Assessment of the greenhouse gas mitigation potential of identified policies and measures by United Nations Development Programme in Ukraine

REUTERS/ Konstantin Chernichkin

Assessment of the Greenhouse Gas Mitigation Potential of Identified Policies and Measures Prepared for The United Nations Development Programme

THOMSON REUTERS POINT CARBON London, 30/09/2013

ACKNOWLEDGEMENTS This report has been prepared by Thomson Reuters Point Carbon as part of the work under the project “Capacity Building for Low Carbon Growth in Ukraine”. Thomson Reuters Point Carbon is grateful to the Ukrainian State Environmental Investment Agency for the strong support provided throughout the Project. As per the sequence of project activities, this report has utilized information presented by the Environmental (Green) Investment Fund in Ukraine in the study entitled “Determination of potential for GHG emissions reductions after implementation of policies and taking measures on low carbon development, computation of its adoption costs”; and the report prepared by Thomson Reuters Point Carbon entitled “Policies and Measures for Low Carbon Growth in Ukraine”. This project is kindly supported by the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety of Germany.

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TABLE OF CONTENTS Acknowledgements ............................................................................................................................ i 1

Executive Summary ................................................................................................................... 1

Introduction............................................................................................................................... 2

Methodology ............................................................................................................................. 3 3.1.1

Sources of information ............................................................................................................................3

3.1.2

Analysis ....................................................................................................................................................5

Historic emissions and medium term projection in ukraine ....................................................... 5

Assessment of GHG mitigation potential from fuel combustion ................................................ 6 5.1

Description of sources of emissions contributing to the fuel combustion Reference Scenario ..................6

5.1.1

Power generation ....................................................................................................................................6

5.1.2

Residential buildings ................................................................................................................................7

5.1.3

Mining, extraction and transport of fossil fuels .......................................................................................8

5.1.4

Manufacturing .........................................................................................................................................8

5.1.5

Transport .................................................................................................................................................9

5.2

TIMES-Ukraine Fuel Combustion Reference Scenario ...............................................................................10

5.3

Description of policies and measures applied to fuel combustion ............................................................10

5.4

Quantification of potential emission reductions from policies and measures applied to fuel combustion 15

5.4.1

Energy Efficiency Scenario .....................................................................................................................15

5.4.2

Renewable Energy Scenario ...................................................................................................................15

5.4.3

CO2 Tax Scenario ....................................................................................................................................15

5.4.4

CO2 Bound Scenario ...............................................................................................................................15

5.4.5

Shale Gas scenario .................................................................................................................................15

5.4.6

Combined scenario ................................................................................................................................16

5.5 6

Assessment of ghg mitigation potential in the Agriculture Sector ............................................ 20 6.1

Description of the agricultural sector and development of the Reference Scenario.................................20

6.2

Agriculture Reference Scenario..................................................................................................................21

6.3

Description of policies and measures applied to agriculture .....................................................................22

6.3.1

Rational fertilizer use and rehabilitation of soil fertility ........................................................................22

6.3.2

Wetlands protection and rehabilitation ................................................................................................23

6.3.3

Development of bio-energy (biomass and bio-fuels) ............................................................................23

6.3.4

Supplementation of the feed additives to cattle rations .......................................................................24

6.3.5

Reduction of total cow population with growth of highly-productive cow fraction at farms ...............24

6.4 7

Comparison of fuel combustion scenarios with the reference scenario ...................................................16

Quantification of potential emission reductions from policies and measures applied to agriculture .......26

Assessment of ghg mitigation potential in the Waste sector ................................................... 26 7.1

Description of sources of emissions contributing to Reference Scenario ..................................................26

7.2

TIMES-Ukraine Waste Reference Scenario ................................................................................................27

7.3

Description of policies and measures applied to waste .............................................................................27 iii

7.4 8

Quantification of potential emission reductions from policies and measures applied to waste ...............29

assessment of ghg mitigation potential in the land use sector ................................................. 30 8.1

Description of sources of emissions contributing to the land use Reference Scenario .............................30

8.2

TIMES-Ukraine Land use Reference Scenario ............................................................................................30

8.3

Description of policies and measures applied to Land use ........................................................................31

8.4

Quantification of potential emission reductions from policies and measures applied to Land use ..........33

Economy wide GHG reduction potential and comparison with estimates of GHG reduction potential of

PaMs from alternative sources ........................................................................................................ 33 10

Conclusion ............................................................................................................................... 35

Appendix 1............................................................................................................................... 37

11.1

Classification of PaMs ................................................................................................................................37

1 EXECUTIVE SUMMARY This report summarizes and adds onto the findings of the first two deliverables under the Capacity Building for Low Carbon Growth in Ukraine project. The report describes and classifies the identified policies in order to highlight how policies and measures need to cover high level ambition, multi level governance and cross cutting issues as well as specific technical interventions at a facility level. It summarizes the results from the TIMES-Ukraine modelling exercise and presents, in a consistent format, the predicted emission reductions arising from a range of either alternative or complementary policies and measures. The report attempts to estimate the costs of emission reductions arising from policies and measures in different sectors or groups of sectors and where possible, compare these against other estimates of the cost or potential impact of policies and measures. The models predict that including sequestration in the land use and forestry sector, Ukraine can reduce its annual emissions in 2050 by 68% compared to 1990 or excluding land use and forestry, by 31% compared to 1990 levels. The land use change and forestry sector can contribute up to 4 billion tonnes of GHG emission reductions between 2010 and 2050 at an average cost of EUR 3 per tonne CO2e whilst economic activities involving fuel combustion can deliver 2.8 billion tonnes of emission reductions at an average cost of EUR 25 per tonne CO2e over the same time period. Emissions from the agriculture sector will decrease and contribute a total reduction of approximately 720 million tonnes CO2e at an average cost of EUR 17.7 to 20 per tonne CO2e. The waste sector is predicted to become GHG neutral by 2050, contributing overall emission reductions of around 150 million between 2010 and 2050 at an average cost of between EUR 4 and 10.5 per tonne CO2e. The most promising policies and measures in the fuel combustion sector are the implementation of either a CO2 tax or an emission trading scheme which puts a price on emitting greenhouse gases. The studies find that this measure alone triggers a wide range of activities throughout diverse actors. In the land use change and forestry sector, major increases in carbon sequestration can be triggered via optimizing the age structure of plantations and applying organic and alternative forms of nitrogen fertilizer which increase soil carbon. In the agricultural sector, important policies include the development of bio-energy and fertilizer management. In the waste sector, it is necessary to close existing unmanaged landfills and open regional managed or sanitary landfill facilities which capture and utilize methane emissions. The report concludes that the next deliverable within this work-stream, the development of marginal abatement cost curves for the identified policies and measures, will contribute significantly to the strength and depth of understanding necessary for the development of a low carbon growth strategy for Ukraine.

2 INTRODUCTION The Capacity Building for Low Carbon Growth in Ukraine project aims to support the Government in steering the country on a low emission pathway for Ukraine’s long-term economic development. To this effect, the project strengthens the institutional capacity within Ukraine to design and implement long-term policies and measures directed at reducing emissions of greenhouse gases and enhancing absorption by sinks. The project goal is the development of a long-term strategy of low carbon growth of Ukraine that can be used by the Government of Ukraine to inform the formulation of its sectoral processes domestically, and internationally. The project team is pursuing an integrated approach, allowing the Government of Ukraine to utilise the tools, information, and support it requires in initiating, developing and adopting a low-carbon development strategy. The project comprises of the following components and sub-components: 

New generation models and comprehensive projections of GHG emissions: a. Sectoral analysis of GHG emissions in Ukraine, with a view to identify specific emission trends and analyse their causes; b. New generation of greenhouse gas models that will be suited for sectoral emission modelling in Ukraine and can be adjusted regularly based on bottom-up information sectoral and installationlevel emissions; c. Comprehensive projections of GHG emissions for the periods up to 2020 and 2050 with and without implementation of climate change policies and measures.



Development of a low carbon development strategy: a. Identified policies and measures for low carbon growth in Ukraine; b. Assessment of the mitigation potential of identified policies and measures; c. Analysis of alternative schemes to finance different strategies with special reference to process from post-Kyoto instruments; d. Preparation and presentation of a concept on low-carbon development strategy for Ukraine, setting out a vision of the country’s new development path up to 2020 and up to 2050.



Preparing for introduction of domestic emissions trading scheme: a. Relevant legal and regulatory analysis, legislative proposals supported, the necessary analytical support to enable their submission to the Parliament of Ukraine; b. Prepared analysis of the scheme’s main elements, such as its goals and objectives, aggregate and sectoral caps, approaches and methods of installation-level allocation, MRV standards; c. Assessment of data needs and facilitation of installation-level data collection to inform the development of the national allocation plan.



Capacity building and climate support policy a. A series of activities leading to strengthening of the overall institutional capacity for climate change policy implementation in Ukraine – ongoing activity for the duration of the project.

This report is the second deliverable under the second component, “development of the low carbon development strategy”, pulling together the results of the first deliverable and other studies conducted in order to present identified policies and measures and an assessment of their GHG mitigation potential. This report is based largely on the findings of the reports: “Policies and Measures for Low Carbon Growth in Ukraine” prepared by Thomson Reuters Point Carbon and “Determination of potential for GHG emissions reductions after implementation of policies and taking measures on low carbon development, computation of its adoption costs” prepared by LLC "Environmental (Green) Investments Fund”.

3 METHODOLOGY 3.1.1 Sources of information Article 4 of the UNFCCC asks Parties to develop and report on Policies and Measures (PaMs) designed to reduce th

their GHG emissions. These results are reported to the UNFCCC periodically, with the 5 and most recent round of National Communications having been submitted in or after 2010. In order to estimate the impact of the proposed PaMs, Parties develop a Reference Scenario, which predicts GHG emissions in the event that no particular PaMs are implemented. The Reference Scenario then forms a basis against which to compare the results of one or two further scenarios - the With Measures Scenario and the With Additional Measures Scenario – which is developed th

to achieve greater emission reductions. Ukraine has submitted its 5 National Communication (NC5) to the 1

UNFCCC and it is available (in Russian only), along with other NC5 reports, on the UNFCCC website . Policies and Measures are implemented at different levels within a jurisdiction, ranging from high level policy instruments such as climate policy strategy and ambition, multi level governance initiatives and cross-cutting instruments and policies down to technical interventions in specific sectors of the economy such as the power sector, the residential sector and transport. As a result, PaMs often overlap complicating the direct comparisons of potential GHG emission reductions from different sources. This report summarizes the findings of a report entitled “Determination of potential for GHG emissions reductions after implementation of policies and taking measures on low carbon development, computation of its adoption costs” prepared by LLC Environmental (Green) Investments Fund. Since the report uses the TIMES-Ukraine model, it is referred to as the TIMES-Ukraine report. It describes the potential GHG emission reductions achieved under a range of scenarios compared to a Reference Scenario, in four complimentary “spheres” or groups of economic activity which together encompass all of Ukraine’s GHG sources: 1. 2. 3. 4.

Fuel combustion Agriculture Waste Land use and forestry

We also draw on the PaMs identified in the report entitled “Policies and Measures for Low Carbon Growth in Ukraine” prepared for the United Nations Development Programme by Thomson Reuters Point Carbon and

http://unfccc.int/national_reports/annex_i_natcom/submitted_natcom/items/4903.php 3

referred to as the PaMs Ukraine report. In the PaMs Ukraine report, PaMs are identified under seven headings as follows: 1. Residential buildings 2. Agriculture land use and forestry 3. Power generation 4. Fossil fuel mining, extraction and transport 5. Manufacturing 6. Waste 7. Transport

Since the different reports classify PaMs and predict their potential impacts in different ways, the heading of fuel combustion in the TIMES-Ukraine report comprises all PaMs listed under residential buildings, power generation, fossil fuel mining, extraction and transport, manufacturing and transport in the PaMs Ukraine report. A similar th

discontinuity arises when comparing the TIMES-Ukraine report with Ukraineâ&#x20AC;&#x2122;s 5 National Communication to the UNFCCC. See the matrix in Table 1 below to show how the spheres and sectors overlap. This explains why the fuel combustion section dominates this report. Table 1: Matrix showing overlap of spheres used in the TIMES-Ukraine model with identified policies and measures and Policies and Measures in Ukraineâ&#x20AC;&#x2122;s 5th National Communication to the UNFCCC. TimesUkraine scenario spheres Residential buildings

PaMs Ukraine Policies and measures

Agriculture land use and forestry Power gen Fossil fuel mining, extraction and transport Manufacturing

Fuel combustion

Agriculture

Land use and forestry

X X X

Waste

NC 5 Policies and Measures

Waste management

Transport

Power

Transport

Industry

Agriculture

Waste

X X

3.1.2 Analysis For each of the four spheres of activity in the TIMES-Ukraine report, we provide: 

 

A description of sources of emissions which are captured within each sphere and how they contribute to the description of the Reference Scenario. This draws on descriptions of the economic sectors in both the PaMs Ukraine report and Ukraine’s NC5; Details of the kinds of policies and measures which are applicable to these sources taken from the PaMs Ukraine Report; and Results of the quantification of potential emission reductions from these policies and measures in each sphere from the TIMES-Ukraine report.

After these sections, we provide a summary of the economy wide GHG reduction potential and some comparisons of estimates of GHG reduction potential of the identified PaMs with PaMs from alternative sources including earlier Marginal Abatement Cost Curves prepared for the Ukrainian economy as part of a 2012 EBRD project and th

Ukraine’s and other Parties’ 5 National Communication to the UNFCCC.

4 HISTORIC EMISSIONS AND MEDIUM TERM PROJECTION IN UKRAINE th

Ukraine’s 5 National Communication reports disaggregated data for historic and projected emissions from the entire economy divided into five sectors. These data reflect the recent economic collapse as Ukraine transitioned from a planned economy to a market economy and they predict continued growth in emissions across all sectors from lows in 1995 to 2000. These data, (see Table 2 below) help to describe the Reference Scenario in each of the spheres modelled in the TIMES-Ukraine report. Table 2: Direct GHG emissions in Ukraine by sectors, without measures (Reference Scenario) 1990 Power Transport

2000

2005

2010

2015

2020

597.8

1995 -

237.3

251.7

234.9

350.9

482

87.7

34.4

42.7

43.5

57.2

69.5

75.3

84.7

120.9

137.4

Industry

128.3

60.3

Agriculture

103.8

65.4

29.9

45.7

54.7

8.5

9.6

9.7

10.4

9.7

10.3

11.5

390.7

418.7

406.8

585

755.1

Waste Total

926.1

Source Ukraine's 5th National Communication to the UNFCCC, http://unfccc.int/national_reports/annex_i_natcom/submitted_natcom/items/4903.php These data suggest that without measures and additional measures, Ukraine’s GHG emissions will continue to grow significantly and in parallel with growth in GDP. By 2020, Ukraine’s emissions will be well over half way towards levels in 1990. Although emissions will still be more than 20% below 1990 emissions, indicating that Ukraine can achieve its 2020 commitment without any specific actions, the emissions will be on a strong upward trajectory and many high emission technologies will have been locked in, making the 2050 target of a 50% reduction relative to 1990 increasingly expensive and difficult to achieve. 5

5 ASSESSMENT OF GHG MITIGATION POTENTIAL FROM FUEL COMBUSTION 5.1 DESCRIPTION OF SOURCES OF EMISSIONS CONTRIBUTING TO THE FUEL COMBUSTION REFERENCE SCENARIO Fuel combustion encompasses emissions from the use of fossil fuels for:     

Power generation including electricity and heat generation (coal and gas); Residential buildings including heating and cooling in the residential and commercial sector (coal, gas and electricity); Mining, extraction and transport of fossil fuels including GHG emissions of methane from pipelines; Manufacturing including the consumption of raw materials and reducing agents in the industrial sector (predominantly coking coal for steel production and calcination for cement production); and Transport by land, air and water (gasoline, diesel, LPG, jet fuel);

Fuel combustion is by far the greatest source of emissions accounting for 88% of Ukraine’s 1990 emissions and 90% of its predicted emissions under the NC5 Reference Scenario (see Table 2 above, fuel combustion comprises emissions reported under the headings of Power, Transport and Industry).

5.1.1 Power generation The primary sources of GHGs in the energy sector come from combustion of coal and gas providing electrical power to industry and the consuming population. As Ukraine’s economy is predicted to grow at a rate of 3.3% per annum between 2010 and 2050 and 360% in total, energy consumption is predicted to grow by 53.5% over the same period. This is less than the rate of growth in GDP due to ongoing structural changes in the Ukrainian economy (less heavy industry, more agriculture and service sector business) and general improvements in technology in both industry and consumer sectors, but the falling population (from 46 million to 39 million) will trigger a rise in per capita emissions from an estimated 7.12 tonnes per person in 2010 to 13.71 tonnes per person in 2050. This will contrast with the European situation, where for example, per capita emissions have decreased 2

from close to 10 tonnes per person in 1990 to 7.5 tonnes per person in 2011 . If the EU meets its 2050 target, per capita emissions will fall to close to 5 tonnes per person in 2050. As the economy grows in size it will become more carbon efficient, reducing its emissions intensity from 4.51 tonnes per EUR1000 GDP to 2.04 tonnes per EUR1000 GDP. At present, Ukraine is heavily reliant upon imported natural gas sourced from the Russian Federation, which supplies around 36.4% of primary energy, out of a total of 39.1% of imported primary energy sources. The balance of primary energy supply is made up of domestically produced and subsidized coal (32.5%), oil (11.4%) and nuclear power (18.6%). Currently around 1.6% of primary energy is sourced from renewable sources. In the electricity sector in 2012, 45.5% of electricity was generated in nuclear facilities, 48.7% from thermal power 3

and combined heat and power plants and 5.8% from hydropower plants .

2 3

http://www.pbl.nl/en/publications/2012/trends-in-global-co2-emissions-2012-report http://www.ebrd.com/pages/news/features/ukraine-nuclear-safety-upgrade.shtml

Reducing the reliance upon the Russian Federation is an important political objective and options include increased nuclear production from domestic supplies of uranium; increased coal production; and the development of shale gas reserves. Hydropower plants have good potential for investment and are supported by a feed in tariff. Biomass for co-firing is also of interest but at present, biomass is exported to Poland. Wind and solar exist but are negligible. 4

EBA (2011) have identified demand for EUR46 bn of investments in new plants and EUR10 bn in upgrading of existing facilities by 2030 in order to meet the growing demand for electricity. Under the TIMES-Ukraine Reference Scenario, it is assumed that oil extraction increases by 70% and conventional natural gas production increases by 50%; the operational lifetime of nuclear units at Ukraine’s nuclear facility are prolonged for 20 years past the 2032 decommissioning date. Supply of electricity from renewable energy sources (predominantly large hydro) and pumped water storage is predicted to double by 2050, though still remaining small at 3.2% of total primary energy. The balance of energy requirements are made up from increases in coal production, up to a maximum of 140 million tonnes per annum.

5.1.2 Residential buildings In 2009 Ukraine‘s residential building stock consisted of approximately 19.3 million dwellings nearly half of which 5

are single family houses . Over 92 % of the stock is owned privately, 6.3%% is in communal ownership and 1.5 % is state owned. Large-scale district heating plays a key role in heat supply, accounting for approximately 60%% of total end use; the majority is owned by municipal authorities. The remaining 40%% of heating is produced through decentralised 6

heating, ranging from boilers serving individual apartment blocks or commercial buildings, to household boilers . The residential housing sector represents a significant opportunity to achieve energy savings in Ukraine. Over 80 % of housing stock in the country was built prior to 1980; due to under-investment in maintenance and refurbishment, the stock is largely inefficient. The district heating infrastructure is also old and inefficient. Over 49 % of heating mains, 47 % of distribution networks and 49 % of boiler plants and substation equipment have been in operation for over 25 years and need modernization. According to the IFC, the sector consumes approximately 25 % of the country‘s electricity and 40 % of its heat 7

energy resources . At least 80 % of needed refurbishments are related either to energy saving or energy distribution; and investments with simple payback terms can result in heat energy savings of 30 to 40 %, and the reduction of gas consumption by 25 to 30 %. 4

EBA (2011),Thermal Power Generation Sector of Ukraine on the Way to implement the LCP Directive 2001/80/EC.

http://www.energy-community.org/pls/portal/docs/1216180.PDF 5 6

Worley Parsons (2011) and Energy Community presentation http://www.energy-community.org/pls/portal/docs/328185.PDF EBRD, 2012

http://www.ifc.org/wps/wcm/connect/region__ext_content/regions/europe+middle+east+and+north+africa/ifc+in+europe+and+central +asia/countries/promoting+energy+efficiency+in+ukraine+residential+housing

Some of the principal barriers to residential energy efficiency in Ukraine relate to the undeveloped status of homeowner associations, absence of targeted state support and lack of control over energy use. Other issues include:  regulated energy prices which are set below the cost of production;  the inability of financial institutions to lend to the sector because of contradictions in legislation concerning homeowner associations;  a lack of knowledge about the benefits of residential energy efficiency;  absence of metering capacity and the technical design distribution networks which all result in a lack of motivation to implement any kind of energy efficiency measures. In recent years, new challenges have begun to emerge. New building developers are now encouraging individual heating systems; and new buildings often opt for electrified heating. While these are typically more efficient than current district heating solutions, the danger is that the potential for future shared heating systems using low carbon or renewable fuel will be lost. In addition, air conditioning is on the rise and domestic power consumption is rising steadily. Under these conditions, the residential sector will contribute significantly to the growth of GHG emissions from the fuel combustion. With appropriate PaMs, it could instead contribute to significant decrease in emissions relative to the Reference Scenario.

5.1.3 Mining, extraction and transport of fossil fuels Ukraine has good resources of coal and currently produces about 80 million tonnes of coal per annum. Ukraine produces and imports natural gas and has a substantial natural gas distribution network. Ukraine also acts as a transit route for almost 80% of the EU’s imports of natural gas from the Russian Federation. Both of these activities result in emissions of methane and consume energy. Whilst near zero methane emission mining is technical feasible, the coal industry is not currently in a position to invest in improvements to reduce methane emissions. Similarly, the natural gas sector which is dominated by the state owned company Naftogaz is not in a position to invest due to below cost tariffs to residential customers, non-payment of dues and significant debt.

5.1.4 Manufacturing Industrial sources accounted for 14% of Ukraine’s emissions in 1990 climbing to 20% in 2005. This increase was due to the fact that absolute emissions from industry declined less than power sector emissions and was not the result of specific actions. In the NC5 Reference Scenario, industrial emissions are predicted to account for 18% of total emissions in 2050. Industrial sources of GHG emissions in Ukraine are derived largely from the strong manufacturing industry. Metals and mining are the most important sectors and the ferrous and non-ferrous metallurgy industries span from mining to finished goods for export and domestic consumption. The other important sectors are Cement, Ammonia and Lime.

Ukraine‘s metals and mining sector has some significant competitive advantages: strong internal metal consumption; rich and suitably located resource base (iron ore, coking coal, cheap electricity); developed transport network and proximity to global markets; high degree of vertical integration; skilled workforce. In recent years, ferrous metallurgy has contributed approximately 20-25 % into GDP and generated approximately 30-35 % of Ukrainian exports. High export orientation of entities representing Ukrainian metals and mining sector (80 % of the output would normally go to export), positions Ukraine among key global players. Based on the export statistics for 2011, Ukraine is the 5th largest iron ore exporting country and 6th largest steel exporting country in the world, exporting 34m tons of iron ore and 26m tons of steel respectively. In spite of Ukraine‘s currently strong ranking, it has been estimated that the metal and mining sector needs to invest approximately EUR 10 – 15 bn within a decade to overcome existing technological gaps. Without intensive modernization of heavily depreciated production facilities, minimization of negative environmental impact and long-awaited technology changeover, in the medium perspective Ukrainian metal and mining producers may lose their leadership due to inability to further challenge technological superiority of other global players. Within the chemical industry, most relevant to greenhouse gas emissions is the sub-sector of nitric, mineral and chemical fertilizers. In relation to the cement sector, the most significant sources of emissions are the calcination of carbon materials in clinker production, and the fuel combustion for creating high temperature calcination conditions.

5.1.5 Transport Private vehicle use in Ukraine is growing rapidly. The number of registered vehicles increased from 116 to 148 per 1000 people from 2003 to 2010 although the actual number of roadworthy vehicles in use is believed to be much lower at 42 in 2003 and 72 per 1000 people in 2010. Nevertheless, rising incomes and worsening public transport mean private car ownership will increase. For comparison, there are 201 cars per 1000 people in Romania and 700 per 1000 in Luxembourg. Emissions from transport comprised 43 million tonnes or 11% of total emissions in 2010 as reported in Ukraine’s NC5 (see Table 2 above), with 10% of these coming from LPG and CNG. 70% of the vehicles on the road meet Euro 0 standards and the Government has passed regulations to phase in higher Euro standards from 2013 to 2018, but only for imported vehicles. Inefficient and old engines combined with poor quality fuel make the private road transport sector a significant source of emissions and potential emission reductions. Potential exists to utilize more bio-ethanol in gasoline and bio-diesel in diesel but many vehicles are limited to 5% of biofuels. Electric vehicles are being encouraged but they will not contribute to lower emissions until the electric grid emission factor comes down. Freight transport has traditionally been via rail but more freight is moving to the road and public transport is poor and declining due to lack of investment, inefficient operation and the need to provide subsidized transport to some groups of the population.

5.2 TIMES-UKRAINE FUEL COMBUSTION REFERENCE SCENARIO Working with the above conditions, the TIMES-Ukraine Reference Scenario predicts that Ukraine’s GHG emissions from the extraction and use of fossil fuels will grow at a rate of 1.2% per annum (a total of 63.7%) from 2010 to 2050, or from 326 million tonnes CO2e in 2010 to 533 million tonnes CO2e in 2050.

5.3 DESCRIPTION OF POLICIES AND MEASURES APPLIED TO FUEL COMBUSTION Table 3 below provides an overview of PaMs for activities involving fuel combustion drawn from the PaMs report and supplemented by existing or proposed PaMs from the TIMES-Ukraine report and Ukraine’s NC5. Table 3 helps to show how PaMs include initiatives at the policy and governance level as well as technical solutions to reducing GHG emissions at the installation level.

Table 3: Description of identified PaMs for fuel combustion sources against UNFCCC classification Type of PaM

Climate policy strategy and

ambition



11% renewable energy target by 2020

Multi level



Membership of EU Energy Community devolves EU standards on a wide range of energy related issues to the national level, including: energy efficiency labelling providing incentives for equal competition amongst market participants including energy audits improvements in metering systems and consumer awareness development of standards for energy performance of buildings (including that all new buildings by 2020 have close to zero energy consumption) measures to reduce emissions from large combustion plants approve a National Emissions Reduction Plan promote the monitoring of emissions; promotion of biofuels and other renewable fuels for transport liberalization of internal natural gas markets Reduce local government involvement in housing and increase incentive-based activities

governance

       

Cross-cutting instruments and policies



Develop an optimized carbon pricing policy – utilizing carbon tax in the short term, and moving to an ETS with linkage to the EU ETS in the medium term Create a state investment fund for infrastructure development and replacement drawing on private finance and operating on a commercial basis Improve the Energy Strategy addressing tariffs; generation efficiency standards; improved competition; low carbon and renewable technology mix and aggressive reductions of grid carbon factors. Reduce implicit subsidies for fossil fuel production

   

Streamline administrative procedures , strengthen the wholesale electricity market and extend the green tariff to new plants Design and publish a nuclear power investment policy to ensure that nuclear power prices cover all costs Finance and implement domestic scale feed in tariffs and improve grid connections in the medium term Review the existing feed in tariffs for renewable electricity to ensure they are sustainable

 

Energy supply Electricity and heat

This classification of PaMs is drawn from the UNFCCC’s consolidated report on the 5

kinds of PaMs which Parties have listed under each heading. 11

National Communications. See Appendix 1 for a description of the

     

Fugitive emissions

      

NERC should introduce incentive-based tariff methodology for distribution and transmission networks in order to deliver investments in modernization and cost reductions Policy makers should encourage the development of smart grid technologies in the medium and long term by promoting collaboration with other countries and between and among the Ukrainian technical and academic sectors. In the medium term, policy makers should work with international donors to pilot smart grid technologies. Ukraine should participate in international programmes on carbon capture and sequestration Green tariffs for renewable electricity production from biomass CHPP, wind, solar, pumped storage natural gas CHPP and geothermal power plants Increase the use of CHPP for heat generation by providing tax credits for investments in CHPP; introducing an economic tariff policy for power and heat; and introduce mandatory standards for cogeneration and trigeneration (CCHP) technologies for district heating and cooling for gas-fired power plants Gas market reform must be accelerated and designed to incentivize development of gas supplies from both conventional and non-conventional sources including: Development of a clear, transparent and predictable regime for gas exploration and production Incentives to attract private investment in new technologies to maximize production from mature fields Remove the two-tier natural gas tariff and implement economically justified gas prices Establish a clear and transparent regulatory framework for non-conventional gas including technical and environmental regulations Develop pipeline construction and operation procedures including permits, standards and technical requirements to address fugitive emissions Address coal mine methane emissions by degassing active coal mines, capturing and utilizing or destroying methane from ventilation systems and extracting coal bed methane by via surface drilling.

Energy consumption Residential commercial and public

     

State and government involvement in the residential should gradually reduce and influence should be increasingly promoted via incentives. Funds should be allocated to energy efficiency projects via competitive selection Tax incentives for enterprises which install energy efficiency measures In the Residential Sector, promote legal reform around homeowner associations e.g. land transfer, capital repair funds, enforcement of payments; ESCOs R&D on residential EE, demand side management, decentralized RE generation Pilots / case studies on public private partnership models, grants and subsidies Awareness raising on residential EE, availability of grants and subsidies 12

 



Industry

Transport energy supply Transport energy demand

Metering and tariff reform; refurbish older properties to reduce energy consumption by 50% Implement measures for energy saving such as draft-proofing; insulation; heat network refurbishment, upgrade and insulation; temperature controls in residences; use of low carbon fuels; effective metering etc. these measures can be financed through ESCO, PPP and credit line models if they are established. In the long term, the residential sector should aim for near zero carbon emissions via demand side management, smart grids and decentralized renewable energy generation at the residential building level.

Implement a carbon pricing mechanism to cover the industrial and manufacturing sector  Introduce manufacturing or sales-related subsidies and tax reliefs and import duty exemptions for renewable and low carbon technologies  Promote refurbishment projects in the metals and chemical facilities  Fund studies to develop and map investment cases for profitable energy efficiency improvements, modernization and process efficiency in a range of priority areas and market them to international investors  Rreplace existing facilities with highly efficient new build facilities  Stop export scrap metal and use it domestically  Implement funding competitions for energy efficiency pilots in all major manufacturing sectors, run transparently  Review customs policies to level out distortions due to petroleum refining subsidies in petroleum product manufacturing countries  Develop and introduce intensity based emission limits in all sub-sectors  Offer state-backed investment products (loans, guarantees, equity) for fixed asset replacement  Promote technology sharing programmes with selected countries to help re-establish Ukrainian manufacturing pre-eminence   

Promote increased use of flexible fuel vehicles and introduce a 5 and 10% bio-fuel blend Introduce compulsory use of bio-ethanol in gasoline Build infrastructure for the supply of CNG

   

Introduce Euro standards to domestically produced cars Differentiate levels of road tax based on emissions of imported and domestic vehicles Utilize PPP mechanisms to construct, improve and maintain all major transport infrastructure Ensure that urban planning starts to take public transport and the need to travel into consideration; promote pedestrian and bicycle-friendly developments and encourage waling and cycling in existing neighbourhoods. Promote car-sharing and car hire in cities via incentives and tax breaks Introduce differential rates of import duty by GHG emissions

 



  

Expand urban electric transport through restricting entry of private vehicles to city centres; increase purchase tax on new cars; ring-fence car parking revenues for the development of municipal electric transport and create a special fund for municipal electric transport. Expand the electrification of railways financed through diesel fuel tax and provision of tax credits to investors in railway electrification Implement differentiated tax rates on diesel fuel depending on bio-diesel component Promote LPG and CNG use in new and converted vehicles through a range of incentives

5.4 QUANTIFICATION OF POTENTIAL EMISSION REDUCTIONS FROM POLICIES AND MEASURES APPLIED TO FUEL COMBUSTION The TIMES-Ukraine report develops five alternative scenarios and a sixth “combined” scenario to analyse the impacts of groups of PaMs on emissions from fuel combustion. These are then compared against the Reference Scenario. Whilst it is not clear exactly what PaMs are implemented under each of the different scenarios, they are driven by an overall focus such as “energy efficiency” or “CO2 Tax”. Each scenario is briefly described below and then the potential emission reductions arising from the PaMs in each scenario are compared to the Reference Scenario.

5.4.1 Energy Efficiency Scenario Under this scenario, it is assumed that Ukraine fulfils its commitments as a member country of the Energy Community and that by 2020, energy efficiency measures result in a 9% reduction in average final internal energy consumption. It is expected that energy efficiency continues to improve at the rate of 0.5% per annum resulting in a 25% improvement in energy efficiency by 2050. The scenario assumes that Ukraine develops a favourable regulatory environment for energy efficiency and consumers observe the requirements strictly. The energy efficiency scenario envisages a number of economically feasible measures in industry, residential and commercial, transport, agriculture, electric power and heat production and pipeline transport (see table 3 above) but does not include, for example, a CO2 tax or ETS.

5.4.2 Renewable Energy Scenario The renewable energy scenario foresees the implementation of the National Renewable Energy Plan resulting in:  11.5% renewable electricity production  14.1% of heat and cooling power demand supplied from renewable sources  10% of transportation energy coming from biofuels This scenario also includes the renewable energy measures implemented under the Energy Efficiency Scenario above. It also includes the use of hybrid and electric vehicles and fuel cell technology.

5.4.3 CO2 Tax Scenario This scenario envisages a carbon tax being implemented from 2030 and reaching a price of EUR 20 per tonne CO2 by 2035 and increasing at the rate of EUR 20 every five years to reach EUR 80 per tonne in 2050.

5.4.4 CO2 Bound Scenario Under this scenario Ukraine meets its international commitments of 20% reduction by 2020 and 50% by 2050. This scenario has no impact on the 2020 emissions since the Reference Scenario already predicts that emissions will be more than 20% below 1990 levels. It assumes the implementation of all the PaMs listed under the energy efficiency and renewable energy scenarios.

5.4.5 Shale Gas scenario This scenario assumes that Ukraine moves forward to exploit its reserves of shale gas with production stabilizing at 97 bn m3 per annum from 2033 onwards.

5.4.6 Combined scenario This scenario takes PaMs from some of the previous scenarios and combines them to predict the results of an optimistic de-carbonization of the economy combined with the meeting the Energy Community requirements. It does not include the exploitation of shale gas or the development of a carbon tax.

5.5 COMPARISON OF FUEL COMBUSTION SCENARIOS WITH THE REFERENCE SCENARIO Table 4 below summarizes the results of the alternative scenarios. The desired results are reductions in the reported values relative to the reference scenario so that, for example, a scenario giving a lower total discounted energy system cost is desirable from a long term costing point of view. None of the scenarios perform consistently well across all indicators. The Energy Efficiency Scenario resulted in an 8% increase in total discounted energy system costs primarily due to increased costs in end-use energy efficient devices. The need to reduce ultimate energy consumption by 25% by 2050 results in increased use of efficient electric devices, which in turn increases the demand for electricity and triggers greater investment in power generation capacity. This scenario does not alter the fuel consumption structure. GHG emissions from fuel combustion sources in 2050 are reduced to 7.6% below the reference scenario. The average cost of emission reductions in the Energy Efficiency scenario is 43.6 EUR per tonne CO2e. The total discounted energy system costs under the Renewable Energy Scenario are 20% more expensive than the Reference Scenario whilst investment in ultimate consumption technologies increases by 86%. This is due to the significantly higher costs of installing renewable energy systems to provide distributed power and heat generation in residential and commercial buildings. New capacity for electric power plant decreases by 14% due to the distributed heat and power plant and imports of energy drop by 10%. GHG emissions in 2050 are 14.7% lower than the reference scenario. Total primary energy supply is lower under all scenarios except the Renewable Energy Scenario because the Renewable Energy Scenario triggers greater production of biofuels which are significantly less energy efficient due to the consumption of energy in the collection and processing of the biomass into a fuel. Renewable energy may also substitute for nuclear energy, with no net impact on GHG emissions. The average cost of emission reductions in the Renewable Energy Scenario is 116 EUR per tonne CO2e. The CO2 Tax Scenario has relatively small impacts on all parameters but delivers a 17.7% reduction in GHG emissions in 2050. This reflects the fact that such a cross cutting measure can deliver very cost effective reductions in GHG emissions. This is as expected because a tax will encourage industry to implement a wide range of cost effective emission reduction activities which in turn will make the economy more competitive. The greatest reductions under the CO2 tax will be derived from changes in the power generation and heat supply technologies used in the utility (predominantly coal) and residential (predominantly gas) sectors. The tax triggers a substitution of gas for coal and encourages more renewable energy supply. Gas import will increase and domestic coal production will reduce. The average cost of emission reductions in the CO2 Tax Scenario is 116 EUR per tonne CO2e.

The CO2 Bound Scenario is not dissimilar from the CO2 Tax Scenario but results in greater emission reductions in 2050 – 26.7% below the Reference Scenario. It triggers a significant increase in gas use for both electricity and heat and a corresponding reduction in domestically produced coal. However, the CO2 Bound Scenario predicts that imports of gas will increase by 9% compared to the Reference Scenario, which is a significant issue in terms of Ukraine’s energy security (this scenario does not consider the development of Ukraine’s shale gas reserves). Both this scenario and the CO2 Tax Scenario take advantage of the fact that imported energy sources have a lower carbon footprint compared to domestically produced sources, since the emissions associated with the mining, extraction and some of the transport occur outside Ukraine’s jurisdiction. Without further financial support, renewable energy supply does not increase significantly under this scenario. The average cost of emission reductions in the CO2 Bound Scenario is 4.32 EUR per tonne CO2e. The Shale Gas Scenario has a very significant impact on imported fuel (down 35.8% compared to the Reference Scenario) and also fuel costs (down 9.1%), dramatically increasing Ukraine’s energy security. It will lead to a substitution of gas for coal throughout the economy, in the power sector, industry and residential / commercial units. Because of its lower price, it will displace more expensive renewable energy and biomass and incur significant emissions from mining extraction and transport of gas, and as a result, it is predicted to have a negligible impact on GHG emissions (down 0.6% compared to the Reference Scenario). The average cost of emission reductions in the Shale Gas Scenario is -158 EUR per tonne CO2e (i.e. the emission reductions are strongly cash positive). The Combined Scenario sees a significant increase in total energy system costs (up 11.1% compared to the Reference Scenario) and as with the Renewable Energy and Energy Efficiency Scenarios, very significant increase in investment in ultimate consumption technologies (up 56.7%) but otherwise this scenario delivers reductions in most other parameters including a 7% drop in energy import and 26.7% drop in GHG emissions in 2050. Gas imports drop rapidly from the start of the modelled period but increase again towards 2050 as coal production decreases. Ultimate energy consumption decreases through the widespread implementation of energy efficiency measures and renewable energy use increases. Energy efficiency measures are rapidly deployed in the housing and commercial building sectors whilst industry adopts many cost effective technologies in metallurgy and cement in particular. Road transport makes much greater use of biofuels and trains are electrified. Gas transport systems are modernized. Electric power generation is changed in favour of gas and renewable. As a result of the reduced demand for electricity the demand for additional capacity falls by 7.7% although since new capacity is added via more expensive wind and solar technologies, overall investment in new capacity will increase. The average cost emission reductions under the combined scenario is EUR 25 per tonne CO2e. In conclusion, the scenario analysis shows that there are both direct and indirect ways of reducing GHG emissions but the indirect methods – Energy Efficiency and Renewable Energy can have unexpected and adverse consequences- such as displacement of nuclear power or increased energy use for the processing of biofuels. Direct methods, such as the CO2 Tax and the CO2 Bound scenarios, result in the initiation of a wide range of mechanisms including energy saving, renewable energy utilization and greater use of low carbon fossil fuels. Overall, there is potential to reduce emissions from fuel combustion between 2012 and 2050 by about 2.8 billion tonnes compared to the reference scenario emissions of 17.5 billion tonnes over the same time period. This represents a reduction of around 17%. Annual emissions in 2050 from these sources could be reduced by around 140 million tonnes, which represents a 26% reduction compared to the reference scenario in 2050 and 17

approximately a 17% reduction in 1990 emissions from the power, industry and transport sectors as reported in Ukraineâ&#x20AC;&#x2122;s NC5. Overall, the total additional discounted energy system costs under the combined scenario from 2010 to 2050 amount to approximately EUR 70 billion compared to the Reference Scenario, equivalent to around 1.1% of GDP, whilst delivering a reduction in total cumulative emissions of around 2.8 billion over the same period. As a result, the average cost of emission reductions in the fuel combustion sector is around 25 EUR per tonne CO2e.

Table 4: Results of alternative scenarios compared to the reference scenario Indicator

Units

Reference

Energy

Renewable

CO2 Tax Scenario

Scenario

efficiency Scen

Energy Scenario

CO2 Bound

Shale Gas

Combined

Scenario

+/-

617

8.1%

126

20.4%

5.7%

2.0%

-16

-2.6%

11.1%

6,735

-282

-4.2%

0.5%

-190

-2.8%

-547

-8.1%

-62

-0.9%

-479

-7.1%

2,593

-329

-12.7%

-280

-10.8%

1.2%

237

9.1%

-928

-35.8%

-182

-7%

1,506

-345

-23%

-65

-4.4%

-16

-1%

-3

-0.2%

-137

-9.1%

-314

-20.8%

110

46.7%

-15

-14.1%

2.8%

3.5%

-3

-2.9%

-9

-7.7%

Investment

Bn EUR

152

6.4%

-1

-0.7%

1.3%

-2

-1.6%

-10

-6.4%

1.8%

costs in energy

2005 1,151

763

66.3%

990

86.0%

2.3%

6.5%

652

56.7%

4,629

-585

-12.7%

0.9%

-48

-1.0%

-169

-3.6%

0.1%

-356

-7.7%

17,569

-6.6%

-1,078

-6.1%

-937

-5.3%

-2,777

-15.8%

101

0.6%

-2,801

-15.9%

-7.6%

-79

-14.7%

-94

-17.7%

-141

-26.7%

-3

-0.6%

-142

-26.7%

Discounted

Bn EUR

total energy

2005

system costs Primary energy

Trf

supply

*10^6

Import

TRF *10^6

Fuel costs

Bn EUR 2005

New Capacity of power plants

sector Investments in

Bn EUR

end-use

2005

technology Ultimate

TRF

energy

*10^6

consumption GHG emissions

Mln t

over entire

CO2e

1,15

period

GHG emissions

Mln t

in 2050

CO2e

Cost per tonne

EUR / t

of CO2

CO2e

533

-40 43.5

116

reduction 19

4.32

-158

6 ASSESSMENT OF GHG MITIGATION POTENTIAL IN THE AGRICULTURE SECTOR 6.1 DESCRIPTION OF THE AGRICULTURAL SECTOR AND DEVELOPMENT OF THE REFERENCE SCENARIO In 2012, nearly 71 % of Ukraine‘s land was used for agriculture. Since the year 2000, Ukraine has become one of the world‘s leading agro-food exporters, with exports of grain, oilseeds and vegetable oil growing significantly. Ukraine produced 5.2 % of world‘s barley and 2.3 % of the global output of wheat in 2012. The country is the world‘s leading exporter of barley, with an average market share between 2000 and 2010 of 14.1 %. Owing to exceptional yields in 2008 and 2009, barley exports from Ukraine reached 30.6 % of the world‘s total in the period 2008-2010. In the following years the share of Ukraine‘s barley in global production and exports declined substantially since the area planted dropped from nearly 5 million hectares in 2009/10 to 3.3 million hectares in 2012/13, while the area with more profitable maize increased from 2 to 4.4 million hectares. Ukraine is also the most important producer of sunflower oil in the world, surpassing Russia in total volume of production in 2010 and 9

accounting for 23.5 % of the global output . The Agricultural Strategy of Ukraine aims to develop and grow the agricultural sector , while ensuring food security, international competitiveness, social development of rural areas, and environmental and soil sustainability. Specifically, the strategy document published in 2012 identifies the following areas of focus:        

Food security; Maintaining market stability for agricultural products and food; Reducing costs and strengthening competitiveness; Increasing productivity ; Reducing the environmental impact of the agricultural sector; Regeneration and protection and improvement of soils; Become a leader in food and agricultural product exports; Social development of rural areas.

The strategy document balances the need for economic development and reform with the environmental and social implications associated with that expansion. In terms of reducing GHG emissions, the plan does not provide specific targets for reduction, but does emphasize biofuel production, sustainable use of fertilizers, and strengthening transparency and regulatory oversight of the sector. From the export, tax revenue and gross value added aspirations in the Agriculture Strategy, it is clear that Agriculture is seen as a major driver of growth in the near future, with potential to increase yields across crop types to reach European Union averages.

FAO (2012)

http://www.fao.org/fileadmin/templates/est/meetings/wto_comm/Trade_Policy_Brief_Ukraine_final.pdf 20

A shift from extensive to intensive agriculture is foreseen with yields improving through optimal use of fertilizers, better quality seeds and other progressive techniques. These efforts, particularly the increased use of nitrogen fertilizers, will bring about a significant increase in emissions – until yields are optimized. Ukraine is traditionally a dairy producer, although its herd sizes and output have been decreasing since independence. Production costs in the sector are comparable to those of New Zealand and significantly lower than most of Eurasian countries. The domestic market is expected to grow strongly in the coming years, and there are export opportunities. Moreover, Ukraine enjoys proximity to a number of large or developing markets, such as the European Union (EU), Russia and the Commonwealth of Independent States (CIS) countries. Within this broad background, the Reference Scenario for GHG emissions from Agriculture in Ukraine (i.e. without measure to reduce GHG emissions) is based on the following specific assumptions:              

Agriculture will be developed under favourable internal and external political and economic conditions; Growth will not be impacted by fiscal or carbon market regulations; In the short and medium term there will be a concentration of the livestock in large agricultural enterprises; Rapeseed and soy production will increase; In the long term the role of small farming enterprises in the gross output of agricultural products will increase; In the long term the productivity of the main grain crops per ha will considerably increase (1.5-2.5 times) against a background of insignificant expansion of the cultivated area; Total volume of excess by-products will remain on fields and enter the soils during ploughing; Sunflower production is expected to flatten out, as currently there is an oil product surplus in the market that results in fall of prices; The areas under the fodder grasses, hayfields and pastures will, in the long term, return to the levels of 1990; There will be a continual and longer term drainage and conversion of wetlands to agriculture; In the long term the number of cattle and poultry in the enterprises of all categories will reach the level of 1990; Dairy will become increasingly important reaching 40% of agricultural output by 2050 and outnumbering beef cattle by 10 to one; The productivity of dairy cows will increase to 5542 kg/head in 2020 and 6500 kg/head in 2050; Due to increase of milk yields, feeding norms and the share of concentrated fodder in the cattle ration will slightly increase.

6.2 AGRICULTURE REFERENCE SCENARIO Working with the above conditions, the TIMES-Ukraine report predicts that the reference scenario for the agricultural sector will see emissions increasing from 35 million tonnes per annum in 2010 to 100 million tonnes per annum in 2050.

6.3 DESCRIPTION OF POLICIES AND MEASURES APPLIED TO AGRICULTURE Based on the above assumptions, five alternative scenarios for the development of the agricultural sector have been identified in the TIMES-Ukraine report and analysed using spreadsheets. The activities involved in each of these scenarios are described below. The Indentified policies and measures are listed in Table 6 below.

6.3.1 Rational fertilizer use and rehabilitation of soil fertility This scenario involves optimizing the use of nitrogen fertilizers including differential application according to the crop needs; reforming the sale of land to create small and medium sized enterprises where farming businesses will manage the land intensively; introduction of precision agricultural technologies which will radically change the face of agriculture in Ukraine. Organic production will also increase in response to demand for organic products. Degraded land is to be rehabilitated through the creation of a state owned fund and provision of support to famers to increase soil fertility and yields and reduce erosion and fertilizer run off. Nitrification inhibitors have shown good results in early trials and, conditional on further positive results, their use should be promoted on a wide scale, as this will bring benefits from a reduction in fertilizer use and a reduction in emissions of GHGs from the nitrification process in the soil. Crop rotation is a scientifically proven method of maintaining and increasing soil fertility and reducing the need for fertilizer applications and should be applied throughout the agricultural industry. Successful crop rotation in today’s agricultural economy is closely linked to no-till technologies. As a result of the application of these policies and measures it is assumed that:      

By 2020, 15% of the total area of low productive and degraded land will be preserved, increasing to 50% by 2050 By 2020, 5% of nitrogen fertilizers will be applied with nitrification inhibitors, rising to 50% by 2050 The area of perennial grasses, hayfield, soya and pea under crop rotation will increase from 2 million ha in 2020 to 5 million ha in 2050 Fertilizer use without crop rotation will average 91 kg/ha per annum in 2020 increasing to 102.4 kg/ha per annum by 2050 and with crop rotations will be 50 kg/ha per annum. Erosion preventive measures will be implemented on 15% of cultivated lands in 2020 rising to 50% of cultivated areas by 2050. Nitrogen losses due to leaching will decrease from 0.18 relative units in 2020 to 0.14 relative units in 2050 (in 2010 it was 0.20 relative units)

Under these assumptions, emissions from the agricultural sector in 2050 are reduced from approximately 100 million tonnes CO2e to 86 million tonnes, corresponding to a 14% reduction compared to the reference scenario. The cost of these measures will range from EUR 6.1 to 7.9 billion in 2050. Assuming the 14% reduction in emissions occurs throughout the reported period of 2010 to 2050, the total cumulative emissions in the reference scenario are approximately 1.3 billion tonnes of CO2e whilst under Scenario 1, they amount to 1.02 billion. As a result, the policies and measures described under Scenario 1 will reduce total emissions over the period by approximately 280 million tonnes at an average cost of between EUR 21.8 and 28.0 per tonne CO2e.

6.3.2 Wetlands protection and rehabilitation Significant areas of wetland have been drained and cultivated in the past, with the resulting loss of an important habitat and significant emissions from the oxidation of soil carbon. Under this Scenario it is proposed to subsidize activities which will lead to the protection and rehabilitation of wetlands with a resulting reduction in the rate of GHG emissions. It is assumed that by 2020, 10% of cultivated wetlands are under protection, increasing to 50% by 2050. These measures result in a reduction of GHG emissions of approximately 1 million tonnes CO2 e in 2050 or 1% of the reference scenario. They equate to overall savings of approximately 20 million tonnes between 2010 and 2050 at a cost of approximately EUR 22 million in 2050, or EUR 1 per tonne CO2e.

6.3.3 Development of bio-energy (biomass and bio-fuels) Ukraine has a target of 11% renewable energy by 2020 but to date, the bio-energy component of renewable energy has been largely overlooked with this source of energy providing only 1.24% of final energy consumption. Ukraine has significant supplies of straw with winter wheat straw alone providing 3.5 million tonnes oil equivalent – enough to power 16,000 0.1 – 1 MW farm boilers and 1,400 1-10MW boilers for centralized heat supply. Biogas has significant potential and all bio-energy technologies will benefit from upward trends in conventional energy prices. Under this scenario, the following policies and measures are implemented:            

Creation of a favourable legislative and regulatory framework for bioenergy Increase in bioenergy usage to reach EU levels Simplification of tax structures including the removal of taxes on the import of energy equipment Application of incentives to bio-energy technologies as per EU directives (e.g. subsidize capital expenses of procurement of bio-energy equipment at the level of 20 – 40% of cost, low interest rate etc) Implementation of the bioenergy plan Removal of fossil fuel subsidies and particularly artificial tariff for natural gas to the housing sector Cancel requirements to use local equipment in project costing Increase the green tariff for livestock derived biogas to an economically feasible level Promote domestic production of boilers and biogas units to reduce costs compared to imported equipment Create favourable conditions for small and medium business in the sector Install several pilot units for straw combustion and biogas production Introduce harsh sanctions for breaking the standards for manure management

These measures will reduce emissions of both CO2, through the displacement of fossil fuels, and non-CO2 GHGs including methane and nitrous oxide. The savings in GHG emissions are similar to those in Scenario 1, resulting in a reduction of about 15 million tonnes CO2e per annum in 2050. Total cumulative emission reductions are similar, at around 280 million tonnes with an overall cost of approximately 4.2 billion EUR in 2050, delivering emission reductions at a cost of approximately 15 EUR per tonne CO2e.

6.3.4 Supplementation of the feed additives to cattle rations Animal rearing technologies have advanced significantly and include important developments in the use of ionophores (e.g. monenin) as a replacement to antibiotics; oils, such as sunflower seeds in feedstock; and the mineral zeolite. All of these feed additives lead, by various means, to improved growth, reduced methane emissions and greater efficiency of conversion of fodder to live weight. This Scenario assumes the following policies and measures are implemented: ď&#x201A;ˇ ď&#x201A;ˇ

Conduct further research on the use of feed additives in Ukraine and develop agreed standards for the use of feed additives Promote the use of biologically active substances via subsidies

The assumed results of these measures are shown in table 5 below: Table 5: Uptake of feed additives in the dairy and cattle industries in 2020 and 2050 Feed additive

Zeolite

Monensin

Vegetable oil additives

2020

30% of all livestock

30% of young stock

2050

75% of dairy cows and

60% of young stock

75% of young stock

60% of beef cattle These measures are expected to reduce GHG emissions by approximately 5 million tonnes CO2e in 2050 and have a total cumulative reduction of approximately 100 million tonnes. The expected cost in 2050 is between EUR 1.75 and 2.0 billion, making these emission reductions cost in the region of EUR 17.5 to 20 per tonne CO2e.

6.3.5 Reduction of total cow population with growth of highly-productive cow fraction at farms EU member states for example the UK have shown decreasing dairy stock with increasing yields can result in an overall decrease in methane emissions from enteric fermentation and manure management. Under this scenario, Ukraine will follow a similar route with production per head of dairy cattle increasing from 6500 kg/hear per yr in 2040 to 7200 kg/head per year in 2050 through breeding and fodder management. As a result, emissions in 2050 will reduce by around 2 million tonnes per annum. The cumulative benefit will be approximately 40 million tonnes at a cost of EUR 0.72 to 0.80 billion in 2050 or an average cost of EUR 18 to 20 per tonne CO2e.

Table 6: Description of identified PaMs for agricultural sources against UNFCCC classification Type of PaM

Climate policy strategy and ambition

Multi level governance Cross-cutting instruments and policies Non-energy sectors Agriculture

Crop production:  Move from extensive to intensive farming including optimized fertilizer use, precision agriculture and no-till techniques  Implement scientific crop rotation, certified seeds etc to increase yields  Reform land ownership and leasing models to give farmers a long term stake in the condition of the land. Wetland protection and rehabilitation:  Provision of subsidies to protect and rehabilitate wetland habitats Bioenergy [Biomass and biofuel]:  Implement an R&D program on bioenergy with pilot plants and case studies.  Implement a feed in tariff for bioenergy Livestock:  Introduce feed additives, manure storage, breeding programs  Make micro finance available to improve livestock herds and attract foreign investment to diary sector by implementing EU standards.  Throughout the agricultural sector there is a need for education and awareness raising on issues such as better techniques and finance.

This classification of PaMs is drawn from the UNFCCC’s consolidated report on the fifth National Communications. See Appendix 1 for a description of the

kinds of PaMs which Parties have listed under each heading. 25

6.4 QUANTIFICATION OF POTENTIAL EMISSION REDUCTIONS FROM POLICIES AND MEASURES APPLIED TO AGRICULTURE All of these scenarios are highly complementary and can be added together. The results of implementing all of the policies and measures would be to reduce emissions in 2050 from the agricultural sector from approximately 100 million per annum to 62 million per annum. The total cumulative benefit between 2010 and 2050 would be in the region of 720 million tonnes of CO2e at an overall combined cost of between EUR 12.8 and 15 billion in 2050, representing an average cost of EUR 17.7 to 20.8 per tonne CO2e.

7 ASSESSMENT OF GHG MITIGATION POTENTIAL IN THE WASTE SECTOR 7.1 DESCRIPTION OF SOURCES OF EMISSIONS CONTRIBUTING TO REFERENCE SCENARIO Waste management in Ukraine is far behind European standards with an estimated 30% of waste going to managed landfills, 4% being recycled and 3% incinerated. Unmanaged landfills (dumps) which receive the balance 70% of waste, are one of the main sources of soil and groundwater pollution. Ukraine currently produces around 10 to 12 million tonnes of waste per annum and this will increase in line with GDP. The Cabinet of Ministers has adopted a Concept of the National Programme for Waste Management for the period 2013 to 2020 which involves reducing the number of waste facilities and concentrating collected solid and liquid waste in properly managed landfills and sewage treatment facilities. The waste sector currently emits between 7.5 and 10 million tonnes of CO2e per annum (in the form of methane) and the NC5 predicts this will rise to 11.5 million in 2020. The TIMES Ukraine report estimates that from a starting point of 7.5 million tonnes CO2e in 2010, unchecked emissions will grow to 10 million in 2020 and 21.5 million tonnes CO2e in 2050. Per capita solid waste generation in 2011 is estimated at 420 Kg per person per year and this is expected to increase. Currently approximately 75% of the population currently receives waste management services. It is assumed that without further GHG reduction measures:    

Waste production will grow at a rate of 1.5% per annum so that by 2050, the per capita waste production will reach 700 Kg per person per year; Waste collection services will cover 100% of the population; All small dumps will be closed and in accordance with environmental regulations, all waste will be routed to managed regional landfill sites; and All waste generated is disposed to landfills but there is no collection or utilization of landfill gas.

The drivers which determine GHG emissions from the waste sector, and hence included in the TIMES Ukraine spreadsheet models include:  

Emissions from combustion of methane for abatement or power generation Uncollected methane emissions from landfills

 

GHG emissions generated during the collection, transport and sorting of waste, recycling, composting and combustion of waste Emissions displaced by use of collected gas to produce electricity, compost used for fertilizer, and due to mechanical biological treatment of waste.

7.2 TIMES-UKRAINE WASTE REFERENCE SCENARIO Working with the above conditions, the TIMES-Ukraine Reference Scenario predicts that Ukraine’s GHG emissions from the waste management sector will rise to 21.5 million tonnes of CO2e in 2050 coming from 27 million tonnes of solid waste.

7.3 DESCRIPTION OF POLICIES AND MEASURES APPLIED TO WASTE The TIMES Ukraine report describes three scenarios based on three technical approaches: 1) Separate collection, sorting and recycling scenario; 2) Biogas scenario (with flaring of biogas); and 3) Biogas based power generation scenario. The results of each of these in terms of GHG emissions in 2050, plus a “low carbon” scenario combining all three technologies, are described below. The identified policies and measures from the PaMs report are listed in Table 7.

Table 7: Description of identified PaMs for waste management sources against UNFCCC classification Type of PaM

Climate policy strategy and ambition Multi level

Policies and Measures from the PaMs Report (blue text), TIMES-Ukraine (green italic) and Ukraine’s NC5 (black underscore)  Kyoto Protocol II commitment – 20% reduction from 1990 and voluntary 2050 target of 50% reduction relative to 1990  11% renewable energy target by 2020 Move to harmonize waste treatment legislation with that of the EU, taking into account:  The Revised Framework Directive (2008/98/EC);  The Landfill Directive (99/31/EC);  The Waste Incineration Directive (2000/76/EC) and

governance



The Packaging and Packaging Waste Directive (94/62/EC).



Short term targets relating to waste treatment, recycling and gas collection and in the long term, a carbon target for waste disposal solutions. Introduce a landfill tax so that over time, other methods of waste treatment become competitive Awareness raising on the benefits of waste reduction, re-use and recycling Subsidies for pilot projects Technology support programmes, R&D to refine new technologies Markets for recycled products need to be identified and facilitated by Government Introduction of a green tariff for electricity from biogas which reflects commercial realities Investment in long term research on new technologies such as hydrogen generation from biogas and use in transport fuels. Facility specific technical solutions include: o Implement landfill gas capture and utilization; o Develop segregated collection facilities; o Develop recycling and composting facilities; o Generate energy from solid waste, organic waste and sewage sludge; o Continue with the implementation of the national “Energy from biogas” project.

Cross-cutting instruments and policies Non-energy sectors Waste

       

This classification of PaMs is drawn from the UNFCCC’s consolidated report on the fifth National Communications. See Appendix 1 for a description of the

kinds of PaMs which Parties have listed under each heading. 28

7.4 QUANTIFICATION OF POTENTIAL EMISSION REDUCTIONS FROM POLICIES AND MEASURES APPLIED TO WASTE With the application of separate collection, sorting and recycling of waste, GHG emissions are expected to result in emission reductions of approximately 11.5 million tonnes by 2050, decreasing 2050 emissions to 10 million tonnes per annum. This activity involves the closure and rehabilitation of old dumps and the creation of new regional waste management facilities. The total cost of rehabilitation and the opening of new facilities is between EUR 1.1 and 3.2 billion in 2050 and the cost of separate collection, sorting and recycling of waste is estimated at between EUR 0.3 to 0.7 billion in 2050. According to the TIMES Ukraine report, these activities reduce total cumulative emissions by approximately 150 million tonnes, making each emission reduction cost between approximately EUR 9.33 to 26 per tonne of CO2e. Note this estimate includes the rehabilitation of the old dumps which has little direct GHG benefit but is required for environmental and sustainable development reasons. Collecting and flaring the biogas from landfills and sewage is expected to reduce emissions further to 5 million tonnes per annum in 2050 and with similar total cumulative reductions of around 150 million tonnes between 12

2010 and 2050 . Utilizing the biogas for power generation will reduce emissions to approximately 4 million tonnes per annum in 2050 and deliver total cumulative reductions of around 25 million tonnes. The total cumulative benefit collecting and utilizing the biogas is therefore approximately 175 million tonnes of CO2e between 2010 and 2050, costing between EUR 0.36 and 0.63 billion in 2050. This suggests that the costs of these GHG emissions is very low â&#x20AC;&#x201C; between EUR 2.0 and 3.6 per tonne but these reductions are conditional on the previous measures being implemented. Finally, if a full life cycle approach is considered and reduced emissions due to the benefits of recycling of primary materials are taken into consideration, total emissions from the waste management sector may fall to zero. Overall, the TIMES Ukraine report indicates that 2050 emissions of around 21.5 million tonnes per annum and total cumulative emissions of around 580 million tonnes between 2010 and 2050 could be reduced to almost zero emissions in 2050 and total cumulative emissions of around 150 million for the cost of between EUR 1.75 and 4.5 billion in 2050. This would suggest that the average cost of emission reductions in the waste sector would be between EUR 4 and 10.5 per tonne CO2e.

There is no estimate of the cost of collecting and flaring the biogas. 29

8 ASSESSMENT OF GHG MITIGATION POTENTIAL IN THE LAND USE SECTOR 8.1 DESCRIPTION OF SOURCES OF EMISSIONS CONTRIBUTING TO THE LAND USE REFERENCE SCENARIO Forest cover in Ukraine varies greatly from region to region, although the total proportion, of 15.7% and 17.6% of the country‘s territory, is relatively low. The majority of forest lands are concentrated in the western (Carpathians) and northern parts of the country. The state owns more than 99 % of forests, the remainder being owned by municipalities and private companies or small private owners. Forest privatization has been regulated by the Forest Code of Ukraine since 2006 and is still at an early stage. The vast majority of these forests are managed directly by the State Forestry Committee as the main body of executive power in the sphere of forestry and hunting. Many other authorities share competencies in forestry management, including the Ministry of Agrarian Policy, the Ministry of Defence, the Ministry of Emergencies, the Ministry of Environmental Protection, and the Ministry of Transport and Communications. Forests can be found in protected areas, ranging from small preserved sites to nature reserves. However, protected areas cover less than 5 % of the national territory and some types of forestry practices, such as clear sanitary cuts and final felling as well as illegal human occupation of the land, constitute a serious threat to them. Forestry and related industries play an important role in the economic development of certain regions of Ukraine. The volume of products, works and services linked to forestry represented EUR 0.3 billion million and 83,000 employees in 2008. In the Carpathian region, the forestry cluster is the fourth major branch of the economy. th

Based on the results of the 5 National Communication and applying the IPCC Good Practice Guidance for the land use sector to spreadsheet calculations, the TIMES-Ukraine report assessed the potential reductions in emissions from land use and increases in sequestration in due to forestry activities. The key assumptions in the Reference Scenario include the following:  

Funding and technological performance in both land use and forestry sectors (with relation to soil management, afforestation rates, forest management etc) will reach European levels by 2050; Use of manure for organic fertilizer by 2020 was assumed to reach the levels last seen in 1990, but with the caveat that poultry manure will account for a larger proportion of organic manure.

8.2 TIMES-UKRAINE LAND USE REFERENCE SCENARIO Working with the above conditions, the TIMES-Ukraine Reference Scenario predicts that Ukraine’s GHG emissions from the land use sector will increase from 14.2 million in 2010 to 39.8 million in 2050; and CO2 sequestration in the forestry sector will decline from net sequestration of 55.6 million tonnes in 2010 to 38.6 million tonnes 2050 (i.e. the forestry sector will sequester 17 million tonnes of CO2 less per annum in 2050 compared to 2010). When combined, in 2050, without measures, the land use and forestry sectors will result in approximately zero emissions.

8.3 DESCRIPTION OF POLICIES AND MEASURES APPLIED TO LAND USE The main activities that will be applied to reduce emissions and enhance CO2 sequestration in the land use and forestry sectors include the following: 13

Land use  Increased use of nitrogen fertilizer to reduce the mineralization of soils and increase humus content and carbon storage  Increase application of organic fertilizers from dairy, cattle and poultry farming  Increase in the use of no-till technologies  Increase use of alternative fertilizers (sapropel) in place of mineral fertilizers  Cultivation of new crops including winter wheat and grain corn  Expansion of perennial grasses Forestry  Improve the age structure of forest stands  Increase afforestation  Implement fire protection measures  Reduce the loss of plantation due to diseases and pests

Table 8 below provides an overview of PaMs for activities involving fuel combustion drawn from the PaMs report and supplemented by existing or proposed PaMs from the TIMES-Ukraine report and Ukraine’s NC5.

Some of these policies and measures may also be reported and modeled in the agriculture sphere 31

Table 8: Description of identified PaMs for land use sources against UNFCCC classification Type of PaM

Climate policy strategy and ambition



11% renewable energy target by 2020

Multi level governance Cross-cutting instruments and policies Non-energy sectors LULUCF

Forests:  Place state forests under a single agency with clear enforcement of regulations including a ban on clear-cutting and mandatory FSC certification  Introduce long term land leasing to give certainty and implement market reform to overcome illegal logging.  R&D on soils and soil carbon sequestration. Implement an environmental tax on fossil fuels to pay for afforestation, reforestation and forest conservation. Peatland:  Implement a peatland restoration program with long term national goals Agriculture:  Improve fertilizer management and application;  Develop the use of alternative nitrogen fertilizer (sapropel);  Promote no-till farming methods;  Change crop types and expand the cultivation of perennial grasses

This classification of PaMs is drawn from the UNFCCC’s consolidated report on the fifth National Communications. See Appendix 1 for a description of the

kinds of PaMs which Parties have listed under each heading. 32

8.4 QUANTIFICATION OF POTENTIAL EMISSION REDUCTIONS FROM POLICIES AND MEASURES APPLIED TO LAND USE The TIMES-Ukraine report predicts that implementing the above measures in the land use sector will turn it from a net source of emissions to a net sink, to the extent that by 2050, the land use sector will be absorbing 45.2 million tonnes of CO2 per annum. The largest reductions in emissions are derived from the application of organic manure and alternative nitrogenous fertilizer (sapropel), then from no-till technologies with smaller reductions from the application of inorganic nitrogen fertilizer and introduction of new crops. In the forestry sector, the TIMES-Ukraine report predicts that sequestration can be increased from 38.6 million tonnes per annum in 2050 to 112.5 tonnes per annum with the large benefits coming from optimizing the age structure of plantations and increasing the rate of afforestation with smaller benefits coming from fire prevention and additional measures to combat diseases and pests. Together, the two subsectors may result in net sequestration of 157.7 million tonnes per annum in 2050 compared to the reference scenario of zero emissions. Cumulatively, between 2010 and 2050, the land use sub-sector could reduce emissions by approximately 1.6 billion tonnes whilst the forestry sub-sector could reduce emissions by approximately 2.5 billion tonnes relative to the reference scenario, representing a total cumulative reduction of approximately 4.0 billion tonnes. Compared to the baseline of zero net emissions, this represents a benefit to Ukraine’s overall GHG emissions and comes at a cost of approximately EUR 12 billion or an average cost of around EUR 3 per tonne CO2 e.

9 ECONOMY WIDE GHG REDUCTION POTENTIAL AND COMPARISON WITH ESTIMATES OF GHG REDUCTION POTENTIAL OF PAMS FROM ALTERNATIVE SOURCES Analysis of the impacts of policies and measures in four sectors or groups of sectors of the Ukrainian economy has yielded the following results in terms of total volume of emission reductions which could be delivered and approximately average costs (see Table 9): Table 9: Summary of cost and mitigation potential of identified policies and measures in 2050 Annual emission

Total cumulative

Range of costs of

Approximately

reductions in 2050

emission

all PaMs (billion

average cost range

relative to

reductions from

EUR, 2050)

(EUR per emission

Reference Scenario

2010 to 2050

(million tonnes

relative to

CO2e)

Reference

reduction)

Scenarios (billion tonnes CO2e) Fuel combustion

-142

2.8

Agriculture

-38

0.72

12.8 – 15

17.7 – 20.8

Waste

-21.5

0.58

1.75 – 4.5

4 – 10.5

Land use and

-157.7

4.0

forestry 33

Reference Scenario projections for the four spheres amount to a total of 655 million tonnes of CO2e in 2050. If all of the above PaMs were implemented, it is predicted that 2050 emissions would fall by 359 million tonnes to a total of 295 million, or 45% of the Reference Scenario emissions. Compared to 1990 emissions of 926 million tonnes per annum, this represents a reduction of 68% including land use change and forestry. Excluding land use change and forestry, emissions would fall by 202 million tonnes in 2050 to 453 million tonnes per annum, 31% below 1990 emissions. This would suggest that the policies and measures modelled in the TIMES-Ukraine report, and to a large degree identified in the PaMs report and including land use change and forestry, are capable of delivering Ukraine’s 2050 target of a 50% reduction in GHG emissions compared to 1990 levels. The majority of the emission reductions in the TIMES-Ukraine report are derived from the land use and forestry sector, which according to the models, can deliver net sequestration of 157.7 million tonnes per annum in 2050 compared to the Reference Scenario which predicted a net contribution from the sector of zero to Ukraine’s 2050 emissions. The bulk of these reductions are expected to come from optimizing the age structure of existing plantations and through the application of organic and alternative nitrogen fertilizers, which both act to increase soil carbon storage. These emission reductions are predicted to come at a relatively low average cost of around EUR 3 per tonne of CO2. The second largest source of emission reductions comes from the fossil fuel combustion sector, with 2050 emissions reduced by 142 million tonnes per annum to 391 million tonnes per annum against a Reference Scenario of 533 million tonnes per annum. This reduction comes from a much wider range of policies and measures though principle amongst them is the introduction of a carbon price either through taxation or an emissions trading scheme which acts to trigger a wide range of activities. Further reductions are drawn from the waste management sector (-21 million tonnes in 2050) and the agriculture sector (-38 million tonnes in 2050). Comparing these results against the results presented in the report entitled “The demand for greenhouse gas reduction Investments: An investors’ Marginal Abatement Cost Curve for Ukraine” prepared by NERA for EBRD in January 2012 (the NERA report) yields some interesting comparisons. The NERA report uses a marginal abatement cost approach to estimate the cost and potential of PaMs to reduce GHG emissions across different sectors of the Ukrainian economy. It does not include the forestry and land use sector and it makes predictions for 2030, not 2050. These differences aside, with the full implementation of “Higher-cost measures”, which overlap significantly with the identified PaMs, the report suggests that in 2030, Ukrainian emissions could fall by 454 million tonnes CO2e in 2030 or 51% below 1990 levels (excluding land use change and forestry). This would involve the implementation of PaMs ranging in costs from negative (i.e. profitable) up to as high as EUR 200 per tonne CO2 and the introduction of a EUR 40 per tonne CO2e carbon price. This result is consistent with the TIMES-Ukraine report’s suggestion that emissions could be 68% below 1990 emissions in 2050 although the NERA report achieves this without reference to the land use and forestry sector and by implementing a carbon tax of EUR 40 per tonne much 34

sooner – under the CO2 Tax scenario in the TIMES-Ukraine report, the tax is not implemented until 2030, starts at EUR 20 per tonne and rises to EUR 80 per tonne by 2050. The TIMES-Ukraine report predicts that the land use and forestry sector will be a major source of emission reductions, with net contribution to total Ukrainian emissions changing from approximately zero per annum in 2050 to a sequestration benefit of over 150 million tonnes per annum. Over the reporting period of 2010 to 2050, this amounts to approximately 4 billion emission reductions, eclipsing the reductions from all other sectors put together. Furthermore, these reductions come at a relatively low average cost of around EUR 3 per tonne CO2e. By contrast, neighbouring countries do not report such a significant role for the forestry and th

land use sector in their National Communications to the UNFCCC. Whilst, for example, the 5 National Communication of Belarus refers to optimizing forest age structure, manure management and application of fertilizers as PaMs, it does not predict such significant emission reductions arising from these activities. In Poland, agricultural emissions in 2020 are predicted to fall by 28% compared to 1988 levels but sequestration th

in the land use and forestry sector remains relatively constant over the reported period. Romania’s 5 NC predicts a slight increase in agricultural emissions from 2006 and 2020 with land use and forestry sequestration relatively constant.

10 CONCLUSION In conclusion, the PaMs report and the TIMES-Ukraine report have identified an extensive list of potential policies and measures which Ukraine can implement to achieve very significant emission reductions against a reference scenario. The PaMs report has highlighted the need for a range of policies and measures from climate policy and ambition, multi-level governance and cross cutting initiatives down to specific technical measures to be implemented within facilities. Based on Ukraine’s socio-economic development to date, there is very significant potential in the energy, housing and industry sectors to increase energy efficiency and reduce GHG emissions. The TIMES-Ukraine report has highlighted some very important and perhaps unexpected impacts of certain policies and measures, suggesting for example, that some indirect measures (e.g. renewable energy and energy efficiency) can have unforeseen consequences on other areas of economic activity, whilst direct measures – notably an emissions trading scheme or a carbon tax, automatically trigger a much wider range of activities. The TIMES-Ukraine report has also highlighted the potential role of the land use and forestry sector as a major source of carbon sequestration. The costs of alternative policies and measures are highly variable and difficult to compare. Neither the TIMES-Ukraine report nor the PaMs report provides policy and measure specific cost estimates coupled with projected emission reductions, but average costs or cost ranges are available for sectors or groups of sectors. The NERA report, which uses a marginal abatement cost curve approach, does provide specific costs but reports in different years. Fifth National Communication reports from other countries report against different timelines and classify PaMs differently. Whilst these reports all contribute to the body of knowledge, they do not yet enable the preparation of an efficient and credible low carbon strategy.

The next stage of this work-stream, to prepare marginal abatement cost curves for the identified PaMs, will add significant strength and depth to the understanding of the costs and potential of a range of policies and measures to reduce greenhouse gas emissions from Ukraine.

11 APPENDIX 1 11.1 CLASSIFICATION OF PAMS To further facilitate the comparison of Ukraine’s PaMs with those in other Annex 1 countries, the authors have elected to use the system described in the UNFCCC Secretariat’s National Communication 5 (NC5) compilation report. Their classification system, with a brief explanation of the kinds of PaMs which Annex 1 Parties have reported under each heading (taken from the synthesis report), is as follows. A fuller description and examples of PaMs implemented under these headings is provided in the addendum to the Synthesis report, pages 43 to 64 at http://unfccc.int/resource/docs/2011/sbi/eng/inf01a01.pdf: 1) Climate policy strategies and ambition This sector includes large policy packages, having demanding medium- and long term emissions goals, used to build political momentum for climate change mitigation action. These packages and goals help to frame, communicate and align the stringency of the many PaMs involved. Among the larger packages and visions reported in the NC5s are the EU “20-20-20” Energy and Climate Package and the medium- and long-term targets of Australia, Japan and the United States. The United Kingdom’s carbon budgets introduce the concept of targets with binding milestones. 2) Multi level governance Parties are making increasing use of multilevel governance to better target PaMs to diverse circumstances existing within their jurisdictions. In some cases, higher-level governments frame the policies, but devolve through regulation (e.g. framework targets), support (e.g. project funding), and political mandates and persuasion - the responsibilities for designing and implementing the PaMs to lower- level governments. EU member States have responsibilities devolved to them by the European Commission. In federal systems (e.g. Canada), States and Provinces have obligations devolved to them by national governments. 3) Cross-cutting instruments and policies The most inherently cross-sectoral PaMs are ETSs, carbon taxes, energy market reform, and urban and regional development and land use, but R&D sometimes spans several sectors as well. Rarely are any of these policies used on an economy-wide scale. Even carbon and energy taxes and ETSs, which are conceptually universal in scope, are often applied only to selected sectors in practice - although some carbon taxes and the New Zealand ETS are widely applied. 4) Energy supply The predominant focus of mitigation PaMs in the energy supply sector is on electricity and heat generation and, increasingly, on transport. They also include PaMs aimed at reducing fugitive emissions at oil, gas and coal facilities. i. Electricity and heat Parties reported using substantially strengthened ETSs, framework targets (administered through economic incentives and other market instruments) and regulations, in addition to the continued use of voluntary enterprise partnerships and long-term R&D, directed at electricity and heat generation in order to: (a) Increase generation shares from energy sources that are less carbon-intensive than coal (i.e. RES, natural gas and nuclear energy);

(b) Increase generation, transmission and distribution efficiency through CHP, grid upgrades, distributed (i.e. small-scale) generation and other means; (c) Stimulate the development, deployment and dissemination of CCS in the longer term. ETSs are used to promote electricity and heat generation emission reductions by all the above-mentioned technical means. All of the active ETSs, except the United Kingdom (CRC) Energy Efficiency Scheme and the Tokyo Cap-and-Trade Programme, cover the power sector. ii.

Fugitive emissions from oil, gas and coal

PaMs to address emissions of methane at oil, gas and coal production and distribution facilities include voluntary enterprise partnerships in the United States, regulations in Norway and voluntary sectoral commitments in the Netherlands. Fugitive CH4 emissions are being included in a tradable emissions allowance system in Australia and both The Russian Federation and Ukraine reported activities to stem losses in natural gas transportation. 5) Energy consumption Mitigation PaMs are being implemented in all of the major energy end-use sectors - residential, commercial and public, and industry. Most of the PaMs focus on improving energy efficiency (as opposed to fuel switching), and are generally sector-specific or even more narrowly targeted. There are some broader policies being pursued, such as systems-oriented policies (e.g. urban design) in Japan. In addition, the EU â&#x20AC;&#x153;2020-20â&#x20AC;? Energy and Climate Package sets a framework target of a 20 % reduction in primary energy use compared with projected levels, to be achieved by improving energy efficiency. i.

Residential, commercial and public

Parties reported the continued use of regulations, fiscal incentives, framework targets, information, voluntary enterprise partnerships, public facilities management and carbon taxes to: (a) Increase the energy efficiency of new and existing residential, commercial and public buildings, including their space heating, cooling and ventilation, water heating, and lighting services (via designing, building, renovating and purchasing); (b) Increase the energy efficiency of household appliances, home entertainment devices, office equipment and lamps (via manufacturing, retailing and purchasing); (c) Increase the use of alternative energy supplies. ii.

Industry

Parties reported on the continued use of ETSs, regulations, voluntary sectoral commitments, voluntary enterprise partnerships, information and long-term R&D to: (a) Increase energy efficiency and general emission reductions (i.e. not targeting specific equipment and processes) in energy-intensive industries; (b) Increase the implementation of energy-efficient methods (e.g. energy management systems); (c) Increase the use of energy-efficient equipment (e.g. motors, boilers and lighting), particularly, but not exclusively, in small and medium-sized enterprises; (d) Promote long-term R&D on CCS by energy-intensive industries. iii.

Transport

Parties reported PaMs aimed at two major objectives in the transport sector: (a) Addressing transport energy supply - reducing the carbon intensity of the transport fuel mix - most immediately through increased use of biofuels, but in the long term also through electricity, fuel cells and hydrogen; and (b) Addressing transport energy demand- increasing the efficiency and effectiveness of transport services and promoting non-motorized modes. a)

Transport energy supply

Parties reported the use of framework targets (administered through economic incentives and other market instruments), regulations, other market instruments and long-term R&D to increase the production, use and environmental sustainability of liquid RES fuels (biofuels) b) Transport energy demand Parties reported new regulations, ETSs, fiscal incentives and information programmes, as well as the continued use of regulations, voluntary sectoral commitments, fiscal incentives, voluntary enterprise partnerships, information and long-term R&D to: (a) Improve the energy efficiency and CO2 emissions intensity of road vehicle fleets; (b) Address transport activity and structure through transport demand management and incentives for modal shifts towards less-polluting transport modes, such as public transport, cycling and walking, trafficflow improvements and spatial planning; (c) Improve the CO2 emissions intensity of domestic and international aviation. 6) Non Energy sectors The predominant focus of PaMs aimed at non-energy sectors is on the waste and industrial processes sectors. Policies aimed at mitigation in the agriculture and LULUCF sectors are also included. i.

Industrial processes

Parties reported the continued use of regulations, reporting, voluntary enterprise partnerships, voluntary sectoral commitments and fiscal incentives (taxes) to: (a) Limit (ban) the use of certain HFCs and PFCs used as substitutes for ozone depleting substances (ODS); (b) Improve the manufacturing, handling, use and end-of-life recovery of fluorine-containing gases used as substitutes for ODS; (c) Reduce PFC, HFC and SF6 emissions in semiconductor manufacture, PFC emissions in aluminium production, SF6 emissions in electric power transmission and distribution, and magnesium production, and HFC and SF6 emissions from miscellaneous sources; (d) Reduce CO2 emissions through improved operations in cement, lime and ammonia production; (e) Reduce N2O emissions through improved operations in adipic acid and nitric acid production. The most effective and most frequently reported measures are those directed at fluorinated gases (F-gases). Those aimed at CO2 and N2O receive less attention. ii.

Waste

Parties reported the continued use of their previous framework targets, regulations, fiscal incentives, voluntary enterprise partnerships, and public facilities, infrastructure and resource management to reduce CH4 emissions via: 39

(a) Waste minimization through reduced packaging and increased product and packaging reusability and recyclability; (b) Waste reuse through the implementation of waste separation and recycling; (c) Landfill waste minimization through processing and incineration; (d) Landfill management with CH4 capture or flaring. iii.

Agriculture

Parties reported relatively few PaMs aimed at the agriculture sector. These included the continued use of their previous fiscal incentives (either direct or within the context of agricultural market reform) and regulations (e.g. the EU nitrates directive) to: (a) Reduce N2O emissions through manure management; (b) Reduce N2O emissions through optimized nitrogen fertilizer use; (c) Reduce CH4 emissions through changes in livestock management. iv.

Land use, land use change and forestry

As with agriculture, Parties reported relatively few PaMs aimed at the LULUCF sector. The measures tend to be part of larger policy strategies aimed at rural development, agricultural reform, environmental stewardship and biodiversity, rather than being solely climate focused. Parties reported the continued use of their previous fiscal measures (subsidies) and regulations (environmental codes) for private lands, and public infrastructure and resource management rules and procedures for public lands to: (a) Promote sustainable forest management, taking into account the need to enhance forest removals and to maintain and enhance biodiversity; (b) Prevent forest fires; (c) Afforest, reforest and manage forests, grassland, wetlands and cropland; (d) Increase green urban areas. 7) Aviation and marine bunker fuels A number of Parties reported on PaMs influencing international transport GHG emissions. The information provided focuses on: specific PaMs; the progress made by the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO) on the subject; the roles that Parties played within the ICAO and/or the IMO to promote and/or implement any decisions on the subject; as well as the scope, principles and design of a global climate regime to regulate GHG emissions from international bunker fuels. Parties also reported on: domestic PaMs to regulate GHG emissions from international bunker fuels, such as the inclusion of aviation in the EU ETS (EU member States); measures aimed at energy efficiency in international transport (Canada, Japan); and methodological approaches to further calculate the carbon footprint of this sector (New Zealand).

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