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Continuing on Ukraine's path to a green energy future

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Green finance continues to develop at pace in leading economies and emerging markets. However, the climate emergency is also rapidly developing, with wildfires ravaging the globe and torrential flooding sweeping across our neighbours in central Europe, writes Kyrylo Shevchenko, governor of the National Bank of Ukraine.

Rising global food and energy prices, the recovery of the global economy from the COVID-19 crisis, the effects of poorer harvests, and further growth in consumer demand through higher wages are all pushing prices up for both businesses and consumers.

While the pressures of global warming and climate change remain high on the agenda of major global players such as the United States, China, and the UK, this does not mean those in the emerging markets have made reducing their own carbon emissions and reaching their own goals any less of a priority. With COP26 fast approaching, governments are strengthening their commitments to slash carbon emissions in order to protect the environment and ensure that we leave the planet a healthier, more livable place for future generations.

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On the plus side, climate investments also have enormous potential. Indeed, the IFC estimates this potential at USD 23 trillion in emerging markets for the period up to 2030.

The National Bank of Ukraine (NBU) clearly understands that financial market regulators can make an urgent and important contribution to building a better future. Therefore, to send a powerful message to our stakeholders, and to build confidence in our commitment to developing a sustainable economy, we have included the promotion of sustainable finance as one of the key strategic goals in our Strategy 2025. Moreover, for the first time in the history of the NBU we have insisted on inclusion of environmental, social and governance (ESG) considerations in our 2022 Monetary Policy Guidelines.

To fulfil our commitments, in April, the NBU signed a Cooperation Agreement with the World Bank’s International Finance Corporation (IFC), taking what I believe to be the first steps towards a green future for our country.

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Ahead of the signing, we both agreed on the drafting of strategies and standards for sustainable finance in Ukraine, committed to integrating ESG requirements in the corporate governance of banks, and promised to share expertise to build the central bank’s capacity for raising awareness about ESG issues.

In just five months, the NBU has taken major steps towards this goal, developing the basis of a roadmap to expand ESG, as well as the Sustainable Funding Strategy. The strategy, which will launch next month, will encourage those operating in Ukraine’s financial markets to incorporate the NBU’s vision of sustainable funding and ESG best practices in their plans for the years ahead, and to make preparations for regulatory changes.

Complimentary to this, between September and October next year the NBU will introduce new mechanisms in the supervisory and management boards of commercial banks to ensure ESG is a significant element in their strategies.

This will be fundamental to assessing the footprint of financial transactions and the effect of each banks’ operations on the environment and on society.

Perhaps the most important step the NBU is taking from the first half of 2023 will be to require commercial banks to consider ESG risks when deciding whether to provide financing to a potential client.

To bolster this requirement, the NBU will also require ESG reporting from banks, disclosing information to stakeholders about portfolios and operations, including corporate governance.

This move will put Ukraine in the vanguard of transparency when comes to reporting standards. Businesses and the general public will, for the first time, be able to compare the environmental ratings of Ukraine’s banks, allowing them to make more informed decisions, based on their own personal preferences. Environmental protection and greater sustainability can only be achieved if countries, their businesses, and their people work together – and we intend to give this power to Ukrainian citizens.

Whilst regulating the banking sector is the basis of what we do at the NBU, our sustainable development team will also be exploring ways to incorporate and build on green finance practices in the nonbank financial sector.

Our wholehearted commitment to greening Ukraine’s entire financial system has thus never been stronger, and the steps we are taking prove this.

At the same time, the NBU is under no illusions: The climate crisis continues to rapidly affect our planet and our way of life.

We understand that we are still at the very beginning of a long journey towards a sustainable global economy. But by continuing carefully along this path, and learning from our partners, we firmly believe that we can be a leader in the emerging markets space in ESG best practices, which will benefit both Ukraine and the planet.

Energy

MEPs debate EU solutions to rising energy prices

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Vulnerable households should get assistance to mitigate rising energy prices, MEPs said in a plenary debate, Economy.

MEPs stressed the urgent need to support EU citizens in the face of record high gas and electricity prices during a plenary debate on 6 October. EPP’s Siegfried Mureşan (Romania) said: "It is affecting citizens, it is affecting European enterprises, particularly small and medium sized enterprises, which were already hit by the pandemic and by the economic consequences of the pandemic. It is our duty to help citizens and enterprises overcome this crisis of increased energy prices.”

Kadri Simson, the European Energy Commissioner, stressed the need for action: "This price shock cannot be underestimated. It is hurting our citizens, in particular the most vulnerable households, weakening competitiveness and adding to inflationary pressure. If left unchecked, it risks compromising Europe's recovery as it takes hold. There is no question that we need to take policy measures - Europe has come through high energy prices many times in the past - and responded to them through diversification of supplies sources and market innovation."

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She highlighted the importance of making clear that current price hikes had little to do with the EU's climate policy, but much to do with Europe's dependence on imported fossil fuels.

For Philippe Lamberts (Greens/EFA, Belgium), the situation is a wakeup call for a faster transition towards renewable energy and for more solidarity: "Faced with this energy insecurity, first of all the member states have to respond by using additional tax revenues to guarantee and extend preferential social tariffs and help target the most vulnerable households. Producing in a sustainable and fair way is more expensive than dirty and unfair. If we wish everyone to be able to afford a decent life based on dignity, we have to turn around these inequalities. Without social justice, the energy transition won't happen, and without this, our societies will collapse."

Manon Aubry (The Left, France) said energy should be a common good and must be accessible to everybody. “You turned it into a product like any other with which you could speculate and make profits. Either to eat or to heat should not be a luxury but a fundamental right.”

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Energy market reform

Some MEPs proposed to redesign the European energy market. Stressing the fundamental and urgent need to provide minimum wellbeing for all European citizens, Iratxe García Pérez (S&D, Spain) said: “First the Commission must present a plan for states to act in a coordinated way when we have stress on the energy market, making sure we have a real European Union of energy. Second, we must slow down speculation on the CO2 market and third, we need to make sure that we have new standards in the functioning of the electric marketplace to ensure a cheaper energy mix.”

Renew Europe’s Christophe Grudler (France) said the EU should look into three areas to resolve the energy crisis: reinforcing energy storage facilities and considering common procurement of gas; promoting energy made in Europe (including hydrogen) by reducing dependence on fossil fuels from other countries; and a rapid reform of the European energy markets, including putting a stop to the tie between electricity and gas prices. “The European energy market needs to be reformed along the lines of the Green Deal,” he concluded.

Climate policies

The role of the EU’s ambitious climate policy in the rising energy prices divided opinion. Anže Logar, the Slovenian Minister for Foreign Affairs representing the Council presidency, said the EU’s climate policy and notably the Fit for 55 package is “neither the source of the current surge of energy prices nor a short-term solution. In the long-term the decarbonisation of the European economy can contribute to mitigating fluctuating energy prices and to fighting energy poverty,” he said. In the meantime, vulnerable households should be offered income assistance via the Social Climate Fund, Logar added.

Joëlle Mélin (ID, FR) said that the focus on renewable energy in the European Green Deal could increase Europe’s vulnerability to market shocks. “Member states should be able to make decisions on their energy mix on their own and shouldn’t have to be part of failure,” she said.

Beata Szydło (ECR, Poland) emphasised that the trend of rising energy prices continues and expressed doubts that the Fit for 55 package would bring the desired results. “I think we have to be extra careful about those solutions. You were talking about what caused this spike in energy prices. This is partly due to the pricing of emissions. Where were those decisions taken? In this house,” she said. “I think we have to re-think our energy policy.”

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Energy

Sassoli: Local initiatives will ensure concrete results for Europe 

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Speech by the President of the European Parliament at the opening of the Covenant of Mayors.

Ladies and gentlemen,

"The European Parliament, the home of European democracy, has hosted the Covenant of Mayors ceremony for climate and energy for over ten years, welcoming mayors and local leaders to Brussels. Last year the event could not take place due to the COVID-19 pandemic, but today I am delighted to be able to meet. We see before our eyes the increasingly visible and dramatic signs of climate change, and the time has come for action. We are working on concrete legislative acts to implement the Green Deal. Therefore, this event could not be timelier.

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"Let me first congratulate you on the success of the Pact: over 10,000 cities have signed up, representing more than 325 million inhabitants from 53 countries. These are impressive figures. As you know, we share similar objectives: to accelerate decarbonisation, strengthen the ability to adapt to the inevitable impacts of climate change, and allow citizens to access secure, sustainable and affordable energy.

"Energy poverty is a problem for all Europeans, in all Member States. As we approach winter, we are seeing a rise in energy prices, and citizens and businesses are understandably concerned. As with COVID-19, we need to join forces and provide a coordinated European response. Our exposure to volatility in global gas prices underscores the importance of our plan to build a strong domestic renewable energy sector. We need to act on energy efficiency, which can really provide a breakthrough. Cities manage large portfolios of buildings, from schools to libraries to housing units. The energy transition represents an opportunity to improve access to better quality housing.

"The European Parliament is determined to work towards achieving a climate-neutral society by 2050, and is fully committed to transforming the Union into a healthier, more sustainable, fair, just and prosperous society.

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"The ecological transition will involve all EU policies and affect all regions of the EU in various ways. Therefore, only a holistic and inclusive approach to implementing the Green Deal will enable us to realise our ambitions. It is for this reason that the European Parliament is in favour of enhanced cooperation with European cities and regions in its work. It is crucial that EU institutions, MEPs, national governments and local politicians join forces to ensure that the energy and climate transition leaves no one behind and improves the quality of life for all European citizens, creating new opportunities and strengthening social cohesion.

"Last year, the European Commission launched a climate pact. The pact provides an opportunity to bring together national governments, local communities, civil society, schools, businesses and individuals to share information, create spaces to express innovative ideas, both collectively and individually, and build capacity to facilitate grassroots initiatives on climate change and environmental protection.

"The European Parliament is a staunch promoter of the work of the Covenant of Mayors. Your work and local initiatives, providing concrete results, will ensure that the EU and its Member States respect their international commitments and the objectives of the Paris Agreement. Local and bottom-up initiatives are also key to encouraging behavioural change, ensuring a profound transformation of society.

"It will be necessary to mobilize substantial public and private investments, across all policies, to help the communities most affected by decarbonisation, while encouraging proactive projects and initiatives.

"European cities also have an important role to play in accelerating the shift to sustainable and smart mobility. The European Parliament has called for a broader urban mobility plan in order to reduce traffic and improve liveability in cities, for example by supporting zero-emission public transport, as well as cycling and pedestrian infrastructure. European cities, with their practical experience and expertise, should be involved in the discussion on the implementation of future mobility policies at EU level.

"In addition, the development of green spaces in urban areas, rich in biodiversity, will be important to help tackle air pollution, noise, heat waves, floods and public health problems in European cities.

"The EU must continue to act as a leader in climate action and is called upon to play, through its diplomacy, a leading role in convincing other global players, such as China and India, to raise their ambitions at COP26 in Glasgow - transforming commitments into concrete policy measures. Time is of the essence and global action is crucial for the success in the fight against climate change. In this context, your role will be essential, both through the twinning programme and Pact offices outside of Europe. Cities need to be on the frontline of world leadership in the fight against climate change.

"I would like to assure you that the European Parliament, in defining the European Green Deal, will ensure that European cities are involved and able to do their part, not only as important allies, but also as active partners.

"Thank you."

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Energy

EU measures to guarantee safe and green energy

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From heating to transport, energy is essential to everyday life, but also a major source of emissions. Read about EU solutions to decarbonize the sector, Economy.

Energy is the biggest source of greenhouse gas emissions in the EU, accounting for more than three quarters. It covers electricity production, heating and transport - all essential to everyday life. In order to reach the EU’s ambitious target of climate neutrality by 2050, emissions need to be drastically cut in the energy sector.

In 2021 gas and electricity have hit record prices. The EU is highly dependent on energy imports, especially when it comes to natural gas (90%) and oil (97%), making them vulnerable to disruptions that can increase prices. Better cooperation and interconnections of energy networks with the development of renewable energy sources can help EU countries secure energy supplies.

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Read on to find out about the different proposals the EU is working on to reduce emissions from the energy sector and guarantee a safe supply.

Better connections between EU countries

Connecting energy infrastructure between EU countries can help to secure a diverse supply of energy and better mitigate possible disruptions.

The EU is currently revising rules on the funding of cross-border energy infrastructure projects in order to meet its climate goals. Every two years, a list of key infrastructure projects is selected. These projects can benefit from simplified permits and the right to apply for EU funding.

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Members of Parliament’s energy committee want to stop the EU from funding natural gas projects and instead direct money to hydrogen infrastructure and carbon capture and storage. The Parliament will negotiate the rules with the European Council.

Renewable hydrogen

When hydrogen is used as an energy source, it does not emit greenhouse gases, meaning it could help decarbonise sectors where it is hard to decrease CO2 emissions. It is estimated that hydrogen could supply 20-50% of the EU’s energy demand in transport and 5-20% in industry by 2050.

However, in order to be sustainable, hydrogen must be produced by renewable electricity. MEPs have insisted on the importance of a clear distinction between renewable and low-carbon hydrogen as well as on phasing out fossil-based hydrogen.

Offshore renewable energy

Currently, wind is the only offshore renewable energy source used on a commercial scale, but the EU is looking into other sources, such as tidal and wave power, floating solar energy and algae for biofuels.

The European Commission has proposed an EU strategy to dramatically increase the production of electricity from offshore renewable sources. Offshore wind capacity alone would grow from 12GW today to 300GW by 2050. Parliament will set out its position later.

More ambitious targets

Increasing the share of renewable energy and enhancing energy efficiency are both needed in order to decarbonize the energy sector. Under legislation aiming to deliver the Green Deal’s targets, the Commission has proposed to revise the targets for both renewable energy (currently 32% by 2030) and energy efficiency (32.5% by 2030).

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