The ETS is a framework that will transform environmental regulation in Ukraine. Plan for its development
The implementation of the greenhouse gas emissions trading system (ETS) in Ukraine is one of the European integration obligations of the Association Agreement. It aims to comply with Ukraine’s obligations under the Paris Agreement and Ukraine Facility Plan.
The Climate Law of Ukraine (more details here) defines the ETS in the list of market mechanisms and instruments for implementing state climate policy. The ETS will regulate greenhouse gas emissions by activity type, setting emission limits based on greenhouse gas emission data and applying the most effective approaches to reduce such emissions.
A prerequisite for introducing the ETS is ensuring the proper functioning of the greenhouse gas emissions monitoring, reporting, and verification (MRV) system launched in Ukraine at the end of 2019. The MRV system started functioning in Ukraine on 1 January 2021, but reporting by enterprises was suspended due to martial law in Ukraine. A draft law has been adopted to restore mandatory reporting under the MRV system.
The implementation of the State Climate Policy requires the Ministry of Environmental Protection and Natural Resources (hereinafter the Ministry), together with other government agencies, to develop a draft law on the principles of the national greenhouse gas emissions trading system in 2025 and to implement the pilot phase of the national ETS in 2026.
That is why the Ministry has published a draft Action Plan for the establishment of the ETS, which defines three strategic areas for further work:
- legal regulation of the ETS functioning;
- ensuring the functioning of the ETS in accordance with the requirements of the EU ETS;
- public dialogue.
According to the mentioned draft Action Plan, the submission of the draft law to the Government is scheduled for 2025-2026, and the launch of the pilot phase of the national ETS is planned for 2028. These timelines are at odds with the operational plan for implementing the climate policy strategy.
In the near future, it is proposed to develop an ETS glossary and proposals for the implementation of the pilot and full operation of the ETS, in particular, on the scope of activities to be covered by the ETS, approaches to setting the cap on the volume of emission allowances and rules for allocating allowances, conditions for conducting auctions for the sale of allowances, rules and procedures for the targeted use of proceeds from the sale of emission allowances.
It is expected that implementing the planned measures will also mitigate the effects of the CBAM on export-oriented industries, including the electricity sector.
The draft Action Plan for establishing ETS has been published on the Ministry’s official website for discussion. Comments and suggestions can be submitted until 20 December 2024.
If you would like to discuss the issues raised in this paper in more detail, please contact the SK team.
Information contained in this legal alert is for general informational purposes only, does not constitute legal or other professional advice and should not be relied upon as a substitute for specific professional advice adapted to the specific circumstances.
