2012 and 8,3% at 2015, while the most pessimistic is 0,2% in 2012 and 0% at For all three scenarios for this report the projection of IMF in 2012 will be used. For the purposes of this report the growth rates of GDP under the BAU scenario will be used

41 initially for all three scenarios. For BAU scenario the GDP growth rate remains constant until year 2050 based on projections of Tables 3 and 4. Table 4: Projections for the GDP of Ukraine from different sources. GDP Projections rd,4 th,5 th NC Ukraine, ,3 6,5 UKRSIBBANK, ,2 5,0 3,8 4,0 IMF, ,2 3 3,5 3,5 3,5 3,5 3,5 EBRD, 2012a January ,0 2,5 SEB, March ,2 5,2 3,2 4,2 SEB, October ,2 2,1 2,9 3,9 Swedbank, October ,8 3,5 EBRD, October ,2 1,0 2,5 World Bank, December ,1 5,2 2,0 3,5 4,0 SEB, March ,1 0,2 0,0 1,8 CASE, ,2 0,8 1,4 UKRSIBBANK, ,2 5,2 1,5 2,5 3,5 Ukrainian economic sectors Figure 2: Economy: GDP current prices. During the last 15 years from 1990 to 2005, the share of agriculture and manufactures in GDP was reduced over services 54 (ECORYS, 2007). In 1990 agriculture represented the 25,6% of GDP, while in 2005 this percentage was approximately 11% (ECORYS, 2007). Services increased their share of GDP from 30% to 55% representing the biggest sector and employer in the Ukrainian economy (ECORYS, 2007). The manufacturing sector used to account for 45% of Ukrainian GDP, but in 2005 its share was reduced to 34% (ECORYS, 2007). 54 In the service sector, transport and travel services have the largest share (ECORYS, 2007). 41

42 Processing industry, trade, transport and communication have a large share of GDP (Martyniuk Andriy, Ogarenko Yulia, 2012). For 2010, exports included metals, especially steel (33,7% of total by value), minerals (13,1%), machinery and equipment (11%), plant products (7,7%), chemicals (6,8%) and transport equipment (6,3%) (BSTDB, 2011). Imports of the same year were: minerals (including fuel) 34,8%, followed by machinery and equipment (13,4%), chemicals (10,6%) metals (6,8%), transport equipment (6%) and plastics and rubber (6%) (BSTDB, 2011). During 2012 the share of construction, agriculture, and consumer-oriented sectors, such as trade, in the GDP increased, removing manufacturing from its leading position (UKRSIBBANK, 2013). Metals and mining are still competitive, but suffer from weak global demand (UKRSIBBANK, 2013). Mining and metallurgical sectors account for about 27% of nominal GDP, 40% of foreign exchange earnings and 15% of jobs (Martyniuk Andriy, Ogarenko Yulia, 2012). Steel production is restricted by decreased prices and lower demand from the euro zone, Russia and Asia (SEB, 2012; CEC, 2009). Foreign investments concern mainly manufacturing, mining (gold, minerals and coal) and the financial sector (European Commission and CASE Center for Social and Economic Research, 2008). Energy sector Ukraine is an energy depended country. Total energy import dependency is 39% (IEA, 2012). 100% of imported oil and natural gas is supplied to Ukraine by the Russian Federation (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). The sector needs large and sustained investment Ukrainian hryvnia (UAH) billion or EUR 170 billion) in the period to 2030 to ensure its modernisation, security and competitiveness (IEA, 2012). Industry The largest Ukrainian industries measured according to their gross industrial production are: food and agricultural products processing (especially sugar), production of coke and refined petroleum products, metallurgy and processing of metal, machine building, transport equipment and chemicals (UNECE, 2010; ECORYS, 2007). The share of forest and wood industry within this sector is low (less than 5%) 55. For 2007 and 2008 the share of industry in GDP was 37% for both years (Market Observatory for Energy, 2010; UNECE, 2010). Since the fourth quarter 2008, industrial production decreased significantly by 25% (UNECE, 2010). The biggest decrease compared to the fourth quarter of year 2007, was recorded in mining and metallurgical (45%), chemicals (33%) and machine building (29%) (UNECE, 2010). In 2011 there was an increase of 8,5% while in 2010 the growth rate was 8,7% 56. Agricultural sector This sector is important for the Ukrainian labour market since in 2007, 17% of workers (compared to the 5,6% of EU-27) were employed in this sector (European Commission, Directorate-General for Agriculture and Rural Development, 2009). However, the number of workers in this sector decreased by almost 2 times: from 1245,5 thousand workers in 2005 the number was reduced at 711 thousands persons in 2011 (State Statistics Service of Ukraine, 2011). Ukraine s agriculture also has the potential to become a major export earner. In the beginning of the nineties 23% of GDP was from agriculture, while in 2007 it dropped to 8% (compared to 1,2% of EU-27) (European Commission, Directorate-General for Agriculture and Rural Development, 2009). Agricultural output was slowed down during 2012 after an unusually cold winter that was followed by a very hot summer (EBRD, 2012b). Ukraine's 55 Juniter_.pdf (in Ukrainian)

43 main trading partner in agricultural products is EU (in terms of import and export) (European Commission, Directorate-General for Agriculture and Rural Development, 2009). For 2012 Ukraine exported agricultural products to Japan, Taiwan, Switzerland, the United Arab Emirates and South Africa 57. Direct foreign investments (share capital) at the beginning of year for the branch of agriculture, hunting and forestry amounted 1,9% in 2011 and 2% in 2010 of the total amount (State Statistics Service of Ukraine, 2011). Agriculture has the potential to promote higher growth, exports, and investments (IMF, 2012b). The sector produces mostly grains, potatoes, sugar beet, milk and eggs (ECORYS, 2007). In 2011, the share of agriculture (including hunting and forestry) in the total gross value added was 6% (in 2010 it was 8,7%) (MENR, 2012). Exports of agricultural products increased compared to 2010 to 28,9% (MENR, 2012). Manufacture It concerns mainly fabricated metal products and machine building. Out of all the investments in 2005, the largest share by 24% concerned the manufacturing industry 58 (ECORYS, 2007). Manufacturing sectors that usually are successful in attracting FDI are food processing, basic and fabricated metal products and machine building (BSTDB, 2011). The ten principal sources of foreign investment are Cyprus, Germany, the Netherlands, Russia, Austria, France, the United Kingdom, Sweden, the British Virgin Islands, and the United States (BSTDB, 2011). Mining and metallurgical industry continue to hold a key role in the national economy, since they are responsible for about 19% of industrial production, over 40% of foreign exchange earnings from exports, employment - more than 15% of the total number of employees in the industry (MENR, 2012). The output of metal products gradually increased and in 2007 reached the level of 24,5 million tons of rolled steel. The global financial crisis of interrupted this positive trend and output of metal products declined by almost 30% (MENR, 2012). GDP per capita Projections of this key driver are based on those of GDP and population. LEAP calculates them automatically based on the projections of the other two key drivers as they are defined for each scenario. GDP distribution per sector There is no the historical data about GDP distribution per sector in Ukraine, therefore there are no assumptions for the scenarios. Average annual household income The stable growth is noticed through the years The growth rate of this variable is assumed to be equal to the growth rate of GDP per capita Investments were made also in the transport sector and in real estate operations (ECORYS, 2007). 43

44 Gini coefficient Figure 3: Economy: Average annual household income. Measures of income inequality are based on data on people's household disposable income. The data on the Gini coefficient will be used for assessment of policy portfolios in AMS method. Climate Statistics Review of information about the region A number of global and regional, climate and hydrology models have been developed to assess temperature, precipitation and runoff levels for different climate scenarios (IPCC, 2007; SINTA, 2008; SEECOF, 2010; CC-waters, 2011). For the temperate continental zone the annual mean temperature is expected to increase by 3-4 o C and up to 4,5 o C in the Black Sea region, while annual precipitation is expected to increase by up to 10%. These projections are until the end of the 21 st century (Lidner M. et al., 2010). Reduction in the annual amount of precipitation in combination with the increase of the mean annual temperature has the following consequences: - Reduction of water resources and availability (IPCC, 2007); - Reduction of the irrigated areas; - Changes in crop suitability and productivity (IPCC, 2007); - Reduction of the hydropower and nuclear activity; - Changes in the forest areas (IPCC, 2007). Precipitation Most of precipitation falls at the Ukrainian Carpathians (up to 1600 mm per year) and at Crimea ( mm). On the rest of the territory precipitation level ranges from mm (north-west) to mm (south-east). In dry years, precipitation has been 44

45 significantly reduced: in the coastal areas of the Azov and Black Seas - up to 100 mm in the steppe mm, and in the forest-steppe - up to mm (MENR, 2012). Precipitation over the last 100 years showed precipitation distribution leveling-off (Buksha Igor, 2009). For regions with insignificant precipitation (southeast of the country), precipitation finally increased by approximately 15%, while in regions with greater precipitation (northwest of the country), it decreased by approximately 5% (Buksha Igor, 2009). Due to this observed changes there was a decrease in the climate's continentality and increased frequency of extreme weather events (rainstorms, floods, unseasonal thawing, early frosts, and squalls) (Buksha Igor, 2009). Throughout the entire region of Europe and Cental Asia, the models are unequivocal: precipitation intensity will increase, ranging from 2 6% (World Bank, 2009). More specifically for Ukraine models predict that the average annual rainfall will change slightly and the changes will be mainly regional and seasonal (ENVSEC Project, 2011). For the BAU scenario the annual precipitation change was considered to follow its historical growth. For the Opt scenario precipitation was increased by an annual growth rate of 1,5% according to the optimistic estimations of the bibliographic references. For the Pes scenario precipitation is increased by an annual growth rate of 0,75% according to the pessimistic estimations of the bibliographic references. Temperature Review of information about the region Figure 4: Precipitation. Modeling results showed an increase in annual temperature in Europe of 0,1 to 0,4 o C/decade (IPCC, 2007). The rates of the projected changes differ across seasons, with much higher temperature changes expected during winter months (Liubimtseva E., Henebry G.M., 2009). Under the RCP 8.5 pathway the temperature is expected to rise up to 6 o C by 2050, while at the RCP 3 the temperature is expected to rise from 2,4 to 2,8 o C (Hoegh-Guldberg Hans, 45

46 2010). These projections are consistent with projections about the B2 and A1 scenarios of IPCC that coincide with the aforementioned RCPs (Umweltbundesamt, 2008). The temperature increase is linked with forest fire risks, crop productivity. Balkans and Turkey are vulnerable to this risk (Giannakopoulos C et al., 2009). Review of information about Ukraine Based on data from the Hydrometeorological Centre concerning the last hundred years, the average yearly temperature in Ukraine increased by about 1 C, while on average the temperature on this planet during the same period increased by 0,6 C (Buksha Igor Fedorovich, 2009). The country shows a similar pattern to global trend parameters, with an increase 0,4 0,6 C over 100 years (Buksha Igor, 2009). All models predict a rise in air temperature of the country, but the extent of this increase is different (ENVSEC Project, 2011). AOGCM model predictions show an increase by 2100 in temperature for the entire country by 2 o C, 3,1 o C and 3,8 o C (average, under three different scenarios) when compared to the time interval (ENVSEC Project, 2011). For the BAU scenario the assumption is a temperature increase following historical trends by For the Opt scenario the assumption is a higher increase at 11,5 o C by For the Pes scenario the assumption is a much higher increase at 13,5 o C by 2020 and 15,5 o C by Frequency of extreme events Flash floods Figure 5: Temperature. In recent years floods have become more frequent in Ukraine due to increased precipitation and sedimentation loads in rivers due to uncontrolled activities in the upper catchments (The International Bank for Reconstruction and Development/The World Bank, 2003). The assumption is that the growth rate for this climate characteristic follows the respective one for precipitation in all scenarios. Heat waves Review of information about the region In 2010 Baltic countries, Belarus, Ukraine, and Kazakhstan experienced extreme temperatures that exceeded the summer records of the last 140 years at many temporal scales 46

47 (CC, 2012) was marked as an extremely hot summer compared to those of previous years. The most hot temperature was in August (average monthly air temperature exceeded the climate norm by 2,0-7,1 degrees) (State Emergency Service of Ukraine, 2010). For all regions of the Mediterranean Basin and the area surrounding the Black Sea an increase is projected for the number of days with maximum temperature exceeding 35 C (Dankers R. and Hiederer R., 2008). Review of information about Ukraine No other information is available. No historical data are available, so no assumptions were used. Frost days No other information is available. No historical data are available, so no assumptions were used. Water resources Future summer river flows will probably decrease up to 50% due to the changing rainfall patterns and runoff across central and eastern Europe, including Ukraine (Met Office, 2010). Studies indicate considerable decrease in river flooding over the long term, due to warmer winters and shorter snow accumulation season, leading to lower snowmelt flooding in spring (Met Office, 2010). Due to climate change maximum flows significantly decrease (i.e. by more than 30 %) in Eastern Europe (Belarus, Baltic States, East Russia, Ukraine, Poland and 20 at Rivers influenced by the Carpathians). As a consequence, floodplains will be less inundated in these areas with negative effects on floodplain vegetation and fish (Schneider et al., 2012). Groundwater The groundwater resources are estimated at 20 km 3 /year while the overlap between them and surface resources is estimated at 17 km 3 /year (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). Warming will increase mineralization of the groundwater 59 and lead to their limited use (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). For all scenarios it is assumed that each category for water resources has a growth rate that follows the respective one for precipitation. Policies and Measures Carbon tax Described in the respective policy mixture of this scenario. Feed in tariff system The rates of the green tariffs 60 are set until 01 January 2030 with a gradual decrease after the years 2014, 2019 and 2024 (by 10 %, 20 % and 30 % respectively 61 ). Currently, the tariff rates for RES-E are the following: 59 Quality of drinking water also depends on the humidity level. Increased levels of moisture reduce the mineralization level of water and vice versa (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). 60 established by Law of Ukraine On Electrical Power Industry N 575/97-ВР of , available at:

48 Electrical energy produced by installations with capacity: Table 5: Tariff rates for RES-E. Formula Retail price of electric power for 2nd class consumers in January 2009, euro / kw Feed-in-tariff coefficients Coefficients for the peak period А В C Tariff, euro/kw up to 600kW A*B 0, ,2 Not applicable 0,0646 Wind energy over 600kW but not exceeding 2000kW A*B 0, ,4 Not applicable 0,0754 over 2000kW A*B 0, ,1 Not applicable 0,1131 Biomass A*B 0, ,4 Not applicable 0,1239 Surface power facilities A*B*C 0, ,8 1,8 0,4653 Solar (on roofs of houses, buildings and construcions) over 100 KW A*B*C 0, ,6 1,8 0,4459 Small hydro power plants (on roofs of houses, buildings and constructions) - exceeding 100 KW, on the facades of houses, buildings and constructions regardless of their rated capacity A*B*C 0, ,4 1,8 0,4265 A*B*C 0, ,8 1,8 0,0775 NERC Decree of 23 December "On approval of retail electricity rates for January 2009, accounting the limits of the tariff rates with a gradual transition to the uniform retail tariff for consumers in the Ukraine"62 Law of Ukraine on October 16, /97-ВР "On Electrical Power Industry", as amended by the Act of April 1, VI «On Amendments to the Law of Ukraine" On Electric Power Industry "for promoting the use of alternative energy sources "63 NERC Decree of 20 December "On tariffs, differentiated by the time period"

49 Quota Not implemented in Ukraine. Soft loans No policy instrument concerning soft loans is applied. Subsidies No policy instrument concerning subsidies is applied. Land management No policy instrument concerning land management is applied. Global trends Crude oil price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Natural gas price For the natural gas prices the following forecasts are encountered in the relevant literature: Coal prices increase from 65$ per tonne in 2006 to 120$ in 2015, then fall to 85$ in 2030, compared with 110$ in 2030 in the Reference Scenario a reduction of 23%. EUA price Projections about the EUA price will be used based on the relevant literature. ERU price The average CER price was 18 /tco 2 based on the first 11 months of 2008 (Rotfub W. et al., 2009). The same growth rates that are adopted for the EUA price will be used for the CER price also. Adaptation Water Use During the 1990s, Ukraine experienced a 50% decline in water use, most of which concerned the industrial and agricultural sectors (The International Bank for Reconstruction and Development/The World Bank, 2003). According to the State Water Agency of Ukraine in 2010 the extracted water from natural water bodies was 14,8 billion m 3 (13,9 billion m 3 of fresh water and 0,9 billion m 3 of sea water), which was 2,5% more than that in Transportation losses were 15% (2,2 billion m 3 ) (SSSU, 2010). Water use consumption in 2010 was 9,8 billion m 3 of water by 0,3 billion m 3 (3,2%) more than in Industrial water use in 2010 accounted for 56% (5,5 billion m 3 ) of the total water used, domestic and drinking needs for 20% (1,9 billion m 3 ), irrigation for 14% (1,4 billion m 3 ), pond-fish farming for 8% (0,8 billion m 3 ) and agricultural water supply and other needs for 2% (0,2 billion m 3 ) (SSSU, 2010). Household water use Total fresh water consumption of the households in 2010 amounted for 9152 million m 3 per year (SSSU, 2010). For the BAU scenario the growth rate is assumed to be 3% increase according to the aforementioned information. For OPT it is 2% and for PES 4%.

50 Water use for agriculture Agricultural water consumption concerns irrigation and counts for 16% or 1377 mln m 3 of the total water consumption of Ukraine in 2010 (SSSU, 2010). Irrigation is of relative importance to the agriculture sectors of Ukraine, where 7% of the cropped land was irrigated in 2003 (The International Bank for Reconstruction and Development/The World Bank, 2003). Irrigation is important in many areas in the southern part of Ukraine. Approximately 2,5-2,6 million ha were developed for irrigation during the time of the Soviet Union (The International Bank for Reconstruction and Development/The World Bank, 2003). According to Ukraine s State Committee for Land Use, 3,9% of the whole land was irrigated in 2005 (World Bank, 2007). For the time interval , the area decreased by about 15%, from 2,6 million ha in 1990 to 2,1 million ha in 2005 (World Bank, 2007) Reduction in the agricultural area and animal husbandry resulted in decreased agricultural water consumption. Fresh water use in 2010 was 2347 mln cbm compare to the 2029 mln cbm in 2005 and 5571 in 1995 (SSSU, 2010). Operational systems are becoming more and more inefficient regarding water use with losses in irrigation systems remaining high at about 60% (The International Bank for Reconstruction and Development/The World Bank, 2003). For the BAU scenario the assumption is that water use for agriculture follows its historical growth. For OPT the growth rate is -0,5%, while for PES it is 1%. Water use for industry The biggest industrial water users are the power, steel, iron and metallurgy, and the chemical industry. Industrial abstractions have been declining since 1990 due, primarily, to economic restructuring with closures in water-using industries such as textiles and steel, and a turn towards less water-intensive industries (SSSU, 2010). Technological improvements in water-using equipment and increased recycling and re-use have also contributed to the decline (SSSU, 2010). For the BAU scenario the assumption is that water use for industry follows its historical growth. For OPT the growth rate is +0,5%, while for PES it is -0.1%. Water Use for energy production Power industry consumption accounted 31,8% in 2010 of the total water consumption of the country, metallurgy industries 15,4% (SSSU, 2010). There are no available data for water used in the cooling process. For water used in the hydropower generation the following assumptions were used: For the BAU scenario the assumption is that it follows its historical growth. For OPT the growth rate is +25%, while for PES it is 15%. 50

51 Energy Demand Ukraine s energy demand framework is comprised of the sectors: households, industry, agriculture, services. Assumptions about these sectors are described in the next sessions. Figure 6: Final Energy Demand per sector. Households Figure 7: Final Energy Demand per fuel. The residential sector is one of the largest primary energy consumers with 28% of the overall primary energy (UNECE, 2010). There is an increase in electricity consumption for households due to the overall economic growth and the real estate development. More specifically, total electricity consumption of this sector increased from 21,6 mln kwh in

52 to 36,7 mln kwh in 2010 corresponding to an increase of 70% (SSSU, 2010) 65. In 2007 the sector consumed 21% of the electricity generation and 40% of gas (UNECE, 2010). The growing electricity use is attributed mainly to the increasing number of appliances owned by households. Energy consumption in this sector will increase because of the welfare improvement of the country, leading to better living conditions (Updated Energy Strategy of Ukraine until 2030, 2012). For the BAU scenario the growth rate of total energy follows that of GDP without the introduction of any other policy instruments apart from those presented in the respective policy mixture. The fuel share of the sector remains as it is. Figure 8: Energy demand for the household sector. Agriculture Electricity consumption for this sector increased by 4,5% in 2011 compared to year 2010 (in 2010 it was 3394,4 mln kwh and in 2011 it reached the amount of 3547,8 mln kwh) (MENR, 2012). For the BAU scenario the growth rate of total energy follows that of GDP without the introduction of any other policy instruments apart from those presented in the respective policy mixture. The fuel share of the sector remains as it is Available in Ukrainian language 52

53 Industry Figure 9: Energy demand for the agricultural sector. The industrial sector is one of the two the other is the residential one - largest primary energy consumers with a share of 42% of the overall primary energy (MENR, 2012; UNECE, 2010). In % of the electricity generation and 33% of gas were consumed by the industrial sector (UNECE, 2010). The heat demand of the sector in 2007 was 54% followed by the residential with 46% (UNECE, 2010). In 2011 electricity consumption increased by 2,1% compared to year 2010 in almost all branches of this sector, except for the steel branch, whose energy consumption decreased by 1,8% compared to the previous year (MENR, 2012). Electricity consumption for the chemical and petrochemical industry increased by 17,3%, for machinery by 7,3%, industry of building materials by 11,5%, wood, pulp and paper industry by 13,1% (MENR, 2012). Electricity consumption in this sector is expected to grow. For the BAU scenario the growth rate of total energy follows that of GDP without the introduction of any other policy instruments apart from those presented in the respective policy mixture. The fuel share of the sector remains as it is. 53

54 Figure 10: Final energy demand in industrial sector by type of industry. Figure 11: Final Energy Demand in Industrial Sector by type of fuel. Services The services sector accounts for 55% of the GDP of the country, but consumes only 3% of the overall primary energy (UNECE, 2010). Electricity consumption increased by 79,4% in 2010 compared to that of year 2001 (18,3 billion kwh compared to 10,2 billion kwh) (SSSU, 2012). In % of the electricity generation was consumed by this sector (UNECE, 2010). Electricity consumption in this sector is expected to grow. For the BAU scenario the growth rate of total energy follows that of GDP without the introduction of any other policy 54

55 instruments apart from those presented in the respective policy mixture. The fuel share of the sector remains as it is. Transport The transport sector plays an important role in the socio-economic development of the country since it has more than 9% share in the GDP (MENR, 2012). The Ukrainian transportation network includes more than 21,64 km 2 of main railway tracks, 169,6 thousand km of automobile roads, 2,1 thousand km of inland waterways, 18 maritime and 10 river ports, 28 airports (MENR, 2012). All transport modes carry annually 1,8 billion tons of cargo and about 7 billion passengers (MENR, 2012). Road transport is the main energy consumer with total consumption in year 2010 of 7315 thousand toe (63% of the total energy consumption of the sector) (SSSU, 2012). Electricity consumption of this sector will increase due to increase in freight and passenger transportations caused by growth in industrial and agricultural production, and increase of real GDP per capita (Updated Energy Strategy of Ukraine until 2030, 2012). Figure 12: Energy demand for the transport sector. For the BAU scenario the growth rate of total energy follows that of GDP without the introduction of any other policy instruments apart from those presented in the respective policy mixture. The fuel share of the sector remains as it is. Non-energy Use sector The share of 10% classified as non-energy use concerns the use of petroleum products, especially the use of chemical conversion processes, the non-energy use of coal and gas (UNECE, 2010). In 2007 this sector was responsible for 16% of the gas consumption in Ukraine (UNECE, 2010). For the BAU scenario the growth rate of total energy follows that of GDP without the introduction of any other policy instruments apart from those presented in the respective policy mixture. The fuel share of the sector remains as it is. 55

56 Figure 13: Energy demand for non-energy use sector. 56

57 Transformation Transmission and Distribution losses Transmission capacity is constrained by congestion according to the Agency for Rational Energy Use and Ecology (ARENAECO) so the Ministry of Fuel and Energy issued a loan for the construction of additional transmission lines 66 (UNECE, 2010). The transmission and distribution systems need investments and maintenance (European Commission and CASE Center for Social and Economic Research, 2008) 67. In 2006 electricity losses in Ukraine accounted for 15% of the total generation (UNECE, 2010). During the last years the electricity losses through the United Energy System of Ukraine (UES) networks ranged lower from 12% to 14% of the electricity production in the country (NASU, 2011). Electricity losses in power grids are attributed to loading losses in the Power Transmission Line (PTL), losses through wire crowns of the PTL, auxiliary losses, and compensating instrument losses (capacitor bank, synchronous condenser, and static thyristor condensers) (UNECE, 2010). In according to the annual report of the National Energy Regulatory Commission (NERC) - the total losses of the electricity transmission network were 21,5 billion kwh or 12,5% of the total electricity output of the network. Actual electricity losses in the 0, kw voltage network decreased from 33,19 billion kwh (21,19%) in 2002 to 21,52 billion kwh (12,54%) in 2010 due to increasing funds from the energy suppliers (NASU, 2011). Compared to year 2009 the transmission losses decreased by 0,6% (NASU, 2011). Figure 14: Transmission and distribution losses of electricity and heat. The gas losses in the respective gas transmission network are approximately 1,1% due to gas leakages through fittings (valves, joints, flanges), flares and gas emissions caused by 66 Transmission networks is one of the main components of UPS of Ukraine, including km, out of which 4,900 km are of kv, km kv, 4600 km kv and 132 power substations (PS) of kv 67 The state of transmission networks is deteriorating annually: 34% of kv overhead transmission lines (OTL) have been operated for more than 40 years; 1,700 km of 330 kv OTL (13% of total length) and 1,600 km of 220 kv OTL (52%) require rehabilitation, 76% of switchyards main equipment has worn up its designed useful operating life (Updated Energy Strategy of Ukraine until 2030, 2012). 57

58 technical failures (UNECE, 2010). In 2004 these losses were 1,06 bcm or 0,5% of supplied gas (Updated Energy Strategy of Ukraine until 2030, 2012). In 2005, gas losses decreased by 90 million cubic meters amounting for 0,97 bcm (Updated Energy Strategy of Ukraine until 2030, 2012). Due to the expansion of the transmission network (longer gas pipelines, increased number of apartments, facilities etc), ageing of gas pipelines and equipment, total losses are expected to be approximately 2% of the gas consumption in 2030 according to the Updated Energy Staretegy (Updated Energy Strategy of Ukraine until 2030, 2012). Natural gas losses particularly in the gas transmission system by year 2030 will probably reach the level of 0,3% of transmission volumes (Updated Energy Strategy of Ukraine until 2030, 2012). District heating distribution networks are outdated, sometimes poorly insulated, and losses are significant (UNECE, 2010). More than 28% of the heat networks have been in operation for more than 25 years, 43% for more than 10 years and only 29% have been in operation less than 10 years (Updated Energy Strategy of Ukraine until 2030, 2012). For the BAU scenario the growth rate of the transmission and distribution losses in electricity are assumed to be 0,6% according to the aforementioned information. For natural gas, oil and heat the respective assumption is 0.5%, for coal 1%. Electricity generation Ukrainian electricity generation has two major sources: nuclear power (approximately 50% in 2005), and thermal power plants (coal- and gas-fired around 43%), with hydropower accounting to approximately 6% (European Commission and CASE Center for Social and Economic Research, 2008). In 2011 the amount of produced electricity was ,5 million kwh, which is by 6000,2 million kwh, or 3,2% more than that in 2010 (MENR, 2012). The country exports electricity to Russia and EU countries (European Commission and CASE Center for Social and Economic Research, 2008). Exports to EU are limited since Ukraine s power grid is not connected to the UCTE system and is synchronized with that of Russia. But, in the expected accession of Ukrainian energy system to the EU distribution system (UCTE) will significantly increase the volume of electricity export (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). Figure 15: Electricity generation. 58

59 For the period electricity consumption increased by 2,7% per year due to the annual real GDP growth which was 7% for the same period (Updated Energy Strategy of Ukraine until 2030, 2012). Electricity consumption decreased during 2008 mainly due to decrease in electricity consumption of metal industry (by 9,4%), chemical and petrochemical industry (by 10,5%) (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). Electricity consumption decreased by 10% in 2009 following the 15% reduction of GDP due to the global financial crisis (Updated Energy Strategy of Ukraine until 2030, 2012). It is expected that the capacity of electricity generation will increase due to the introduction of new power plant, the modernization of the CHP plants, and the increase of capacity of distribution networks (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). The country intends to increase the share of coal as primary supply for thermal power plants by 150% until year 2030, while simultaneously to reduce the use of gas by 50% (UNECE, 2010). This trend is supported by the European Bank for Reconstruction and Development, which provided loans for the reconstruction and modernization of block four of the Starobeshevskaya electric power plant (UNECE, 2010). Construction of new nuclear power plants, and development of RES are under consideration (UNECE, 2010). More specifically, the RES target capacity by 2030 will be at least 10% of installed capacity or 5,7 GW (10-12 GW including large hydro), and production of TWh (23-28 TWh including large hydro) (Updated Energy Strategy of Ukraine until 2030, 2012). For the BAU scenario no new installed capacity is included. Heat production Over the past decade, heat consumption in Ukraine has decreased by 45%, mainly due to reductions in material production (3 rd, 4 th and 5 th NC of Ukraine to UNFCCC, 2009). In 2010 the total produced and consumed heat reached the amount 232 million Gcal (Updated Energy Strategy of Ukraine until 2030, 2012). Over the last 5 years heat consumption decreased by nearly 10%, mainly due to changes in the structure of heat production and the recession that began in 2008 (Updated Energy Strategy of Ukraine until 2030, 2012). The main consumers of heat production are the residential sector (approximately 70% in 2010) followed by the industrial sector (20%) and other sectors with slightly more than 10% (Updated Energy Strategy of Ukraine until 2030, 2012). Figure 16: Heat production. 59

60 The predominant heat supply source is gas with a share of 97%, while the remaining 3% is coal (UNECE, 2010). The Ukrainian heat sector is dominated by district heating with 45,000 km total length of pipelines and 200,000 MWth of total network capacity (UNECE, 2010). In % of the population was supplied by district heating systems and 76% by hot water supply (UNECE, 2010). 40% of all heat energy resources consumed by the district heating sector were used in 2010 to supply multi-apartment buildings (UNECE, 2010) Coal transformation The national energy mix is dominated by natural gas accounting for 40% of Total Primary Energy Supply in 2010, reduced compared to the 47% in 2004 (IEA, 2012). The same year coal accounted for 31%, compared with 23,6% in 2004, while nuclear was 17% of supply (IEA, 2012). The amount of exctracted stone coal has been steadily increasing since year 2000 (MENR, 2012). In ,7 million tons of coal were extracted (7,7 million tons more compared to year 2010) (MENR, 2012). Almost all extracted coal is used in national needs (power system - 40% of total coal production, metallurgy - about 30% and municipal sector - about 30%) and only a small portion is exported (Kravtov V. et al, 2005). In the Donetsk Basin coal one of the main Ukrainian resources the coal ranges from lignite to highly metamorphized bituminous 68 (U.S. Environmental Protection Agency, 2001). Coal transformation corresponds to 7% of total primary energy supply (12% of total final energy consumption) while losses during energy distribution are 7% of total primary energy supply (11% of total final energy consumption) 69. Although the level of intermediate energy consumption by energy plants is comparable to that in many OECD countries, Ukraine has much higher coal transformation costs and distribution losses 70. Difficult mining conditions increase also the cost of Ukrainian coal (UNDP, 2007). Clean coal technologies and approaches are used to decrease sulphur and mercury oxide emissions and concern (Updated Energy Strategy of Ukraine until 2030, 2012; National Ecological Centre of Ukraine, 2010): i) purification of coal from impurities prior to combustion, e.g. washing out unwanted minerals by mixing the grinded coal with liquid and subsequent separation of impurities using one of the existing methods; ii) regulation of coal combustion to minimize sulphur and nitrogen oxide emissions using wet scrubbers (flue gas desulfurization systems); iii) dewatering of lower class coal (e.g. brown coal) to increase calorie content and efficiency of energy production; iv) coal gasification (Integrated Gasification Combined Cycle) which leads initially to a mixture of carbon mono-oxide and hydrogen (syngas and then ir purified and combusted in a gas turbine to produce energy. 68 brown coal is also used (Updated Energy Strategy of Ukraine until 2030, 2012)

61 Oil Refining Figure 17: Coal trasformation. The country has six oil refineries with installed production capacities three times more than the internal demand for oil products (Herasimovich Viachaslau, 2008). Mainly due to outdated equipment the capacities are utilised for less than one fifth (Herasimovich Viachaslau, 2008). Due to insufficient amount of oil, imports oil products cover almost a half of the internal demand (Herasimovich Viachaslau, 2008). In 2005 national demand for oil and petroleum derivatives was 18 million tons, out of which 4,3 million tons were supplied by Ukrainian oil and gas producing companies, and the rest 71 was imported from Russia and Kazakhstan (Updated Energy Strategy of Ukraine until 2030, 2012; UNDP, 2007). Gasoline consumption increased from 3,2 million tons in 2001 to 4,6 million tons in 2010, while that of diesel fuel from 4,7 million tons to 5,3 million tons (Updated Energy Strategy of Ukraine until 2030, 2012). Increased demand was attributed to economic growth and expansion of the vehicle fleet (Updated Energy Strategy of Ukraine until 2030, 2012). According to the Undated Energy Strategy of Ukraine if oil refining efficiency increases up to 85% by year 2030 then the production of major petroleum products will increase also (ie gasoline production will increase to 11,5 million tons (twice as much compared to 2005); diesel fuel up to 17,2 million tons (2,1 times); jet engine fuel, up to 1,5 million tons (3,8 times). Mazut production will decrease to 5,7 million tons (by 17,4%). Due to economic recession in 2008, total consumption was reduced almost at 1 million tons (mainly because of reduced demand for diesel fuel). In 2010 the total domestic demand for basic light petroleum products (gasoline, diesel, kerosene) was approximately 10,3 million tons, including kerosene consumption of 0,4 million tons (Updated Energy Strategy of Ukraine until 2030, 2012). 71 crude of the Urals type (UNDP, 2007) 61

62 Global warming potential (GHG emissions) The below graph shows the GHG emissions which are attributed to each energy consuming sector. Figure 18: GHG emissions. 62

63 References BSTDB, Ukraine Country Strategy Bd a. Available at: Buksha Igor, Ukraine - Study of climate change impact on forest ecosystems, and the development of adaptation strategies in forestry. Available at: Cabinet of Ministers of Ukraine, Resolution 318, of April 5th, Projections of the State Budget of Ukraine for 2013 and Available at: %D0%BF/page CASE (Center for Social and Economic Research, Available at: CC, 2012 Climate change: the European scale. Ukraine. Available at: Commission of the European Communities, Commission Staff Working Document, Accompanying the Communication from the Commission to the European Parliament and the Council, Implementation of the European Neighbourhood Policy in Progress Report Ukraine. SEC (2009) 515/2, Brussels, Available at: en.pdf and Dankers Rutger and Hiederer Roland, Extreme Temperatures and Precipitation in Europe: Analysis of a High-Resolution Climate Change Scenario. Available at: EBRD, 2012a, Regional Economic Prospects in EBRD Countries of Operations: January 2012, EBRD Office of the Chief Economist. Available at: EBRD, 2012b October Regional Economic Prospects in EBRD Countries of Operations: October EBRD Office of the Chief Economist ECORYS, Trade Sustainability Impact - Assessment for the FTA between the EU and Ukraine within the Enhanced Agreement - ANNEXES, Ref: TRADE06/D01, Final Report ANNEXES. Available at: ENVSEC Project, ENVSEC Project Reducing vulnerability to extreme Floods and climate change in the Dniester river basin (Dniester III floods & climate) Summary of the Baseline studies for Ukraine (prepared by Mr. Nabyvanets) and for the Republic of Moldova (prepared by Ms. Serenco) Summary Prepared by Ms. Lesya Nikolayeva, Zoi. Available at: European Commission, Directorate-General for Agriculture and Rural Development, The Agricultural Sector and Trade in Ukraine. Available at: European Commission and CASE Center for Social and Economic Research, The Economic Aspects of the Energy Sector in CIS Countries. ISBN , doi / Available at: FAO, Ukraine, Water Report. Available at: Herasimovich Viachaslau, Ukrainian Oil Refinery Sector Review. Available at: 63

64 IEA, Ukraine 2012, Executive summary, Key recommendations Introductory chapter Energy policies beyond IEA countries. Available at: IMF, World Economic outlook. April Growth Resuming, Dangers Remain. Available at: 3 rd, 4 th, 5 th National Communication of Ukraine to UNFCCC, Available in Russian language only. Available at: IMF, 2012b. IMF Country Report No. 12/315 Ukraine 2012, Article IV, Consultation, November Available at: IPCC, IPCC projections assumptions of SRES scenarios. Available at: Kravtsov Vladlen, Sheludchnko Vladimir, Mass Nicolai, Palkina Svetlana, Modern aspects of coal gasification technology development and prospects of its application within the framework of Ukrainian fuel and energy balance. METAl 2005, , Hradec nad Moravicí. Available at: Market Observatory for Energy, Country file Ukraine. Available at: Met Office, Impacts of Climate Change Ukraine. Available at: MENR, Ministry of Ecology and Natural Resources of Ukraine. National report on the state of environment in Ukraine in (in Ukrainain language) Available at: Ministry of Environmental Protection of Ukraine, Ministry of Emergency Situations and Protection of population from the consequences of the Chernobyl disaster, The National Academy of Sciences of Ukraine, Ukrainian Hydrometeorological Institute, Third, Fourth and Fifth National Communication of Ukraine on climate change. Available at: NASU, Institute of Physics of the National Academy of Science of Ukraine. Assessment of greenhouse gas emission reduction by decrease of process losses in distribution networks of Ukraine. Available in Ukrainian language only. Available at: National Ecological Centre of Ukraine, Problems of Ukraine s coal sector and greenhouse gas emissions from coal mining and consumption. Available at: http: //climategroup.org.ua/wpcontent/uploads/2010/06/ukraine_coal-sector_web pdf Schneider C., C. L. R. Laize, M. C. Acreman, and M. Florke, How will climate change modify river flow regimes in Europe? Available at: SEB, 2012b. Eastern European Outlook, Economic Research Theme: Effects of euro zone crisis on Eastern Europe March Available at: astern_european_outlook_201203_eng.pdf?epslanguage=en SEB, Eastern European Outlook, Economic Research October Available at: astern_european_outlook_201210_eng.pdf?epslanguage=en 64

65 SEB, Eastern European Outlook, Economic Research March Available at: astern_european_outlook_201303_eng.pdf?epslanguage=en SSSU, Statistical yearbook Environment of Ukraine. Available at: State Statistics Service of Ukraine, Agriculture of Ukraine Statistical yearbook. Available at: (under Publications) SWEDBANK, Baltic Sea Report, No 33, 2 October Available at: The International Bank for Reconstruction and Development/The World Bank, Water Resources in Europe and Central Asia. Available at: UKRSIBBANK, December Ukraine Macro Outlook, Nearing a trough Written by Alexander Belozyorov. Available at: UKRSIBBANK, Ukraine Macro Outlook Difficult Policy Choices. Written by Anastasia Golovach, Yevgeniy Orudzhev, Serhiy Yahnych, Pavlo Moroz. Available at: UN, World Economic Situation and Prospects. Available at: UNDP, Comparative Analysis - EU and Ukraine Security of Energy Supply. Written by Blue Ribbon Analytical and Advisory Centre Energy Policy Team. Available at: UNECE, Financing Energy Efficiency Investments for Climate Change Mitigation Regional Analysis of Policy Reforns to promote energy efficiency and Renewable energy investments. Available at: United Nations, Department of Economic and Social Affairs, World Population Prospects The 2010 Revision, Volume I: Comprehensive Tables. Available at: United Nations, World Population Prospects. The 2010 Revision, Volume II: Demographic Profiles. Available at: pdf/wpp2010_volume- II_Demographic-Profiles.pdf U.S. Environmental Protection Agency, Coal mine methane in Ukraine: Opportunities for production and investment in the Donetsk coal basin. Available at: Water profile of Ukraine, Available at: World Bank, Ukraine: Recent Economic Developments World Finance Review. Available at: World Bank, 2012b. World Bank Ukraine Partnership: Country Program Snapshot, October Available at: World Bank, Adapting to Climate Change in Europe and Central Asia Available at: 65

66 World Bank, Integrating Environment into Agriculture and Forestry Progress and Prospects in Eastern Europe and Central Asia - Volume II, UKRAINE - Country Review. Prepared by the Europe and Central Asia Region - Sustainable Development Department, November Available at: 66

67 OPTIMISTIC SCENARIO ( ) Optimistic scenario description General comments The Opt scenario is structured by: i) the mitigation/adaptation policy instruments that the country has set into force after January 1 st, 2011; ii) additional policy instruments in line with the EU climate change policy that can be adjusted to the needs and priorities of the examined country 72 and iii) the maximum exploitation of the potential of the country in energy efficiency and renewable energy sources. The following facts define the policy portfolio of this scenario. The country is a potential candidate for future enlargement of the European Union (UNECE, 2010). The Ukraine-EU Action Plan, which concerns EU commitments to support Ukraine, was approved in February 2005 for a three year period (UNECE, 2010). Based on this Plan, a Technical Assistance and Information Exchange Instrument (TAIEX) programme was set up (UNECE, 2010). In the frame of this program, two workshops were conducted for Ukrainian state officials, the Financial Instruments Available for Encouraging Energy Efficiency and Renewable Energy in Ukraine (9 July 2007) and Political Issues and Practical Details of Improving Standards of Energy Efficiency in Ukrainian Buildings to the EU Current Standards (17 July 2007) (UNECE, 2010). The country made progress during year 2008 in certain areas covered by the EU-Ukraine Action Plan and continued to approach EU through negotiations on an Association Agreement (CEC, 2009). In March 2008, under the context of the MoU on Energy, EU and Ukraine signed a roadmap on energy efficiency, renewable energy sources and climate change (CEC, 2009). Ukraine is preparing a draft law on energy efficiency in housing (CEC, 2009). The European Commission supported continuously Ukraine in implementing the Kyoto Protocol, while the EU-Ukraine Working Group on Climate Change met in October 2008 (CEC, 2009). Furthermore, Ukraine continues to support the EU initiative to reach a global and comprehensive post-2012 agreement (CEC, 2009). Ukraine as an Energy Community member needs to implement the EC energy legislation (European-Ukrainian Energy Agency, 2011). The European Commission intends to evaluate the performance of the country regarding its commitments and the implementation of energy legislation (European-Ukrainian Energy Agency, 2011). In the context of these obligations, eight of EC acts had to be implemented from January These concern: - the Gas Directive 2004/76/EC on measures to ensure the security of natural gas supply, - two directives on electricity (Directive 2003/54/EC on common rules for the functioning of the internal electricity market, Directive 2005/89/EС on activities to ensure the safety of investing in energy supply systems and infrastructure). the Protocol of Accession to the agreement provides for a longer term for Directives in the field of environmental protection (European-Ukrainian Energy Agency, 2011). In 2012 one more effort to fulfil the requirements of the Energy Community Treaty was the introduction of a law permitting the unbundling of Naftogaz entities, although privatization is still prohibited (IMF, 2012b). Further efforts focus to accelerate progress on pilot projects for modernization of the gas transit and distribution system with the assistance of the EBRD and EIB, and also to join the EITI (IMF, 2012b) The country aims to reduce the use of natural gas and to increase that of coal. This intention is reflected in the Updated Energy Strategy until It is expected that coal 72 Albania, Moldova, Serbia and Ukraine are Contracting Parties of the Energy Community and have committed to comply with the EU energy policy ( This commitment concerns also climate change policy due to policy instruments that support the usage of technologies for energy efficiency and renewable energy sources. Armenia and Turkey are observers to this Treaty. 67

68 consumption will increase to 82,2 mln. t.o.e. in 2020 compare to 37 mln. t.o.e. in 2010 (UNFCC, 2009). 73 Power companies have already reported that they have limited electricity production from natural gas only to the minimum technically possible since the increased import prices made natural gas uncompetitive compared to other fuels (University of Oxford, 2011). Additionally, since the country is a net electricity exporter there are no short or medium term plans to raise the share of natural gas in electricity generation (University of Oxford, 2011). Modernization of the energy companies (after 2015) is expected to reduce further the consumption in natural gas through energy savings (University of Oxford, 2011). Further long-term plans for the upgrading of generation in the electricity sector and the coal industry are provided in the Updated Energy Strategy until 2030 (endorsed by a Decision of the Board of MECI of Order of MECI of No. 323) (Ministry of Energy and Coal Industry of Ukraine, 2012). In late January 2013, the Ukrainian government and the Royal Dutch Shell signed an agreement regarding gas extraction and production in Ukraine (SEB, 2013). The deal may potentially be worth of more than 10 billion USD and is considered as the first step of the country to develop its own gas reserves, and reduce its dependence on Russian gas (SEB, 2013). Policy portfolio for this scenario Mitigation A. Existing policy instruments Policy instruments for RES After 31 st December 2010, the country has undertaken the following actions and has implemented the quoted policy instruments for the promotion or RES. The country also undertook the responsibility to prepare by July 1 st, 2011 (Energy Community, 2010): - Plan for the implementation of Directive 2001/77/EEC on the promotion of electricity produced from RES in the internal electricity market. The Plan was drafted in the first half-year of 2011, but not approved (Arzinger, 2012). - Plan for the implementation of Directive 2003/30/EC on the promotion of the use of biofuels or other renewable fuels for transport. The Plan was drafted in the first half-year of 2011, but not approved (Arzinger, 2012). The following law that affects the penetration of RES was introduced: Law of Ukraine of , No 5485-VI, On Amendments to the Law of Ukraine "On the power" for stimulation of the electricity generation from alternative energy sources 74 It introduces the guarantee of origin for the produced electricity and sets a fixed percentage for RES-E. One Draft Law that will also affect electricity from RES is being dicussed: Draft Law On Principles of Functioning of Electricity Market of Ukraine of

69 This Draft Law regulates relations arising between electricity market players during functioning of the market and sale of electric energy and services on it. Law of Ukraine No 5021 On Fees for Connection to the Networks Owned by the Natural Monopoly Entities (issued on 1 January 2013) 76 The Law changes significantly the procedures regarding the connection to the power grid. It requires the power plants generating electricity out of the RES to pay the reimbursable financial assistance to the TSO which will be later repaid by the latter. (Deloitte, 2012) Policy instruments for energy efficiency After 31 st December 2010, the country has undertaken the following actions and has implemented the quoted policy instruments for energy efficiency. Resolution of CM of Ukraine of , No. 439, On approving the use of funds allocated in the state budget for government support of energy efficiency measures through the mechanism of reduction credits 77. Resolution of CM of Ukraine of , No.577-p, On approval of the National Action Plan for Environmental Protection for Law of Ukraine of , No VI, On ratification of the Guarantee Agreement Project for Energy Efficiency between Ukraine and the International Bank for Reconstruction and Development 79. Resolution of CM of Ukraine of , No. 1056, Some questions of the use of funds for energy efficiency and energy conservation 80 Resolution of CM of Ukraine of No. 397 Some question for determining medium term priorities for innovation branch level for Resolution of CM of Ukraine of No. 615 Some question of the use of 2012 funds in energy efficiency and energy conservation. 82 Resolution of CM of Ukraine of No.588-p On approval of the action plan for the legal provision of energy efficiency policy of heat consumption and modernization of heat supply. 83 Resolution of CM of Ukraine of No. 970-p On approving the plan of priority measures for implementation of the State program for domestic production development

70 Resolution of CM of Ukraine of No On amendments to the State Target Scientific and Technical Program "Development and implementation of energy saving LED light sources and lighting systems based on them" 85. Policy instruments for the transport sector Law On Amendments to Certain Laws of Ukraine regarding Production and Use of Motor Fuels Containing Biocomponents No 4970-VI on It provides amendments to parts of: i) the Law "On Entrepreneurship" 87 (No 698-XII issued on and last amended before this law with No 1391-VI on ) and ii) the Law of Ukraine "On Alternative Fuels" 88 (No 1391-XIV issued on and last amended before this law with No 1391-VI on ) regarding production and use of motor fuels containing biocomponents. Policy instruments for JI-GIS Resolution of the Cabinet of Ministers of Ukraine No. 348 on "On Approval of Procedure for Use of Funds provided for by the State Budget for Implementation of Measures 89, 90 to Reduce GHG Emissions (Increasing of Absorption) This Resolution defines the procedure for using funds allocated in the state budget by the program "State support of the measures aimed at emission reduction (increase of absorption) of GHG, including insulation of social security institutions, development of international cooperation on climate change" which are received from the sale of AAUs under Article 17 of the Kyoto Protocol. The use of the budget funds will be in accordance with the action plan, approved by SEIA and in agreement with the Ministry of Environment, Ministry of Finance and the Prime Minister of Ukraine. B. Additional policy instruments Mitigation Policy instruments for RES Financial policy instruments such as tax exemptions and subsidies are proposed. The already implemented tax exemptions are proposed to be improved (longer time interval and higher amounts). Policy instruments for energy efficiency The implementation of the Energy Strategy until 2030 regarding the use of coal for electricity generation requires substantial investments in developing technologies enabling clean and efficient burning and, ideally, carbon sequestration methods (UNDP, 2007). The term "clean coal" is used to describe technologies designed to enhance efficiency and environmental acceptability of coal extraction, preparation and use, with no specific quantitative limits on any emissions (UNDP, 2007). Carbon sequestration (Carbon capture

71 and storage, CO 2 sequestration) is used to describe processes that remove carbon dioxide from the atmosphere (UNDP, 2007). Regulatory policy instruments One of the policy instruments that are considered as important in improving governance and affordability in district heating sector is heat metering and consumption-based billing (World Bank ESMAP, 2012). Particularly, consumption-based billing provides better transparency to customers and simultaneously increases their confidence and trust in disctrict heating companies (World Bank ESMAP, 2012). The country is preparing a Law for energy efficiency issues in the buildings. More specifically: Draft Law of Ukraine "On the energy efficiency of residential and public buildings" of This Draft law contains legal, economic and organizational provisions for energy efficiency for residential and public buildings. It aims to the rational use of energy. Article 9 of this Draft Law refers to the minimum requirements for the energy performance of buildings. These requirements will be approved every five years by the central executive authority for implementation of the state policy in construction, architecture, urban planning and housing. Articles 11 and 12 refer to the energy audit and certification of buildings. Passport energy efficiency of the building is a term defined by this Act to enable the owners (co-owners) and tenants of such buildings to assess the actual level of energy efficiency, to predict the cost of maintenance and operation of the building during its lifecycle, develop a list of required technically and economically feasible energy efficiency measures 92. For this Draft law one more Draft Law is discussed ie Draft Law on the Concept of improving energy efficiency in housing and communal services of Financial policy instruments Subsidies that support technological improvements such as more efficient appliances and lighting are proposed. Dissemination policy instruments Policy instruments that support the behaviour support are proposed. Supporting public awareness campaigns about the benefits of metering will contribute in the penetration of energy efficient technologies and approaches (World Bank- ESMAP, 2012). Policy instruments for transport sector Regulatory policy instruments (Fuel switch) Dissemination of E85 (gasoline fuel containing 85% bioethanol) as a transportation biofuel was considered by the government. This type of fuel requires an increased number of FFVs (Flexible fuel vehicles), private and public investment including construction of new fueling stations, refining of such legal institutions, relevant land lease procedures and regulations. Practical and specific implementation plans need to be considered and gradually implemented for successful use of E85 biofuel (Ministry of Strategy and Finance, the Republic of Korea, 2010)

72 Financial policy instruments Subsidies that support the purchase of more energy efficient vehicles are proposed. Dissemination policy instruments Policy instruments that support the behaviour support are proposed. Supporting public awareness campaigns about the benefits of eco-driving and fuel economy are also proposed. Policy instruments for climate policy issues According to the Decision 2009/04/MC-EnC Ukraine will incorporate into national legislation the following Directives with specific time schedule (Energy Community, 2010): - By January 1 st 2012, Directive 1999/32/EC relating to a reduction in the sulphur content of certain liquid fuels; - By January 1 st 2018, Directive 2001/80/EC on the limitation of emissions of certain pollutants into the air from large combustion plants. Adaptation Policy instruments for water management There is need for improvement of economic, administrative and technical regulations of water supply (Ministry of Environmental Protection of Ukraine, 2007). Financial policy instruments Economic instruments (such as pollution fees and water charges) will assist the sector in taking measures against climate change. Dissemination policy instruments By organizing awareness campaigns the population will realize the importance of water efficiency. Policy instruments for agricultural sector Financial policy instruments Economic instruments (such as tax policy, subsidies, pollution fees and water charges) will assist the sector in taking measures against climate change (World Bank, 2007). Dissemination policy instruments By providing seminars, and organizing awareness campaigns farmers will realize what they need to do to adapt to climate change. Policy instruments need to target in improving the monitoring and the dissemination of information, public awareness of rural environmental issues (World Bank, 2007). Policy instruments for forest management As quote in the session about the adaptation needs of the country in the forestry sector the overall objectives of forest management need to be set. Institutional responsibilities need to be assigned along with the establishment of transparent systems for budgeting and accountability. Regulatory policy instruments 72

73 Since Ukraine intends to increase the share of coal in electricity production and transformation industries apart from the aforementioned policy instruments for the support of energy efficiency and RES, the country needs to introduce policy instruments for forest management. Such policy instruments contribute simultaneously to mitigation and adaptation of climate change. It is proposed to increase the forest land by 5% under this scenario. Forests contribute to mitigation. Adding responsibilities to the State Forest Resources Agency 94 about adaptation issues wil assist in forest management. The forestry legislation 95 needs to be updated confronting the needs of this sector. Main characteristics The policy mixture of this scenario is stricter and supports efforts for increased penetration of RES and energy efficiency in almost all economic sectors. Climate change policy options are strongly affected by the decision in the energy policy area. The decision to increase the share of coal and to reduce that of natural gas dedictates that the climate policy needs to support strongly this type of policy mixture. Its implementation requires the reinforcement of the JI activities and the avoidance of suspension for the international market as in the past. UNFCCC on 12 October 2011 decided 96 the suspension of Ukraine from the international transfer of AAUs and ERUs from JI Track 1 due to failure of the Ukrainian system 97 (Shishlov I. et al., 2012). Ukraine became fully eligible again to participate in the mechanisms on 9 March 2012 (UNFCCC, 2012). Until now the low energy efficiency in Ukraine can be attributed to (IEA, 2006): i) Low energy prices that do not encourage consumers to invest in new energy saving equipments and appliances. This now is overcome in this policy mixture with subsidies and increased energy prices. ii) Very low energy prices do not allow the coverage of the full, long-term costs of the energy suppliers or the generation of funds to modernize their facilities like power plants, transmission and distribution systems and district heat supply systems. The introduction of higher energy prices will improve the situation, while the introduction of tax exemptions and subsidies will motivate energy suppliers. iii) Most district heating distribution networks are outdated, poorly insulated, with losses tht reach up to 30% (IEA, 2006). Poorly insulated buildings lose 30-50% of the heat delivered (IEA, 2006). Ukrainian power and heat supply systems seem to be even less efficient than those of East European countries. This situation is improved through financial, regulatory and dissemination policy instruments. Funds raised by emission trading (JI and GIS) are used for improving the energy efficiency of industry and households (subsidies, soft loans) and RES. Additionally, petroleum and LNG import levies and the electric power infrastructure fund have proven to be very useful in financing the R&D activities of the energy sector, energy saving and energy infrastructure (Ministry of Strategy and Finance, the Republic of Korea, 2010). There is consideration about introducing or reinfording such schemes to overcome the current lack of sufficient funds for financing energy saving and energy efficiency (Ministry of Strategy and Finance, the Republic of Korea, 2010) A national system includes the institutional, legal and procedural arrangements for estimating emissions and sinks covered by the Protocol, and for reporting and archiving this information (UNFCCC, 2012). 73

74 References Arzinger, Presentation The Ukrainian Energy Law. New developments. August, Available at: AD&url=http%3A%2F%2Fwww.aeeconline.com%2Ffileadmin%2Fuser_upload%2FVortrag_Herr_Wolfram_Rehbock Arzinger.pptx&ei= dsycubixacsoo83rgua&usg=afqjcneaepg7cwodkl2gxustzpmz2ri9cg&sig2=l6mfscrd Z-pSIbNAu8R5Ow&bvm=bv ,d.ZWU Commission of the European Communities, Commission Staff Working Document, Accompanying the Communication from the Commission to the European Parliament and the Council, Implementation of the European Neighbourhood Policy in Progress Report Ukraine. SEC (2009) 515/2, Brussels, Available at: en.pdf and Ministry of Strategy and Finance, the Republic of Korea, Energy Efficiency Improvement and New and Renewable Energy Development Strategies for Ukraine. The document was prepared for The Government of Ukraine. The National Agency of Ukraine on Ensuring of Efficient Use of Energy Resources Management (NAER) also cooperated for its preparation. Available at: Shishlov Igor, Bellassen Valentin and Leguet Benoît, Joint Implementation: A frontier mechanism within the borders of an emissions cap. No February Available at: UNFCCC, Informal information note by the secretariat. Available at: al_information_note_ukr_reinstatement_ pdf World Bank, Integrating Environment into Agriculture and Forestry Progress and Prospects in Eastern Europe and Central Asia - Volume II, UKRAINE - Country Review. Prepared by the Europe and Central Asia Region - Sustainable Development Department, November Available at: 74

75 Key assumptions The key assumptions used for the development of scenarios are similar to those used in previously published studies and papers for Ukraine. The categories of the key parameters are common for all scenarios and are divided as follows: Demographics and Economy The demographics and economy assumptions described in BAU scenario are used for all three (3) scenarios (BAU, OPT, PES). Climate Statistics Precipitation For the Opt scenario precipitation is increased by an annual growth rate of 1,5% according to the optimistic estimations of the bibliographic references. Temperature Figure 19: Precipitation. For the Opt scenario the assumption is a higher increase at 11,5 o C by

76 Frequency of extreme events Flash floods Figure 2021: Temperature. According to the information in the respective session for the BAU scenario, flash floods will increase. For the OPT scenario the assumption is that the growth rate for this climate characteristic follows the respective one for precipitation in all scenarios. Heat waves Figure 22: Flash floods. No other information is available. No historical data are available, so no assumptions were used. 76

77 Frost days No other information is available. No historical data are available, so no assumptions were used. Water resources For the OPT scenario the assumption is that the growth rate for this climate characteristic follows the respective one for precipitation in all scenarios. Groundwater For the OPT scenario the assumption is that the growth rate for this climate characteristic follows the respective one for precipitation in all scenarios. Policies and Measures Carbon tax Described in the policy mixture of OPT scenario. Feed in tariff system Described in the policy mixture of OPT scenario. Quota Not implemented in Ukraine. Soft loans No policy instrument concerning soft loans is applied. Subsidies No policy instrument concerning subsidies is applied. Land management No policy instrument concerning land management is applied. Global trends Crude oil price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Natural gas price For the natural gas prices the following forecasts are encountered in the relevant literature: Coal prices increase from 65$ per tonne in 2006 to 120$ in 2015, then fall to 85$ in 2030, compared with 110$ in 2030 in the Reference Scenario a reduction of 23%. EUA price Projections about the EUA price will be used based on the relevant literature. ERU price The average CER price was 18 /tco 2 based on the first 11 months of 2008 (Rotfub W. et al., 2009). The same growth rates that are adopted for the EUA price will be used for the CER price also. 77

78 Adaptation Water Use Household water use Based on the information provided in the respective session for the BAU scenario, the assumption is that for OPT the growth rate is 2% increase. Water use for agriculture Based on the information provided in the respective session for the BAU scenario, the assumption is that for OPT the growth rate is -0,5%. Water use for industry Based on the information provided in the respective session for the BAU scenario, the assumption is that for OPT the growth rate is 0,5%. Water Use for energy production Based on the information provided in the respective session for the BAU scenario, the growth rate assumption for water used in the hydropower generation for OPT is 25%. 78

79 Energy Demand Ukraine s energy demand framework is comprised of the sectors: households, industry, agriculture, services. Assumptions about these sectors are described in the next sessions. Households For the OPT scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments described in the respective policy mixture. Technological improvements, more energy efficient appliances, introduction of building code are assumed, resulting to 5% energy reductions compared to the amount of year 2009 (this year is defined in the session about Energy Efficiency for the household sector). The fuel share of the sector has the following distribution: i) reduction of natural gas from 52% in 2015 to 40% in 2030; ii) increase of use for biomass, up to 6% by year 2020; iii) these assumptions lead to increased share for coal. Agriculture Figure 23: Energy demand for the household sector. For the OPT scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments described in the respective policy mixture. Technological improvements are assumed, resulting to 2,5% energy savings in 2020 compared to the amount of year The fuel share of the sector has the following distribution: the share of natural gas is limited to the half of its share in year 2010, the share of biomass is increased to 7% until year 2020 and that of coal is increased to 1%. The shares of oil, electricity and heat remain almost stable. The justification of these assumptions is based on the following: the country intends to reduce the use of natural gas in all financial sectors and increase that of coal. Because of the larger produced amount of GHG emissions from the use of coal, biomass is more preferable as the fuel that will substitute natural gas. Biomass is one of the promising RES in the country and has already a share in domestic use (see session Exploitation of RES ). 79

80 Industry Figure 24: Energy demand for the agricultural sector. For the OPT scenario the growth rate of total energy in this sector follows that of GDP. Energy savings due to the policy instruments described in the respective policy mixture concern the two most energy intensive branches of this sector: iron and steel and non specified. Technological improvements are assumed, resulting to 5% energy savings compared to the respective amount for each branch of year 2010 (the last year of considering implemented policy instruments for BAU policy mixture). The fuel share of the branche Iron and Steel has the following distribution: reduced use of natural gas, increased use of coal and biomass. In the Non specified branch natural gas is not used at all. It is assumed that biomass will increase its share by 1% over coal. Figure 25: Energy demand for the industrial sector. 80

81 Services For the OPT scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments described in the respective policy mixture, supporting technological improvements. Technological improvements are assumed, resulting to 10% energy savings in 2020 compared to the amount of year The fuel share of the sector has the following distribution: the share of natural gas was already reduced compared to previous years. The share of biomass was increased so as to reach and exceed that of previous years, while the remaining share of coal supplements accordingly these changes. The share of the other fuels is assumed to remain as it is. Transport Figure 26: Energy demand for the sector of services. For the OPT scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments described in the respective policy mixture. Technological improvements in the road branch are foreseen, resulting to 20% energy savings by 2015 and to 40% by The same was assumed for the rail and navigation branches as well. Regarding the fuel share, the share of biofuels was increased for the road branch at 8% until year The share of natural gas was low (less than 1%) and was assumed to remain stable. The share of oil is reduced accordingly to the increase of biofuels. Electricity consumption by the transport sector is expected to increase due to a growth in freight and passenger traffic caused by the growth of industrial and agricultural production, and increase of GDP per capita. According to the Updated Energy Strategy of Ukraine until 2030 electricity consumption in the transport sector will grow by 50% to 14 TWh until 2030 (Updated Energy Strategy of Ukraine until 2030, 2012). Taking this into consideration the share of electricity was increased in the rail branch. For the other branches the share remained as it was, following the recorded shares. 81

82 Non-energy Use sector Figure 27: Energy demand for the transport sector. For the OPT scenario the growth rate of total energy follows that of GDP. Figure 28: Energy demand for the non-energy use sector. 82

83 Transformation Transmission and Distribution losses The situation is presented in the respective session for the BAU scenario. For the OPT scenario the assumptions are that the growth rates are lower than those compared to BAU due to technological improvements. More specifically, for electricity and heat the growth rate is 0,4%. Figure 29: Transmission and Distribution losses of electricity and heat. Electricity generation The country intends to increase the share of coal as primary supply for thermal power plants by 150% until year 2030, while simultaneously to reduce the use of gas by 50% (UNECE, 2010). Construction of new nuclear power plants, and development of RES are under consideration (UNECE, 2010). More specifically, the RES target capacity by 2030 will be at least 10% of installed capacity or 5,7 GW (10-12 GW including large hydro), and production of TWh (23-28 TWh including large hydro) (Updated Energy Strategy of Ukraine until 2030, 2012). According to the Undated Energy Strategy by 2030 the total capacity of hydro power facilities is expected to increase up to MW, while their total generated power (including HPSPs 4,5 billion kwh, about 15%) will be 18,6 billion kwh. Hydropower production will substitute 6,4 million tons of standard fuel per year. The situation is presented in the respective session for the BAU scenario. For the OPT scenario the assumptions are: Acording to the Undated Energy Strategy by 2030 the share of biomass, wind, hydro, solar and geothermal energy sources will increase. Based on the information quoted in session Exploitation of RES, the respective amounts were used. 83

84 Heat production Figure 30: Electricity generation. The situation is presented in the respective session for the BAU scenario. For the OPT scenario the assumptions are that process efficiency will increase. Coal transformation Figure 31: Heat production. The situation is presented in the respective session for the BAU scenario. For the OPT scenario the assumptions are that process efficiency will increase. 84

85 Oil Refining Figure 32: Coal trasformation. The situation is presented in the respective session for the BAU scenario. For the OPT scenario the assumptions are that process efficiency will increase. Figure 33: Coal trasformation. 85

86 Global warming potential (GHG emissions) The below graph shows the GHG emissions which are attributed to each energy consuming sector. Figure 34: GHG emissions. 86

87 References BSTDB, Ukraine Country Strategy Bd a. Available at: Buksha Igor, Ukraine - Study of climate change impact on forest ecosystems, and the development of adaptation strategies in forestry. Available at: Cabinet of Ministers of Ukraine, Resolution 318, of April 5th, Projections of the State Budget of Ukraine for 2013 and Available in Ukrainian. Available at: CASE (Center for Social and Economic Research, Available at: CC, 2012 Climate change: the European scale. Ukraine. Available at: Commission of the European Communities, Commission Staff Working Document, Accompanying the Communication from the Commission to the European Parliament and the Council, Implementation of the European Neighbourhood Policy in Progress Report Ukraine. SEC (2009) 515/2, Brussels, Available at: en.pdf and Dankers Rutger and Hiederer Roland, Extreme Temperatures and Precipitation in Europe: Analysis of a High-Resolution Climate Change Scenario. Available at: EBRD, 2012a, Regional Economic Prospects in EBRD Countries of Operations: January 2012, EBRD Office of the Chief Economist. Available at: EBRD, 2012b October Regional Economic Prospects in EBRD Countries of Operations: October EBRD Office of the Chief Economist ECORYS, Trade Sustainability Impact - Assessment for the FTA between the EU and Ukraine within the Enhanced Agreement - ANNEXES, Ref: TRADE06/D01, Final Report ANNEXES. Available at: ENVSEC Project, ENVSEC Project Reducing vulnerability to extreme Floods and climate change in the Dniester river basin (Dniester III floods & climate) Summary of the Baseline studies for Ukraine (prepared by Mr. Nabyvanets) and for the Republic of Moldova (prepared by Ms. Serenco) Summary Prepared by Ms. Lesya Nikolayeva, Zoi. Available at: European Commission, Directorate-General for Agriculture and Rural Development, The Agricultural Sector and Trade in Ukraine. Available at: European Commission and CASE Center for Social and Economic Research, The Economic Aspects of the Energy Sector in CIS Countries. ISBN , doi / Available at: FAO, Ukraine, Water Report. Available at: Herasimovich Viachaslau, Ukrainian Oil Refinery Sector Review. Available at: 87

88 IEA, Ukraine 2012, Executive summary, Key recommendations Introductory chapter Energy policies beyond IEA countries. Available at: IMF, World Economic outlook. April Growth Resuming, Dangers Remain. Available at: 3 rd, 4 th, 5 th National Communication of Ukraine to UNFCCC, Available in Russian language only. Available at: IMF, 2012b. IMF Country Report No. 12/315 Ukraine 2012, Article IV, Consultation, November Available at: IPCC, IPCC projections assumptions of SRES scenarios. Available at: Kravtsov Vladlen, Sheludchnko Vladimir, Mass Nicolai, Palkina Svetlana, Modern aspects of coal gasification technology development and prospects of its application within the framework of Ukrainian fuel and energy balance. METAl 2005, , Hradec nad Moravicí. Available at: Market Observatory for Energy, Country file Ukraine. Available at: Met Office, Impacts of Climate Change Ukraine. Available at: MENR, Ministry of Ecology and Natural Resources of Ukraine. National report on the state of environment in Ukraine in (in Ukrainain language) Available at: NASU, Institute of Physics of the National Academy of Science of Ukraine. Assessment of greenhouse gas emission reduction by decrease of process losses in distribution networks of Ukraine. Available in Ukrainian. Available at: National Ecological Centre of Ukraine, Problems of Ukraine s coal sector and greenhouse gas emissions from coal mining and consumption. Available at: http: //climategroup.org.ua/wpcontent/uploads/2010/06/ukraine_coal-sector_web pdf Schneider C., C. L. R. Laize, M. C. Acreman, and M. Florke, How will climate change modify river flow regimes in Europe? Available at: SEB, 2012b. Eastern European Outlook, Economic Research Theme: Effects of euro zone crisis on Eastern Europe March Available at: astern_european_outlook_201203_eng.pdf?epslanguage=en SEB, Eastern European Outlook, Economic Research October Available at: astern_european_outlook_201210_eng.pdf?epslanguage=en SEB, Eastern European Outlook, Economic Research March Available at: astern_european_outlook_201303_eng.pdf?epslanguage=en SSSU, Statistical yearbook Environment of Ukraine. Available at: State Statistics Service of Ukraine, Agriculture of Ukraine Statistical yearbook. Available at: (under Publications) 88

89 SWEDBANK, Baltic Sea Report, No 33, 2 October Available at: The International Bank for Reconstruction and Development/The World Bank, Water Resources in Europe and Central Asia. Available at: UKRSIBBANK, December Ukraine Macro Outlook, Nearing a trough Written by Alexander Belozyorov. Available at: UKRSIBBANK, Ukraine Macro Outlook Difficult Policy Choices. Written by Anastasia Golovach, Yevgeniy Orudzhev, Serhiy Yahnych, Pavlo Moroz. Available at: UN, World Economic Situation and Prospects. Available at: UNDP, Comparative Analysis - EU and Ukraine Security of Energy Supply. Written by Blue Ribbon Analytical and Advisory Centre Energy Policy Team. Available at: UNECE, Financing Energy Efficiency Investments for Climate Change Mitigation Regional Analysis of Policy Reforns to promote energy efficiency and Renewable energy investments. Available at: United Nations, Department of Economic and Social Affairs, World Population Prospects The 2010 Revision, Volume I: Comprehensive Tables. Available at: United Nations, World Population Prospects. The 2010 Revision, Volume II: Demographic Profiles. Available at: pdf/wpp2010_volume- II_Demographic-Profiles.pdf U.S. Environmental Protection Agency, Coal mine methane in Ukraine: Opportunities for production and investment in the Donetsk coal basin. Available at: Water profile of Ukraine, Available at: World Bank, Ukraine: Recent Economic Developments World Finance Review. Available at: World Bank, 2012b. World Bank Ukraine Partnership: Country Program Snapshot, October Available at: World Bank, Adapting to Climate Change in Europe and Central Asia Available at: World Bank, Integrating Environment into Agriculture and Forestry Progress and Prospects in Eastern Europe and Central Asia - Volume II, UKRAINE - Country Review. Prepared by the Europe and Central Asia Region - Sustainable Development Department, November Available at: 89

90 PESSIMISTIC SCENARIO ( ) Pessimistic scenario description General comments The Pes scenario is structured by: i) the mitigation/adaptation policy instruments that the country has set into force after the 1 st January 2011; ii) no other additional policy instruments apart from those already decided to be implemented and in line with the EU climate change policy; the EU policy instruments will be adjusted to the needs and priorities of the examined country and iii) the minimum exploitation of the potential of Ukraine in energy efficiency and RES by limiting the possible technological options only to the promotion of the most promising for Ukraine RES i.e. biomass and wind power. The main priorities under this scenario are not those related with climate change policy, but with energy policy. The following facts justify this national need. There have been delays regarding the energy sector reform, energy enterprises are in poor financial condition, there is lack of investments, while maintenance to aging infrastructure has been deferred (World Bank, 2012b). All these risk the maintainance of security, the reliability and quality of supply (World Bank, 2012b). These problems threaten the sustainability of economic growth, degrade the environment and increase the cost of social services (World Bank, 2012b). That is why improvements in this sector are among the top national strategic priorities (World Bank, 2012b). It is indicative that the total amount of investments needed until year 2030 for the development of backbone, interstate and distribution power networks, organization of the parallel operation of Ukrainian UPS and UCTE, modernization, upgrading and construction of switch-yards, is estimated at 82,9 UAH billion (Updated Energy Strategy until year 2030, 2012). The Ukrainian coal industry faces problems due to low coal prices and high production costs, since approximately 40% of all mines have been operating for more than 50 years and mining equipment have not been adequately renewed (Ministry of Strategy and Finance, the Republic of Korea, 2010). In May 2008, the country adopted a concept for reforming the coal sector by focusing on privatisation and modernization (CEC, 2009). However, additional efforts are required in this sector so as to achieve Ukraine s goal of further improvements in mine safety (CEC, 2009). The country intends to expand the production of electricity from nuclear power plants. More specifically from 22,5 Mtoe (32,2 million tons of coal equivalent, Mtce) in 2005 to 37,7 Mtoe (53,8 Mtce) in 2020 and 49,9 Mtoe (71,3 Mtce) in 2030 as quoted in the Energy Strategy for the period until 2030 ((Ministry of Strategy and Finance, the Republic of Korea, 2010). On the other hand, there is no uranium processing and nuclear power plant construction industry in the country. So, the realization of this intention will require considerable investments (Ministry of Strategy and Finance, the Republic of Korea, 2010). Ukraine started preparations for a master plan on the rehabilitation of the gas transit system, while is is also considering a smooth reform of the gas sector, including legal separation and corporatisation of the gas transmission operator (CEC, 2009). These activities will provide control over the income from gas transmission revenues, facilitating the needed investments, which are estimated at 2,5 billion EURO (CEC, 2009). Ukraine prepared a draft law on the principles of the natural gas market functioning on which the European Commission provided comments (CEC, 2009). The country focuses its efforts for enhanced domestic production and for new suppliers and supply routes through the Caspian region and North Africa. Ukraine launched with companies from Azerbaijan, Georgia, Lithuania and Poland a study regarding the extension of the Odessa-Brody oil pipeline to Gdansk in Poland (CEC, 2009). Ukraine contributed to the 90

91 further development of the Boyarka Natural Gas Metrology Centre, established with assistance from the European Commission (CEC, 2009). Policy portfolio Mitigation A. Existing policy instruments Policy instruments for RES After 31 st December 2010, the country undertook actions and implemented policy instruments for the promotion or RES. Same as in the policy mixture of OPT. Policy instruments for energy efficiency After 31 st December 2010, the country undertook actions and implemented policy instruments for the promotion or RES. Same as in the policy mixture of OPT. B. Additional policy instruments Policy instruments for RES None. Policy instruments for energy efficiency Draft Laws as presented in the OPT policy mixture. Policy instruments for transport sector Regulatory policy instruments (Fuel switch) Same as in the OPT policy mixture. Dissemination policy instruments Policy instruments that support the behaviour support are proposed. Supporting public awareness campaigns about the benefits of eco-driving and fuel economy are also proposed. Policy instruments for climate policy issues According to the Decision 2009/04/MC-EnC Ukraine will incorporate into national legislation the following Directives with specific time schedule (Energy Community, 2010): - By January 1 st 2012, Directive 1999/32/EC relating to a reduction in the sulphur content of certain liquid fuels; - By January 1 st 2018, Directive 2001/80/EC on the limitation of emissions of certain pollutants into the air from large combustion plants. 91

92 Adaptation Policy instruments on water management Financial policy instruments As in OPT policy mixture. Policy instruments for agricultural sector Dissemination policy instruments By providing seminars, and organizing awareness campaigns farmers will realize what they need to do to adapt to climate change. Policy instruments need to target in improving the monitoring and the dissemination of information, public awareness of rural environmental issues (World Bank, 2007). Policy instruments for forest management Regulatory policy instruments Same as in OPT scenario but with proposal for increasing forest land by 2,5% under this scenario. Main characteristics This policy mixture focuses on the national efforts to improve energy independence by reducing the share of natural gas in the energy mix and increasing that of coal. Simulateously, climate change efforts concern energy efficiency, renewable energy sources and emission trading through JI and GIS, but mainly for the energy sector. This intension of promoting climate change policy options through energy sector is reflected to the following decisions. The Energy Strategy allocates 515,9 UAH billion (49,4%) to the power sector, 300,3 UAH billion (28,7%) to the oil and gas sector, 221,7 UAH billion (21,2%) to the coal sector and 7,1 UAH billion (0,7%) to the RES sector. All these funds are allocated to expand and improve the energy supply system (Ministry of Strategy and Finance, the Republic of Korea, 2010). Additionally, funds raised by emission trading are used for improving the energy efficiency in power plants, transmission network. 92

93 References Commission of the European Communities, Commission Staff Working Document, Accompanying the Communication from the Commission to the European Parliament and the Council, Implementation of the European Neighbourhood Policy in Progress Report Ukraine. SEC (2009) 515/2, Brussels, Available at: en.pdf and Ministry of Strategy and Finance, the Republic of Korea, Energy Efficiency Improvement and New and Renewable Energy Development Strategies for Ukraine. The document was prepared for The Government of Ukraine. The National Agency of Ukraine on Ensuring of Efficient Use of Energy Resources Management (NAER) also cooperated for its preparation. Available at: Ministry of Fuel and Energy, Energy Strategy of Ukraine for the Period until Available at: 93

94 Key assumptions The key assumptions used for the development of scenarios are similar to those used in previously published studies and papers for Ukraine. The categories of the key parameters are common for all scenarios and are divided as follows: Demographics and Economy The demographics and economy assumptions described in BAU scenario are used for all three (3) scenarios (BAU, OPT, PES). Climate Statistics Precipitation For the Pes scenario precipitation was increased by an annual growth rate of 0,75% according to bibliographic references as thesewere presented in the respective session of the BAU scenario. Temperature Figure 35: Precipitation. For the Pes scenario the assumption is a higher increase at 13,5 o C by

95 Figure 36: Temperature. Frequency of extreme events Flash floods According to the information in the respective session for the BAU scenario, flash floods will increase. For the PES scenario the assumption is that the growth rate for this climate characteristic follows the respective one for precipitation in all scenarios. Heat waves No available historical data. Figure 37: Flash floods. 95

96 Frost days No available historical data. Water resources No available historical data. Groundwater No available historical data. Policies and Measures Carbon tax Described in the policy mixture of BAU scenario. Feed in tariff system Described in the policy mixture of PES scenario. Quota Not implemented in Ukraine. Soft loans No policy instrument concerning soft loans is applied. Subsidies No policy instrument concerning subsidies is applied. Land management No policy instrument concerning land management is applied. Global trends Crude oil price Projections for the crude oil prices regarding the Reference scenario of the IEA, World Energy Outlook 2010 will be used. Natural gas price For the natural gas prices the following forecasts are encountered in the relevant literature: Coal prices increase from 65$ per tonne in 2006 to 120$ in 2015, then fall to 85$ in 2030, compared with 110$ in 2030 in the Reference Scenario a reduction of 23%. EUA price Projections about the EUA price will be used based on the relevant literature. ERU price The average CER price was 18 /tco 2 based on the first 11 months of 2008 (Rotfub W. et al., 2009). The same growth rates that are adopted for the EUA price will be used for the CER price also. Adaptation Water Use No available historical data. 96

97 Household water use Based on the information provided in the respective session for the BAU scenario, the assumption is that for PES the growth rate 4%. Water use for agriculture Based on the information provided in the respective session for the BAU scenario, the assumption is that for PES the growth rate is -1%. Water use for industry Based on the information provided in the respective session for the BAU scenario, the assumption is that for PES the growth rate is -0,1%. Water Use for energy production Based on the information provided in the respective session for the BAU scenario, the growth rate assumption for water used in the hydropower generation for PES is 15%. 97

98 Energy Demand Ukraine s energy demand framework is comprised of the sectors: households, industry, agriculture, services. Assumptions about these sectors are described in the next sessions. Households For the PES scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments described in the respective policy mixture. Technological improvements, more energy efficient appliances, introduction of building code are assumed, resulting to 2,5% energy reductions compared to the amount of year 2009 (this year is defined in the session about Energy Efficiency for the household sector). The fuel share of the sector has the following distribution: i) reduction of natural gas from 52% in 2015 to 35% in 2030; ii) increase of use for biomass, up to 3% by year 2020; iii) these assumptions lead to increased share for coal. Agriculture Figure 38: Energy demand for the household sector. For the PES scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments described in the respective policy mixture. Technological improvements are assumed, resulting to 1,25% energy savings in 2020 compared to the amount of year The fuel share of the sector has the following distribution: the share of natural gas is limited to the half of its share in year 2010, the share of biomass is increased to 3,5% until year 2020 and that of coal is increased to 1%. The shares of oil, electricity and heat remain almost stable. The justification of these assumptions is explained in the respective session of OPT. 98

99 Industry Figure 39: Energy demand for the agricultural sector. For the PES scenario the growth rate of total energy in this sector follows that of GDP. Energy savings due to the policy instruments described in the respective policy mixture concern the two most energy intensive branches of this sector: iron and steel and non specified. Technological improvements are assumed, resulting to 2,5% energy savings compared to the respective amount for each branch of year 2010 (the last year of considering implemented policy instruments for BAU policy mixture). The fuel share of the branche Iron and Steel has the following distribution: reduced use of natural gas more when compared to that of the OPT scenario, increased use of biomass, but less than in the OPT scenario and increased use of coal (more than in OPT scenario). In the Non specified branch natural gas is not used at all. It is assumed that biomass will increase its share by 0,5% over coal. Figure 40: Energy demand for the industrial sector. 99

100 Services For the PES scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments was described in the respective policy mixture, supporting technological improvements. Technological improvements are assumed, resulting to 5% energy savings in 2020 compared to the amount of year The fuel share of the sector has the following distribution: the share of natural gas was already reduced compared to previous years. The share of biomass was increased so as to reach that of previous years, while the remaining share of coal supplements accordingly these changes. The share of the other fuels is assumed to remain as it is. Transport Figure 41: Energy demand for the services. For the PES scenario the growth rate of total energy follows that of GDP minus the energy savings due to the policy instruments described in the respective policy mixture. Technological improvements in the road branch are foreseen, resulting to 10% energy savings by 2015 and to 20% by The same was assumed for the rail and navigation branches as well. Regarding the fuel share, the share of biofuels was increased for the road branch at 4% until year The share of natural gas was low (less than 1%) and was assumed to remain stable. The share of oil is reduced accordingly to the increase of biofuels. Electricity consumption in the transport sector is expected to increase due to a growth in freight and passenger traffic caused by the growth of industrial and agricultural production, and increase of GDP per capita (Updated Energy Strategy of Ukraine until 2030, 2012). 100

101 Non-energy Use sector Figure 42: Energy demand for the transport sector. For the PES scenario the growth rate of total energy follows that of GDP. Figure 43: Energy demand for non-energy use sector. 101

102 Transformation Transmission and Distribution losses The situation is presented in the respective session for the BAU scenario. For the PES scenario the assumptions are that the growth rates are lower than those compared to BAU, but higher compared to the OPT scenario. More specifically, for electricity the growth rate is 0,8% and heat 0,6%. Electricity generation Figure 44: Transmission and distribution losses of electricity and heat. The situation is presented in the respective session for the BAU scenario. For the PES scenario the assumptions are: According to the Undated Energy Strategy by 2030 the share of biomass, wind, hydro, solar and geothermal energy sources will increase, but will be less than that of OPT. the use of coal will increase compared to OPT scenario. Based on the information quoted in session Exploitation of RES, the respective amounts were used. 102

103 Heat production Figure 45: Electricity generation. The situation is presented in the respective session for the BAU scenario. Coal transformation Figure 46: Heat production. Clean coal technologies and approaches are used to decrease sulphur and mercury oxide emissions and concern (Updated Energy Strategy of Ukraine until 2030, 2012; National Ecological Centre of Ukraine, 2010): i) purification of coal from impurities prior to 103

104 combustion, e.g. washing out unwanted minerals by mixing the grinded coal with liquid and subsequent separation of impurities using one of the existing methods; ii) regulation of coal combustion to minimize sulphur and nitrogen oxide emissions using wet scrubbers (flue gas desulfurization systems); iii) dewatering of lower class coal (e.g. brown coal) to increase calorie content and efficiency of energy production; iv) coal gasification (Integrated Gasification Combined Cycle) which leads initially to a mixture of carbon mono-oxide and hydrogen (syngas and then is purified and combusted in a gas turbine to produce energy. Oil Refining The situation is presented in the respective session for the BAU scenario. 104

105 Global warming potential (GHG emissions) The below graph shows the GHG emissions which are attributed to each energy consuming sector. Figure 47: GHG emissions. 105

106 References BSTDB, Ukraine Country Strategy Bd a. Available at: 106

107 RESULTS OF LONG RANGE ENERGY ALTERNATIVES PLANNING SYSTEM (LEAP) Energy Primary Energy Demand for all three scenarios is presented at Figure 45. Since key drivers: GDP growth and population are same for all three scenarios analyzed, difference in energy demand between scenarios is due to the different policy mixtures. Figure 48: Primary Energy Demand for three scenarios for period It could be observed that OPT can be characterized by the lowest energy demand, while PES -with the highest one. Demand Expected final energy consumption in analyzed scenarios is presented at Figure 46. The highest final energy consumption can be expected in BAU Scenario and the lowest in OPT Scenario. 107

108 Figure 49: Final Energy Demand for Ukraine for the period Transformation Electricity generation output for all three scenarios is presented at Figure 47. Figure 50: Electricity generation output for Ukraine for the period Global warming Global warming potential for analyzed scenarios is presented at Figure 46. The highest amount of GHG emissions is expected in BAU scenario, where no energy efficiency policy instruments, neither fuel switch are applied. 108

109 Figure 51: Total GHG emissions for Ukraine for the period