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Iryna Stavchuk, Oleh Savytskyi: How Europe and Ukraine can phase-out Russian oil and gas

March 25, 2022 11:10 PM 6 min read
Ukrainian state-run gas transport company Ukrtransgaz is part of the largest national oil and gas company of Ukraine, Naftogaz. (Ukrtransgaz)
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Today, Russia's egregious armed aggression against Ukraine as an X-ray highlights a chronic disease of a united Europe that has long required radical "surgery". The acute energy crisis that EU is facing now comes as the culmination of decades of flawed energy policy and the result of a pernicious dependence on fossil fuel imports from Russia and other anti-democratic regimes. Today, it is obviously clear how politically, socially and economically vulnerable Europe is because of its dependence on coal, oil and gas. Addictions to fossil fuel imports and energy subsidies have already posed threats to the EU's energy security, profoundly undermining economic security and, worst of all, violating human rights, destroying the environment, climate and social justice.

In the month since Russia's full-scale invasion of Ukraine, EU countries have paid the Putin regime nearly 19 billion euros for fossil fuels, including 12 billion euros for natural gas. Because Western powers have imposed sanctions on Russia's Central Bank and frozen its reserves, Putin is now demanding that gas be paid for in rubles, which Western customers must buy for foreign currency. Thus, the Kremlin is openly trying to put Gazprom in the place of the Central Bank, while openly blackmailing the EU and showing how much the Putin regime relies on exporting fossil fuels for its survival.

Without billions in financial flows from hydrocarbon exports, Russia would not be able to wage hybrid wars against neighboring countries, finance propaganda and a brutal repressive machine within the country, as well as build offensive weapons and blackmail the world with nuclear weapons. The invasion of Ukraine should be the beginning of the end for the Russian oil and gas industry, and the EU should make every effort to accelerate the transition from fossil fuels to green energy.

The problem of fossil fuel addiction creates another global problem - climate change. Today we are at a time when temperatures in the Arctic are 30 degrees above the historical level, and in Antarctica - 40 degrees, and UN Secretary-General Antonio Guterres declares from the rostrum of an international conference that "dependence on fossil fuels is a mutual guaranteed destruction."The climate emergency we are facing is threatening not only all of humanity, but most of life on Earth. This is a time to realize mistakes and probably the last chance for decisive action.

It is indeed difficult for Europe and Ukraine to give up coal, oil and gas at the same time. In Europe, rising gas and fuel prices are already having severe consequences for the economy and the social sphere, and there are currently no guarantees of protection against new energy price spikes due to the large role of fossil fuels in the energy balance. But now Europe and Ukraine, already physically integrated into a single synchronous electricity grid, are on the threshold of a new "green" energy era with an enormous shared potential for renewable energy development.

The decisions taken these days will determine the fate of Europe’s energy security over the next few years, as well as the EU’s ability to meet its obligations under the Paris Agreement and be a leader in tackling the climate emergency. Ukraine must be an active player in shaping and implementing these decisions. The long-term success of the united Europe's energy transition is largely up to us. So what should Europe and Ukraine do to succeed?

Specific measures to eliminate dependence on fossil fuels

Responding to the climate crisis, the EU is already implementing and strengthening its policy of phasing out fossil fuels. Last year, the European Union adopted a package of legislative changes "Fit for 55" to make EU policies on climate, energy, land use, transport and taxation suitable to reduce net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. Achieving such emission reductions over the next decade is crucial for Europe to become the world's first climate-neutral continent by 2050 and to make the European Green Deal a reality.

Aggression in Ukraine and energy blackmail by Russia have added to the urgency of plans to completely decarbonise Europe and call for them to be greatly accelerated.

Fig. 1. Share of Russian supplies in EU imports of fossil fuels in 2021.

Source: European Commission

This week, the Climate Action Network Europe, which brings together more than 1,700 CSOs in 38 countries, called on the European Commission and EU national governments to take decisive and immediate action to eliminate fossil fuel dependence.

In particular, the European Climate Network points to 8 specific measures to implement an accelerated, secure and compatible with the Paris Agreement energy transition to the EU:

1. It is necessary to immediately adopt specific plans for phase-out of fossil fuels, starting with Russian, and then all other imports and the curtailment of local production in a socially just way.

2. Set ambitious energy saving targets at European and national levels. Overall energy consumption should decline significantly within this decade.

3. Deep and large-scale renovation of buildings in Europe must begin immediately, for which appropriate incentives must be created.

4. It is necessary to build at least 4 times more solar and wind energy capacities every year compared to 2020.

5. It is necessary to ensure a rapid transition to heating systems based on renewable energy sources, starting with the large-scale deployment of heat pumps.

6. For the energy market, tools should be introduced to increase the flexibility of energy systems to facilitate the balancing of solar and wind energy.

7. Industrial restructuring should be based on energy and resource adequacy targets using the best available technologies.

8. All financial flows, both public and private, should support the energy transition.

All these 8 measures are also relevant for the future of Ukraine, as our economy in the process of future post-war reconstruction will have to find a new path and end its dependence on Russian energy resources.

The vital need for an accelerated energy transition for Ukraine

Following a full-scale Russian invasion and the strengthening of the geopolitical alliance between Russia and China, a major overhaul of energy and the economy to eliminate energy dependence on imports of coal, gas, oil and nuclear fuel is essential for Ukraine to assert its sovereignty and gain energy independence.

Moreover, the transition to clean and safe renewable energy sources and clean technologies will allow Ukraine to build a new strong and modern economy, closely integrated with the economies of the EU member states.

According to the latest available energy balance data, in 2020 Ukraine imported 12 million tons of oil and oil products, 21 million tons of coal and 9.1 billion m3 of natural gas.

According to the State Customs Service, in 2020 Ukraine also imported $ 212 million worth of nuclear fuel from Russia, which is 62% of all supplies of fuel assemblies. Thus, more than half of all nuclear fuel came from Russian company TVEL, while the American Westinghouse supplied only 38%.

Ukraine paid for imported coal $ 1.7 billion in 2020, and in 2021 - $ 2.5 billion. Most of the coal came from Russia and Kazakhstan - 62.1% and 10.2% respectively. So last year we bought more than two-thirds of imported coal from the enemy.

The situation with gas is somewhat better - in 2021 Ukraine reduced gas imports by 6 times to 2.6 billion m3. But dependence on Russia remains, as 89% of imported gas comes in virtual reverse from EU countries to which transit flows go.

Fig. 2. Share of imported energy in Ukraine's energy balance in 2020

To gain full and real energy independence from Russia, Ukraine in the process of reconstruction must immediately follow the path of accelerated energy transition and not repeat its own mistakes and the mistakes of the European Union, made in recent years. We must ensure that Ukraine's post-war reconstruction plan is developed and implemented to deliver the rapid development of high value-added sectors and new industries in Ukraine, such as: renewable energy technologies; building materials and technologies for energy efficient construction; production of batteries, electronics, electric cars, heat pumps; electrometallurgy and hydrogen-based steel production.

As a basis for reconstruction, Ukraine needs to build its own new industrial base and means of production that will not rely on fossil fuels. Without this, the development of a modern green economy of the XXI century is impossible. The post-Soviet industrial legacy of energy-intensive industries, which have already suffered structural decline, now has been severely affected by the Russian invasion, and related supply chains have been halted.

Some of the enterprises after the shelling and bombing simply no longer exist, so the reconstruction of the industry will have to start from scratch using new technologies. The production of equipment for renewable energy, batteries, electric vehicles, heat pumps, modern electrified construction equipment and other solutions to get rid of dependence on fossil fuels should be the focus for the revival of Ukrainian industry.

Today, Ukraine has a chance to start implementing energy transition at a pace unprecedented for Europe, integrating into new clean supply chains and helping to decarbonize Europe's economy faster. To achieve the ultimate victory and protect our children from new resource wars, energy blackmail and the devastating effects of climate change, we must not just embark on the path of energy transition, we must race upon it and push Europe forward to completely stop using coal, oil and gas. Then we will win the final victory.

Iryna Stavchuk is a deputy minister of Environmental Protection and Natural Resources of Ukraine for European Integration.

Oleh Savytskyi is a climate and energy policy expert of the Ukrainian Climate Network

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