VZCZCXRO8770
PP RUEHIK
DE RUEHKV #2062/01 3291407
ZNR UUUUU ZZH
P 251407Z NOV 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 8884
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZG/NATO EU COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RHMFIUU/HQ EPA WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 KYIV 002062 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR OES, EUR, EEB 
 
E.O. 12958: N/A 
TAGS: SENV KGHG EREL PREL XH UP
 
SUBJECT: UKRAINE: KEEN TO PRESERVE STATUS QUO ON CLIMATE 
 
REF: KYIV 936 
 
KYIV 00002062  001.2 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET DISTRIBUTION 
 
¶1.  (SBU) Summary.  Ukraine's position on climate change is to 
preserve the current Kyoto Protocol-based status quo.  The country 
has reduced its greenhouse gas emissions by more than 50 percent 
since 1990 -- largely as a result of its post-Soviet industrial 
collapse -- and has become a beneficiary of the Kyoto carbon trading 
system.  Despite its status as one of the world's largest polluters 
and least energy-efficient economies, Ukraine could increase 
emissions and still comfortably reach its stated emissions reduction 
target of 20% by 2020.  Environmental concerns continue to be of 
secondary importance here, where climate change mechanisms are 
generally viewed as convenient tools to raise revenue and attract 
investment.  End Summary. 
 
INDUSTRIAL COLLAPSE LEADS TO EMISSION REDUCTION 
--------------------------------------------- -- 
 
¶2.  (U) Industrial collapse after the fall of the Soviet Union led 
to significant reductions in greenhouse gas emissions throughout the 
region.  Ukraine's emissions totaled 926 million metric tons in 
1990, but stood at just 436 million metric tons in 2007, a de facto 
53 percent reduction. 
 
¶3.  (U) Ukraine signed the Kyoto Protocol as an Annex 1 country, 
committing to maintain greenhouse gas emissions at or below the 1990 
baseline by 2012.  This was essentially a political gesture, as even 
the most optimistic economic growth forecasts saw Ukraine emitting 
less than 60% of 1990 levels by 2012, and less than 80% by 2020, 
without any real emission reduction efforts. 
 
1990 BASELINE YEAR "NON-NEGOTIABLE" 
----------------------------------- 
 
¶4.  (SBU) Ukraine's official position for the post-Kyoto treaty 
negotiations is a greenhouse gas emission reduction of 20% by 2020, 
and 50% by 2050, from the 1990 level.  One of Ukraine's chief 
climate negotiators privately described this position as "cynical", 
since a 20% reduction by 2020 could also be viewed as an increase of 
approximately 70% from the 2009 level. 
 
¶5.  (SBU) According to Ukraine's official position paper submitted 
to the UNFCCC, "imposing stricter obligations on Ukraine (would) not 
only render economic growth impossible but (would prevent the 
economic) recovery as well as the recovery of the population of 
Ukraine."  In fact, while Ukraine may be ready to compromise on 
emission reduction numbers, its negotiators have been adamant that 
the 1990 baseline year be preserved in any new agreement.  The 
director of Ukraine's National Agency for Environmental Investments 
(NAEI) told us the 1990 baseline year was "non-negotiable" and that 
"Ukraine would not be part of a climate change agreement" that would 
peg emissions at a later year. 
 
¶6.  (SBU) According to Ukraine's climate negotiators and other 
observers, the benefits of keeping the 1990 baseline year are 
two-fold.  First, it relieves pressure on Ukraine to strengthen its 
emission reduction efforts.  Second, it gives Ukraine access to 
"excess" carbon credits that can be sold under the International 
Emission Trading scheme.  This cap-and-trade mechanism has allowed 
countries that have not reached emission reduction targets under 
Kyoto to buy emission allowances from countries with excess. 
According to NAEI estimates, Ukraine will have approximately 1 
billion excess Assigned Amount Units (AAUs), a figure equal to 1 
billion metric tons of unused "hot air", before the Kyoto Protocol 
expires in 2012. 
 
CARBON DEALS 
------------ 
 
¶7. (SBU) Ukraine has completed only one carbon trade deal, selling 
30 million AAUs to Japan for roughly $300 million (reftel).  Two 
other deals, announced in May, to sell 150 million AAUs to two 
companies registered in Switzerland and New Zealand have not 
materialized.  According to the NAEI, the firms were unable to prove 
that they had the financial means to complete the transactions. 
Analysts speculate, however, that potential investors had 
reservations about Ukraine's commitment to use carbon revenues to 
"green" its economy. 
 
¶8.  (SBU) Prodded about the size of the potential market for AAUs, 
the NAEI's director admitted that Ukraine would be lucky to sign 
 
KYIV 00002062  002.2 OF 002 
 
 
similar deals before 2012.  He predicted, however, that the 
continuation of the Kyoto-based cap-and-trade scheme under the new 
climate change agreement would significantly boost trade in AAUs, 
since it would remove market uncertainty about the future utility of 
such credits.  Nonetheless, given the lack of a post-Kyoto treaty, 
Ukraine plans to "urgently" sell its surplus AAUs before 2012, 
according to one of Ukraine's climate change negotiators. 
 
COMMITMENT TO CLIMATE CHANGE LACKING 
------------------------------------ 
 
¶9. (SBU) Despite Ukraine's official goal of reducing emissions "20 
by 2020", Kyiv-based NGOs lamented the government's lack of 
commitment to fighting climate change.  A representative from the 
National Ecological Center said Ukraine was looking solely at the 
financial benefits of a post-Kyoto deal but was not willing to 
acknowledge that "Ukraine is also responsible for climate change and 
should take action." 
 
COMMENT 
------- 
 
¶10. (SBU) Ukraine's civil society critics appear to be right. 
Despite lofty-sounding goals, Ukraine has thus far gained from 
laying low, letting more zealous Europeans take charge on 
negotiations over emissions targets and baseline dates.  Ukraine 
will continue to push for the Kyoto-based status quo at Copenhagen. 
Meanwhile, Ukraine will lack incentives to lose its twin distinction 
of being one of the world's largest polluters and least 
energy-efficient countries. 
 
PETTIT