The country needs environmental insurance
Olena Kryvoruchkina, People's Deputy of Ukraine, Deputy Head of the Verkhovna Rada of Ukraine Committee on Environmental Policy and Nature Management, for the portal Green Deal
The Green Deal is an action program adopted by the European Union, according to which Europe commits to becoming climate neutral by 2050. Ukraine, of course, must make every effort to integrate into the new EU climate policy. That is why the state and business need to plan the transformation of many industries: energy, metallurgy, mechanical engineering, chemical, and agricultural. Personally, I believe that the introduction of mandatory environmental insurance in Ukraine will accelerate eco-modernization in these industries.
Technogenic danger
In August 2013, a massive ammonia emission into the air occurred at the chemical enterprise PJSC "Concern Stirol" in Horlivka. A white cloud formed over the plant and spread around. As a result of the accident, six people died and 26 were injured. This was the largest man-made disaster in the chemical industry since Ukraine's independence. Currently, Horlivka is in uncontrolled territory, the plant is shut down, but environmentalists are concerned whether it will pose new threats if the workshops are damaged.
In 2015, in Vasylkiv district of Kyiv region, in the village of Kryachky, a fire broke out, and later an explosion at the BRSM oil depot. The fire engulfed eight of the seventeen fuel tanks. As a result of the fire four people died, 12 were injured. The wind carried the cloud of poisonous smoke away from Kyiv. It was visible for tens of kilometers. It was reported that about 14 thousand tons of oil products were stored at the base. The 10-kilometer zone around the epicenter was declared dangerous. The regional state administration reported that there was no serious air pollution in the 20-km zone around the burning oil depot, although before that the Kyiv City State Administration warned that the content of harmful substances in the air in Kyiv exceeded the norm.
I have mentioned only a few cases that, unfortunately, led to human deaths and, among other things, caused significant damage to the environment.
One of the solutions to this problem could be the introduction of environmental insurance in Ukraine, i.e., insurance against losses from man-made accidents caused to the environment and affected persons. This mechanism successfully operates in many countries around the world, but, unfortunately, not yet in ours.
Draft law on mandatory environmental insurance
Each country has its own system of environmental insurance, and among them, there are none that we could blindly copy. Instead, Ukraine should choose and assemble its own puzzle of mechanisms that will be most effective in our conditions.
A number of Ukrainian laws contain references to the concept of environmental insurance, but we do not have a special law. Therefore, by Presidential Decree of March 23, the decision of the National Security and Defense Council "On challenges and threats to national security of Ukraine in the environmental sphere" was introduced, which provides for the development of a law on environmental insurance within three months.
But the parliamentary working group, which I head, began working on this problem even before the NSDC decision. Our task is to create a bill that, once it becomes law, will actually work.
According to the members of the Committee on Environmental Policy and Nature Management, environmental insurance should become mandatory for enterprises from risky sectors of the economy, namely metallurgical, machine-building, chemical and energy. This approach has proven itself in Slovakia and Germany.
The bill we are working on aims to establish the legal, economic and organizational foundations for environmental insurance in Ukraine in a mandatory form and to regulate public relations in the field of mandatory environmental insurance. We need to develop an effective mechanism aimed at compensating victims for damage caused by accidental pollution of the natural environment. The bill provides for the approval of a range of dangerous types of economic and other activities that may lead to emissions into the atmosphere or discharge of harmful substances into water, including the discharge of solid, liquid or gaseous pollutants or the generation of radiation or other harmful effects exceeding the permissible level.
Of course, enterprises that will be obliged to insure environmental risks - and these are mostly large industrial corporations - are wary of this initiative. But I want their representatives to ask themselves - do they really assess their own resources for compensating environmental damage that a man-made accident can cause? The payment of contributions to insurance companies, which will be united in insurance pools, will allow accumulating huge resources. In case of emergencies, these financial resources will help companies cover insurance consequences.
Thus, environmental insurance is a business aid that allows an enterprise to maintain financial stability in conditions where they are obliged to compensate for environmental damage.
Risks and ways to overcome them
In addition to the problems that lobbyists of large corporations can create, insurers also view environmental insurance with apprehension. Unfortunately, we do not yet have insurance companies that deal with these types of insurance.
However, this problem can be solved by creating insurance pools that will allow for joint accumulation of funds. Representatives of insurance companies are part of our working group, and together we are solving the issues of how to assess possible risks and how to monetize the damage caused to the environment. In parallel with this, we are solving the problem of the lack of monitoring of man-made risks in Ukraine.
It should be borne in mind that environmental insurance has another important function - preventing man-made accidents. We stipulate in our bill that if there were no accidents at the enterprise, it will be able to count on compensation for part of its insurance premiums.
In addition, companies that have passed the certification of polluting enterprises according to ISO 14001 or EU Eco-management and Audit Scheme (EMAS) will be able to pay lower insurance premiums. In some cases, the discount provided by insurance companies for this type of risk can reach up to 20%.
Finally, companies that will be subject to mandatory insurance are large exporters, for whom reputation in the international market is extremely important. Environmental insurance will allow them to ensure such a reputation.
It is clear that businesses do not want to incur additional costs. However, it can be persuaded if ways emerge to transfer insurance risks. And here innovative financial mechanisms can be useful, for example, "green" finance or special mechanisms with the participation of the state and international financial institutions, in particular, the World Bank.
Chances of success are high
I sincerely believe in the prospects of introducing environmental insurance, as I see the political will to adopt environmental decisions. Currently, in the working group, we have a team of professionals, which, in addition to people's deputies, includes specialists from ministries, departments, non-governmental groups, and international organizations.
Gradually, we are moving towards a more environmentally conscious society. Environmental insurance, along with environmental tax, belongs to the mandatory pool of environmental finance mechanisms. They are necessary for environmental standards to actually work.
To the citizens of a country that has experienced the Chernobyl accident, the largest man-made disaster in human history, the threats from industrial damage to the environment and human health are known like no other. It is in our hands to introduce an effective mechanism for preventing man-made disasters, which environmental insurance offers.