1. Providing critical insights into energy and environmental markets www.pointcarbon.com Recent GIS Developments in Ukraine Olha Semkiv Budapest April 25, 2008

2. Providing critical insights into energy and environmental markets www.pointcarbon.com Outline AAU country ratings Eligibility status – Ukraine The National Environmental Investment Agency –GIS procedures –Selection criteria for GIS projects –AAU price floor cancelled –New DFP under JI mechanism

3. Providing critical insights into energy and environmental markets www.pointcarbon.com What is a Green Investment Scheme? A spin-off of International Emissions Trading under Article 17 Trading of AAUs Proceeds are invested by seller country into “greening” –Emission reductions –Pollution prevention –Environmental activities No UNFCCC/ Kyoto rules apply –Other than AAU trading rules (Modalities for Article 17) Sale of government property to another government or private entity

4. Providing critical insights into energy and environmental markets www.pointcarbon.com AAU ratings

5. Providing critical insights into energy and environmental markets www.pointcarbon.com AAU host country ratings (April 2008) CountryAAU rating JI rating 1 (1) Ukraine BBB+ 2 (4) Hungary BB 3 (7) Czech Rep BB 4 (2) Romania BBB 5 (8) Poland BB 6 (3) Russia BB+ 7 (9) Estonia BB- 8 (5) Bulgaria BB 9 (10) Belarus CC+ 10 (6) New Zealand BBB BB BB- B CCC+ CCC- - BB JI rating (previous) BBB+ BB+ BB BBB+ BB BB+ BB CC+ BB+

6. Providing critical insights into energy and environmental markets www.pointcarbon.com GIS status Latvia AAU trading law adopted, Dec.2007. WB GIS options study, 2007. Operational structure under development. Hungary Government order and climate strategy approved, Dec. 2007. Priority areas and operational issues being finalized. Czech Republic Government decision to sell AAUs, AAU working group established. GIS structure to be aproved by June 2008. Will involve State Env. Fund and State Energy Agency. Ukraine WB Study, 2006. WB/Japan Grant for GIS preparation, on- going. GIS procedures adopted. Russia WB Study on GIS options + WB/Japan Grant for GIS preparation launched, formally endorsed by the government. Bulgaria WB GIS options study, 2004. Slow movement after government change, but possible interest. No structure. Romania Legal option study completed, 2006. Strong interest but weak political support in the government. Slovakia Early mover. Project – backed AAU sale in 2002. Little interest after personnel change in MoE. Poland Very little interest initially. Possibly more receptive new government. MoU might be required.

7. Providing critical insights into energy and environmental markets www.pointcarbon.com Eligibility status

8. Providing critical insights into energy and environmental markets www.pointcarbon.com Eligibility Ukraine is to become eligible on 29 April 2008 Initial review report published in December 2007 Assigned Amount set at 4,604 Mt CO2e Commitment period reserve is 2,059 MtCO2e Review team confirmed that Ukraine complied with the requirements of the Kyoto Protocol and the CMP decisions Recommendations: –Maintain the operational functions of its national system –Maintain and enhance the existing inter-institutional and inter-agency cooperation and responsibilities for inventory submission

9. Providing critical insights into energy and environmental markets www.pointcarbon.com The National Environmental Investment Agency

10. Providing critical insights into energy and environmental markets www.pointcarbon.com The National Environmental Investment Agency (NEIA) Established by the Governmental order in May 2007 (right before the parliamentary crisis in Ukraine) Deals with GIS development and implementation –Draft regulations have been developed on ERU transfer and GIS –Negotiations on ‘greening’ AAUs started –Testing of the national registry completed in October 2007 –Change of Government - change of management

11. Providing critical insights into energy and environmental markets www.pointcarbon.com AAU/ERU price floor Set by the Tymoshenko’s Government in January 2008 –To prevent accusations of corruption in JI and GIS –To be reviewed on a quarterly basis –Draft methodology developed by the NEIA –Intentionally to be set at the low level THE DECREE REVOKED On 17 April 2008

12. Providing critical insights into energy and environmental markets www.pointcarbon.com GIS Procedures - the government’s decree No 221 The NEIA assigned as a focal point for GIS project consideration/approval/monitoring Application with determination report to be submitted –The NEIA accredits independent entities –Preliminary selection by interdepartmental working group The projects are approved according to the conditions of international agreements on AAU transfers –Buyer can choose the project types The NEIA selects the project managers/independent entities etc.

13. Providing critical insights into energy and environmental markets www.pointcarbon.com To be approved… To be improved… Procedures for IEs accreditation –Criteria for selection –Timeframe The Inter-Departmental working group –Composition and level of representatives –Timing for project consideration Criteria for a GIS project selection (open for public comments) Approach to financial incentives (soft loans, grants…) Clear rules for tenders

14. Providing critical insights into energy and environmental markets www.pointcarbon.com Process of target financing of GIS projects in Ukraine* NEIA Development of the budget program Inclusion to the State Budget of Ukraine Target financing of projects BUDGET OF UKRAINE Enterprises of Ukraine Target environmental projects Determination of projects eligibility Independent monitoring of projects The draft of the CMU’s Decree “On accreditation of independent companies for checking eligibility and monitoring of GIS projects” is under development by the NEIA. The draft is to be submitted to the Ministry of Environment for agreement. The graph is taken from the Mr. Bebeshko’s presentation to the Parliament of Ukraine, April 2008

15. Providing critical insights into energy and environmental markets www.pointcarbon.com GIS project pipeline > 100 projects submitted to the NAIE The pipeline to be reviewed for the potential JI projects Priority for the year 2008 – ‘hard greening’ Sectors: –Housing and public utilities; –Reconstruction of district heating systems; –Forestry In the 2009-12 period – ‘soft greening’ (up to 25 per cents from the AAU proceeds to the state budget) The Govt submitted to the Parliament an amendment to the state budget law (2008) –UAH 50m (app USD 10 m) income form the AAU trading –Administrator – the NAIE

16. Providing critical insights into energy and environmental markets www.pointcarbon.com The NEIA: JI and GIS The Government’s decree from 17 April 2008 (No 392) –The NEIA assigned as a Designated Focal Point –The Ministry of Environment is to devolve the JI project data base, national registry, and national inventory to the Agency in two weeks The NEIA coordinates both Kyoto mechanisms –Easy switch in between –Lack of institutional memory –Time for recruitment and development of institutional capacities –Improvements of existing and developing regulations

17. Providing critical insights into energy and environmental markets www.pointcarbon.com Summary The Agency now coordinates both JI and GIS Ukraine is to become eligible on 29 April 2008 1,200 million AAUs are offered under the green AAU trading Govt aims for a pilot deal to be signed in May 2008 The legislation exists, but needs to be improved The price floor cancelled

18. Providing critical insights into energy and environmental markets www.pointcarbon.com Thank you! Olha Semkiv, Point Carbon Kiev os@pointcarbon.com +380 50 132 0161