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THE OPPORTUNITIES FOR UKRAINE IN A LOW-CARBON FUTURE December 2017 The Bellona Foundation, Kiev, Ukraine, December 2017 Authors: Oskar Njaa; [email protected] Ana Serdoner; [email protected] Larisa Bronder; [email protected] Keith Whiriskey; [email protected] Disclaimer: Bellona endeavours to ensure that the information disclosed in this report is correct and free from copyrights but does not warrant or assume any legal liability or responsibility for the accuracy, complete- ness, interpretation or usefulness of the information which may result from the use of this report. © 2017 by the Bellona Foundation. All rights reserved. This copy is for personal, non-commercial use only. Users may download, print or copy extracts of content from this publication for their own and non-commercial use. No part of this work may be reproduced without quoting the Bellona Foundation or the source used in this report. Commercial use of this publication requires prior consent of the Bellona Foundation. Acknowledgement: This report was supported by the Ministry of Foreign Affairs of Norway and the Embassy of the Kingdom of Norway in Ukraine. 2 TABLE OF CONTENTS Foreword .................................................................................................................................................. 4 Executive Summary ................................................................................................................................. 5 1 Past & Current economic and industrial development of Ukraine ............................................ 6 1.1 Ukraine’s economy and the rest of the world ....................................................................... 8 1.2 Ukraine’s economy in the world of tomorrow .....................................................................12 2 The Emerging Global Low Carbon Supply Chain ......................................................................13 2.1 The societal pull and the commercial push ..........................................................................13 2.2 The products of the 21st century ............................................................................................14 2.2.1 Wind turbine market .......................................................................................................16 2.2.2 Solar cell fabrication market .........................................................................................20 2.2.3 Transport Batteries and Energy Storage Market: .....................................................25 2.2.4 Energy Efficiency in industry and homes:.....................................................................29 2.2.5 Low carbon infrastructure (CO2 pipeline) Market: ...................................................33 3 Increasing requirements of global low-carbon markets ...........................................................36 3.1 Product standards – counting entrained CO2 at the border ...........................................36 3.2 Shifting markets and requirements for Bioenergy .............................................................37 4 Summary: Ukraine and the low-carbon market ..........................................................................38 4.1 Ukraine’s place in the future low carbon supply-chain .....................................................39 5 Conclusion: Ukraine has to choose .................................................................................................41 References ..................................................................................................................................................42 3 process of discovering the path towards sustained growth without compromising the climate. But, we FOREWORD should recognize that this is also a challenge to the industry itself: to make a transition to new products, new capacities, and new markets. We are proud Promoting low-carbon solutions in Ukraine is a way of of being among the first Parliaments reducing dependence on fossil fuels and enhancing in the world national security. Therefore, military aggression is not that voted for the ratification an obstacle for an energy transition, but a challenge of the Paris Agreement. and an impetus. Olga Bielkova Nowadays, the leadership shown by the Verkhovna Deputy Head of the Verkhovna Rada Rada should be taken as a sign by all the executive Committee on the Fuel and Energy authorities for Ukraine to fulfill its global obligations. Complex, Nuclear Policy, and Nuclear Renewable energy and energy efficiency technolo- Safety; Co-chairwoman of the gies constitute a significant part of climate change parliamentary inter-factional caucus "Green power shift" mitigation policy. The existing Ukrainian legislation has created a niche for these technologies, but we aim to develop a vast low-carbon market. In 2017 renewable energy sources constituted around 7% (including big hydro power plants) in Ukraine’s gross final energy consumption with a goal of 11% by Natalia Katser Buchkovska 2020. Head of the Subcommittee on Sustainable Development, Strategy and A feed-in tariff was introduced in 2008 in order to Investments of the Committee on Fuel and Energy Complex, Nuclear Policy incentivize production of energy from renewable and Nuclear Safety of the Verkhovna sources, and this is still one of the major incentives Rada of Ukraine; Co-chairwoman of in Ukraine. A bonus for local content is also envis- the parliamentary inter-factional caucus aged in the legislation. Still, further work on creating "Green power shift" a comprehensive framework for the promotion of renewable energy sources and developing national low-carbon industries is yet to be done. We believe that the policy of promoting sustainable technologies should not be limited only to financial instruments. We Oleksii Ryabchyn should also work on stimulating the deployment of Head of the Subcommittee on Energy low-carbon technologies. Ukraine could use its exper- Saving and Energy Efficiency, the Verkhovna Rada Committee on the Fuel tise, knowledge and resources in order to become a and Energy Complex, Nuclear Policy, and carbon-conscious industrial hub. At present, there is Nuclear Safety; wind turbine manufacture, solar-solutions production, Co-chairman of the parliamentary inter- and emerging simple lead-acid batteries fabrication factional caucus "Green power shift" in Ukraine. Moreover, Ukraine´s reserves of lithium and graphite are among biggest in Europe. This is a decent starting point to replace declining old indus- tries with innovation. Ostap Yednak Secretary of the Verkhovna Rada This report reflects the initial diagnosis of existing Committee on Environmental Policy, industrial ecosystem in Ukraine, which could be a Natural Resources Management, and the Liquidation of the Aftermath of the source of ever-increasing economic output. It clearly Chernobyl Disaster; Co-chairman of the shows that there is a mutual interest in enhancing parliamentary inter-factional caucus the transfer of advanced technologies from Europe "Green power shift" to Ukraine. The edition also aims to be a thought- provoking contribution to the ongoing policy-making 4 EXECUTIVE SUMMARY Ukraine has in recent years been dealt many more Just as wind generation capacities, challenges than opportunities. The economic situa- the solar market has exceeded its tion in the country has fl uctuated over the previous projected growth year after year. decades, varying from times of struggle to renewed With the exports of solar compo- growth and to recession again due to external infl u- nents from China dropping, Ukraine ence. Today the Ukrainian economy still rests on tra- will be able to make use of the ditional core industries, with exports in the form of drop-in supply for the ever-de- agricultural goods, metals and lower value-added manding European market. products. These sectors are limited in growth po- tential, and potentially at risk from new disruptive technologies. It is important for Ukraine that industry, The investment required for further workers, education and legislators work together to electricity storage technologies take advantage of all emerging economic opportu- worldwide will range from 380- nities. What global trends in emerging technology, industry, services and energy can Ukraine take ad- 590 billion USD. The growth of the vantage of to create new, globally competitive, high lithium-ion battery market will be value-added sectors? particularly noticeable in Europe. With abundant natural resources and a highly qualifi ed population, The aim of this report is to provide an overview of Ukraine has large potential to tap the overlap of Ukraine’s existing strengths and po- into the expanding energy storage tentials with the projected future market growth of market. low-carbon technologies and products. The transi- tion to a low carbon economy opens new commercial niches that Ukraine is well positioned to contribute to Energy effi ciency measures are key and profi t from. The impetus of reaching climate tar- to both enable the future growth of gets is unleashing a wave of disruptive technological renewables and complement their change. Rapidly increasing competitiveness of clean CO2-emissions-reduction potential. technologies and services are creating new industrial Only the renovation of buildings sectors that are anticipated to grow globally. The in the European Union will require 21st century will require vast amounts of low-carbon average annual investments of inputs requiring new supply chains