Municipal Energy Reform in Ukraine: Modelling and Strategic Planning of Low-Carbon Development

The project aimed to develop and assess low emission development (LED) scenarios for the Ukrainian energy sector. The key issue was the identification of potential policies and LED scenarios based on best international practices and effective strategic documents of Ukraine. The report presents the results of the research work on Activities 2.1-2.5 of Task 2, which included the development of terms and assumptions on the expanded list of LED scenarios for the Ukrainian energy sector and industrial processes. The report also investigates the LED scenarios for Ukraine and ways of their implementation, which primarily include energy efficiency increase, wider use of renewable energy sources, and implementation of taxation and emission trading scheme (ETS) for greenhouse gases (GHG). The report analyzes energy supply and dynamics of GHG emissions under different LED scenarios in Ukraine. The results show that the combined policy, which includes promotion of energy efficiency and renewable energy sources, is the most economically feasible way to reduce GHG emissions in Ukraine regardless of macroeconomic scenarios. This option boosts economic growth, increases the level of national economy's competitiveness and economic security, ensures the diversification of energy supply, promotes job creation, and decreases the negative impact of fluctuations in global energy prices. Under the baseline macroeconomic scenario, the achievement of energy efficiency and renewable energy targets leads to the cumulative GHG emissions reduction by 15% (or 946 million tons of CO2 eq.) by 2030 and 23% (or 3584 million tons of CO2 eq.) by 2050. GHG emissions in such sectors as "Energy" and "Industrial processes" in 2030 would amount to 300 million tons of CO2 eq. and 380 million tons of CO2 eq. in 2050, which is respectively by 63.7% and 54.0% lower than in 1990. Additional reduction of GHG emissions from significant tax changes or introduction of an effective emissions trading system in Ukraine can be considered as an option for additional investments, which Ukraine could attract within the mechanisms of international cooperation. Under a low (5.5 EUR per ton) CO2 price, Ukraine could offer up to 260 million tons of GHG emissions reduction totaling to 1.4 bn EUR for participation in the international market mechanisms. The report concludes that the ambitious and at the same time reasonable targets of 2030 GHG emissions reduction in Ukraine for "Energy" and "Industrial processes" (in terms of IPCC) sectors in the context of INDC can be proposed: 22% below BAU or 64% below 1990 level or 22% below 2005 level. In case of substantial international aid attraction, 2030 targets can be strengthened: from 27 to 35% below BAU or 66-70% below 1990 level or 26-35% below 2005 level. The detailed results of modelling and predicting a wide range of LED scenarios for Ukraine would be available on VEDAViz web portal, which was developed for Ukraine as part of USAID Municipal Energy Reform in Ukraine.