Marshall Plan for the post-war reconstruction of Ukraine. Proposals of the UN Global Compact Ukraine

The UN Global Compact Ukraine calls for: 

• The Parliament of Ukraine: fulfill Ukraine’s European integration commitments and vote on the necessary bills that will enable global donors to invest in Ukraine’s reconstruction on the principles of sustainable development and prevent spending on obsolete and toxic technologies that are not allowed in the EU. 
• Cabinet of Ministers of Ukraine: to develop the necessary by-laws in terms of approximation of Ukrainian legislation to EU law. 
• European Parliament and European Commission: to provide advisory, financial, and technical assistance to Ukraine in the framework of the approximation of national policy to the European Green Deal and the implementation of EU standards.

Note: This document is not final. If you have suggestions and specific developments in other or existing in this document areas, please send them to [email protected]. We will review them and contact you for further advocacy.

Construction. The prohibition of asbestos

Authorities: Adopt a legislative ban on asbestos contained in Bill 4142 “On the Public Health System.”
Status: adopted in the first reading.
European Parliament: funding only asbestos-free technologies in the construction process.

Ukraine still allows the use of asbestos in construction — a toxic carcinogenic mineral, which is banned in 70 countries, including the EU.

Russia has destroyed about 30% of Ukraine’s infrastructure worth more than $ 100 billion, but construction companies are in no hurry to convert to the production of asbestos-free goods. The asbestos-containing building materials, which were imported from Russian suppliers, continue to be imported from other post-soviet countries.

Due to the dangerous effects of chrysotile asbestos on human health, manufacturers in developed countries are now using a safe substitute based on polychloroalcohol and cellulose fibers.

The European Bank for Reconstruction and Development’s (EBRD) policy on investing in projects that promote environmental and social sustainability (April 2019) deserves special attention. According to the requirements of Annex 1 (List of activities not financed by the EBRD for environmental and social reasons) — it is prohibited to finance activities aimed at the production, use or trade of asbestos fibers, as well as goods or mixtures to which these fibers are intentionally added. 

According to the Association Agreement between Ukraine and the European Union, the Ministry of Health of Ukraine had until 30 October 2021 to implement Directive 2009/148/EC on the protection of workers from the risks related to the effects of asbestos at work, which prohibits the use of all types of asbestos and asbestos-containing products in the EU.

Today, the ban on asbestos is included in bill № 4142 “On the public health system” of September 22, 2020. The adoption of this norm will contribute to the ban on the use of asbestos in Ukraine and the fulfillment of the European integration commitments in the field of protection of the health of the population and workers from the deadly effects of asbestos exposure.

Circular economy. Recycling, reuse, recovery

Authorities: adoption of bill № 2207–1D “On Waste Management.”
Status: adopted in the first reading.
European Parliament: funding of modern methods of recycling, which are allowed by EU Directives.

Missile and ammunition explosions and the accumulation of millions of tons of scrap metal and construction debris cause significant damage to Ukraine’s environment and public health. Dozens of Ukrainian cities are awaiting de-occupation, demining, and reconstruction. It is very important today to establish a legal basis that will ensure proper analysis and assessment of the extent of damage, make Ukraine’s recovery safe and energy-efficient, and take into account best practices. Post-war reconstruction should be based on building sustainable infrastructure integrated in a circular economy.

To do this, it is necessary to adopt the bill № 2207-1D “On Waste Management”, which for the first time since Ukraine’s independence introduces a European approach to waste management. It will be the foundation for building Ukraine’s circular economy, which is now part of the European Green Deal.

Further work is needed on the adoption of sectoral legislation on waste management, in particular on Extended producer responsibility (EPR) relating to packaging, electrical and electronic equipment, batteries and accumulators, tires, lubricants, oils, etc., and on an approximation of legislation to the Mining Waste Directive.

Industry. The best available technologies in Ukraine

Authorities: adoption of bill № 6004–2 “On Ensuring the Constitutional Rights of Citizens to a Safe Environment for Life and Health.”
Status: registered in the Verkhovna Rada.
European Parliament: set funding criteria for industry projects on the basis of  BAT compliance.

As a result of Russia’s war against Ukraine, metallurgy lost 30% of its assets. About a hundred enterprises were damaged or destroyed, among them: Azovstal, Ilyich iron and steel works of Mariupol, Avdiivka Coke Plant, etc. Other companies have suspended production or are operating at partial capacity.

Therefore, when rebuilding the Ukrainian industry, it is necessary to take into account current European standards in the form of Best Available Technologies and Management Methods (BAT). Directive 2010/75 / EU, which is based on the BAT, ensures a high level of protection of human health and the environment and has shown its high effectiveness in practice. Since 2004, European companies have reduced their emissions of sulfur dioxide by 77%, nitrogen oxide by 49%, and dust by 81%.

The revival of the Ukrainian industry should be centered on the production of equipment for renewable energy facilities, batteries, electric vehicles, heat pumps, as well as the production of steel using hydrogen, and implement other solutions that will alleviate Ukrainian industry from dependence on fossil fuels. Deep and comprehensive integration of Ukraine into the EU’s new industrial alliances, electrification, and clean manufacturing should be the basis for post-war reconstruction.

In the coming decades, the EU and the G7 are set to provide incentives to invest $100 billion a year in industrial modernization to fund climate protection projects in developing countries. In order to make such financial support available to Ukraine, it is important that MPs support Bill № 6004–2, which introduces BAT in Ukrainian law.

Energy and energy efficiency. Support for renewable energy sources (1)

Authorities: proposals under development.
European Parliament: financing for renewable energy sources and energy-efficient technologies, investment in energy-efficient construction which means investment in achieving climate goals.

Even before the full-scale invasion, Ukraine declared its intention to gradually decarbonize the economy, both for the sake of combating climate change and to reduce energy dependence. After Ukraine’s victory, it is necessary to focus on this and introduce renewable and low-carbon energy sources at an explosive pace.

The main task of the policy on energy efficiency and promoting the development of green energy is to phase out  Ukraine’s dependence on imported (read — “Russian”) gas. It should be noted that Ukraine imports up to 34% of the gas in the total energy balance, and 39% of the natural gas balance is spent on the needs of the population, including the housing sector. Therefore, steps to support Ukrainian energy independence can be:

1. Energy efficiency
   Ukraine has committed itself to implementing Directive 2010/31/EU on the energy performance of buildings into national law, Article 9 of which stipulates that after 31 December 2020, all new buildings must be near-zero energy buildings (NZEB). According to Ukrainian legislation, the start date of the construction of NZEB has been postponed until December 31, 2027 (National Plan of increasing buildings with close to zero energy consumption). Today, in the case of new construction, the minimum requirement for the energy efficiency of a building is class “C”, while NZEB criteria are not defined. In the postwar period, mass construction of new housing is planned. An urgent increase of the minimum requirements for energy efficiency of buildings to European standards will significantly reduce energy consumption in the operation of new buildings, will have a positive social effect (reduction of utility bills), reduce greenhouse gas emissions during the life cycle of buildings, and bring other benefits.1.1. Financial support through affordable loans, including through Ukrainian commercial banks for projects of thermal modernization of buildings and heat supply based on renewable energy sources.1.2. Introduction of decentralized energy supply systems in cities (especially small ones) of Ukraine through the installation of modular boilers on the site of destroyed and gradual replacement of existing boilers built in the 1970-80s.
2. Green energy
   2.1. Use of donor assistance to rebuild the war-torn green energy facilities of the European Energy Community-established Ukraine Energy Support Fund.2.2. Grant and microcredit support for the purchase of European equipment by Ukrainian enterprises, support for green energy producers for the construction of new green energy facilities, as well as equipment for electricity storage systems and new balancing facilities.2.3. Adoption of legislation on premium feed-in mechanisms for existing and new RES projects. This will reduce the financial pressure on the electricity market, as well as better integrate RES producers into it.
3. Electricity market
   3.1 Development and approval of a mechanism to guarantee the origin of electricity from renewable sources. This mechanism will allow producers and consumers to confirm the source of electricity when concluding direct contracts for electricity supply.3.2 Development and adoption of legislative and regulatory acts that will allow the introduction of a net billing mechanism. This mechanism will promote the development of primarily distributed electricity production by households, enterprises, and institutions.3.3 Create conditions for concluding “virtual” corporate PPAs, in particular, “contracts for difference” between electricity producers and consumers.3.4. Ensuring access of electricity producers from RES to cross-border electricity trade with Moldova, Romania, Hungary, and Slovakia to promote synchronization of the Ukrainian green electricity market with the EU market and the introduction of certificates of origin for green energy.

The EU’s Covenant of Mayors initiative is a great opportunity to decarbonize cities. As part of this initiative, it is important that cities conduct models and estimates of the energy transition to RES and submit them for co-financing to financial institutions. Large international investment banks are directing their fossil fuel investments to green projects. For example, the European Bank for Reconstruction and Development (EBRD) plans to invest €1 trillion by 2030 in projects to combat climate change and maintain environmental sustainability, including the construction of RES facilities. It is also important to implement the so-called Clean Energy Package (CEP) in Ukrainian legislation, namely a set of eight pieces of legislation on the energy performance of buildings, renewable energy, energy efficiency, integrated climate governance, and electricity market design.

Environmental control. Environmental impact assessment and strategic environmental assessment

Authorities: adoption of bill № 3091 “On State Environmental Control.”
Status: preparation for the second reading.
European Parliament: funding of projects that have positive conclusions from the EIA and the SEA.

Russian troops commit dozens of environmental crimes in Ukraine every day: destroying nature reserves and ecosystems, creating nuclear and radiation hazards as a result of hostilities in the Chornobyl Exclusion Zone and capturing nuclear power plants, blowing up oil depots, gas pipelines, thermal power plants, and metallurgical plants. The State Environmental Inspectorate records environmental crimes and calculates damages. However, state environmental control today does not allow environmentalists to work effectively. The post-Soviet control system does not make it possible to prevent the destruction of valuable territories, the creation of natural dumps, the arbitrariness of poachers, the mass burning of dry vegetation, and the illegal trade in Red Book plants.

Bill № 3091 amends more than 30 laws to make state environmental control modern, open, public, maximally effective, and aimed not at punishing but at preventing environmental damage.

The bill provides for video recording of everything that the environmental inspector does, increases the inspector’s responsibility for the abuse of power, regulates the system of accrual of damages, and penalties for environmental damage. Currently, only about 5% of fines imposed by the State Environmental Inspectorate are collected from violators. At the same time, the closure of the enterprise is possible only by court decisions. The reform envisages the creation of a new body of state environmental control and the elimination of the corrupt State Environmental Inspectorate. The bill balances the interests of business, government, and the public.

Climate finance and fiscal policy. Green Deal

Authorities: preparing a bill (and accompanying NPAs) on the implementation of Directive 2003/96/ EU .
European Parliament: Ukraine needs a post-tax policy and its own financial instruments for post-war reconstruction and development.

In the field of climate finance, Directive 2003/96 / EU on energy taxation in the EU, aimed at achieving the goals of the European Green Deal until 2050, is awaiting adaptation to Ukrainian legislation. 

The main objectives of the Directive are: 

• aligning the taxation of energy products and electricity with EU energy and climate policies to help achieve the EU’s 2030 energy goals and climate neutrality by 2050; 
• preserving the EU single market by renewing the volume and structure of tax rates and streamlining the use of optional tax breaks and discounts.

It is also important to spread the EU green taxonomy in Ukraine, the development of new climate finance instruments such as vouchers, green bonds, and more.

Consideration should be given to establishing a Clean Energy and Industry Climate Fund, which could potentially be replenished after the end of the martial law with ETS (carbon emissions trading), carbon tax, and other sources of funding to create affordable financial mechanisms for business. Funding should be with the greatest emphasis on best technologies, according to the EU’s green taxonomy list. In particular, projects must be energy efficient, financially viable, and resilient to climate and man-made disasters. Sources of income and the form of the fund are questions of separate research that will directly depend on the situation in the markets and in the country.

Emerald network. Preservation of ecosystem services (2)

Authorities: adoption of bill №4461 “On the territory of the Emerald Network.”
Status: sent for second reading in the Verkhovna Rada.
European Parliament: Assistance in recording and calculating war crimes in Ukraine and assisting in international litigation to compensate Russia for environmental damage.

Since the beginning of Russia’s military aggression in 2014 and together with the full-scale military invasion in February 2022, 900 objects of the nature reserve fund with an area of ​​12,406.6 sq. Km, which is about a third of the nature reserve fund area, has been damaged by hostilities. About 200 areas of the Emerald Network with an area of ​​2.9 million hectares and 14 Ramsar sites with an area of ​​397.7 thousand hectares are under threat of destruction. These areas are under fire and chemical pollution. In the temporarily occupied Crimea, unique natural objects have been damaged and destroyed due to the uncontrolled extraction of natural resources and military operations.

Natural ecosystems play an important role in maintaining environmental security and reducing the vulnerability of Ukrainian communities to climate change. Bill № 4461 is designed to implement the Association Agreement between Ukraine and the EU and, in particular, to implement the Council Directive 92/43/EU on the conservation of natural habitats and of wild fauna and flora and the Directive 2009/147/EU, as well as the provisions of the Berne Convention, which directly provide for territories of the Emerald Network. Despite the fact that the first territories of the Emerald Network were declared in 2016, they were not enshrined in law. Post-war reconstruction will also require many natural resources. Bill № 4461 contains a number of provisions that introduce clear procedures for evaluating planned activities within the Emerald Network and provide for the development of management plans for the Emerald Network, which is particularly important for war-affected areas.

Agriculture. Sustainability (3)

Authorities: proposals in development.
European Parliament: support for small and medium-sized farmers, funding for climate-friendly technologies, and sustainable practices in the agricultural sector.

With the outbreak of a full-scale war in Ukraine, the global food system has faced problems with logistics and production, which could potentially exacerbate global hunger and endanger food and environmental security. 

Therefore, Ukraine should create a strategy for the development of the agri-food sector in the postwar period, and prioritize the development and support of more flexible and decentralized agri-food systems through the diversification of small and medium-sized agricultural enterprises, their cooperation, and localization. 

Agricultural production and processing should focus on sustainable and climate-friendly solutions, including the practices of precision farming, crop rotation, and a biologically diverse multicultural approach to crop production. 

Agricultural enterprises must introduce new technologies that can reduce greenhouse gas emissions, reduce generation and ensure the processing of agricultural and food waste. Ukraine must take a course to adapt the food system to external challenges and ensure environmental and food security for citizens in the face of climate crisis and security threats.

Development of competition authorities. Efficient use of limited resources (4)

Authorities: development of a package of bills to reform the antitrust infrastructure of Ukraine.
European Parliament: advisory and technical assistance in the development and further implementation.

The high level of monopolization of the Ukrainian economy, the low culture of competition, weakness and political dependence on antitrust infrastructure, and the prevalence of discriminatory rules can hinder the efficient use of limited resources, and sustainable development and serve as a deterrent to potential investors.

The effective use of significant resources invested in the reconstruction of Ukraine requires the creation of a transparent and competitive economic environment where businesses can compete on equal terms.

This approach will save limited resources,  give an opportunity to cover more areas, and attract new investment. It will also create a new business environment in Ukraine when limited resources will be available to the most efficient, and legal culture will be a constant standard and custom.

In the context of the Green Deal, this is becoming increasingly important, given the new forms of unfair competition that market players may resort to, and the undue state support that could be provided.

(1) According to the recommendations of the Center for Environmental Initiatives “Ekodia” and the Ukrainian Renewable Energy Association
(2) According to the recommendations of the Center for Environmental Initiatives “Ecodia”
(3) According to the recommendations of the Center for Environmental Initiatives “Ecodia”
(4) According to the recommendations of the Antitrust League

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