UKRAINE: ENVIRONMENTAL INVESTMENT AGENCY ON COPENHAGEN

UNCLAS KYIV 000229 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV KGHG ENRG SENV UP SUBJECT: UKRAINE: ENVIRONMENTAL INVESTMENT AGENCY ON COPENHAGEN ACCORD REF: A. STATE 11182 ¶B. KYIV 129 SENSITIVE BUT UNCLASSIFIED ¶1. (SBU) Acting Economic Counselor and Economic Analyst met on February 3 with Igor Lupaltsov, the head of the National Environmental Investment Agency of Ukraine (NEIA),to discuss Ukraine's association with the Copenhagen Accord and deliver talking points per reftel A. Lupaltsov, who headed the Ukrainian delegation at the Copenhagen summit, echoed NEIA's earlier statement that the agency supported the association but the final decision would be made by the Cabinet of Ministers (reftel B). He did not provide a timeline of when Ukraine would formerly associate; although, he mentioned that NEIA would send its formal recommendation on February 4 or 5 to the CabMin to associate. ¶2. (SBU) While Lupaltsov professed Ukraine's disappointment with the outcome of the Copenhagen negotiations and criticized the organization of the summit, he said the Copenhagen Accord was an important step to reach a binding agreement. At the same time, Lupaltsov stressed Ukraine would only join any future agreement if the Kyoto-based cap-and-trade mechanism remains in place. Ukraine plans to offer an emission reduction target of 20% by 2020, using 1990 as a baseline year. However, to reduce emissions by just 10% from a business-as-usual scenario by 2020, Ukraine would reportedly need to spend approximately $20 billion - funds which Ukraine does not have absent a mechanism to sell its excess carbon units, according to Lupaltsov. Although Ukraine's current emissions are approximately 60% of the 1990 level, Lupaltsov estimates it would exceed its emissions target if it reaches its goal of doubling GDP by 2020. As a result, Ukraine views income from the cap-and-trade system as essential to reduced emissions. Lupaltsov opined that the only chance for a binding agreement to succeed is if it is based on economic principles and offers a market-based approach to climate change. ¶3. (SBU) Comment: Ukraine supports the Copenhagen Accord and wants positive movement toward a legally binding agreement that would be favorable to Ukraine. A legally binding agreement that includes a carbon trading scheme benefits Ukraine in that it would provide cash for Ukraine's surplus carbon credits, and, presumably, it would attract environmental investment into Ukraine. It is uncertain how soon Ukraine will formally associate with the accord given the ongoing change-over in government; however, it seems inevitable that Ukraine will associate and will continue to press for a follow-on binding agreement. End Comment. TEFFT