Brussels’ climate initiatives have been undermining the European economy for years. Ukraine should avoid adopting the EU’s risky demands, as they could delay the recovery of our energy sector for years.
The European Greens
Russia’s aggression against Ukraine has inflicted unprecedented damage on the country’s energy system, adding to its many woes. With most of Ukraine’s thermal power plants in ruins, the challenge now is to rebuild from scratch. The priority should be constructing an energy system that delivers maximum efficiency at minimal cost.
Yet, Ukraine has long been on a path toward energy inefficiency. The country’s commitments under the Kyoto Protocol in 1997 and the Paris Climate Agreement in 2015, aimed at reducing greenhouse gas emissions to tackle what was once called “global warming” and later “climate change,” have steered it in this direction. These pledges have led the government to embrace Soviet-style centralised planning, with direct interference in the market, fostering an energy structure that leans heavily on costly and inefficient renewable sources.
Tackling climate change has been a cornerstone of European Union policy for years. Yet, the recent European Parliament elections underscored a shift in voter sentiment on this issue. The biggest casualties were the left-liberal parties, notably the European Green Party, which saw a significant setback. The Greens lost 19 seats, reflecting a sharp drop in voter backing since the 2019 elections. In Germany, their support plummeted from 20.5% to 12%, while in France, it fell from 13% to a mere 5%.
European voters have made their discontent with climate policies clear. Central to this is the European Green Deal, which aims to achieve net-zero greenhouse gas emissions by 2050. Realising this ambitious target necessitates staggering investments: the International Renewable Energy Agency projects that global spending on energy transition will need to hit $35 trillion by 2030, with a third of this amount coming from private sources. Given the unpredictable returns, businesses are understandably reluctant to commit such vast sums. Consequently, EU officials and the current US administration are resorting to centralized economic planning and coercive measures reminiscent of traditional communist practices.
Brussels is advancing a series of ambitious climate measures, including a ban on the sale of internal combustion engine vehicles by 2035 and an increase in carbon tax rates that will be extended to new economic sectors. The proposed regulations also require the modernisation of energy-inefficient residential buildings, with the Italian government estimating that about 60% of the country’s homes will need upgrades. Additionally, the introduction of carbon limits in agriculture aims to force farmers to cut livestock numbers and reduce meat production, exemplified by a new Danish tax that will cost farmers around €100 per cow annually.
The impact of Europe’s climate policies up to 2022 is starkly evident. By phasing out fossil fuels and nuclear energy, Europe became increasingly reliant on Russian gas, which supplied 40% of the EU’s gas by the end of 2021. The abrupt cutback in Russian energy imports throughout 2022 led to a dramatic surge in energy prices. This energy crisis continues to stymie economic growth in Europe, with the IMF forecasting a mere 0.8% GDP growth for the EU in 2024, compared to 2.6% for the US.
Apocalyptic warnings from officials about the imminent collapse of the global economy due to climate change are periodically refuted by rigorous analyses, such as those provided by the UN’s Intergovernmental Panel on Climate Change (IPCC). According to the IPCC’s Fifth Assessment Report, global temperatures are projected to increase by 3°C by 2100, potentially leading to a 3% reduction in economic growth. Nevertheless, the report also forecasts that the global economy will continue to expand at an average annual rate of 2% through the end of the century. When adjusting for the anticipated impacts of climate change, this growth rate is expected to marginally decline to 1.96%, demonstrating that the influence of climate change is relatively minor and falls within the bounds of statistical error. Chapter 10 of the report further elaborates: “The impact of climate change on most economic sectors will be relatively insignificant compared to other factors such as demographic changes, shifts in age distribution, variations in income, technological advancements, fluctuations in relative prices, lifestyle changes, government regulation, and a host of other socio-economic dynamics that affect supply and demand.”
Ukrainian energy vs. the Green lobbyists
In the wake of the extensive damage Russian aggression wrought on Ukraine’s energy infrastructure, the restoration effort must be executed with optimal efficiency, leveraging energy sources that promise the highest output at the lowest cost. The revamped energy framework might well incorporate various forms of renewable energy, provided their benefits are demonstrably significant.
Nevertheless, amid the ongoing conflict, Ukraine’s reliance on external financing necessitates alignment with the preferences of its international partners. Under the Ukraine Facility programme, which promises approximately €50 billion from the European Union over the next three years, Ukraine has pledged to undertake a series of reforms, with a notable emphasis on addressing so-called “climate change.” Notably, at least 20% of the funds from the Ukraine Facility Investment Framework are earmarked for mitigating climate impacts and advancing Ukraine’s “green transformation.”
Following the model of Brussels’ bureaucratic practices, Kyiv is embracing centralised economic planning. This initiative encompasses several administrative measures: issuing permits and regulating industrial pollution in line with the EU Industrial Emissions Directive; implementing a mandatory system for monitoring, reporting, and verifying greenhouse gas emissions; establishing a national emissions trading system for greenhouse gas quotas; and introducing a carbon pricing mechanism consistent with EU practices.
Adhering to these EU requirements will shift Ukraine’s energy sector away from inexpensive fossil fuels, replacing them with costly and inefficient renewable sources. This transition will see market mechanisms severely restricted by state intervention. Unquestioningly, following Brussels’ mandates could cause substantial delays in the recovery of Ukraine’s energy infrastructure and hamper economic growth due to prolonged increases in energy costs.
It is anticipated that EU regulations will soon extend to nuclear energy, which is currently Ukraine’s sole reliable energy source. The European Green Party’s programme, for instance, advocates for a ban on the construction of new nuclear reactors and calls for the cessation of existing projects. Additionally, it proposes that nuclear power plant operators should not receive any state funding and aims for Europe to achieve 100% renewable energy by 2050.
Germany has experienced firsthand the consequences of abandoning nuclear energy, which led to a complete dependence on Russian gas. In 2022, the German government was compelled to reactivate some decommissioned nuclear reactors to address a substantial energy deficit. Currently, the European Union is heavily influenced by the green lobby, which has been instrumental in creating an energy crisis and contributing to slower economic growth across the bloc. In contrast, Ukraine has a different agenda: to build a robust energy sector supported by the most efficient generation technologies available. Blindly adhering to EU demands in this area could result in significant delays to Ukraine’s energy recovery and hinder economic progress due to prolonged increases in energy costs.
