Low Carbon Ukraine (LCU): Advising Ukrainian decision makers on low emission policy paths

State of implementation/results

• Project completed.
• The project regularly published compact Policy Briefings and detailed Policy Papers on various topics, such as the green recovery of Ukraine, effects of the Russian invasion of Ukraine on climate and energy policies in the European Union’s Eastern Partnership and Central Asian countries and the power plant park or the optimal determination of renewable capacities to be auctioned, Policy reforms supporting Ukraine’s green reconstruction (www.lowcarbonukraine.com/…).
• The Policy Briefing “Fueling the Future: The Economic Relevance of Ukraine’s Biomethane Sector” examined the role of biomethane production and export in Ukraine’s recovery, economic stability, and green transition. It highlighted how Ukraine’s vast biomethane production potential could generate significant export revenues, ranging from EUR 0.97 billion to EUR 1.24 billion by 2030. To achieve this, Ukraine must produce 1 billion cubic meters (bcm) of biomethane annually, reducing greenhouse gas (GHG) emissions by 2.5 MtCO₂eq per year. Realizing this potential requires EUR 2 billion in investments. Additionally, establishing a national biomethane register is crucial for compliance with European standards. On the EU side, policy adjustments are needed—particularly in Germany—where enabling Ukrainian biomethane to count toward the greenhouse gas reduction quotas, enhancing its marketability.
• The Policy Paper, “A Deep Dive into Ukraine’s Imports of Critical Energy Equipment and Fuels Since Russia’s Invasion” and accompanying Op-ed in Vox Ukraine examined Ukraine’s response to energy security challenges following Russia’s full-scale invasion in February 2022. The study focused on the surge in imports of critical energy equipment and fuels, essential for restoring damaged infrastructure and stabilising energy supply. The analysis highlighted key import trends, showing that the share of energy equipment within Ukraine’s total imports doubled from 1.4% in 2021 to 2.7% in 2023, with diesel generators emerging as the most imported energy generation equipment due to their reliability and rapid deployment during outages. Moreover, the study found that immediate energy supply concerns have taken precedence over renewable energy expansion, as reflected in the declining share of imported solar PV and wind generation equipment. The paper concluded with key policy recommendations aimed at strengthening Ukraine’s long-term energy resilience and supporting its integration into the European energy market.
• The Policy Paper “Instruments to Catalyse Energy Efficiency Investments in Residential Buildings” and accompanying Op-ed in Vox Ukraine examined the urgent need for energy- efficient construction and retrofitting in Ukraine’s housing sector. The full-scale invasion had caused over EUR 54 billion in economic damages, with ongoing attacks on energy infrastructure exacerbating shortages and highlighting the necessity of energy-saving measures. Even before the invasion, Ukraine’s residential buildings were highly inefficient, with energy consumption 30–50% above the European average due to aging housing stock, low energy tariffs, and inadequate maintenance of multi-family buildings. High owner-occupancy rates further complicate large-scale energy efficiency improvements. This paper explored financial mechanisms to bridge the investment gap, recommending expanding eligibility for Ukraine’s Energy Efficiency Fund, introducing green mortgages, and leveraging energy service companies (ESCOs) to modernize the sector. These instruments would enhance long-term energy security and support Ukraine’s alignment with EU climate goals.
• The Policy Briefing “Ukraine’s Steel Sector: State of Play and Pathways to a Greener Future” provided an in-depth analysis of the current state of Ukraine’s steel industry. It examined the impact of the war on production capacity, the distribution of production technologies and the sector’s CO₂ emissions profile, while exploring viable pathways for decarbonisation. In the short to medium term, investment in the scrap-based Electric Arc Furnace (EAF) route could reduce CO₂ emissions by 43% by 2035, requiring EUR 1.1-2.0 billion. In addition, the introduction of hydrogen-based Direct Reduction of Iron (H₂-DRI) after 2030 could increase the reduction to 63% by 2035 (14.5 MtCO₂) with an additional investment of EUR 2.0-5.3 billion. A favourable investment environment with strong financial mechanisms and de-risking policies will be essential to attract funding for these low-carbon projects.
• The Policy Proposal and accompanying Policy Briefing “Pathways for Reforming Ukraine’s Carbon Tax: Towards an ETS-Compatible Upstream Tax with an Expanded Scope” addressed the critical need for reforming Ukraine’s carbon pricing mechanisms in alignment with European Union standards and the country’s EU accession goals. It advocated transitioning Ukraine’s outdated and narrowly focused carbon tax to a reformed upstream tax, expanding its coverage to sectors like buildings and road transport analogous to the scope of the upcoming EU ETS 2. This approach would not only enhance efficiency and fairness but could also complement the planned Ukrainian Emissions Trading System (ETS) by providing a price floor, thus stabilizing carbon prices and reducing price uncertainty. The proposal highlighted the potential for significant emissions reductions and annual revenue generation of EUR 1.2–4.2 billion by 2030, contingent on an increasing tax trajectory gradually approaching expected EU ETS 2 prices. It also emphasized the importance of mitigating regressive effects through targeted social compensation measures. This reform proposal provided the blueprint for a cornerstone of Ukraine’s future climate policy, enabling Ukraine to catch up and converge with European climate policy architecture and carbon price levels while mitigating regressive effects for vulnerable households.
• The Policy Briefing “Overview of Carbon Taxes in Europe” complemented the Policy Proposal “Pathways for Reforming Ukraine’s Carbon Tax: Towards an ETS-Compatible Upstream Tax with an Expanded Scope” as well as the Policy Briefing with the same title, which provided a summary of the Policy Proposal. It provided an overview of carbon taxation across different European countries, including summary country fact sheets for a selected list of countries. The comparison of sectoral coverage, point of regulation, carbon price levels and other indicators aimed to inform the debate on the reform process for Ukraine’s carbon tax. The Policy Briefing illustrated that the overwhelming majority of carbon taxes in Europe are regulated upstream, most of which included sectoral coverage of the buildings and transport sectors. Carbon price levels were consistently higher than the current tax rate in Ukraine. The example of Switzerland’s climate dividend scheme is also reviewed as a blueprint for a social compensation scheme.
• On 9 October 2024, Henriette Weser, Analyst at Low Carbon Ukraine project, participated in the panel discussion “Green Transformation in Germany, Poland, and Ukraine Amid the War and Prospects for Post-War Reconstruction” organized by Austausch e.V. and the Heinrich Böll Foundation. The discussion explored how Ukraine’s energy transition and reconstruction can benefit from Germany’s and Poland’s experience in renewable energy expansion and decarbonization with insights on Germany’s energy transition, the challenges of renewable deployment, and the link between ecological transformation and security policy.
• On October 15, 2024, Yiğit Tahmisoğlu, analyst in the Low Carbon Ukraine project, participated in the discussion “What is hindering the growth of Ukraine’s metallurgy sector?” organised by the Centre for Economic Strategy (CES) and the German Economic Team (GET). The discussion focused on key challenges such as security risks, logistical constraints, production facility conditions, and unfavourable global market trends, including falling iron ore and steel prices. The event gathered representatives from leading Ukrainian metallurgical companies and policy experts to explore pathways for strengthening the sector’s recovery and competitiveness.
• On October 16, 2024, Robert Kirchner, Team Leader of the Low Carbon Ukraine project participated in the panel discussion “Resilient against Cold and Darkness: Strengthening Ukraine’s Energy System against Russian Attacks” at the international Ukraine conference “What Kind of Peace? Ukraine and Us” organized by Center for Liberal Modernity. Other panelists included Inna Sovsun (Verkhovna Rada of Ukraine), Volker Oel (Federal Ministry for Economic Cooperation and Development, Germany), and Anna Ackermann (International Institute for Sustainable Development). The panel discussed urgent steps required to enhance Ukraine’s energy security in the face of continued military aggression.
• On 29 October 2024, Pavel Bilek, Deputy Head of the Low Carbon Ukraine project, participated in the EUEA Vienna Energy Efficient Reconstruction Conference, where he discussed the role of energy efficiency in rebuilding Ukraine’s residential sector based on the respective Policy Paper. The presentation highlighted how reconstruction presents an opportunity to modernize buildings, reducing energy consumption and reliance on fossil fuels. Improving energy efficiency would not only enhance living conditions but also contribute to greater energy security and emissions reductions. However, financial and structural barriers remain, with limited funding and challenges in scaling retrofitting efforts. The discussion emphasized the need for innovative financing solutions, stronger policy frameworks, and targeted pilot projects, particularly in multi- family buildings. Collaboration between international donors, government initiatives, and vocational training programs will be crucial in accelerating the transition to a more energy- efficient housing sector.
• On 14 November 2024, LCU participated in the International Energy Conference ReBuild Ukraine 4.0, contributing to the panel on Human Capital in the Energy Sector: Capacity Building and Gender Balance. The discussion focused on global energy employment trends, the increasing demand for skilled labour, and the importance of gender balance in Ukraine’s energy sector reconstruction. Robert Kirchner highlighted the critical role of human capital investment in Ukraine’s energy transition, emphasizing upskilling and reskilling programs, lessons from Germany, and strategies for integrating displaced workers into the clean energy sector. The panel underscored the need for international collaboration, structured vocational training, and targeted policies to develop a workforce capable of supporting Ukraine’s long-term energy resilience and sustainability.
• On 20 November 2024, Rouven Stubbe, energy economist and consultant for the Low Carbon Ukraine project, took part at the Kryvyi Rih International Forum on Green Metallurgy. Kryvyi Rih has been severely affected by the environmental impacts of mining and metallurgy, as well as repeated attacks on civilian energy, industrial and residential infrastructure during the ongoing war. Despite these challenges, Kryvyi Rih’s city council and business community are actively developing ideas for the recovery and transformation of its industrial sector. During the panel discussion many participants presented initiatives and technologies for low-carbon iron and steel production, as well as circular approaches to the reuse of iron ore tailings and steel slag. The Low Carbon Ukraine-project contributed to the event with a presentation of its latest study on the possible role of carbon pricing for a green reconstruction of Ukraine’s industrial sector, which provides an overview of implications for the industrial sector of Ukraine’s upcoming ETS- scheme, different design options on competitiveness and investment conditions for low carbon technologies.
• On 25 and 27 November 2024, Robert Kirchner, Team Leader at the Low Carbon Ukraine project, participated in two events on Ukraine’s energy sector challenges and investment strategies. On 25 November, he spoke at the panel “Bridging Investments and Innovation: Strategies for Ukraine’s Energy Transition” during the conference "Decentralized Energy Solutions for Ukraine’s Security." On 27 November, he joined the CMS Webinar Series on “Investing in Ukraine: Focus on Investments and the Current Situation in the Energy Sector.” In both events, insights were shared about Ukraine’s energy sector challenges, including infrastructure damage, power supply deficits, and financing needs for reconstruction and energy transition. Investment opportunities, policy measures to enhance energy security, and pathways for integrating renewables into Ukraine’s energy system were underscored. The critical role of decentralized energy solutions and strategic investments in accelerating Ukraine’s transition towards a resilient and low-carbon energy future was highlighted.
• On 12 December 2024, Berlin Economics participated in an expert discussion “Carbon pricing scenarios and assessment of its impacts on Ukrainian economy” organised by GIZ. Discussions focused on carbon tax reform, ETS development, and the economic implications of the EU Carbon Border Adjustment Mechanism (CBAM) for Ukraine. Rouven Stubbe, a consultant at Low Carbon Ukraine project, provided analytical insights on the design and potential impacts of carbon tax reforms, complementing broader discussions on Ukraine’s ETS development and alignment with EU carbon pricing mechanisms. A high-level expert discussion followed the presentations, featuring representatives from the European Commission’s DG CLIMA, the Energy Community Secretariat, and the EU Delegation to Ukraine, and strategic advisors to the Ukrainian government.
• On 19 December 2024, Berlin Economics organised a Roundtable “Pathways for reforming Ukraine’s carbon tax” for the Ministry of Energy and the Ministry of Environmental Protection and Natural Resources to discuss pathways for reforming Ukraine’s carbon tax in alignment with the country’s climate neutrality commitments and upcoming national Emissions Trading System. The session featured opening remarks from Robert Kirchner, and keynote speeches by Olha Yukhymchuk, Deputy Minister on European Integration (Ministry of Environmental Protection and Natural Resources), and Roman Andarak, Deputy Minister (Ministry of Energy). The main presentation, delivered by Rouven Stubbe, energy economist and consultant for the Low Carbon Ukraine project, focused on the findings of the policy proposal “Pathways for Reforming Ukraine’s Carbon Tax” and its distributional impact on households.
• On February 15, 2025, Rouven Stubbe, Consultant for Energy & Climate Policy, joined Ukrainian.Media for an interview discussing Germany’s energy policies and potential cooperation with Ukraine in the post-war energy transition. The conversation covered key topics, including Germany’s support programs for Ukrainian energy workers, post-war energy projects, hydrogen production costs, and Ukraine’s nuclear energy ambitions. The discussion also explored Germany’s shift away from nuclear power, the effectiveness of its green energy transition, and the future priorities of its energy strategy over the next decade. This interview was conducted as part of the Vidnova Placement program, implemented by Commit by MitOst gGmbH with financial support from the Robert Bosch Stiftung.
• On March 10, 2025, Zentrum Liberale Moderne hosted a pre-Café Kyiv expert discussion on Ukraine’s energy security, held under Chatham House rules. Robert Kirchner, Team Leader of the Low Carbon Ukraine project at Berlin Economics, contributed to the discussion, which examined the impact of Russia’s systematic attacks on Ukraine’s energy infrastructure. The session reviewed key efforts by the government, industry, and international partners to restore the energy system and strengthen resilience, including decentralised energy solutions and new legislative measures. With insights from Inna Sovsun (MP, Verkhovna Rada energy committee) and experts from Ukraine and Germany, the discussion also explored Ukraine’s European energy integration and long-term security strategies.
• On March 11, 2025, Berlin Economics co-organised the expert panel “Powering through Crisis: Lessons from Last Winter and the Importance of Energy Security” with Zentrum Liberale Moderne at Café Kyiv 2025, hosted by the Konrad-Adenauer-Stiftung. Rouven Stubbe, consultant and energy economist at Berlin Economics, joined the discussion, which focused on Ukraine’s energy challenges following large-scale attacks on its infrastructure. The panel examined key lessons from the winter of 2024/2025 and explored strategies to enhance resilience. Bringing together representatives from the Ukrainian government, Parliament, the private sector, and German institutions, the discussion highlighted policy measures and investment needs to secure Ukraine’s energy future.

Latest Update:
12/2025