Reducing emissions from thermoelectric stations in Ukraine by meeting the European Energy Community requirements

Green Paper

International Center for Policy Studies

Kyiv 2011

Reducing emissions from thermoelectric stations in Ukraine

by meeting the European Energy Community requirements

Policy analysis document prepared for the project “Ukraine’s integration strategy in the European Energy Community”

Contact information:

International Centre for Policy Studies

vul. Pymonenka, 13а, Kyiv, Ukraine, 04050 Tel.: (044) 484 4400, 01, fax: 484 4402 e-mail: [email protected], web: www.icps.com.ua

This report has been prepared under the “Ukraine’s integration strategy in the European Energy Community” project carried out by the International Centre for Policy Studies (ICPS).

Project advisor: Ihor Bohatyriov.

Authors: Ildar Gazizullin, Larion Lozoviy, Olga Ivakhno, Vivica Williams, Iryna Petrenko, Roman Zaika.

Authors would like to thank Iryna Verbytska (DTEK) and Yuri Trofymenko (NAK “EKU”) for their feedback and other experts who participated in the discussions undertaken in preparation of this report.

Design and layout: Publishing House “Optima”

English translation and editing: Lidia Wolanskyj

Content

Overview 5The Problem: Higher than permissible harmful emissions 6What impedes compliance with air quality standards 8

Technological and structural factors 8

Outdated power generating and environmental technologies 8

Fuel consumption 9

Use of low quality coal 10

Environmental rules that favor polluters 11

Regulating heat-generated electricity rates 13

Dilatory reforms on the electricity market 14

Ineffective technical assistance 14

The economic and social impact of emissions 16Dampened economic growth 16

Poorer quality farm products and lower land values 16

Additional costs to the healthcare system 17

Deteriorating quality of human capital 18

Reduced life expectancy 18

Loss of workforce 20

Impeding the development of Ukraine’s power generation 20

Greater risks for investing in heating plants 20

Complications with trading Ukrainian electricity on EU power markets 20

The growing cost of environmental programs in the future 21

Loss of status as a reliable international partner 22

A vision of the future of thermal power generation in Ukraine: eco-friendly and safe for humans 24

The positive future impact of meeting EEC environmental requirements 24

The environment will remain a priority 26

Environmental standards will meet European requirements 26

Volumes of emissions will go down 26

Options for resolving the problem 28Proposed solutions 29

Annex 1. Tables and charts 30Annex 2. The value of a statistical life 37Annex 3. EU environmental protection requirements in the Energy Community Treaty 38Annex 4. Environmental fees and taxes 40Annex 5. Territorial spread of emissions in Ukraine, 2008 42Annex 6. Cross-border impact of emissions 43Annex 7. Population centers within TES pollution zones in Ukraine 45

List of Abbreviations 47Glossary of Terms 48

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Overview

The purpose of this Green Paper is to identify key problems and obstacles in reducing harmful emissions from heating plants, or thermo-electric stations (TESs) as they are known in Ukraine, now that the country has joined the Energy Community Treaty (EEC). The identification and detailed description of these problems will be subject to discussion with experts and stakeholders, which will make it possible to determine their positions regarding the prospects for bring-ing thermo-electric generation in line with EU requirements.

This Green Paper looks at thermal power plants, which are governed by Di-rective 2001/80/EC, which is a binding part of the Energy CommunityTreaty. These are primarily large plants—thermo-electric stations (TESs) and combined heating and power plants (CHPs), known as thermoelectric centrals or TETs in Ukrainian—with total capacity over 50 MW. And it is these companies that emit the greatest amount of pollution into Ukraine’s air every year. Besides thermal generation companies, large combustion plants are used in district heating, chemical and steel companies. Therefore, the combined analysis of problems and obstacles presented in this paper can also be applied to other sectors of the economy where large combustion plants operate.

This paper examines the impact of three groups of key pollutants emitted by thermo-electric generation: sulfur dioxide (SO

2), nitrogen oxides (NO

x) and

dust. The issue of carbon dioxide emissions (СО2) is not raised as this pollutant

is covered by other framework agreements, including the Kyoto Protocol.

The Energy Community is allowed to expand the list of requirements for pro-tecting the environment that its member countries must abide by. Currently, this most likely means incorporating Directive 2010/75/EU, which came into effect in January 2011 with the purpose of combining all major EU environmental norms from the last few years with regard to industrial production.1 If this comprehen-sive document is included in the list of environmental norms that are part of the Energy Community Treaty or the Association Agreement between Ukraine and the European Union, it will become binding on Ukraine as well.

Expert commentary provided during a public discussion of this Green Paper will make it possible to clarify the problems raised here and the obstacles to resolv-ing them and will become the basis for a subsequent White Paper. That paper will contain recommendations for how approach the problem of the harmful im-pact of thermo-electric power generation on Ukraine’s environment, based on the requirements of Directive 2001/80/EC.

1 The two most complicated requirements are Directive 2001/80/EC and 96/61/EC (IPPC), but there are a slew of other regulatory documents with regard to the use of emissions, the production of organic solvents, and so on.

Overview

� Reducing emissions from thermoelectric stations in Ukraine by meeting the European Energy Community requirements

The Problem: Higher than permissible harmful emissions

Today, Ukraine’s thermoelectric stations (TESs) emit between 5 and 30 times more pollutants than EU standards allow. In fact, thermoelectric plants are the main source of air pollution in Ukraine; this sector is responsible for nearly 80% of all countrywide emissions of sulfur dioxide and 25% of nitrogen oxides. The by-products of burning fuel, mainly coal, are solid ash particulates or dust, SO

2,

NOx and carbon dioxide (СО

2).

The harmful emissions of thermoelectric power companies have not decreased, despite the fact that, over 2006–2008, Ukraine’s environmental standards be-gan to approximate European ones. For instance, related Decrees issued by the Ministry of the Environment2 generally correspond to European practice using the best available techniques, in accordance with Directive 2001/80/EC.3 The country’s power generating companies also pay taxes for emitting pollutants into the atmosphere that are small compared to the damage these emissions cause (prior to 2011, there was a fee).

What is more, according to market players, the emissions coming from TESs will continue to be higher than the permissible levels through 2030 and further, even though the deadline for meeting Directive 2001/80/EC in Ukraine has been set for 2017.4

For one thing, power companies are investing little or nothing in environmen-tal measures on their existing units or in building new ones with the exception of some filtration equipment reconstruction projects. The construction of new power units that meet environmental norms5 is not planned for the foreseeable future. According to some estimates, Ukraine needs to draw between US $5bn and US $17bn in investment, depending on the number of power units it decides to modernize (see estimates in Annex 1).6 This means that investments just to bring TESs in line with EU environmental standards for air quality should be several times more than the annual total amount of investment in thermal power generation today.

2 Environment Ministry Decrees №309 dated 27.06.2006 and №541 dated 22.10.2008.3 See I.A. Volchyn, 2010.4 See, for instance, the draft Concept for a State Targeted Program for fuel and energy com-

plex (FEC) enterprises to gradually reduce the aggregate annual emission of pollutants into the atmosphere at existing combustion plants in line with Directive 2001/80/EC dated 30.03.2011, for the period through 2030.

5 The Annex to this report provides data on concentration caps in mg/cu m for pollutants in TES flue gases according to EU and Ukrainian norms.

6 The cost of harmonizing Poland’s thermoelectric stations to EU norms could reach EUR 20 billion. http://www.wbj.pl/article-50262-eu-directive-poland-must-halve-industrial-emis-sions-by-2020.html

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HowDirective2001/80/ECisbeingmetinEUcountries

Some EU companies and countries are not meeting the requirements of Directive2001/80/EC.For instance, in200�,40%ofPoland’s thermoelectricstationsstilldidnotmeettheregulatedlevelsofsulfuroxideemissionssetfor2008.Today,90%ofPoland’sTESsdonotmeet theemissionstandards fornitrogenoxidesset for201�.Oneof themain reasons why countries cannot meet strict air quality standards is the age ofTESpowerunits,whichare20-30yearsold.

Because some countries, primarily Great Britain and Poland, were unable to meet therequirementswithintheestablishedtimeframe,thepracticeofderogationorpartialre-vocationofthelawhasbeenintroduced.Thisgivescountriessomebreathingspacetopulltogethercostlyreforms.Thereareanumberofwaystopostponethefulfillmentofrequirements:

AcountrycanlaunchatransitionalnationalplanthatallowsittoputoffthedeadlineformeetingstandardstoJune2020.

IndividualpowerplantscanbeexemptedfromtheDirectiveiftheyoperatelessthan20,000hoursandareslatedtobeshutdownbyDecember201�.

PowercompaniescanalsobeexemptedfromtheDirectiveiftheyintendtooperatetheequipmentforlessthan1�,�00hoursfortherestofitsservicelife.Thisprovisionwillbeineffectover201�–2023.

TESsthatburn localhardfuel,suchas lignite,maybeexemptedfromtheneedtomeet standards for SO2 emissions until 2019, provided that the sulfur is removedfromthefuel.

ThiskindofpracticeismeetingcriticismwithintheEU,asitcouldencouragecountriestocontinuenottomeetstandards.Accordingtosomeestimates,theresultingairpollu-tioncouldleadto�00,000earlydeathsintheEUeveryyear,inadditiontodamagingtheenvironmentthrougheutrophication,�increasedacidityandtheemergenceofground-levelozone.

Sources: Сhrister Еgren, “Emission ceilings may be further postponed,” Air Pollution and Climate Secre-tariat, December 2010, http://airclim.org/acidnews/2010/an3-10.php#fourteen; Evaluation of Member States’ emission inventories for 2004–2006 for LCPs under the LCP Directive (2001/80/EC), European Com-mission, 2008; Chris Tighe, “Doubt cast over power plant’s future,” Financial Times, 23 April 2010, http://www.ft.com/cms/s/0/d7529c58-4e39-11df-b48d-00144feab49a,s01=1.html#axzz1JyBOJ2Gb.

Fordiscussion

HowjustifiedandrealisticdoyoufindthepermissibleemissionlevelsestablishedbyDi-rective2001/80/EC?

Whatisthecauseofthegapbetweenformalcapssetinenvironmentallegislationandrealemissionlevels?

7 The addition of artificial or natural nutrients to water, causing excess plant growth.

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TheProblem:Higherthanpermissibleharmfulemissions

8 Reducing emissions from thermoelectric stations in Ukraine by meeting the European Energy Community requirements

What impedes compliance with air quality standards

TechnologicalandstructuralfactorsOutdated power generating and environmental technologies

Ukraine’s thermoelectric stations demonstrate some of the lowest technical, economic and environmental indicators in Europe. The main equipment at the country’s TESs went on line in the 1960s and 1970s and was designed accord-ing to standards from the 1950s.Their life-cycles have already come to an end (see Annex 1). Altogether, power units generating a total of 12 GW or 42% of all the standing capacity of Ukraine’s TESs are currently in need of replacement, making average utilization efficiency at domestic TESs around 32%, compared to 45% in most developed countries.8 Moreover, most TES scrubbers for the re-moval of particles in Ukraine are not efficient enough to meet the standards of Directive 2001/80/EC,9 and no TESs have installations for filtering sulfur oxides and nitrogen from flue gases.10

The inefficiency of TES power equipment makes it commercially unfeasible to install filtration equipment. For instance, systems for filtering flue gases could significantly reduce the efficiency of power units by 1.5-2%—and, in some cases, up to 5%—by increasing the consumption of power for internal use. In addition, such systems cost a considerable amount to operate, ranging from EUR 3mn to EUR 8mn annually.11

The majority of desulfurization and denitrification technology are intended for use during the base operating periods of power-generation equipment. How-ever, Ukraine’s coal-fired plants are forced to operate to cover peak and semi-peak loads in Ukraine’s Unified Power System. This is because of the high share of atomic energy stations, 48% in 2009, producing electricity in Ukraine and the general concentration of hydroelectric resources in the Dnipro, which is also a source of water supplies for many of the country’s regions.

8 Rukhlov, A.V., Electricity in coal mines in the context of problems in the power generation sector of Ukraine, Mining elctromechanics and automation: Science and technology series, 2007, Vol. 77, pp 19-25. Ukraine also lacks a fully developed scientific and technological infrastructure for the design, development and production of flue gas filtration equipment.

9 In Ukraine, 62% of TES coal-fired facilities are equipped with precipitators (ash filtration efficiency η=92–99%), 35% use wet scrubbers (η=92–96%, η=92–99%,) and 3% use cy-clone separators (η≤90%). See Y. Leha, O. Mysliuk and N. Korneliuk, “Ways to improve the filtration of flue gases at TESs,” Environmental Safety, 2008, №1, pp 42-50.

10 Desulfurization facilities have been planned, among others, for the new power units at the Dobrotvirska TES. See the report “Rehabilitating heating and power stations in Ukraine: A needs, costs and benefits assessment,” prepared by IMEPOWER, 2008.

11 Eugenio Podda, Megalopolis WFGD: Project Experience and Design Initiatives; Lars-Erik Johansson, FGD: Choosing NID® DFGD or Open Spray Tower WFGD; European Users Conference, Lisbon, 15–17 September 2009.

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Cogenerationplantsalsopollute

Ukrainehasmorethan20combinedheatingandpowerorcogenerationplants(CHPs),knownasTETslocally,withanoutputcapacityofover�0MW(seelistofTETsinAnnex1).ThesecompaniesarecategorizedaslargecombustionplantsandarethusgovernedbyDirective2001/80/ЄС.

Cogeneration plants are considered more efficient and eco-friendly than classicTESs.Still,Ukraine’sTETscurrentlyemitfarabovetheEUnormsofNOх.Forinstance,evenifitmaintainsalltheproperconditionsduringitsoperation,theKharkivskaTET-�stillemits400–�00 mg/m3 concentrations of NOх (using gas) and �20–��0 mg/m3 (using mazut)duringcombustion,whenthemaximumvolumeallowedundertheDirectiveforcompa-niesofthissizeis200mg/m3.

Ukraine’sTETsmainlyrunongasandhavetraditionallybeenviewedasenterprisesthatdonotpollutetheenvironmentwithSO2emissionsanddust.However,thegrowingcostofnaturalgasandproblemswithitsreliabledeliveryhavebeenforcingTETstolookattheoptionofswitchingtheirfacilitiestocheap,availablecoal.ThiskindofreconstructionisoccurringattheKaluskaTET,oneofthelargestinUkraine.Afteritsreconstructionin2009,theKramatorskaTETalsoreturnedtocoalfiring.Thiscouldturnsuchenterprisesintomajoradditionalsourcesofsulfurdioxideanddustpollution.GiventhatthemajorityofTETsarelocatedwithinmajormetropolitanareas,switchingtocoalcouldnoticeablyincreaseman-madepressureonthelocalenvironment.

Fuel consumption

The high level of pollutants, especially sulfur oxides, by TES companies is mainly a result of their use of coal as their main fuel. Nearly 90% of power units at Ukraine’s thermoelectric stations have been designed to use coal. Ukraine has many confirmed reserves of coal, which make this form of fuel a priority for domestic thermoelectric generation. Ukraine’s current Energy Strategy for the period to 2030 is oriented towards using only domestic coal for domestic power generation.12

Each year, Ukraine’s TESs use nearly 25 million tonnes of coal. Over the last 20 years, there has been a sharp reduction in the use of gas and mazut, from 50% to nearly 20%. The steep rise in the price of Russian natural gas has caused most gas and mazut-based power generation units to be shut down13.

12 The base scenario is for no imported heating coal over 2015–2020, while starting in 2030, plans are to use no more than 3.2% imported coal.

13 For instance, over 2010, none of the gas-mazut power units at Ukraine’s TESs were in opera-tion: two units generating 300 MW each at the Trypilska TES, three units generating 800 MW each at the Vuhlehirska TES, and three more units generating 800 MW each at the Zaporizka TES. Based on data from the Institute for Energy Studies, in Q1’11, consumption of natural gas at TESs belonging to Ukrainian power utilities was 175mn cu m less than in the same period of 2010. The Scientific and Technical Association of Power and Electrical Engineers of Ukraine, Center for Public Information on Issues in the Fuel & Energy Com-plex, Analytical Study of the State of the Fuel & Energy Complex of Ukraine, №410, Kyiv, 2011..

Whatimpedescompliancewithairqualitystandards


Use of low quality coal

The quality of coal that is used as fuel at Ukraine’s TESs does not correspond to the initially designed indicators, being typically lower in caloric value and high-er in ash content. Ukraine’s TESs were built to be fired by coal with a combustion level of 27.61 kJ/kg, under 17% ash content, and a maximum of 1.0% sulfur.14 Instead, the caloric value of coal that was delivered to NAK Energy Company of Ukraine’s TES in 2010 was only 22.08kJ with an ash content of 22.0%15.

The lower quality of coal has led to greater quantities of harmful emissions into the air. Compared to projected figures, using coal without enrichment increases the relative weight of sulfur oxide and particulate emitted by 30-40% per kWh of power generated16. In addition, the high ash content of the coal results in greater erosion of equipment and higher costs for internal power consumption at the TES, which increases the operating costs and reduces the overall efficiency of the station. Moreover, the high ash content of this coal prevents the industry from reaching a high efficiency coefficient, even with the most up-do-date fur-naces, and requires the use of natural gas to ignite the firing process.

Burning Ukrainian anthracite, the planned fuel for nearly 50% of the country’s power equipment, also leads to additional costs. The long-term extraction of an-thracite made it necessary to begin exploiting deposits in deeper layers, which contain slow-burring anthracite, which requires even the most modern ash and coal boilers to use natural gas to ignite the combustion process.

Monopolizedaccesstocoalleadstolowqualitycoal

InUkraine,accesstocoalishighlyrestrictedasthereisnofreemarketforthefuel.Currentpricesforcoalareformedasameansforcompensatingthecostofrunningcoalminesanddonotmeetmarketconditions.Thiskindofapproachhasledtoamonopolizedcoalmarket.ItimpedestheimportsofheatingcoalfromneighborssuchasPolandandRussiaandsuppliesbynon-residents,evenatpricesatparandofcompetitivequality.Theresultfordomesticcoalminingcompaniesisalackofincentivetomeettheneedsofcustom-ers,suchasthermo-electricutilitiesby,forinstance,reducingthesulfurcontentoftheircoal.

Today,thevirtualmonopolistcoalsupplierdeliveringtopowercompanieslargelyownedbythestateisastateownedVuhilliaUkrainy.Thiscompanyincludesstate-ownedminesand enrichment plants that are highly inefficient, outdated and close to the ends oftheirlifespansandwhoseproductioncostisveryhighandresultsinpricesthatarenotmatchedbyquality.Theaverageproductioncostofcoalin2010wasUAH��/t,whilethepurchasepriceofheatingcoalwasUAH3��-�3�/t.

14 Op. cit. Rukhlov, A., Vol. 78.15 Ukraine’s TES have been operating using low quality coal for decades. Because of this, the

stations were forced to make a series of design changes to their boilers and undertake orga-nizational and technological measures to adapt them to the actual quality of coal. The result is that TES boilers in their current state will be unable to work on the planned quality of fuel properly or long term without returning to their planned designs.

16 A 1 percentage point rise in the proportion of sulfur in coal increases the concentration of sulfur dioxide in flue gases by 2,300-2,500 mg/m3.

11

AgingequipmentandtechnologyanddifficultgeologicalconditionsintheminesalsonegativelyaffectthequalityofcoalextractedinUkraine.Thestate-ownedcoal-miningsectortypicallyhashighlywornworkingassets—morethan�0%ofthemineshaveneverdoneanyupgradinginthelast30years—anduseseventhosehighlyinefficiently.Moststatecompaniesminingheatingcoalare loss-making,making it impossible todoanyupgradingontheirownusingcompanycapitalandrequiringconstantinjectionsfromthestate.Althoughthevolumeofstatefundingofthecoalsectornearlyquadrupledover2001-2010,toUAH�.�bn,thecurrentcapacityofthestatetoinvestthenecessarycapitaltoupgradeequipmentisnotenough.

Thestatecoalsectorishighlyuncompetitiveandisartificiallycompensatedbymanda-toryprocurementsoffuelbythepowerutilitiesthatarelargelystateowned.Suchsub-sidizationoftheindustryattheexpenseofthermalgenerationcomplicatestheoptionsforpowercompaniestoattractthenecessarycapitaltobuildenvironmentallyfriendlyfacilities.Becauseofthisandbecauseofthelowenvironmentalstandards,Ukraine’sTESsburndirtycoalandhavenoreasontoswitchtocleanerfuels.

Duringthetransitiontomarketrelations,coalindustryenterprisesandpowercompanieswillbeinterestedinraisingthequalityindicatorsofthecoaltheyburn.Rightnow,“gas”coal,whichiswhattheremaining�0%ofUkraine’spowerequipmentrunson, is infargreaterdemand,asitisusedinthesteel-makingbusinessandisexportedabroad.

EnvironmentalrulesthatfavorpollutersDespite growing penalties and taxes for polluting the environment, the finan-cial incentives17 for polluters to reduce harmful emissions are insufficient. It is more convenient for energy companies to pay their fees and taxes than to invest in environmental measures. According to an OECD report,18 the small fees and low rate of collection suggest that Ukraine’s oversight bodies use inappropriate, flawed methods to assess the damage to the environment, so that they seriously underestimate the economic impact of pollution. In other words, the amount of annual fees paid by Ukraine’s power companies, which was UAH 520 million in 2009 alone, is less than 5% of the value of the damage that pollution causes to Ukraine’s population and economy in the form of additional illness and higher mortality (for details, see section on the impact of pollution).

WhatUkraine’sEnvironmentalStrategydoesnotmentionTheActionPlanforUkraine’sEnvironmentalStrategythrough2020containsnoconcreteindicatorsformaximumconcentrationsofvariouspollutants,suchassulfurdioxide,ni-trogen dioxide and nitrogen oxide or particulates. It only contains provisions for newlegislativeandregulatorydocumentstobedrawnup(Art.2.2.�)andplansformeasurestoestablishtargetindicatorsforthecontentofharmfulsubstancesinlinewithEUlegisla-tion(Art.2.3.1).

17 For instance, the Tax Code calls for increasing the tax rate for emissions from stationary facilities by 3.6 times. See the list of fees and taxes in the Annexes to this report.

18 See OECD, “Translating Environmental Law into Practice: Progress in Modernizing Envi-ronmental Regulation and Compliance Assurance in Eastern Europe, Caucasus, and Cen-tral Asia,” 2007.



TheActionPlanalsocallsfor“reducingthevolumeofemissionsofwidespreadpollutants:stationaryfacilitieshaveuntil201�toreducetheseby10%anduntil2020toreducethemby2�%ofthebaselinelevel”(Art.2.2).Butthebaselineitselfisnotestablished.Althoughallquantitativecommitmentsregardingthereductionofemissionsaresupposedtobecountedfrom2010,itisnotclearwherethequantitativedatafor2010hasbeenidenti-fiedandwhethertheyhaveactuallybeenestablishedornot.Thus,incontrasttoDirective2001/80/EC,theserequirementscanbeinterpretedinavarietyofwaysandeffectivelyignored.

Ukraine’s system of environmental monitoring and oversight has all the neces-sary components and generally resemble international practice in managing en-vironmental protection. But the practice of implementing environmental policy is very different from EU standards.

Firstly, Ukraine has published some figures about the worst industrial pollu-tion, but did not provide any information about the reason why these were above established norms. In this way, it is nearly impossible to analyze how effective government policy is in ensuring that polluters meet environmental standards. Government officials often refer to the large number of inspections carried out and the number of investigations into violations as an indicator of the success of their policies, but not actual reduction in emissions.19

Secondly, the Government lacks the necessary instruments and technical con-ditions to properly monitor and oversee.20 Inspectors and other employees at surveillance agencies have a hard time enforcing environmental legislation be-cause their human and financial resources are seriously limited, and they have no access to the latest data—or to the modern technologies needed to collect and analyze data. A total of only 130 Environment Ministry staff are responsible for administrating and granting permits to more than 15,000 companies through 27 territorial offices. Moreover, their salaries are much lower than in the private sector, which leads to a high rate of turnover and creates the conditions for cor-ruption to spread.

Ukraine has a program for polluters to do their own monitoring and to pay for its cost. But the results vary greatly between what state laboratories come up with and what the labs belonging to these companies get. This is due partly to the poor standards for ensuring the accuracy of results, partly to unreliable testing methods, and partly to the lack of regulated procedures regarding the condi-tions for testing.21

19 Ibid., OECD, 2007.20 Materials adapted from a report by the European Commission assessing cooperation be-

tween Ukraine and the EU.21 Ibid., OECD, 2007.

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MonitoringsystemrequirementsforEnergyCommunitymembers

Directive 2001/80/EC requires Energy Community members to set up their own pro-gramsformonitoringemissionsandadaptingtoEUdirectives.MonitoringsystemsinEUcountrieshaveanumberofcommonfeatures:theuseofmultiplemethodsforcheckingresultswithbothinternalandexternalqualitycontrols;theholdingofconsultationswithstakeholders such as representatives of heavily polluting industries and local govern-mentbodies;andtheprovisionofinformationsothatthepubliccaneasilyaccessit.Mostcountriesalsodelegatesomeoftheoversightfunctionstothelocallevel.

EnergyCommunitymembersusethecontinuousemissionmonitoringsystem,orCEMS,andconsistent—forinstance,daily—systemsformonitoringthelevelofpollutionclosetothesourceoftheemissions.Thecostofthismonitoringistypicallycarriedbythecom-panies,whoareexpectedtomonitorontheirown.Thesecompaniesarethenauditedtoensurethattheyareupholdingenvironmentalstandards.Themonitoring itself ishan-dledbyanindependent,accreditedinstitution.EUcountriesusestandardizedmethodstomeasureemissionstogetresultsthatcanbecomparedattheUnionandinternationallevels.

Sources: Guide to the Approximation of European Union Environmental Legislation, EU Directives

RegulatingthermalelectricitygenerationratesToday, the only available source of capital for large environmental projects or compensation for attracted financial resources applied to this purpose is the investment component of the electricity rates charged to customers by power companies. Still, because of the enormous amount of investments needed in general to update heat-generating equipment and install systems to filter flue gases, these are hard to justify economically and to charge the environmental investment component in electricity rates.

The current system for setting wholesale and retail electricity rates cannot en-sure the return of investments in flue gas filtration systems at TESs. What makes this impossible is the cross-subsidization and discount policy that reduce resi-dential electricity rates at the expense of industrial and commercial users and the overregulation of wholesale rates on the electricity market.

Residential users in Ukraine do not pay the real cost of the electricity that they use, as electricity is considered a social good. The result is that the sector does not earn the income necessary for sustainable growth and for investment in en-vironmental measures. Rates for residential electricity are 2-4 times lower than industrial rates and 3-12 times lower than what EU residents pay.22 This has made profit margins for generating electricity in Ukraine less in recent years than simi-lar indicators for power companies in EU countries.

The wholesale rate for power is based on the Rules of the Wholesale Energy Mar-ket (WEM) in Ukraine and largely depends on the cost of fuel, especially coal,

22 Compare data on electricity rate levels in Ukraine and the EU at www.nerc.gov.ua and www.energy.eu.



which constitutes 70-80% of the production cost of generating electricity at the country’s TESs. According to WEM rules, price requests from heat-generating companies are supposed to be based on actual technical and economic data from the previous period (month) with a margin of fluctuation of ±5%. This means that generating companies cannot significantly increase the price of wholesale electricity on the WEM and to thus earn additional income to institute invest-ment programs, including environmental ones.

DilatoryreformsontheelectricitymarketThe main factor keeping investors from putting capital into the implementation of the Directive’s requirements is the continuing postponement of reforms in Ukraine’s electricity sector. The Government itself will have no means to seri-ously fund thermal generation because it is scheduled to make major payments on foreign debts over the next five years. At the same time, the funds in the En-vironmental Protection Fund are not being directly put towards emission reduc-tion (see data on the amounts of received and spent funds in Annex 1).

It is also highly unlikely that thermal generation companies will be able to get major credit from international financial institutions like the IBRD, EBRD or EIB without state guarantees and basic reforms on Ukraine’s electricity market.23 For instance, in the EBRD’s lending portfolio on Ukraine, only 7% of loans have gone to Ukraine’s power sector, whereas in other countries in the region, this share is typically 10-20%. The available mechanisms for receiving bank loans for TES24 purposes is based on the growth of prices on the wholesale electricity market and is not enough to satisfy the real capital needs of thermal generation in full.

In short, Ukraine’s TES companies have little investment appeal because of the excessive administrative regulation on the electricity market, especially when it comes to companies owned by the state. Nor will the privatization of power com-panies guarantee attracting the necessary investment capital to upgrade gen-erating facilities unless there is reform in the energy market and investors can be offered clear, transparent and long-term guarantees that their environmental investments will have a return.

IneffectivetechnicalassistanceCooperation between the EU and Ukraine has not led to major improvements in environmental conditions. As Ukraine’s largest donor,25 the EU did not initi-ate projects directed at improving environmental management in general or the capacity of the Environment Ministry, in particular, to carry out environmental 23 See the Concept for Reforming the Wholesale Electricity Market (WEM). Reforming the

WEM is also called for in the Protocol on Ukraine’s accession to the European Energy Com-munity.

24 See Cabinet Instruction №648 dated 8.09.2004.25 Since 1991, the total volume of technical assistance provided to Ukraine by the EU through

the TACIS program, macrofinancing and humanitarian aid has added up to EUR 1 billion. See http://comeuroint.rada.gov.ua/komevroint/control/uk/publish/article?art_id= 52066&cat_id=44792.

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policy over 2002–2009.26 Instead, the EU supported the drafting of legislation that has had little sustainable impact. The TACIS program, the EU’s main in-strument for cooperation with Ukraine on environmental issues, only supported development of regional potential based on small-scale pilot projects. Until re-cently, the European Commission also gave no support to Ukraine for upholding international commitments.

The Commission began to change its approach to technical assistance to Ukraine by undertaking more comprehensive and systemic programs. In 2010, for instance, it initiated a new Twinning project with the Environment Ministry that was directed at increasing the agency’s technical capacities. This includes exchanging practical experience and learning methodology. At the end of 2009, two additional projects were launched to help Ukraine follow through on the Aarhus Convention27 and the Espoo Convention on assessing environmental im-pact in a cross-border context.28 In January 2011, the EU announced that it was launching a Budget Support program for the Government of Ukraine worth a total of EUR 35 million in support for the implementation of the national envi-ronmental strategy.29

Fordiscussion

How much incentive do environmental charges give companies to reduce their emis-sions?

HowcloselydoesUkraine’senvironmentalregulationsystemtodaycomplywiththere-quirementsofDirective2001/80/EC?

Whatisthemainreasonforthelowleveloffundingtomakethermalgenerationcompa-niesmoreenvironmentallyfriendly?

WhatkindofimpactdointernationaldonorshaveontheGovernment’senvironmentalpolicy?

26 See Evaluation of the European Commission’s Cooperation with Ukraine, 2010.27 The Aarhus Convention regulates the right to access to information, public participation

and access to justice on environmental matters.28 Under these two projects, the European Commission proposes to revise the Action Plan to

improve the legal environment and administrative potential necessary to comply with both conventions. This includes the participation of other ministries, including the Ministry of Energy and the Coal Industry.

29 The complete list of the EU’s main technical assistance programs in energy and the environ-ment in Ukraine can be found at: http://eeas.europa.eu/delegations/ukraine/projects/list_of_projects/projects_en.htm. Over 2007-2013, the EU has plans to provide nearly EUR 141 million in assistance to energy projects.


1� Reducing emissions from thermoelectric stations in Ukraine by meeting the European Energy Community requirements

The economic and social impact of emissions

DampenedeconomicgrowthPoorer quality farm products and lower land values

TES emissions constitute a constant source of soil pollution, primarily acid rain and ash sediment, with toxic heavy metals such as lead, cadmium, copper and zinc. These pollutants eventually end up in ground waters and rivers. Moreover, TES emissions have a negative impact on the health of those who reside where these hazardous materials settle. As an example, the ground soil in local eco-systems around the Burshtyn TES typically show higher levels of phytotoxic-ity, fluctuating between minimal in areas with complex planting and extremely intensive on the territory of the Burshtyn plant itself. This leaves surrounding farmlands and areas along roadways in danger, as the toxicity of surface areas are constantly higher than average.30

The operation of the TES has a noticeably toxic and mutagenic impact on local farming. Harmful emissions can lead to lower yields in orchards, pathologies in fruit-bearing trees themselves, and uncontrollable mutational processes among seed cultures. For instance, it has been shown that sulfur dioxide inhibits plant growth31 and makes farm produce more vulnerable to pests, leading to possible greater use of pesticides to counter this threat. Soil contaminants are also tied to a higher overall incidence of illness in the local population.32

Moreover, territorial pollution happens in an extremely uneven manner. Air pol-lutants settle and contaminate the groundcover in concentric bands that extend as far as 20-30 kilometers. Dust, in combination with heated air, does not settle immediately around the TES but moves with air streams and gradually lands on the soil. Within this area, completely safe farmland borders on “islands” of con-taminated parcels. Thus, in order for farmsteads and commercial farms located within these zones to be certified as growing environmentally clean produce, a labor-intensive and costly procedure needs to be undertaken to establish the boundaries of the polluted areas.33

30 See Penderetskiy, O.V., Determining soil contamination from the Burshtyn TES in order to assess opportunities to grow environmentally-clean agricultural products, The Environ-ment and Safe Living, №6, 2004, pp 62–69.

31 B. Miller, B., Coal Energy Systems, Elsevier Academic Press, 2005, 507 pp.32 Zhdanov, V.V., An assessment of the impact of emissions from the Luhansk TES on soil

contamination with heavy metals, Current Issues in Hygiene and Environmental Safety in Ukraine: Third Marzeyev Readings, materials from the academic conference in Kyiv, 24-25 May 2007, pp 57–58.

33 Mishchenko, L.V., A geoecological audit of the impact of human factors on the environ-ment and health of the local population, using the Pokuttia region as an example, Candi-date of Geographical Studies dissertation, Chernivtsi, 2003, 21 pp.

1�

Certifyingecologically-cleanproducts:Ahighstandard

Ukraineappliesbothnationalandinternationalstandardsofecologicalcertificationforplotsoflandandtheproducegrownonthem.CompliancewithinternationalcriteriaisdeterminedbysuchorganizationsastheGlobalEcologicalNetwork(GEN)andtheInter-national Federation of Organic Agriculture Movements (IFOAM).The procedure estab-lishedbytheseorganizationsprimarilyseestheproductionprocessasrequiringcertifica-tion,nottheendproduct,anditstartswithinspectingthequalityofthesoilasthefirststep.34FarmsthatexportorganicproductstotheEUmustundergoastrictcertificationprocedureregulatedbyECResolution2092/91,whichisdonebyforeignstandardizationagenciesthatoperateinUkraine.

UsersoflandplotsthatarewithinthepollutionzoneofaTESarefacedwithseriouscom-plicationsduringthisprocedure.This landisalsonoteligibleforstatusasaspecialre-sourcezone,whereitispermissibletogrowproduceforpediatricanddieteticpurposes.Suchareasnormallyneedtobeacertainregulateddistancefromindustrialareas.3�Thismeansthatthesefarmenterprisesareeffectivelyoutoftherunningforthepromisingmarketoforganicandecologicallycleanproducts.

The very fact that a piece of land is in a risk zone has a negative impact on its value when it comes to selling the lot. Given that the practice of selling or trans-ferring land under long-term leases through auctions is growing in popularity in Ukraine, this factor is likely to play an even more important role. The require-ment to have an expert assessment of the starting price of a parcel of land and to complete the technical certificate providing detailed information about the land that is being put up for sale could significantly reduce the chances of a success-ful sale of those parcels that are in polluted zones.

Additional costs to the healthcare system

The country’s economy suffers losses because of the growing cost of healthcare paid by both the State Budget and private households. It has been established that a day of hospitalization costs at least UAH 500, while an emergency house call is at least UAH 300. Conservative estimates are that the direct losses on doctors’ visits and hospital services due to illnesses caused by air pollution in Ukraine is over UAH 1 billion annually.36

The country suffers even greater losses because of the higher mortality rate caused by poor air quality. Although the methodology for calculating the eco-nomic cost of increased mortality is fairly ambiguous (see Annex 2), the data available in Ukraine is more than just suggestive. For this country, the value of statistical life (VSL) is around US $90,000, based on 2006 figures. This means that the most conservative estimates in pre-crisis times result in a cost of increased

34 Artysh, V.I., Improving the system of regulation of the production of organic products in Ukraine, Scientific Courier of the National University of Bioresources and Nature Manage-ment of Ukraine, №145, 2010.

35 Mozalova, M., Regulating the certification of soil zoned for agricultural use, Issues in Legal-ity №103, 2009.

36 Strukova E., Golub A., Markandya, A., The Cost of Air Pollution in Ukraine. Access: http://ideas.repec.org/p/fem/femwpa/2006.120.html.

Theeconomicandsocialimpactofemissions


mortality due to air pollution that is UAH 12 billion per annum.37 This means that Ukraine loses nearly 4% of GDP every year. By comparison, Russia loses 5% of GDP, while developed countries lose under 2%.38

AdditionalcostsduetotheemissionofcertainharmfulpollutantsinRussiaandtheUS

InRussia,everyadditionaltonneofSO2coststhehealthcaresystemEUR3,000annually.Theoverallannualburdenofadditionalcoststhroughhigherratesofdiseaseandmortal-ityduetoSO2emissionsisnearlyEUR4bnandEUR1.�bnannuallyfromNOx

39emissions.

In the US, similar costs are a factor higher: for instance, every additional tonne of SO2

andNOxleadstonearlyUS$10,000additionalcoststothebudgetandannualcoststothehealthcaresystemduetosuchdiseasesascancerandrespiratoryandpulmonaryill-nessescausedbyairpollutionamounttooverUS$18�bnayear.40

Deterioratingqualityofhumancapital

Reduced life expectancy

Emissions from Ukraine’s TESs are damaging the health of those who live adja-cent to such plants. This is seen primarily in the inhalation of coal dust and par-ticulates, which are found in greater concentrations in the air around TESs. They also contain a slew of heavy metals, which has led to nearly double the normal rate of illness in those regions:

respiratory diseases – 1.9digestive illnesses – 2.6diseases of the circulatory system – 1.6endocrinal diseases, eating disorder, metabolic imbalances – 3.4birth defects – 1.441

It has been shown that the general rate of severe and chronic diseases of the respiratory system, such as ARD, pneumonia, chronic bronchitis and bronchial asthma among those residing near TESs is on average 2.1 times higher (see An-nex 1). A 10% increase in the concentration of coal dust in the air leads to a 3.9% rise in the incidence of respiratory disorders, a 2.5% rise in circulatory disorders, and a 3.9% rise in birth defects.

Those groups of the population who suffer the most from this negative impact are children, especially children under the age of six. In addition to the con-tinuous worsening of overall and local immunity in children, there has been an

37 Ibid.38 Ibid.39 http://www.cedelft.eu/publicatie/external_costs_of_coal/878?PHPSESSID=f1382192

38c72e8038a0a5694354af1d40 See assessment of expenditures for selected countries in Annex 1.41 V. Zhdanov, “Hygienic evaluation of the impact of harmful emissions from TESs on the

health of the local population and arguments for various prophylactic measures,” disserta-tion, Candidate of Science, 14.02.01- 2009.

19

increase in disorders of the broncho-pulmonary system.42 Studies have recorded excessive concentrations of heavy metals such as cadmium, copper, manganese, lead and zinc in the hair of children who live directly near TESs. This suggests how the cumulative effect of exceeding emission norms, taken together with the significant pollution from transportation, causes an accumulation of dangerous chemical elements in the human body. Overall, children who live in industrial zones with various types of air pollution have health indicators that are two to three times below the average for children who live in ecologically clean areas.

ThelinkbetweendesulfurizationandinfantmortalityinGermany

InastudyofinfantmortalitycarriedoutinGermanybetween198�and2003,43mortalitywascomparedbeforeandaftertheinstallationofadesulfurizationplantatalocalpowerplant.Thestudyrevealedthatareductioninemissionssaved8�0–1,�00infantlivesperyear.

Air pollution causes up to 90% of all carcinogenic risks linked to environmental pollution. Over the last 50 years, the lung cancer rate in heavily industrial areas has risen more than fivefold, especially through the use of powerful TESs, the first of which went into operation nearly 50 years ago.

Air pollution leads to a significant increase in overall mortality rates in a given population. And this group of diseases is one that underlies the most deaths among Ukrainians: cardiopulmonary diseases and cancer of the lungs—togeth-er result in as much as 68% of deaths due to disease. An analysis of additional mortality in Zaporizhzhia due to sulfur dioxide and coal dust emissions in just one district of the city revealed that 100 more people died every year - that is 1,700 per 1,000,000 annually.44 Estimates place the absolute number of addition-al deaths caused by air pollution in Ukraine at nearly 30,000 every year.45

Emissions from the country’s largest TES affect the health of residents in eight oblasts: Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Kyiv, Luhansk, L’viv, Vin-nytsia, and Zaporizhzhia. According to estimates, more than 800,000 Ukrainians live within 30 kilometers of a major TET. This number would be even larger if the emission zone of those CHPs located near or directly in major cities is taken into account. The problem with pollution has a cross-border aspect as well: on one hand, Ukraine pollutes the territories of other countries; and on the other, the country is also polluted by neighboring countries (see Annex 5).

42 V.M. Kulias, O.B. Yermachenko, O.A. Trunova, I.B. Ponomariova, D.P. Sadekov, V.S. Ko-mov, and O.A. Dmytrenko, Microbiocenosis of the mucous membranes of the throat and nose of children inhaling the ash of multicomponent chemical dust, Medical Perspectives, Vol. XV, 1, 2010.

43 See Simon Lüchinger (2009), cited at ftp://ftp.zew.de/pub/zew-docs/dp/dp10079.pdf. 44 M. Brody, J. Caldwell and A. Golub, Developing Risk-Based Priorities for Reducing Air Pol-

lution in Urban Settings in Ukraine, Journal of Toxicology and Environmental Health, Vol. 68, №9 (2005), pp. 356–357.

45 E. Strukova, A. Golub and A. Markandya, Air Pollution Costs in Ukraine, Access: http://ideas.repec.org/p/fem/femwpa/2006.120.html.



Loss of workforce

TES companies are finding it hard to keep highly-qualified specialists. Such pro-fessionals are extremely mobile and are always on the lookout for a job in a less polluted environment for themselves and their families.

Projected losses due to high absenteeism during operating hours due to illnesses caused by the poor local environment amounted to more than UAH 500mn in 2005, the last year for which figures are available. If the direct loss of time needed to rehabilitate and renew working capacities are added—normally up to 7 days after hospitalization—the scale of these losses among the working population will be even higher.

This trend towards a declining quality of workforce particularly affects those counties that are located right next to TES operators. Although TESs are gener-ally located far from major urban conglomerations in Ukraine, the territories im-mediately adjacent to them tend to be heavily populated. The average number of employees at a single TES is 1,500-2,000, most of whom live with their families as close as possible to their jobs. Thus, although TESs offer locals the prospect of a decent job and social benefits, they simultaneously jeopardize the health and performance of these same workers.

ImpedingthedevelopmentofUkraine’spowergeneration

Greater risks for investing in heating plants

Because Ukraine lacks a consistent policy regarding the implementation of Directive 2001/80/EC, the risks related to investing in heat-based power gen-eration are higher, which puts a damper on incoming investment.46 For foreign investors, the lack of negative environmental impact from carrying out a given project is one of their criteria in choosing where to invest their capital. For in-stance, the EBRD has been increasing its investments into alternative energy in Ukraine as well as into projects aimed at reducing emissions of greenhouse gas-es. According to the already-announced “Initiatives in the sustainable energy sector”47 policy of the EBRD, the Bank plans to support “clean energy” projects, especially renewable ones, and places no priority on upgrading the power units of Ukraine’s TESs.

Complications with trading Ukrainian electricity on EU power markets

If Ukraine’s TESs continue to generate power using technologies that cause sig-nificant environmental damage, it will be very hard to integrate the domestic grid into the single European electricity market. All other factors being equal, Euro-pean buyers tend to prefer to buy power that is being generated using “clean” technologies. On one hand, European countries and many other world players 46 Over the last 20 years, because of anticipated stricter EU environmental policies and grow-

ing uncertainty regarding the size of fines for emissions, the construction of new coal-fired power plants in the EU has effectively ground to a halt (see Annex 1).

47 http://www.ebrd.com/russian/pages/sector/energyefficiency/sei/strategy.shtml

21

on the electricity market, belong to that category of electricity consumers who are prepared to pay more for clean energy.48 On the other hand, EU power com-panies are concerned about losing their competitive edge due to higher environ-mental standards and are demanding that the European Commission apply the same rules to trading partners.

Thecarbonleakageeffect

Europeanproducersarealwaysonthesearchforwaystocompensatethecostofimprov-ingtargetedEUrequirementsregardingCO2emissions.Someofthemaretransferringtheirpowergeneratingfacilitiestocountriesthatdonotlevystrictfinesforemissions.Thisisleadingtothephenomenonof“carbonleakage,”wherethereductionofemissionsincountryAisleadingtoaproportionallyhigherlevelincountryB.Moreover,thegloballevelofemissionsisnotbeingreduced,whichiscastingdoubtonthesuccessofclimatechangepoliciesaltogether.Thistrendisparticularlynoticeableinenergy-intensiveman-ufacturingsectors,suchascement,steel,paperandchemicals.

In a situation where there is strong competition on the single EU energy market, such production factors as environmentally friendly generation—which at first glance would seem secondary—turn out to be key factors that force a buyer to choose the more compliant provider rather than any other one.

The growing cost of environmental programs in the future

By ignoring Directive 2001/80/EC when constructing new power units now, Ukraine will face a higher cost to institute environmental protection measures further down the line. The country already felt the effect of such “path depen-dence”49 before, when the prior selection of a particular technology made efforts to modernize the system ever more complicated and costly. Those who draft projects to reduce emissions at existing TES power units often face a dilemma: to choose new equipment on a short-term basis (10-15 years) as a relatively in-expensive but not very effective choice, or to choose more costly technical solu-tions that will later be adapted to new equipment that will replace that which has completed its useful lifespan.

Timeisnotonthesideofagingpowerunits

Everyyear,bringingexistingTESpowerunitsinlinewithenvironmentalregulationsbe-comesamorecomplicatedprocedure.ThedesignoftheseTESs,whichwerebuilttomeetthespecificationsofoutdatedsovietdustcollectors,desulfurizationplantsandboilerashandslagremovalfacilities,wassupposedtoofferconsiderableadvantagesinexploita-tion.But today theyhaveturned intoaseriousbarrier to installingmoderntreatmentsystems.SomeaspectsoftheconstructionofthesovietTESsmakeitunreasonablyex-pensiveandevenriskytoapplycontemporarysolutions.

48 According to a study by IBM Global Business Services, 67% of users surveyed in six coun-tries—Great Britain, Germany, Holland, the US, Japan, and Australia—have indicated the willingness to pay higher rates for environmentally friendly energy. For more details, see http://www-935.ibm.com/services/us/index.wss/ibvstudy/gbs/a1029014.

49 For more details, see Page, S.E., Path Dependence, Quarterly Journal of Political Science, 2006 (1), pp 87–115.



For instance, manyTESs have no room to install sulfur and nitrogen treatment plants.Sulfurdioxideaccelerates thecorrosionofmetalsand is themostdamagingchemicalmaterial pollutant. Changes in temperature and humidity increase the pace at whichequipment iswornoutthroughcorrosion.�0 If theproblemofemissionsof thiskind isnotresolved,Ukraine’sTESs,whicharealreadyoperatingatthepeakoftheirnormalpo-tential,couldfindthemselvesreachingtheendoftheirnormal lifespansmorequickly,leadingtoevenmoreemissions.

LossofstatusasareliableinternationalpartnerIf Ukraine fails due to lack of motivation to fulfill the commitments it made on its accession to the European Energy Community, Kyiv’s stable foreign policy course will be undermined, as well as its status as a reliable foreign partner. Ukraine is already losing its reputation because of misappropriation of Kyoto Protocol funds and failure to comply with the Aarhus Convention in domestic legislation.51

Sanctions from the EEC and publicity in the international community could put under question Ukraine’s ability to fully participate in multilateral projects. Such an official step by the EEC Council of Ministers, such as announcing the fact that Ukraine’s legislation is not in compliance with related EU laws, might not have any legal force in the final analysis, but it would definitely complicate any further integration of Ukraine’s energy market with the Community’s en-ergy markets.

SanctionsbytheEuropeanEnergyCommunity

TheleadershipoftheEECcouldraisesanctionsagainstacountrythatisinviolationofitsrulesifthereisevidenceofaviolationortherearedoubtswhetherthecountrywillmeetpointsintheTreatyinatimelymanner.Currently,EECmechanismstodealwithmemberswho“donotplayfair”aremoreorientedtowardsconsensualproblemresolutionthantowardsseverepunishments.However,infuturethepenaltiesfornotcarryingoutcom-mitmentsthatacountryhastakenoncouldbemoreserious.

TheEuropeanEnergyCommunity’sinstitutionalstructureprovidesforaseriesofmecha-nismsintendedtospurmembers,especiallynewones,tofullycomplywiththepointsintheAgreement.

Firststage.TheEECSecretariatlaunchesthepreliminarystagesofconflictresolutionandsendsthe“guiltyparties”anopenletter.Shouldsuchmembersdelaymeasurestoresolvethegivenproblem,theEECsendsitsreasonedopinionandpresentsitsreasonedrequest,bothofthemthenpostedforopenaccess.

50 B. Miller, Coal Energy Systems, Elsevier Academic Press, 2005, p. 507.51 Ukraine’s ratification of the Aarhus Convention in 1999 failed to push the country to change

its domestic legislation to provide both individuals and civil society organizations access to information about the environment. In 2011, Ukraine could lose its membership in this Con-vention. See http://www.rac.org.ua/skhovishche-novin/novina/article/orguska-konven-cija-turkmenistan-chi-ukrajina/.

23

Secondstage.Ifsuchprecautionarymeasuresproveinsufficient,theCommunity’sCoun-cilofMinisterscanofficiallyannouncethattherehavebeenviolationsbasedoncollectedinformation,includingevidencefromthirdparties,justificationfromthe“accused”party,andtheopinionoftheAdvisoryCommittee.Althoughsuchinstrumentsbelongtotheclassof“softpower”measures,theirapplicationistypicallywidelybroadcast,aswasthecasewiththeSerbianGovernment,whichwasunabletoensuretheproperimplementa-tionofcertainEUDirectives.

Thirdstage. In thecaseofaserious, lengthyviolationofcommitments, theCouncilofMinistershastherighttosuspendcertainrightsthatamembercountryenjoysthroughitsAgreement,including:therighttovoteintheCommunity,toparticipateinmeetingsandtomakeuseofmechanismsprovidedbytheAgreement.Thelastincludeusingthepowergridwithouttraderestrictions,makinguseofassistanceinthecaseofanemer-gency,andhavingthelicensesandstandardsofoperationsofutilitiesrecognized.

Source: European Energy Community (EEC)

Fordiscussion

HowaccuratedoyouthinktheestimatedcostofUkraine’sproblemsis?

HoweffectiveanincentivearecurrentEECsanctionstoensurethatallpointsintheTreatyarefulfilled?

TowhatextentdoyouthinknotcarryingouttheenvironmentalDirectivewillcomplicateintegrationintothesingleEUelectricitymarket?

How significantly would you say air pollution affects the working age population andhumancapitalasawhole?

Whatotherinterestedpartiescanyouthinkofforwhomexcessiveemissionsfromther-malgenerationconstitutesaproblemandwhatisthecostofthatproblemforthem?



A vision of the future of thermal power generation in Ukraine: eco-friendly and safe for humans

If Ukraine’s thermo-electric generation is modernized along the principles of sustainable development and completely complies with the environmental con-ditions of the European Energy Community, this sector will become safer for humans and environmentally friendly.

ThepositivefutureimpactofmeetingEECenvironmentalrequirementsThe activity of the Energy Community is aimed at reaching three key goals: lib-eralizing the market and increasing competitiveness; increasing the security of energy supplies; and reducing the impact on the environment. The most positive impact from Ukraine’s accession to the Community is seen as coming from the first two goals: simplifying access to the unified European electricity market, gaining the opportunity to establish direct links to end users, diversifying supply sources and increasing energy security. But the environmental requirements are too often seen as an obstacle and an extra “whim” on the part of the Europeans.

In actual fact, a realistic vision of the future of thermal generation in Ukraine within the common European energy market is impossible without the environ-mental aspect of integration. The overall success of integration into the EEC de-pends on a clear understanding of the full range of future positive effects that will accompany joining the common energy space, including positive changes in environmental protection.

The table below shows the potential costs and benefits that carrying out the en-vironmental requirements of the EEC could bring to the basic interested parties in Ukraine.

2�

Future positive costs and benefits of meeting EEC environmental requirements (Directive 2001/80/EC)

Keyinterestgroups Benefits Costs

Individual Ukrainians

Life expectancy should rise, while infant mortality and the loss of years of life due to illnesses caused by the unsatisfactory state of the atmosphere should go down.

• More expenditures on power required

Business

Environmental law will become more predictable. Clearer requirements regarding the volume of emissions, the timeframes for acting and the size of environmental taxes should make it easier to plan production operations.Additional incentives will encourage the modernization of existing facilities and technologies and to come up with new, more efficient generating capacities.Electricity generated in an environmentally friendly manner will be in greater demand on the common European market.Investments in eco-friendly policies and the application of the best available technologies should promote a better image for companies, which will begin to be associated with cutting-edge achievements in environmentally-oriented power generation.A lower rate of disease will make it possible to improve the quality of human capital and the overall employability of workers. At the same time, it will minimize economic losses due to temporary inability to work.

•

•

•

•

•

Longer ROI term

The State

The Ukrainian side will recover its status as a reliable partner in international energy and environmental cooperation.Ukraine will enjoy the full rights and preferences due to it as a signatory to the ECT and will avoid sanctions for not enforcing the Treaty’s provisions.Additional incentives will arise to reform the energy sector.Public spending on healthcare should go down, especially in areas with a high level of pollution from TESs.

•

•

••

Need for institutional changes and additional costs to introduce effective environmental policies

European partners

A reduction in the amount of cross-border leakage of air pollution should improve the environment for a number of neighboring EU member countries.Ukrainian and European power generating companies should find themselves operating on a more level playing field. Additional spending on environmental protection measures will affect all participants in the common energy market and not just EU members.New opportunities to invest in joint environmental projects will arise. European partners will be more eager to invest in and provide credits and technical assistance to Ukraine.

•

•

•

More competition from clean Ukrainian power

Source: ICPS

AvisionofthefutureofthermalpowergenerationinUkraine:eco-friendlyandsafeforhumans


TheenvironmentwillremainapriorityReducing man-made pressure on the environment is one of the most important benefits that Ukraine could enjoy from having joined the EEC. However, the re-lated positive effects will not be felt immediately, but in the medium and longer term. The “market” and “security” components of the ECT will be felt sooner than the environmental one.52

In this vision of the future, Ukraine will continue to meet its environmental com-mitments to the EEC, successfully taking advantage of all the benefits of par-ticipating in the Treaty. And, on the contrary, if integration into the EEC moves away from the desired course and problems with funding or diplomatic support from the EU arise, this will no longer offer an excuse to roll back the environmen-tal protection program.

EnvironmentalstandardswillmeetEuropeanrequirementsThe environmental requirements of the Energy Community will continue to be the main incentive for making heating plants more environmentally friendly, as their modernization is supposed to be in line with the main framework agree-ment, Directive 2001/80/EC “On the limitation of emissions of certain pollut-ants into the air from large combustion plants.” In Ukraine, all the necessary legislative conditions for complying with this Directive are to be set in place and its provisions developed in a National Action Plan to reduce harmful emissions. During the drafting of this plan, Ukraine will be guided by detailed recommenda-tions for this type of document from the European Commission, which includes pathways to reach goals with the help of European methods and practices. The set of measures in the Action Plan will be aimed at meeting established norms and sources of funding and will take into account realistic timeframes for com-plying with EEC requirements.

VolumesofemissionswillgodownUkraine will ensure the gradual convergence of the concentration of specific emissions of pollutants from new and existing combustion plants with those lev-els that are established in the Directive. The actual concentrations of emissions at new TES power units will approximate European norms for dust at 30–50 mg/cu m, sulfur oxides at 200-400 mg/cu m, and nitrogen oxides at 200–600 mg/cu m. A state system for environmental monitoring that has been reformed in line with best European practice will provide reliable information on the pace of annual reduction of emissions.

52 The European Commission’s report on EEC activities for 2011 shifts meeting environmental priorities to medium term objectives while noting that this will take place no earlier than when national markets are “opened” an the delivery of electricity becomes reliable. See ec.europa.eu/energy/gas_electricity/community/doc/20110310_report_en.pdf).

2�

AvisionofdevelopmentofthermalgenerationinPoland

Coalwillcontinuetobeamajorfuelinthecountry’spowergenerationsector,butitwillbegintobeusedmoreinagasifiedorliquidstate.PolishTESswillusecleancoaltech-nologiessuchasCarbonCaptureandStorageandgasifyingcoal, thus reducingemis-sionsintotheair.

In2020,PolishresidentsshouldnotbefeelingtheimpactofconcentrationsofashthatarehigherthanthoseallowedbyECDirectives.Asaresult,thenumberofrespiratoryandcardiologicalillnesses,aswellasthecoststothehealthcaresystem,shouldstartdecreas-ing.

Source: Energy Strategy of Poland

AvisionofthefutureofthermalpowergenerationinUkraine:eco-friendlyandsafeforhumans


Options for resolving the problem

During the process of adapting to Directive 2001/80/EC, countries are expected to develop a strategy for reorganizing their TESs and to establish which existing generating capacities will be decommissioned, which ones will be modernized, and how many new power units will have to be brought on line. The two latter options typically mean: 1) changes to the balance of fuels more towards natural gas; 2) a higher quality of fuels, such as enriched coal; 3) greater efficiency in the production process; and 4) the introduction of gas-cleaning technologies. EU countries are following a variety of ways to adapt to the Directive.

The end of lifespan option. Countries decide to shut down a TES when upgrad-ing makes no economic sense. The lifespan of such power units is limited to a few years or because the designated number of hours of operation is running out. Choosing this option could indicate planned changes in the energy balance of the country in favor of atomic energy or renewable sources of energy. For instance, after shutting down most of its TES, France switched to mostly atomic energy. Using this option requires diversifying sources of energy, dealing with the social impact in those regions where plants are being shut down, and renew-ing the polluted territory.

The extended lifespan option. Countries upgrade their existing TESs, switching them to basic power mode and increasing their load, so a few modernized TESs can compensate for the capacities of those that have been shut down. Great Brit-ain and Ireland are examples of countries that have kept a series of major TESs by upgrading them and switching them to being gas-fired. Germany, which has also kept most of its TESs, radically improved the quality of its fuel coal. The downside of this option is that modernizing old power units does not necessarily allow the country to fully meet environmental requirements and it is not always economically sound, given the small amount of extended lifespan added to the block.53

The starting from scratch option. Building new TESs makes it possible to use the latest technologies for capturing harmful emissions and to switch to cogenera-tion. Introducing this option is complicated by the need to attract a large amount of investment up front and to designate suitable locations for new power sta-tions.

53 Worn and obsolete power units are typically reconstructed so that their lifespan is extend-ed, but usually only for 10-15 years. This casts doubt on the point of investing major capital in highly costly gas cleaning equipment.

29

Proposed solutions

Over 2011–2016, Ukraine is supposed to start meeting the requirements of Di-rective 2001/80/EC regarding the reduction of emission and heat-generating plants in order to improve the health of its population. But this has to happen without risking the reliability of the unified power system in Ukraine, which means:

to establish the basic principles of energy security—the best balance between domestic and imported fuel and energy resources;to prepare a National Emission Reduction Plan;to draw up a Strategy or plan for handling TES emissions: using ash slag and other byproducts of sulfur and nitrogen treatment, such as gypsum, nitrogen fertilizers, and so on;to establish permits for concentrations of emissions that are based on best available techniques and reflecting local features;to develop a strategy for decommissioning aging power units; the basis for extending the use of newer units on condition that they are completely up-graded, including the installation of efficient gas filtration units, and the principles for building new power-generation facilities that meet the require-ments of EC Directives;54

to amend existing legislation to ensure the fulfillment of the National Emis-sion Reduction Plan and the upgrading and new construction of TESs;to implement other provisions of the Energy Community in a timely manner, especially Directive 2003/54/EC, which calls for the completion of reforms of the electricity market;to reform the coal industry by introducing a coal exchange.

Fordiscussion

TowhatextentdoyouagrewiththevisionofthefutureofUkraine’sthermo-electricsec-torpresentedhere?

HowworthitisitfortheEnergyCommunitytoextenditstimeframesonenvironmentalrequirements?

Inwhatwaycanthereductionofemissionsatheat-generatingplantsaffectvariousin-terestedparties?

Whatotheroptionsarethereforresolvingtheproblemofpollutingsubstances?

54 Directive 2009/72/EC dated 13 July 2009 on the basic rules for internal electricity markets, EC Regulation № 714/2009 dated 13 July 2009 on the requirements for access to power grids that provide cross-border exchanges of electricity, and Directive 2005/89/EC dated 18 January 2006 on measures to ensure power supply and investing in infrastructure, and so on.

Proposedsolutions


Annex 1 Tables and charts

Table 1. Volumes of air emissions from power and thermal generation in Ukraine over 2005–2007

Pollutant200� 200� 200�

emissionvolume,’000t

%oftotalemissions


%oftotalemissions


%oftotalemissions

NOx 154.06 30 158.21 32 172.34 24SOx 876.06 73 1,114.64 77 1,069.24 79Dust 327.72 42 347.61 44 306.24 41

Source: Environment Ministry, based on data provided by the Institute of Energy under the National Academy of Sciences of Ukraine

Table 2. Comparison of EU and national requirements for emissions of air pollutants from TES flue gases

І.Newcombustionplants

Pollutant,thermalcapacity,MW

Nominalemissions,mg/cum

Directive2001/80/ECEnvironmentMinistry

Decree№309of2�.0�.200�

EnvironmentMinistryDecree№�41of

22.10.2008Particulates P>100* 30 50 30

Sulfur dioxide P>100 200 500 200

Nitrogen oxides P>100 200 500 200

31

ІІ.Upgradedcombustionplants

PollutantThermalcapacity,

MW

Currentemissionlevel,

mg/cum

Nominalemissions,mg/cum

InexcessofECDirective,%Directive

2001/80/EC

EnvironmentMinistry

Decree№309of2�.0�.200�

EnvironmentMinistry

Decree№�41of22.10.2008

Particulates P>500**P<500

1,000-1,700*** 50100

50

as of 01.01.2016

50100

2,000–3,400

Sulfur dioxide 100<P<500

P>500

3,000–7,000 2,000–400400

500

as of 01.01.20162,000–400

400

750–1,750

Nitrogen oxides 100<P<500

P>500

700–1,800 600200

500

as of 01.01.2016

600200

350–900

* P>1000 applies to power units generating >50 MW.** P>500 – to units generating >160 МW.*** Does not include the level of emissions from reconstructed dust-capturing equipment.

Source: Ministry of Fuel and Energy

III.CombustionplantsofmajorpowergeneratingcompaniesinUkraineEmissionsfor2009,mg/cum

Pollutant Actual Directive2001/80/EС Excess,%NAK Energetychna Kompania Ukrainy (EKU)

Sulfur dioxide 3,300 400 825Nitrogen oxides 1,050 200 525Particulates 1,200 50 2,400

SkhidEnergoSulfur dioxide

Zuyivska 2,637 400 659Luhanska 5,483 400 1,371Kurakhivska 3,773 400 943

Nitrogen oxidesZuyivska 1,224 200 612Luhanska 1,408 200 704Kurakhivska 486 200 243

Source:Company data

Annex1


Chart 1. Technical state of NAK EKU TES power units relative to their lifespans

Note: As of April 2011, NAK EKU power units generated a total of 23 GW or 85% of all available capacities at Ukrainian TESs.

Source:Y. Trofymenko, “Approaches to equipping NAK Energetychna Kompania Ukrainy TESs with gas-cleaning equipment as part of the implementation of Directive 2001/80/EС,” presentation at roundtable on “Integrating Environmental and Energy Policy: Challenges for members of the European Energy Community,” held on 7.12.2010.

Table 3. Estimates of the cost of implementing Directive 2001/80/EC5556

Organization Parameters Assumptions

Institute of Energy under the NAS55

Timeframe: by 2020Cost: US $16-17bnCapacity: 27–28 GW

Extending the lifespan of power units by installing cleaning systems on coal-fired units and applying primary measures to reduce NOx emissions on gas oil units along with the installation of emission reduction systems.

VAT L’vivORHRES56

Timeframe: 20 years Cost: US $22bn Capacity: 27.122 GW

Change of electrical filters: US $40/kWConstruction of desulfurization plants: US $200/kWEquipping boilers with gas denitrification catalyzers: US $100/kWDollar inflation: 3% p.a.

55 See B.A. Kostiukovskiy, S.V. Shulzhenko and N.P Nechayev, “Approaches to meeting envi-ronmental requirements regarding emissions of air pollutants in the thermal energy sector in Ukraine,” Institute of Energy under the NAS.

56 See Energy and Electrification №7, 2010, pp 39–42.

0

50

100

150

200

250

300

350

1,100 MW

15,414 MW

1,446 MW

4,800 MW

Lifespan of metals established by current norms

Permissible individual lifespan

Individual lifespan

Idle lifespan

7 blocks4.8%

61 blocks67.7%

7 blocks21.1%

5 blocks6.4%

000

hour

s

33

Organization Parameters Assumptions

NAK EKUTimeframe: by 2030Cost: US $3.9–6.8bnCapacity: EKU plants

In 2009–2010 prices

Donbas Fuel & Energy Company (DTEK)

Timeframe: by 2018Cost: UAH 85bn57

Capacity: 22.1 GWCost: US $3–4bn58

Capacity: DTEK plants

Constructing desulfurization and denitrification plants: US $350/kW

Source: ICPS5758

Table 4. Age of TESs in EU as of 2005Averageage

ofTESpowerunitsCapacitiesolderthan2�years,%

Capacitiesolderthan40years,%

Coal-fired 26 54 9Gas-fired 12 17 1Mazut-fired 26 55 5All power units 21 42 6

Source:Tzimas et al (2009)

Table 5. The cost of damage from additional illnesses and mortality

CountrySO2 NOx Dust(PМ2.�)

EUR/tonneAustralia 9,048 8,334 36,392China 1,090 1,003 4,381European Union 7,948 7,320 31,965India 566 521 2,277Japan 8,499 7,828 34,182Republic of South Africa 2,257 2,079 9,078Russia 3,158 2,909 12,702United States 11,096 10,220 44,628

Source: Adapted from External Costs of Coal: Global Estimate, External Costs of Coal: Global Estimate // Access: http://www.cedelft.eu/publicatie/external_costs_of_coal/878?PHPSESSID=f138219238c72e8038a0a5694354af1d

57 Ibid., pp 32–33.58 See Energobusiness №45/680 dated 9.11.10.

Annex1


Chart 2. Illness per 10,000 population in Luhansk

Source: Adapted from V.V. Zhdanov’s Assessment of the impact of the Luhanska TES on the atmosphere and health of the local population, Hygiene and Epidemiology Bulletin, Vol. 10, №1, 2006.

0

200

400

600

800

1 000

1 200

1 400

Number of illnesses among people, who live within the 1-3 km area from TES

Bronchial asthmaChronic bronchitis Flu Angina

Number of illnesses among people, who live in the 3km and further from TES

Number of illneesses among people, who live areas without TES

3�

Table 6. Combined Heating and Power or Cogeneration Plants (TETs) in Ukraine subject to Directive 2001/80/EC

Name Capacity,MWBilotserkivska TET 120Darnytska TET 160Dniprodzerzhynska TET 62Kaluska TET 200Kyivska TET-5 700Kyivska TET-6 500Kramatorska TET 120Kremenchutska TET 255Myronivska TET 260Odeska TET-2 68Oleksandriyivska TET-3 60Pervomaiska TET 48Sevastopolska TET 55Severodonetska TET 260Simferopilska TET 278Svema TET 115Kharkivska TET-2 74Kharkivska TET-3 62Kharkivska TET-5 540Khersonska TET 80Khersonska TET-2 74Cherkaska TET 230Chernihivska TET 210Total 4,531

Source:Company data

Table 7. Fees for polluting the environment in Ukraine, 2009

Typeofcommercialactivity

Actualfeespaidforpolluting

’000UAH %%

Actuallypaid priorto2008

All types 1,107,119 100.0 92 113Power, gas and water utilities 521,652 47.1 105 125

Source:Derzhkomstat, Ukraine’s statistics agency

Annex1


Table 8. Capital investments and current spending to protect the atmosphere and on climate change, 2009, ’000 UAH

Typeofcommercial

activity

Capitalinvestmentandcurrent

spending

Actualspending,

total

Including

internalfunds

StateBudgetfunds Localbudgetfunds othersources

offunding

totalState

EnvironmentalFund

totallocal

environmentalfunds

All types

Capital 1,273,789 1,203,358 5,622 – 7,813 5,646 56,996

Current 1,035,156 1,029,143 4,640 – 447 431 926

Power, gas and water utilities

Capital 146,051 141,185 2,400 – 2,465 299 –

Current 57,543 57,307 – – 237 2301 –

Source:Derzhkomstat, Ukraine’s statistics agency

Table 9. Top 10 major EU combustion plants, by annual emissions

Country SO2 Country NOx Country AshBulgaria TPP Maritsa Iztok 2 Great Britain Drax Greece Ag. Dimitrios ІII-IV

Spain CT AS Pontes Poland BOT Elektrownia Bełchatów S.A. Greece Ag. Dimitrios І-II

Bulgaria TPP “Maritsa Iztok 3” Spain CT Teruel I-II-III Slovakia Slov.elektrбrne, Vojany, EVO

Spain CT Teruel I-II-III Great Britain Aberthaw Estonia Narva Elektrijaamad AS, Balti Elektrijaam

Poland BOT Elektrownia Bełchatów S.A. Poland Elektrownia

Kozienice S.A. Bulgaria TPP Maritsa Iztok 3

Greece Megalopoli II Great Britain Cottam Poland Elektrownia Kozienice S.A.

Poland Elektrownia Patnуw Іспанія CT Compostilla II

(G 3,4) RomaniaS.C. Complexul Energetic Rovinari S.A. No. 2

Bulgaria TPP Bobov dol Great Britain Ratcliffe Estonia Narva Elektrijaamad AS, Eesti Elektrijaam

Bulgaria TPP Brikel Great Britain Kingsnorth Poland BOT Elektrownia Bełchatów S.A.

RomaniaS.C. Complexul Energetic Rovinari S.A. No. 2

Great Britain Scottish Power plc Bulgaria TPP Maritsa Iztok 2

Source: Evaluation of Member States' emission inventories 2004–2006 for LCPs under the LCP Directive (2001/80/EC), European Commission, 2008.

3�

Annex 2 The value of a statistical life

The methodology for calculating the value of a statistical life is generally criti-cized as being subjective and ethically suspect. Still, it is one of the few means available to apply an economic value to resources that are needed in order to compensate for damages caused to human health by environmental pollution.

In the model recently proposed by the US Environmental Protection Agency (EPA),59 this parameter is calculated on the basis of how prepared the average person is to pay extra in order to reduce additional mortality risks. 100,000 ran-domly selected respondents were asked a simple question: How much would you be willing to pay to reduce your personal risk of death from any given factor next year?

“Reducing risk” in this case means that, of 100,000 people, one person less will die, that is, a single “statistical life” will be saved. The average sum that respon-dents named was multiplied by 100,000, which is the ultimate cost of this statisti-cal life. Thus, it becomes clear to what extent society is prepared to pay to save the life of a single individual, without really knowing who that individual might be.

59 For more details, see http://yosemite.epa.gov/ee/epa/eerm.nsf/vwFUS/41DD6DBAE46 D241B85256E89005C2989.

Annex2


Annex 3 EU environmental protection requirements in the Energy Community Treaty60

Directive 79/409/EС on protecting certain species of birds. Only Art. 4(2) ap-plies, which requires the protection of ordinary migratory birds by paying spe-cific attention to preserving wetlands, including international ones.

Directive 97/11/EС, which amends and expands Directive 85/337/EEС, on as-sessing the impact of certain countries and private projects on the environment. The purpose is to ensure the necessary evaluation of the environmental impact of both states and private projects on human health, quality of life, biodiversity and the capacity of ecosystems to renew themselves. This Directive requires projects with a potentially serious impact on the environment to get permission to design and assess their environmental impact. The environmental impact as-sessment should reveal, describe and evaluate both the direct and indirect im-pact of such projects on humans, fauna and flora, soil, water, air, climate and landscape, material assets, and cultural sites, and to calculate the mutual impact of these various factors.

Directive 1999/32/EС on reducing the sulfur content of certain types of liquid fuels. The purpose of this Directive is to reduce SO2 emissions from the burning of certain liquid fuels. With specific exceptions, it prohibits the use of heavy fuels whose sulfur content is over 1% of mass as of 1.01.2003, while light diesel fuel may not be used if it contains more than 0.2% of sulfur as of July 2000 and 0.1% as of 1.01.2008. Sampling and testing the conformity of fuels to these limits are supposed to be done according to established methods and Commissions are expected to report annually on the results.

Directive 2001/80/EС on limiting emissions of certain pollutants into the air from sustained combustion plants. The purpose of this Directive is to reduce and control emissions from sustained combustion plants. It applies to plants that fire fuels whose nominal effective thermal capacity is equal to or higher than 50 MW. Member countries should draft related programs to gradually reduce the cumulative annual volume of emissions from existing plants and to uphold caps on emissions based on the relevant percentage reduction set for each country. National emission reduction plans should ensure that overall annual levels of NOx, SO2 and ash emissions from existing plants reaches the levels that would have been reached if these caps had been applied to plants that were operating in 2000. Member countries should ensure that all building and operating permits for new plants comply with these emissions caps.

60 Adapted from informational materials on the EEC prepared by the Kantor Company under the EU ТАCIS project called “Assistance to Ukraine in analyzing its energy policy and pro-moting the idea of joining the Energy Community Treaty.”

39

In addition to these regulations, Art. 13 of the Energy Community Treaty states that the parties to its Treaty also recognize the importance of the Kyoto Pro-tocols and should put effort into meeting them. The parties to this Treaty also agree to put effort into instituting Council Directive 96/61/EС on comprehen-sive pollution prevention and control.

The Annex to the Protocol on Ukraine’s accession to the Energy Community Treaty sets the schedule for Ukraine to implement the acquis communautaire as one of the requirements of the Energy Community Treaty, especially in terms of environmental protection. Directives 79/409/EEС and 97/11/EС were to be instituted once the EEC came into effect, while Directive 1999/32/EС should be introduced into domestic legislation by 31 December 2011. Directive 2001/80/EEС should be instituted by 31 December 2017.

Table 10. Schedule for Ukraine to implement acquis communautaire on environmental protection

Directive 85/337/EС (with changes and additions) on assessing the impact of certain state and private projects on the environment, amended by Directive 97/11/EС and Directive 2003/35/EС

01.01.2013

Directive 79/409/EС (Art. 4, Point 2) on protecting wild birds 01.01.2015

Directive 1999/32/EС on reducing sulfur content in certain liquid fuels 01.01.2012

Directive 2001/80/EС on establishing caps on emissions of certain pollutants into the air by large combustion plants 01.01.2018

Annex3


Annex 4 Environmental fees and taxes

Table 11. Environmental fees and taxes

Pollutant Nominalfee,UAH/t,effectiveuntil2011

Taxrate,UAH/t,effectiveasof2011

Nitrogen oxides 80 1,221

Ammonia 15 229

Sulfur anhydrates 80 1,221

Acetone 30 458

Benzopyrene 101,807 1,554,343

Butylacetate 18 275

Vanadium pentoxide 300 4580

Hydrogen chloride 3 46

Carbon monoxide 3 46

Particulates 3 46

Cadmium compounds 633 9,664

Manganese and compounds 633 9,664

Mercury and compounds 3,390 51,757

Carbon disulfide 167 2,550

Ethyl n-butyl 80 1,221

Sources: Tax Code, Cabinet of Ministers Resolution №303 “On approving the procedure for setting nominal fees for polluting the environment and for collecting such fees” dated 1 March 1999.

The base nominal fee, that is, the basic indicator for establishing the rate of pay-ment, for polluting the air was introduced in 1999 by Cabinet resolution.61 This resolution remained in effect until 2010. The base nominal fee effectively did not change for all those years, as it was only marginally raised in 2003.

The amount of these fees was calculated using an inflation coefficient and an annual order from the Cabinet of Ministers, which made the entire procedure extremely convoluted and complicated the reporting process. The size of the fee for emitting pollutants into the air from stationary facilities was calculated according to the formula:

61 Cabinet of Ministers Resolution №303 “On approving the procedure for setting nominal fees for polluting the environment and for collecting such fees” dated 1 March 1999.

Па.с. = Σ(НбіМлі + КпНбіМпі)КтКіндП

t=1

41

where N is the base nominal fee, along with a series of coefficients that took into account territorial, social and environmental factors.

With the adoption of the new Tax Code in 2011, environmental taxes were in-troduced that were nearly 20 times more than the original nominal base. Actual collections of these fees were not equally increased, however, as the formula for calculation was simplified by dropping all coefficients. The total tax charged for air pollution from stationary sources is calculated by taxpayers themselves inde-pendently every quarter, based on actual volumes of emissions.

Annex4


Annex 5 Territorial spread of emissions in Ukraine, 2008Left to right: SO

2, NO

x, recovered nitrogen, non-methane light organic com-

pounds, ash (2.5 μm), ash (2.5–10 μм)

Source: Norwegian Institute of Meteorology, 2010

43

Annex 6 Cross-border impact of emissions

Ukraine, 29%

Belarus, 8%

Kazakhstan, 5%

Bulgaria, 3%

Romania, 2%

Other, 14%

Russia, 39%

Countries receiving SOx emissions from Ukraine

Ukraine, 45%

Poland, 9%

Bulgaria, 6%

Romania, 8%

Other, 25%

Russia, 7%

Contribution of SOx emissions from other countries to Ukraine

Annex�


Source: Norwegian Institute of Meteorology, 2010

Ukraine, 23%

Belarus, 9%

Kazakhstan, 4%

Bulgaria, 3%

Romania, 3%

Other, 18%

Russia, 40%

Countries receiving NOx emissions from Ukraine

Ukraine, 25%

Poland, 10%

Italy, 3%

Romania, 5%

Other, 33%

Russia, 19%

Contribution of NOx emissions from other countries to Ukraine

Germany, 5%

4�

Anne

x 7

Po

pulat

ion c

ente

rs wi

thin

TES p

ollu

tion z

ones

in U

krai

ne

Com

pany

<1k

m,f

acili

tylo

cate

dw

ithin

ap

opul

atio

nce

nter

(R

isk

Zone

І)

1–3

km,p

opul

atio

nce

nter

bo

rder

son

faci

lity

(Ris

kZo

neІІ

)

3–10

km

,pop

ulat

ion

ente

rnot

farf

rom

faci

lity

(Ris

kZo

neII

I)Po

pula

tion

inri

skz

one,

’000

(u

rban

/rur

al)

Burs

htyn

ska

TES,

Iv

ano-

Fran

kivs

k O

blas

tBu

rsht

ynKu

ropa

tnyk

y, Ko

rost

ovyc

hi, V

ytan

’, N

asta

shyn

e, D

em’ia

niv

Chah

ariv

, Kon

iush

ky, O

beln

ytsia

, Kal

ush,

Hal

ych,

Be

rezh

any,

Zhyd

achi

v, Lu

chny

tsi, Y

unas

hkiv

, Sa

rnyk

y, D

ibro

va, O

zeria

ny, K

uriv

, Slo

boda

, Zh

alyb

ory,

Kina

shiv

, Nar

ayiv

ka, B

ovsh

iv

61.8

(23.

8/38

.0)

Hal

ytsk

iy C

ount

y

Vuhk

lehi

rska

TES

, D

onet

sk O

blas

tSv

itlod

arsk

eLu

hans

ke, N

ovol

uhan

ske,

D

olom

itne

Sem

yhiry

a, T

ravn

eve,

Myr

oniv

skiy

, Nyz

hnye

Loz

ove,

Ky

rpyc

hne

52.3

(41.

1/11

.2)

aggl

omer

atio

n of

Deb

alts

eve

and

Svitl

ohra

dske

Dob

rotv

irvsk

a TE

S, L’

viv

Obl

ast

Dob

rotv

irM

aiky

, Mat

iash

i, St

ariy

Dob

rotv

ir,

Koza

ky, R

oket

y, D

olyn

y, Ro

hali,

Pe

reka

lky,

Sele

ts

Rekl

ynet

s, Pa

vliv

, Bab

ychi

57.5

(23.

0/34

.5)

Kam

iank

a-Bu

zka

Coun

ty

Zapo

rizhs

ka T

ES

Zapo

rizhz

hia

Obl

ast

Ener

gohr

adPr

ymirn

e, N

ovo

Ukr

aink

aIv

aniv

ka, N

ovov

odya

ne, D

nipr

ovka

, Mic

hurin

a,

Vody

ane

41.7

(13.

6/28

.1)

Kam

ians

k-D

nipr

ovsk

Cou

nty

Zmiy

ivsk

a TE

S,

Khar

kiv

Obl

ast

Kom

som

olsk

eD

onet

sBl

ahod

atne

, Zan

ke, H

eniy

ivra

, Dac

hnt,

Ukr

ains

ke,

Om

elch

enky

, And

riyiv

ka, C

herv

oniy

Don

ets

73.0

(34.

0/39

.0)

Zmiy

iv C

ount

yZu

yivs

ka T

ES,

Don

etsk

Obl

ast

Zugr

esM

ykol

ayiv

ka, Z

uyiv

kaH

irne,

Ved

mez

he, K

hart

syzk

Lyp

ove,

Ser

dyte

, Ts

upky

, Zac

hativ

ka, S

pivu

che,

Sha

khtn

e, T

royi

tsko

-Kh

arts

yzke

, Pok

rovk

a, S

hyro

ke, N

ovop

elah

iyiv

ka,

Nov

omyk

olay

ivka

, Sad

ove,

Dub

ivka

, Zol

otar

ivka

105.

4 (1

04.5

/0.9

61)

Khar

tsyz

k Co

unty

Kryv

oriz

ka T

ES,

Dni

prop

etro

vsk

Obl

ast

loca

ted

mor

e th

an

2 km

from

the

near

est

popu

latio

n ce

nter

Zele

nodo

lskVe

lyka

Kos

trom

ka, M

ala

Kost

rom

ka, T

opol

ne,

Ukr

aink

a, N

ovoa

rmia

nivk

a57

.6 (2

8.6/

29.0

) Ap

osto

livsk

Cou

nty

Annex�


Com

pany

<1k

m,f

acili

tylo

cate

dw

ithin

ap

opul

atio

nce

nter

(R

isk

Zone

І)

1–3

km,p

opul

atio

nce

nter

bo

rder

son

faci

lity

(Ris

kZo

neІІ

)

3–10

km

,pop

ulat

ion

ente

rnot

farf

rom

faci

lity

(Ris

kZo

neII

I)Po

pula

tion

inri

skz

one,

’000

(u

rban

/rur

al)

Kura

khiv

ska

TES,

D

onet

sk O

blas

tKu

rakh

ove

Illin

ka, B

eres

tky,

Step

aniv

kaSt

ari T

erny

, Dal

ne, D

achn

e, S

hevc

henk

o,

Vozn

esen

ka, K

rem

inna

Bal

ka, I

zmay

ilivk

a, H

irnyk

, Ku

rakh

ivka

, Zor

iane

, Ole

ksan

drop

ol, O

stro

vske

, Ya

ntar

ne, U

spen

ivka

, Rom

aniv

ka

84.7

(56.

0/28

.7)

Mar

iyin

sk C

ount

y

Lady

zhyn

ska

TES,

Vi

nnyt

sia O

blas

tLa

dyzh

ynD

myt

renk

y, Ba

saly

chiv

kaKh

arpa

chka

, Bub

nivk

a, N

ovos

eliv

ka, L

ukas

hivk

a,

Zaoz

erne

23.9

(22.

6/1.

3)

Lady

zhyn

City

Cou

ncil

and

near

by v

illag

esLu

hans

ka T

ES,

Luha

nsk

Obl

ast

Shch

astia

Pere

dilsk

e, О

bozn

e, V

esel

a H

ora,

Pet

rivka

, Hey

ivka

, St

ariy

Aid

ar, T

svitn

i Pisk

y, Sv

itle,

Pry

vitn

e, K

hrys

tove

13.0

Sh

chas

tia a

nd n

earb

y vi

llage

sPr

ydni

prov

ska

TES,

D

nipr

opet

rovs

k O

blas

tD

nipr

opet

rovs

k,

Sam

arsk

iy C

ount

yLi

ubym

ivka

, Pry

dnip

rians

keIla

riono

ve, I

vani

vka,

Vas

yliv

ka, D

nipr

ove,

Vol

oske

, Pe

rshe

Tra

vnia

77.9

Sam

arsk

Cou

nty

Slov

ians

ka T

ES,

Don

etsk

Obl

ast

Myk

olay

ivka

St

arod

ubiv

kaO

rikho

vatk

a, R

ai-O

leks

andr

ivka

, Pys

kuni

vka,

Kry

va

Luka

, Bru

sivka

, Sta

riy K

arav

an, S

lovi

ansk

34.7

(15.

1/ 1

9.6)

Sl

ovia

nsk

Coun

tySt

arob

eshi

vska

TES

, D

onet

sk O

blas

tSt

arob

eshe

veVo

znes

enka

Hor

bate

nko,

Chu

mak

y, O

leks

andr

ivka

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List of Abbreviations

ECSEE Energy Community of Southeast Europe; also known as the European Energy Community (EEC)

EBRD European Bank for Reconstruction and Development

EIB European Investment Bank

IBRD International Bank for Reconstruction and Development

NAK EKU Energetychna Kompania Ukrainy (Energy Company of Ukraine) National Stock Company

BAT Best Available Techniques

OECD Organization of Economic Cooperation and Development

ORE Wholesale Electricity Market

TES Thermoelectric Stations (heating plants)

TET Thermoelectric Centrals (cogeneration plants)

CEMS Continuous Emission Monitoring Systems

GEN Global Ecolabelling Network

IFOAM International Federation of Organic Agriculture Movements

TACIS Technical Assistance for the Commonwealth of Independent States

ListofAbbreviations


Glossary of Terms

Emissions Limit Values (ELVs)

Establishing an emissions threshold requires bringing the current levels of emissions in line with the thresholds detailed in Annexes III-VI and Arts. 5, 7 and 8 of Directive 2001/80/EC. Average monthly indicators for actual emissions, with the exception of equipment start-up and shutdown periods, must not exceed the established emissions thresholds.

Environmental tax

A mandatory national fee that is based on actual emissions released into the air, pollutants released into bodies of water, waste disposal, the actual volume of radioactive wastes that are temporarily stored by their manufacturers, the actual volume of radioactive wastes generated and the actual volume of radioactive wastes accumulated through 1 April 2009 (based on the new Tax Code).

Best Available Technology (BAT)

A process, technique and method, an approach to the design, construction, management, servicing and maintenance, exploitation and decommissioning of industrial sites, that is based on modern scientific and technological practices that have been approved by government environmental agencies and are registered in the national BAT registry.The term “best” means technology that is the most effective for producing output while upholding an established level of environmental protection. The term “available” means technology that has been developed to the point where it can be applied in a given branch of industry both cost-effectively and technically. In some cases, “available” may be substituted by the term “current” if this is allowed according to state law.

National Emission Reduction Plan (NERP)

The NERP outlines the gradual reduction in overall emissions of nitrogen (NOx), sulfur dioxide (SO2), and ash from existing plants based on low parameters: real annual operating time for each facility, volumes of fuels used, and so on. This document should include targets and objectives aimed at reducing emissions, to establish timeframes for their achievement, and to describe monitoring mechanisms.