Press briefing on the implementation of the Association Agreement with the EU 15.10.2019

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Прес-реліз підготовлено Українським Кризовим Медіа Центром.

The five-year government action program on energy and environmental sectors should be revised to fulfil Ukraine`s commitments under the EU-Ukraine Association Agreement. Experts from the Energy Reforms Coalition said this following the analysis of the government program for compliance with the provisions of the Association Agreement at the press briefing at the Ukrainian Crisis Media Center. 

Gas Sector 

The gas sector goals are generally correct. At the same time, there is no clear understanding of how the government will provide a "fair price" through market-based instruments, said Roman Nitsovych, director of research - DiXi Group.

“It is very difficult to combine market-based instruments and fair prices because equity is a category beyond market logic. It is worth remembering that since January 1, 2020, the reduction coefficients for the population on the marginal price will be abolished. It means that the maximum price for the population will be equal to the average price for the industry on a prepaid basis if the government will not change the resolution on the assignment of special duties. On May 1, the resolution loses its validity - we must open the gas market with market prices and free choice of supplier,” the expert said.

The concern is that if the import of energy resources is economically viable in the short term, the government will support such imports. “It means that if tomorrow Gazprom comes to our market with lower prices - there will be no obstacles for it. How the government will open imports (even from the aggressor country) and ensure diversification of supply - no more than 30% of imports from one source?” said Roman Nitsovich.

It is also important that all the necessary steps for unbundling (separation of the gas transmission system operator from Naftogaz, which will end till January 1, 2020 ) take place in the highest level. “The implementation of the European principles on the GTS operator performance is a significant factor in the negotiations on the gas transit contract, and Russia has already stated that they will monitor how Ukraine has implemented European legislation. Any fault will be used against us,” Roman Nitsovich says.

Electricity

All major regulatory acts have already been adopted to launch the new electricity market. “The only problem is certification by the transmission system operators and the necessary measures to start the ancillary services market. These at least two key elements that would allow us to fulfil our circumstances and responsibilities by the end of the year," said Svetlana Golikova, an expert from Energy Reforms Coalition.

As for the possibility of cross-border trade of electricity in all three markets - it takes time to analyze its economic feasibility, and we should not forget about its impact on energy security, the expert added.

We have problem with the legislative regulation of the NEURC activities when in June the Constitutional Court of Ukraine ruled on the unconstitutionality of certain provisions of the law. Parliamentarians and donor organizations work on this law. President has submitted amendments to the Constitution regarding the President's right to appoint and create an independent regulatory body. However, voting for these changes won`t be held until the next session (in February). This situation threatens Regulatory operation from January 1 and until the changes are adopted.

Energy efficiency

The program mentions 7 goals and objectives but does not explain tools and mechanisms for the achievement of the goals.

The part, which depends on the Ministry of Social Policy and the Ministry of Regional Development, is about strengthening, verification, targeting and monetization of subsidies. "This is what we have been talking about for the last few years. It is good that this is recorded in the Government program. But it is important that by the monetization all understood subsidy in cash and the new government should completely switch to the system when assistance received by a specific person, not by the service provider,” said Tatiana Boyko, Energy programs coordinator from OPORA.

Oil

Ukraine's international commitments got little attention. This could interrupt implementation of the Directives requirements 2009/119/EC, 99/32/EC, 94/63/EC into Ukrainian legislation, said Gennadii Riabtsev, the expert from Energy Reforms Coalition.

“The new Government hasn`t approved any regulatory act which aimed at fulfilling of Ukraine's international commitments in the oil sector. Most of the submitted projects were returned to the developers for further elaboration with the wording “if the practical implementation of the projects will remain relevant”. It means that the plans for the implementation of the Association Agreement that was stated in the program of the previous government, are not being implemented. All these terms have been broken. The agenda of the new Cabinet also has little to do with the oil sector, ”the expert said.

The environment

There are 6 goals in the government program, but they do not always have benchmarks and clear methods of achievement. For example, we are talking about reducing the level of environmental pollution by 20%, but it does not indicate what kind of pollution and what year are taking into account.

The most detailed tasks for industrial pollution. Specifically, about implementing an integrated permit and using the best available technologies at pollutants, but it does not specify how to support such upgrades.

For the atmospheric and environmental fields, only certain needed measures are described, which needed for implementation of the European directives. “It is good that we are monitoring atmospheric air quality and collecting and disseminating such information. But it is unclear how the goal of reducing emissions will be achieved because there is no reference to either the relevant EU directive or the need to create zones, agglomerations and pollution reduction plans for them"- said Natalya Andrusevich, chairman of the Community and Environment Resource and Analysis Center.

The business climate in the energy sector

The part concerning the business climate is about reducing the tax burden, deregulation, setting a "fair price", reviewing the support system for renewable energy sources, simplifying business operations.

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“The biggest concern for investors in the energy sector is the thesis about reviewing existing renewable energy support system. It is better not to make retrospective changes because it will be a signal to investors in all sectors of the economy that Ukraine is an unreliable partner. We are proposing other mechanisms to supplement the budget to offset green tariff payments, including the abolition of excise taxes, which today increase the final cost of electricity, increase the tax on carbon dioxide emissions and other mechanisms,” Oleksandra Gumeniuk said, director of the European-Ukrainian Energy Agency.

 

Background: The project "Increasing the Impact of Civil Society on Monitoring and Policy Dialogue on Energy Reforms and Related Sectors as Implemented by the Association Agreement" is funded by the European Union and the International Renaissance Foundation. It is performed by the public organization DiXi GROUP, the civic network "OPORA", the ukrainian public organization Energy Association of Ukraine, the resource and analytical center "Society and the Environment" and the association "European-Ukrainian Energy Agency". The project monitors the implementation of the Energy Association Agreement, facilitates dialogue for the proper implementation of European reforms, including through public sector experts, and informs the public about the progress of energy and environmental reform, the implications and potential benefits of these changes. The project runs from May 2016 to December 2019.

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