Energy Reforms experts presented results of their analysis of the government’s five-year Action Program for conformity with the Association Agreement in the energy and environment sectors.

The presentation took place during the briefing “Conformity of the government’s plan with requirements of the Association Agreement in the energy sector”, organised by a coalition of Energy Reforms experts under the project “Increasing the influence of civil society in monitoring and political dialogue concerning reforms in the energy and related sectors according to implementation of the Association Agreement” with financial support from the European Union and co-financing by the International Renaissance Foundation.

Gas

The government’s program sets generally right goals and views reform of the gas market from the consumer’s perspective. However, several details are missing: how the lowering of prices will be ensured, and what market mechanisms will be implemented.

“The decision declining replacement of imports as a priority objective, in the event of economic expediency, is especially worrying from the security viewpoint. The unbundling (separation of GTS operator from Naftogaz) – the key change in the market that must be completed by 1 January 2020 – wasn’t mentioned, either,” Roman Nitsovych, an Energy Reforms expert and Research Director at DiXi Group stressed.

Electricity and business climate

In the electricity sector, the format of the energy-related part of the government’s Action Program also puts the Ukrainian energy consumer in the centre of evaluation of the government’s performance, but at the same time, it remains unclear how the desired result is going to be achieved.

“For example, one of the program’s points stating that “Ukrainian consumers and Ukrainian businesses pay a fair price for quality energy products” could mean either continuing movement toward implementation of market conditions in the electricity sector or reversal to government regulation of that market. A fair price is a notion that could have a broad range of meanings for various stakeholders,” Svitlana Golikova, an Energy Reforms expert said.

Speaking about the business climate, experts also noted a number of decisions which do not give an unambiguous answer concerning conformity with investor expectations. In particular, these were:
– simplification of tax administration;
– increasing the percentage of energy produced from sources of economic priority;
– introducing tax incentives to promote a clean environment.

Energy efficiency

Energy Reforms experts believe that as of today, the energy efficiency goals declared in the government’s Action Program for the coming years contain only slogans and objectives for the future.

“The government’s program does not contain concrete instruments and mechanisms for achieving goals. The Ministry of Regional Development has seven goals envisaging attainment criteria and objectives, but clear actions and concrete expected results aren’t there. Eight goals and mechanisms of attaining them set by the newly-established Ministry of Energy and Environmental Protection of Ukraine do not contain concrete objectives at all, never mind clear actions,” Tetiana Boiko, an Energy Reforms expert and Coordinator of Energy Programs at Civil Network OPORA  emphasised.

At the same time, among the advantages of the government’s Program, the experts noted the initiative of developing a long-term strategy for thermal modernisation of the housing stock and a database of energy and operational characteristics of buildings.

Environment

The government’s program contains six goals concerning environmental protection. However, these goals do not always have concrete target indicators, and the ways and methods of achieving them are anybody’s guess.

“This program could have been more focused and contained concrete priorities. Out of the program’s seven general target indicators, one is environmental and it concerns the reduction of environmental pollution by at least 20%, but it is unclear what kind of pollution it means,” Natalia Andrusevych, an Energy Reforms expert and the Chair of  Resource and Analytical Center “Society and Environment” said.

As for particular sectoral aspects, objectives related to industrial pollution are described in the greatest detail. The implementation of an integrated permit and the use of the best available technologies, and fulfilment of the National Plan on Reduction of Emissions from Large Combustion Plants are also mentioned. Certain provisions concerning the openness of data regarding businesses and access to geoinformation could be found in the Program, too. As for the ambient air and protection of nature, they contain only certain actions which could help implement the relevant directives.

Oil

The Action Program of the new Cabinet of Ministers also does not devote proper attention to the implementation of Ukraine’s international commitments in the oil sector. Only the goal 9.6 mentions the interest in “the maximal replacement of hydrocarbon imports” and the goal 9.7 “development of domestic production and processing of oil and gas”, which must create new jobs and enlarge tax base along the entire chain of goods and services engaged in related sectors.

“Since the new Cabinet of Ministers took office, not a single regulatory act aimed to implement Ukraine’s international commitments in the oil sector was adopted. Given the absence of succession in actions of governments in Ukraine, it means de-facto failure to meet the applicable deadlines for implementation of objectives set out in the Ukraine-EU Association Agreement, in particular, in the part concerning implementation of Directives 2009/119/EC, 99/32/EC, 94/63/EC and 94/22/EC in Ukrainian legislation,” Hennadii Riabtsev, an Energy Reforms expert stressed.

“Presently, such matters as the choice of a model for the creation of oil stocks and adoption of legislative acts regulating stock formation mechanisms and the terms of storing, unblocking (using) and replenishing oil stocks must be addressed as soon as possible,” Hennadii Riabtsev added.

The expert opinions are based on the results of regular monitoring of the implementation of the Ukraine-EU Association Agreement in the energy and environment sectors. Members of six working groups are responsible for examination, providing the latest information regarding reforms and the relevant analytical products.

Energy Reforms expert coalition includes DiXi Group, Civil Network OPORA, Energy Association of Ukraine (all-Ukrainian civil society organisation), Resource and Analytical Center “Society and Environment”, and European-Ukrainian Agency.

The results of regular monitoring of the implementation of the Ukraine-EU Association Agreement in the energy and environment sectors and the analytical memo “Creating Oil Stocks: No More Delays” are available on the official website of Energy Reforms expert coalition.

Source: DiXi Group