The concept of the energy Green Deal threatens Ukraine with higher tariffs
After the recent official visit of President Volodymyr Zelenskyy to Paris and negotiations with his French counterpart Emmanuel Macron, the topic of Ukraine's fulfillment of its obligations under the Paris Climate Agreement has sharply intensified in the domestic information space. It is possible that the main ideologist of promoting the Green Deal concept found arguments and the right words in a conversation with the Ukrainian leader.
The Cabinet of Ministers stated that as part of the synchronization process with the Green Deal, Ukraine is ready to reduce carbon emissions by 65-70% by 2030 (from the 1990 emission level).
Why Ukraine is rushing to "fulfill and overfulfill" the terms of the climate agreement, and why the Parisian deal will have to be paid dearly by "little Ukrainians" - in the Vesti.ua review.
"Cosmic" desires and Green Deal budgets
Earlier, Vesti.ua analyzed in detail how the Ukrainian government, with the support and supervision of Western partners, is developing a strategy for reforming the energy sector, with the pompous name "European Green Deal".
On April 1 of this year, the Ministry of Ecology presented a draft resolution of the Cabinet of Ministers "On the approval of Ukraine's Second Nationally Determined Contribution (NDC2) to the Paris Charter"
As part of the course towards decarbonization of the economy and an energetically "green transition", the Ministry of Ecology calculated that by 2030, Ukraine is capable of reducing carbon emissions by 70% compared to 1990. Iryna Stavchuk, Deputy Minister of Environmental Protection and Natural Resources, announced such calculations of the NDC2 indicator.
At the same time, Stavchuk noted that after consultations and discussions, the department settled on a mark of 65%. However, at first glance, there is no particular grandeur in the stated task, and officials will not have to strain their bureaucratic potential.
According to the same Ministry of Ecology, a 65% reduction in greenhouse gas emissions by 2030 from the 1990 level corresponds to a 9.6% reduction compared to the indicators achieved in 2018. The process of deindustrialization and "decommunization" of the Soviet industrial heritage has done the lion's share of the "dirty work" for officials in Ukraine's pursuit of the ideals of the Green Deal.
Nevertheless, the reduction of the remaining 9.6% of CO2 by 2030, in the project of the Ministry of Ecology, is estimated at a fantastic sum of 102 billion euros of investments that need to be attracted to the energy sector of Ukraine.
The office of the Ukrainian Business and Trade Association (UBTA) called such a plan of the Cabinet of Ministers "unthoughtful radicalism". Nazar Bobytskyi, head of the UBTA Brussels office, stated that the investment need for the entire strategy of Ukraine's "green" transition is 245 billion euros by 2030. At the same time, according to him, the government plans to allocate only 5% of the necessary funds for these processes, and the rest of the financial burden will fall on businesses.
And business, by the way, a very specific one, doesn't like this much. But the "cosmic" costs of the trendy Green Deal are not the only problem for this business and the state of Ukraine.
Hello, "border carbon tax"!
On March 10, the European Parliament adopted a resolution on the introduction of a Carbon Border Adjustment Mechanism (CBAM) in the EU. Europeans plan to launch the CBAM mechanism as early as January 2023. Thus, the European Union can, at its discretion, restrict the import of certain goods whose production has a "carbon footprint".
This prudent-cynical and aggressive policy of European protectionism in the new economic realities of the global world is called another "European value" in Ukraine. Thus, the Deputy Representative of Ukraine to the EU, Roman Andarak, stated that the Green Deal is a kind of new parameter in the system of European values, and therefore Ukraine should negotiate with the EU on updating the Association Agreement in this regard.
Domestic business also calls for negotiations with Europeans to obtain a partial or full indulgence for Ukrainian exports. At least to provide for a grace period for non-application of the CBAM mechanism to domestic products.
The first on the list of "victims" of the border carbon tax are metallurgists. According to preliminary calculations by the specialized analytical agency GMK Center, 2.5 billion euros of export products from Ukraine's mining and metallurgical complex to EU countries fall under the CBAM. The maximum losses for the industry are estimated at 700 million euros annually.
Dissatisfied with situation #2 - a part of farmers, for whom the EU market is the main direction.
It is not difficult to guess that the generalized Ukrainian MMC is mostly represented solely by Rinat Akhmetov's oligarchic group (about 60% of Ukrainian steelmaking, iron ore mining, and metal smelting).
This is "greeting" #1 from the Green Deal to Akhmetov's business empire and partners. However, if only Rinat Leonidovich's personal fortune suffered from this, it would hardly be worth worrying about the oligarch's insolvency. But this is extremely painful
it will hit the Ukrainian economy as a whole, with which Akhmetov has merged into a single alloy.
State budget and double tariff are paramount!
"Hello" #2 to Akhmetov's group from the Green Deal - a blow to another pillar of his business agglomeration - energy. As part of the decarbonization policy, Ukraine is de facto eliminating its own coal mining and radically reducing the share of thermal (coal) generation in the overall energy balance.
As previously stated by the Minister of Environmental Protection and Natural Resources Roman Abramovsky, within the framework of the NOV2 project to reduce CO2 emissions, the planned targets will be achieved, in particular, due to the growth of electricity generation from renewable energy sources (RES) to 30% and a decrease in the share of thermal power plants - to 13%.
At the same time, Akhmetov's group controls over 70% of thermal generation and about 80% of energy coal mining. Naturally, within the framework of the decarbonization policy, the business can be reoriented to the production of "green" energy, which, in fact, the oligarch was engaged in, concentrating one of the largest portfolios of renewable energy generation (especially wind). But the "green transition" of Ukraine means the costs directly of "Akhmetov's transition", which must be compensated.
The only "cash desk" for issuing such financial "compensations" is the state budget, i.e., the pockets of ordinary taxpayers. And here a conflict between the private sector and the state is possible. As a fresh example - the appeal of "DTEK Energo" on April 23 with a lawsuit to the Commercial Court of Kyiv. The defendant is the grid operator NEC "Ukrenergo", from which "DTEK" demands 2.4 billion hryvnias of debt for work on the balancing market during the heating season.
"The debt of 2.4 billion hryvnias was accumulated during October 2020-February 2021, its largest increase - almost 1 billion hryvnias - occurred in January, when we were very actively given commands to load. As a result, beyond the commercial schedule, in this month, in particular, we produced about 500 million kWh, for which we had to burn scarce coal," complained Ildar Saleev, CEO of "DTEK Energo".
Apparently, another increase in electricity tariffs for the population by another 20-30% will cover the commercial troubles of energy companies and the costs of priceless coal, but does Ukraine need such a Green Deal?