country profile ukraine – energy and climate policies

Country profile of UkraineEvaluation of energy and climate policies

compared to the EU

By: Erika de Visser, Luis Janeiro, Yvonne de Bie,

Niklas Höhne

April 2013

© ECOFYS | |

Table of content

> Chapter 1 Introduction Slide 3

> Chapter 2 Methodology Slides 4-5

> Chapter 3 Results Slides 6 - 19

> Chapter 4 Conclusions Slides 20 - 25

> References Slide 26

> Annex I Overview of EU policies Slides 27 - 28

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Chapter 1: Introduction

Goal of the project:

> to evaluate climate and energy policies in countries outside of the EU and

to provide recommendations for policy opportunities for the

transition to a sustainable energy supply in the respective country.

Deliverables:

> to develop a methodology to evaluate energy and climate policies in non

EU countries.

> to apply the methodology to two non-European countries: Morocco and

Ukraine.

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Chapter 2: MethodologySegments

The analysis is categorized in key economic sectors (rows), and policy

areas (columns), which together determine the individual segments

(dotted lines) of the analysis:

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General energy and climate strategy

Energy supply

Industry

Buildings

TransportEn

erg

y E

fficie

ncy

Ren

ew

ab

le e

nerg

y

Lo

w c

arb

on

str

ate

gie

s

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Chapter 2: MethodologyIndicators and scores

> For each segment we analyse indicators for incentives and barriers,

which together form a coherent and consistent strategy to achieve a long-

term low-carbon future

> Each segment is scored for incentives and barriers:

– Incentives:

● 0: No incentives

● 4: Capturing the full technical mitigation potential in that segment

– Barriers:

● 0: no barriers

● - 4: prevents policies from achieving reductions for this segment

as much as positive incentives could support them

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Barriers

-4 -3 -2 -1 0

Incentives

0 1 2 3 4

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Chapter 3: ResultsOverview of policies

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Energy efficiency Renewables Low Carbon

EN

ER

GY

SU

PP

LY

• Tax exemptions and reductions on energy

efficient technologies and appliances and

CO2 taxation

• Low electricity tariffs do not allow for a

return on investment; subsidies on fuels

I B• Feed-in tariff scheme with high rates for

solar, wind, small hydro, and some

forms of biomass

• Administrative barriers for purchase of

electricity and for licensing

I B

• No relevant policy support in place

• Ukraine is considering a domestic

GHG emissions trading scheme.

I

IN

DU

ST

RY • Tax exemptions and reductions on energy

efficient technologies and appliances and

CO2 taxation

• No barriers found

I B

• Fiscal incentives for import to Ukraine,

sales and use of renewable energy

equipment in Ukraine

• Administrative barriers for licensing

I B


• Ukraine is considering a domestic

GHG emissions trading scheme.

I

BU

ILD

IN

GS • Mandatory building energy code for new

buildings and standards for energy using

equipment in households

• Low electricity and heat prices

I B

• Fiscal incentives for import to Ukraine,

sales and use of renewable energy

equipment in Ukraine

• Low heat prices

I B


TR

AN

SP

OR

T

• Excise tax on oil products

• Fuel subsidies

I B • Fiscal measures for biofuels in place,

including exemption from corporate

profit tax on income from sale of biofuels

and excise tax exemption for motor

biofuels

• Fuel subsidies

I B


I

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Chapter 3: ResultsGeneral energy and climate strategy

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EFFICIENCY/RENEWABLES/LOW-CARBON

AssessmentScore

Ukraine

Score

EU

GENERAL CLIMATE

STRATEGY

• Ukraine has declared a long-term goal of a 50%

greenhouse-gas emissions reduction by 2050 from 1990

levels in the context of the UNFCCC, however a

comprehensive climate strategy to achieve this goal

is missing. The draft Updated Energy Strategy of Ukraine

to 2030 provides general guidelines, but does not provide

a strong foundation to drive action.

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Chapter 3: Results

Energy efficiency in energy supply

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ENERGY EFFICIENCY

AssessmentScore

Ukraine

Score

EU

ENERGY SUPPLY

Incentives

• The tax code (effective January 2011) includes a number

of instruments to energy efficiency: tax exemptions and

reductions to stimulate the use of energy efficient

technologies and appliances and CO2 taxation to

stimulate GHG emissions reduction from the supply side.

• No policy support/incentive to reduce grid distribution

losses.

Barr

iers

• Electricity tariffs do not allow for a return on

investment and subsidies on fuels.

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Chapter 3: ResultsRenewable energy in energy supply

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RENEWABLE ENERGY

AssessmentScore

Ukraine

Score

EU

ENERGY SUPPLY

Incentives

• Ukraine has a feed-in tariff system in place providing

differentiated and relatively high support for solar, wind, small

hydro and some forms of biomass. Electricity production from

animal waste, biogas and landfill gas is not eligible for feed-in

tariffs.

• In addition, some fiscal incentives apply to renewables, such

as tax exemptions on import and sales of equipment for

generating renewable energy and production and sales of

electricity or heat from renewables.

Barr

iers

• The system operator has no obligation to provide priority

dispatch for generation from renewable sources. Besides there

is no strategy for integration of renewables in the grid.

• Moreover procedures for getting licenses and permits to build

and operate renewable energy facilities are complex and time

consuming.

• Investors face significant risks, because they can only obtain

the feed in tariffs after the plant is constructed.

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Chapter 3: ResultsLow carbon technologies in energy supply

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LOW CARBON

AssessmentScore

Ukraine

Score

EU

ELECTRICITY

AND HEAT

SUPPLY Incentives

• No policy instruments to support fuel switch to low-

carbon fuels have been found. In contrary, some district

heating facilities have recently switched from gas to coal.

• There are no policy instruments to support CCS.

• Ukraine is considering a domestic GHG emissions trading

scheme. A draft law is to be presented to parliament by

the end of 2013.

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Chapter 3: ResultsEnergy efficiency in industry

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ENERGY EFFICIENCY

AssessmentScore

Ukraine

Score

EU

INDUSTRY

Incentives

• The tax code (effective January 2011) includes a number

of instruments to energy efficiency: tax exemptions and

reductions to stimulate the use of energy efficient

technologies and appliances and CO2 taxation to

stimulate GHG emissions reduction from the supply side.

Barr

iers

• There are no barriers identified, such as subsidies or tax

exemptions for fuels (e.g. coal, gas), in contrary to the

supply sector and transport.

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Chapter 3: ResultsRenewable energy in industry

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RENEWABLE ENERGIES

AssessmentScore

Ukraine

Score

EU

INDUSTRY

Incentives • Some fiscal incentives apply to renewables, such as

tax exemptions on import and sales of equipment for



Barr

iers • Procedures for getting licenses and permits to build and

operate renewable energy facilities are complex and time

consuming.

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Chapter 3: ResultsLow carbon technologies in industry

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LOW CARBON

AssessmentScore

Ukraine

Score

EU

INDUSTRY

Incentives • There are no policy instruments to support CCS.

• Ukraine is considering a domestic GHG emissions

trading scheme. A draft law is to be presented to

parliament by the end of 2013.

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Chapter 3: ResultsEnergy efficiency in buildings

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ENERGY EFFICIENCY

AssessmentScore

Ukraine

Score

EU

BUILDINGS

Incentives

• Ukraine has a mandatory building energy code for new

buildings since 2007. Compliance with the requirements from

the building code could be improved.

• Furthermore Ukraine has a number of national standards

and requirements for energy-using products in place. In

2011, actions were initiated to align with EU legislation on

labeling and technical regulations for household refrigerators,

freezers and washing machines. Transposition of the EU

labeling directive is expected at the end of 2012.

Barr

iers

• Current (subsidized) electricity and heating tariffs do not

provide residential homeowners with incentives to invest in

energy efficiency measures.

• Furthermore the lack of end-user control over energy

consumption and the absence of knowledge about the

benefits of residential energy efficiency and technical expertise

needed to develop bankable energy efficiency projects are key

barriers.

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Chapter 3: ResultsRenewable energy in buildings

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RENEWABLE ENERGY

AssessmentScore

Ukraine

Score

EU

BUILDINGS

Incentives • Some fiscal incentives apply to renewables, such as tax

exemptions on import and sales of equipment for



Barr

iers

• Current (subsidized) electricity and heating tariffs do not

provide residential homeowners with incentives to invest

in renewable energy

• Because the privatization process for housing has not

been fully completed, commercial banks are not

willing to give loans for renewables to homeowner

associations since they are set up as not-for-profit legal

entities, lack balance sheets and have neither guarantees

nor income streams. Revision of the homeowner

association legislation is planned for late 2012.

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Chapter 3: ResultsLow carbon technologies in buildings

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LOW CARBON

AssessmentScore

Ukraine

Score

EU

BUILDINGS

Incentives • There are no policy instruments to support a low-carbon

energy supply. In contrary, the government has launched

a program to replace natural gas by coal in district

heating plants.

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Chapter 3: ResultsEnergy efficiency in transport

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ENERGY EFFICIENCY

AssessmentScore

Ukraine

Score

EU

TRANSPORT

Incentives

• There are no fuel efficiency standards for light and/or

heavy vehicles in place. Though excise tax on oil

products exists.

Barr

iers • Lower prices due to taxation policy, poor quality products

and domestic oil production sold at prices below real

market levels.

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Chapter 3: ResultsRenewable energy in transport

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RENEWABLE ENERGY

AssessmentScore

Ukraine

Score

EU

TRANSPORT

Incentives

• In 2009, a number of support measures for biofuels

were introduced, including exemption from corporate

profit tax on income from sale of biofuels, and excise tax

exemption for motor biofuels production.

• The draft Updated Energy Strategy of Ukraine to 2030

projects gradual growth in demand for biofuels. In its

reference scenario, the mix of bioethanol in total gasoline

consumption will reach 10% by 2020 and 15% by 2030.

Barr

iers • Lower prices due to taxation policy, poor quality products

and domestic oil production sold at prices below real

market levels.

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Chapter 3: ResultsLow carbon technologies in transport

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LOW CARBON

AssessmentScore

Ukraine

Score

EU

TRANSPORT

Incentives

• No relevant policy incentives for electric mobility,

promotion of modal shifts or strategies to increase the

share of non-motorised transport have been found.

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Chapter 4: ConclusionsElectricity and heat supply

Sector assessment ‘electricity and heat supply’

> Current electricity tariffs do not allow for a return on investment and

price distortions on fuels do not promote efforts to increase

efficiency in energy the supply side.

> Although a feed-in tariff system is in place, there is no strategy for

integration and/or priority dispatch to the grid. Moreover,

procedures for getting licenses and permits to build and operate

renewable energy facilities are complex and time consuming. The

risks for investors are substantial since feed in tariffs can only be

obtained after plant construction.

> There is much to be gained in improving energy efficiency in

transmission and distribution networks. Though there is no policy

instrument to incentivize such investments.

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Chapter 4: ConclusionsElectricity and heat supply

Policy Recommendations ‘electricity and heat supply’

> Allow electricity producers to recover their full costs, e.g. increase

the regulated tariff in a socially acceptable way.

> Remove administrative barriers so that the feed in tariff can be

more effective.

> Expand the scope of the feed-in tariff scheme for renewables to

include technologies such as biogas.

> Introduce an incentive-based tariff for distribution and

transmission networks to trigger the required investments in

energy efficiency.

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Chapter 4: ConclusionsSector industry

Sector assessment ‘industry’

> Very little incentives for energy efficiency and renewable energy

found

> Energy subsidies are limited, in contrast to other sectors

Policy recommendations ‘industry’

> Improve the administrative environment to make sure that the

incentives have maximum impact.

> Introduce an obligation for energy management systems and

energy audits

> Set up an emissions trading scheme

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Chapter 4 ConclusionsSector buildings

Sector assessment ‘buildings’

> Current (subsidized) electricity and heating tariffs in the Ukraine and

the lack end-user control over energy consumption, do not provide

residential homeowners with incentives to invest in energy efficiency

measures.

Policy recommendations ‘buildings’

> Eliminate subsidies for electricity and heat end-use in a socially

acceptable way.

> Establish (more) strict building energy codes for new buildings as well

as buildings undergoing renovation. Enforce and regularly strengthen

the performance requirements for buildings. Establish timelines and

renovation rates for energy efficiency retrofits in existing buildings.

Provide all buildings with metering equipment.

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Chapter 4 ConclusionsSector transport

Sector Assessment ‘transport’

> Ukraine has neither energy efficiency nor renewable policy in

place or strategies to stimulate electric mobility, modal shift

and/or non-motorized transport.

Policy recommendations ‘transport’

> Adopt the European energy efficiency standards for light vehicles

and elaborate a standard for trucks

> Introduce modal shift or strategies to increase the share of non-

motorized transport.

> Create policy incentives for electric mobility

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Chapter 4 ConclusionsOverall conclusions

> Ukraine has significant GHG mitigation potential, mainly in the energy

supply sector, and related to energy consumption in the residential and

commercial sectors, primarily buildings and appliances, and in

industry.

> However, little of this potential has been tapped, owing to a number of

regulatory, economic, technical and infrastructural barriers.

> A priority could be to remove these barriers before putting in place

incentives through policies.

> In addition, the lack of systematic planning, monitoring and evaluation

of the programs and measures at the national and sectorial levels, is a

challenge that needs to be addressed in order to tap this mitigation

potential.

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References

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• Ecofys, 2011. EU Climate Policy Tracker. Published in November 2011 by WWF.

• Government of Ukraine (2012), draft Updated Energy Strategy of Ukraine for the

Period till 2030, June 2012, Kiev.

• OECD/IEA, 2012. Energy Policies beyond IEA Countries: Ukraine 2012.

• Ukrainian Programme of Economic Reform for the Period 2010-2014. Unofficial

translation available from

http://www.usubc.org/site/files/Ukraine_Program_of_Economic_Reforms_2010-

2014.pdf (last accessed December 2012)

• Building code for Ukraine (2006). Thermal protection of buildings. DBN V.2.6-

31:2006. Available from:

http://energycodesocean.org/sites/default/files/%20%C3%A9%202.6-31-

2006.pdf (last accessed December 2012)

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Annex I – Overview of EU policies

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Energy Efficiency Renewables Low carbon

General Climate

Strategy

Energy supply

• Energy Efficiency Directive

(2012/27/EU)

• Effort Sharing Decision (2009/406/EC)

• European Emissions Trading System

(ETS) (2009/29/EC)

• Energy Taxation Directive (2003/96/EC)

• Renewable Energy Directive

(2009/28/EC)

• Internal electricity market Directive

(2009/72/EC)

• Security of electricity supply and

infrastructure investment Directive

(2005/89/EC)

• Effort Sharing Decision (2009/406/EC)

• Carbon Capture and Storage

(CCS) Directive (2011/92/EU)

Industry

• Eco-design Directive (2009/125/EC)

• Energy Labelling Directive

(2010/30/EU)


(2012/27/EU)


(ETS) (2009/29/EC)



(2009/28/EC)

• Carbon Capture and Storage

(CCS) Directive (2009/31/EC)

• Industrial Emissions Directive

(IED) (2010/75/EU)

• Landfill Directive (1999/31/EC)

Buildings

• Energy Performance of Buildings

Directive (EPBD) (2010/31/EU)


(2012/27/EU)

• Eco-design Directive (2009/125/EC)

• Energy Labeling Directive (2010/30/EU)



(2009/28/EC)

Transport

• Regulation on Energy Efficiency for

passenger cars (443/2009)


(ETS) (2009/29/EC)



(2009/28/EC)

country profile ukraine – energy and climate policies

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