The World Bank together with the National Environmental Investments Agency of Ukraine conducted a workshop “Preparation of Ukraine for International Emissions Trading” on April 24, 2007 to promote Ukraine’s participation in this new market mechanism.

Ukraine has made notable progress compared to other potential sellers, and is in a position to be a pioneer in the market together with Latvia with the potential to influence the development of this fledgling market. At the same time, the steps taken by Ukraine over the next 6 – 12 months will be critical in establishing Ukraine’s position as an early mover in this market. In particular, this concerns establishment of enabling domestic institutions and legislation.

Peter Thomson, Sector Director for the Sustainable Development Unit of the World Bank noted that the timely adoption and effective implementation of regulation that would enable implementation of Ukraine’s commitments under the United Nations Framework Convention on Climate Change, including a realistic schedule for implementation of a green investment scheme will be crucial in securing benefits of the future emissions trading.

The workshop had a high attendance with around 45 people spanning a cross section of the government, the Verkhovna Rada, private sector and NGOs. During the workshop the National Environmental Investments Agency outlined Ukraine’s plans for participation in IET and for developing a green investment scheme (GIS). The workshop also introduced participants to the requirements and opportunities for trading under the Kyoto flexible mechanisms, scenarios for development of a global emissions market, options for designing a GIS and the progress of other potential seller countries in international emissions trading. Presentations were also made by representatives from the Embassy of Finland and the Japanese Climate Policy Project of the Institute for Global Environmental Strategies.

The workshop included two panel discussions covering the architecture for emission trading and GIS, as well as criteria for prioritizing sectors and projects for sale of emission quota. There was active discussion during these panel sessions on a range of issues including:

- the legal status of assigned amount units (AAUs) and the experience in other countries in framing the appropriate domestic legislation;
- the steps that would be needed to implement a pilot transaction;
- the plans for engaging the public in GIS design and project selection;
- whether AAU proceeds would be taxed;
- how buyer countries might use the AAUs that they trade;
- how proceeds from AAU transactions would be disbursed to projects, e.g. in the form of results oriented grants, soft loans, equity, etc;
 - the process for project selection and approval and the role of the Ministry of Environment Protection;
- whether an auction approach would be appropriate to identify projects for greening;
- how to approach verification of greening;
- whether to support projects that are financially viable without GIS funding;
- the preference of some buyers for spot rather than forward trading to minimize the delivery risk.

In summary it was concluded that while there may be difficulties in defining the legal nature of AAUs this should not halt discussions with potential buyers on pilot transactions as long as they are properly treated under tax and civil liability laws. The credibility of a GIS will be crucial for both the buyers and public at large and while a supervisory body is not envisaged for central executive organs under Ukrainian legislation it may be possible to consider some form of advisory body in future to ensure full engagement of stakeholders in this process. It was agreed that GIS should not compete with Joint Implementation activities, and strategically important projects should be targeted for greening. Participants also suggested that GIS should support projects with low cost of emission reduction, those that can be implemented quickly, that have long technical life time, that generate auxiliary local environmental benefits and that are not commercially viable without GIS funding. It was said that the GIS should mainly support sectors that are of strategic importance to Ukraine and that face barriers to adequate finance for emission reduction and energy efficiency investments.

The National Environmental Investments Agency will continue stakeholders’ consultation to develop agreed criteria for selecting priority sectors and projects for the GIS.

Workshop materials are attached below:

Green Investment Schemes – Concepts, Ideas, Challenges, presentation by Ms. Jane Ebinger, Senior Environmental Specialist, World Bank 

AAU Sales and Green Investment Schemes: Towards Implementation in Ukraine, presentation by Mr. Grzegorz Peszko, Senior Environmental Economist, World Bank 

Preventing Harmful Anthropogenic Impact, Restricting Climate Change, Stimulating Social and Economic Development, presentation by Mr. Vitalij Nakhlupin, Head of the National Environmental Investments Agency 

Japan: Situation for AAU Trading, presentation by Mr. Yuji Mizuno, Climate Policy Project of the Institute for Global Environmental Strategies

Finland: AAU Buyers Plans and Perspectives, presentation by Mr. Lauri Pullola, Embassy of Finland in Ukraine

Latvia: Green Investment Schemes, presentation by Mr. Grzegorz Peszko, World Bank

For further information please contact: Grzegorz Peszko, World Bank, Project Manager, “Technical Assistance to Ukraine in International Emission Trading and pilot Green Investment Scheme” and “PHRD grant for Industrial Rehabilitation and Kyoto Mechanisms”.

Phone: (1-202) 473-4767
Email: gpeszko@worldbank.org