News

Guarantees of Origin for Electricity Produced from RES as a New Instrument for Achieving Ukraine's Climate Neutrality.

UWEA initiated a comprehensive study of the market for Guarantees of Origin for electricity from RES (GOs) in Ukraine. The SE Ukrzovnishinform analyzed existing trends in the GO market in Europe and assessed the development prospects for this market in Ukraine in its Report titled “Guarantees of Origin for electricity produced from renewable energy sources, as a new tool for achieving Ukraine's climate neutrality. Trends and prospects for developing the GO commodity market in Ukraine, impact on the national economy in the medium term” (the Report).

Below are the key findings of the Report.

Despite the progress made in developing the GO market, several barriers hinder its full-fledged operation in Ukraine, including:

1. Non-compliance with EU Standards: The mechanism for circulating guarantees of origin in Ukraine does not fully comply with EU standards, complicating the potential export of 'green' electricity to EU countries. Specifically, the export of GOs from Ukraine is currently possible only under foreign trade agreements.
2. Low Interest from Potential GO Buyers and a Limited Domestic Market: Ukraine lacks incentives to increase buyer interest in purchasing GOs. The absence of benefits (e.g., tax incentives) hinders the development of the GO market.
3. Lack of Mechanisms to Stimulate GO Demand Based on Environmental Value: Currently, GOs cannot substitute eco-tax payments, thus lacking sufficient economic justification for their existence.
4. Industrial Enterprises' Lack of Right to Use Ukrainian GOs: Industrial companies currently lack the right to use Ukrainian GOs (whether generated or purchased) to verify the origin of electricity used in producing goods for export (no tools exist to reduce embedded emissions levels for the Carbon Border Adjustment Mechanism - CBAM).
5. Insufficient Consumer Awareness: There is a lack of consumer awareness regarding GOs as a new tool for their tangible impact (contribution) to Ukraine's economic 'green transition' and environmental protection in Ukraine.

At the same time, GOs can become an additional source of income for RES producers, as well as for other electricity market participants entitled to sell. An increase in trading volume in the GO market will positively impact the reduction of payback periods for RES projects, which, in turn, will facilitate the continued growth of the renewable energy sector.

In addition, providing incentives to increase demand for GOs will lead to a reduction in the burden on NPC Ukrenergo and other state companies related to the Renewable Energy PSO.

The Report emphasizes the necessity of implementing mechanisms to stimulate demand for GOs, including:

1. Implementing stimulating state policy measures (e.g., introducing emissions trading similar to the EU, and/or providing specific tax incentives that recognize the environmental value of guarantees of origin, introducing mandatory disclosure of the share of consumed RES energy in product manufacturing, etc.);
2. Securing agreement on and authorization of exports, and ensuring the recognition of Ukrainian GOs in EU markets;
3. Direct engagement with businesses focusing on corporate social and environmental responsibility (CSR/ESG).

AT the same time, GOs can become an additional source of income for RES producers, as well as other electricity market participants entitled to sell GOs (including the Guaranteed Buyer, USSs). An increase in trading volume in the GO market will positively impact the reduction of payback periods for RES projects, which, in turn, will facilitate the further development of the renewable energy sector.

Without stimuli, demand for GOs will remain low, not exceeding 20-30 million GO units per year. Resolving the issues in the GO market will foster the development of RES capacities in Ukraine. Consequently, the electricity generation mix will change, automatically reducing CO2 emissions. Thus, the carbon footprint of Ukrainian products will decrease in the long term.

According to the report, increased investment and the construction of new RES capacities, driven by the full-fledged, efficient GO market in Ukraine, will have a positive impact on key macroeconomic indicators in the country:

• GDP and Gross Output Growth: According to the authors’ model calculations, Ukraine’s GDP will increase by 0.26% (UAH 20.9 billion in 2024 prices), and gross output by 0.3% (UAH 51.6 billion). The largest growth will be observed in the electrical equipment manufacturing and construction sectors.
• Job Creation: The creation of 17,600 new jobs is expected, including 5,800 in industry. Primarily, these new jobs will accommodate workers from currently destroyed thermal power plants.
• Tax Revenues: Increased economic activity will generate an additional UAH 5.5 billion in tax revenues, particularly from VAT (+UAH 1.9 billion) and PIT (+UAH 1.5 billion). The export of surplus “green” electricity will add another UAH 32 billion to the budget, totaling UAH 37.5 billion.
• Production Localization: The GO market will promote the localization of RES equipment manufacturing in Ukraine, attracting European investors.

The development of the GO market in Ukraine is critically important for restoring the energy system destroyed by the war and ensuring the “green” transition in line with global climate goals. An effectively functioning GO market will stimulate demand for “green” energy, attract significant investment, and achieve growth and decarbonization of the national economy.