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Environment in Ukraine - Problems and Challenges

3. Problems and Challenges

3.1 Introduction

In this chapter we look upon the environmental related problems and challenges in Ukraine related to the water (water resources and water supply and also waste water), waste (hazardous waste and municipal waste) and energy sectors. Furthermore, we look upon the environmental policy capacity of Ukraine. This issue is a cross cutting issue that affects all the above-mentioned sectors.

The sectors and cross cutting issue are dealt with separately in the Sections 3.2-3.7 below. In each section we concentrate on the most important problems, the background for these and the possible, more or less challenging way-outs.

The environmental related problems in Ukraine related to the water, waste and energy sectors have been identified on the basis of an assessment of the risks of these to environment and human health. The corresponding challenges are linked to the development and implementation of the possible way-outs.

Please note that many of the problems and challenges highlighted in this chapter are closely interrelated. It underpins the need of a comprehensive reform.

3.2.1 Problems

Poor drinking water quality

According to the WHO in average 25 per cent of the samples of drinking water taken from piped water supply systems and private wells in Ukraine do not meet the EU water quality standards regarding bacteriological parameters.

The NEHAP for Ukraine provides similar figures confirming the fact that drinking water quality is notably poor. According to the NEHAP for Ukraine many regions show figures between 30-50 per cent of noncompliance for chemical parameters and 20-40 per cent for bacteriological parameters.

In all 12,233 people were infected by water transmitted agents during 1992-2001 according to the Ministry of Health of Ukraine. Most of the outbreaks occurred in the southern and eastern parts of the country.

The poor drinking water quality seriously impacts on human health. Outbreaks of various diseases among the population due to poor drinking water quality are frequently reported in Ukrainian mass media. These deceases include cholera, virus hepatitis A, ontological illness, metabolic disorder, endocrine dysfunction, allergies and all sorts of skin diseases, including dermatitis and eczema.

Inefficient operation of water supply system

The water supply system – consisting of drinking water reservoirs, pumping stations, treatment plants and distribution systems – is relatively old. It dates back to the 60’s and 70’s. Furthermore, maintenance is inadequate. Consequently, breakdowns, leakages and scheduled water supply are common. These events seriously increase the risk for contamination of the drinking water.

In total, as much as 30 per cent of the abstracted water for drinking water supply is lost due to breakdowns and leakages on its way to the consumers. This figure is high in comparison with EU countries. In Denmark, it is 7 per cent.

Unsurprisingly, the loss of water from the distribution systems due to break-downs and leakages increases pumping and ultimately energy costs of the water utilities, measured as energy costs per m³ of water supplied, considerably.

In order to decrease the loss of water, thereby saving energy costs, several cities have introduced scheduled water supply. However, the introduction of less than 24 hours of water supply increases the risk of contamination of the water in the water supply system. In other words, it causes a serious health hazard.

Figure 3.1
– In Lviv, only 10 per cent of the people have access to water all the time

At the same time water consumption per capita is still high in comparison with not only the EU countries but also most CEE/NIS countries. In Ukraine, water consumption amounts to 330 litres per capita per day. In most EU countries, water consumption amounts to less than half.

Figure 3.2
– Water consumption could be considerably lowered

Contamination of water resources

More than 80 per cent of total water abstraction stems from surface water bodies (rivers, lakes and reservoirs). Thus, groundwater plays a limited role. This picture will not change in future. Potential surface water resources are estimated at 210 km³, whereas potential groundwater resources are estimated at 22 km³.

Virtually all surface water bodies are officially classified as polluted or very polluted. Most important exceptions are the rivers of the Carpathians and Mountain Crimea. Unsurprisingly, the environmental authorities are especially concerned about the contamination of the Dniepro river basin, since it provides drinking water for almost 75 per cent of the Ukrainian population.

Surface water bodies are mainly polluted with compounds of chromium, manganese, nitrogen, sulphate, oil product and pesticides. Increased concentrations of phytoplankton are experienced every year during the summer time.

It is particular alarming that monitoring of surface water quality shows that despite of the significant decline in industrial production and the consequent decrease in waste water discharges, the environmental condition of the receiving waters has not improved.

The Chernobyl’ accident added to the pollution of surface water bodies, foremost the catchments basins of Prypiat and Dniepro rivers. Furthermore, floodings in the 90’s increased the concentration of radio nuclides in these. In recent years, however, the concentration of radio nuclides has remained stable. In most parts of the rivers concentration levels are not dangerous to human health. Nevertheless, many Ukrainians are afraid to drink water from these.

Distribution of the groundwater is very uneven due to the geological and hydrogeological formations, and the smallest amount of potential groundwater is found in the southern and eastern regions, which also have the smallest amount of available surface water bodies. At the same time these regions have the highest water consumption mainly due to level of industrialisation. The availability of surface waters amounts to 140-550 m³ per capita in the southern and eastern regions and to 700-6000 m³ per capita in the northern and western regions.

An increasing amount of groundwater does not meet the standards, whether Ukrainian standards or EU standards. Groundwater is polluted with compounds of nitrates, high salt content, pesticides, fluorine, iron manganese and bromine and barium; the latter is experienced in Lugansk and Donetsk regions.

3.2.2 Background

Poor drinking water quality

The poor drinking water quality is, to a large extent, caused by the deterioration of the physical infrastructure, such as pumping stations, treatment plants and distribution systems, throughout the 80’s and 90’s. Much needed investments have not been carried out. Furthermore, most water utilities have not even been able to cover the required operation and maintenance costs.

There are, however, other important reasons why drinking water quality is notably poor. These include contamination of rural water resources from, especially, agricultural production and insufficient monitoring and enforcement.

Chemical and bacteriological contamination of rural water sources constitutes a serious problem. Many of the approximately 127,000 sources of non-centralised water systems monitored do not meet established water quality standards, whether Ukrainian standards or EU standards. The quality of the groundwater used without any treatment by most part of the rural population is even worse. Nitrate contamination is increasing due to uncontrolled use of mineral and especially organic fertilisers at the private and collective agricultural farms. Furthermore, rural water supply systems are often in a very poor condition compared to urban water supply systems. Non-centralised water supply systems are in a particular bad condition. So the rural population is hard hit.

Insufficient monitoring and enforcement constitute another serious problem. It is very much linked with the existing system of water quality standards, which dates back to the Soviet Union. The water quality standards are, as already mentioned in Chapter 2, very strict compared with EU standards. They are based on a goal of zero damage to human health and also ecosystems, totally ignoring the technical and economic feasibility of meeting these. The methodology for establishing the water quality standards is still based upon the water quality standards for fishery. That is, almost all water bodies are designated for fishing use, a category subject to most stringent requirements as can be seen from Table 3.1. It is almost impossible, not only to meet the standards, but also to monitor them. In the words of the EAP TF Secretariat: "In fact, the mandated concentration limits for pollutants (in the NIS countries, ed.) are so low that they cannot be detected by the available monitoring equipment."² Requirements that are impossible to meet and monitor are not easy to enforce.

Table 3.1
Selected water quality standards for protection and support of fish life in Russia, Ukraine, Kazakhstan and the EU1

Inefficient operation of water supply system

The water sector, including the waste water sector to be dealt with in Section 3.3 below, is in a critical condition. It suffers from many years of insufficient investments in infrastructure renewals, combined with oversized and outdated equipment. Most facilities are constructed 20-40 years ago without taking into consideration the need to minimise operation and maintenance costs, including energy costs. Pipes, pumps and other physical infrastructure have not been upgraded or even maintained properly for decades. As a result, the infrastructure for a number of years has been and still is rapidly deteriorating, which has implied that the citizens of Ukraine in these years are experiencing a severe reduction in the quality of the water services provided. Probably, the negative effects this has had on human health and ecosystems as well as the strain that has been put unnecessarily on the country’s natural resources cannot be overestimated.

Funding available for improving the conditions within the water sector is insufficient. Enterprises and households have traditionally paid far too little for the services provided by the water utilities. Level of water tariffs has been low. In fact, due water tariff payments have not even been able to cover operation and maintenance costs of the water utilities. This is still the case. In the second half of the 90’s funding available was further reduced as a result of the emergence of non-payments and non-monetary transactions, such as barter. Water utilities experienced an increase in non-payments by enterprises and organisations within certain sectors. In recent years, non-payments have, however, decreased.

Generally speaking, there is a limited focus on water conservation in Ukraine.

Contamination of water resources

Since 1990 total water abstraction has decreased by nearly 50 per cent. Surface water and groundwater abstracted have decreased by 50 and 43 per cent, respectively. Figure 3.3 provides an overview of this trend. As can be seen surface water bodies constitute the lion’s share of total water abstraction in Ukraine.

Figure 3.3
– Much less water abstracted from surface water bodies

The far most important reason for this decrease is the output decline within industry and agriculture. It is not owing to increased efficiency in water use.

Waste water discharges constitute a major pollution source regarding surface water bodies. Only a fraction of waste water discharges are satisfactorily treated. The main receiving surface water bodies for waste water discharges from industries, agriculture and cities and settlements are the rivers and the Black Sea. The vast majority of the rivers drain into the Black Sea; only a few drain into the Baltic Sea. The total waste water discharges constitute 13 per cent of the total run-off into the receiving surface water bodies, foremost rivers.

Investment needs

Anticipating a spread of the investments over a time horizon of about 20 years, the average cost per capita totals EUR 17-20 per year, corresponding to EUR 340-400 per capita for the entire period from 2003 to 2022.

Total capital cost requirements of improving the operational safety of the centralised water supply system has been estimated at EUR 3-4 billion EUR. It is envisaged that investments may be carried out from 2003 to 2010. The average cost per capita totals EUR 80-110 for the entire period from 2003 to 2022.

Legal framework

The environmental policy reform initiatives in Ukraine within the water sector mentioned in Section 2.6.1 address the above-mentioned problems fairly well. Consequently, it is important in the short to medium term to ensure further progress in the development and successful implementation of these initiatives.

In doing this, there is a need to pay special attention to the water resource classification scheme, water quality standards, water utilities’ management and operation and relevant international environmental agreements. Furthermore, there is a need to eliminate existing contradictions, voids and uncertainties within the legal framework and also to focus the required secondary legislation.

The water resource classification scheme should be in accordance with the EU Water Framework Directive. The comprehensive water quality monitoring initiative that was initiated by the MENR, Ministry of Health and State Committee on Water Resources in 2001 as part of the preparation of the state programme for water sector development provides a solid basis for such a legal reform.

Water quality standards, including the potable water standards, should be changed so that they correspond to the EU standards. An important step in this direction has, in fact, already been made with the adoption of the Law of Ukraine "On Potable Water and Potable Water Supply" in 2002. However, Article 27 in the law may be slightly revised in order to ensure compliance with the EU standards. Furthermore, there is a need to implement the law.

The legal framework regarding the water utilities’ management and operation needs a complete overhaul. Most important is to ensure decentralisation and commercialisation of the water utilities. They should operate with managerial and accounting independence from municipalities, full cost recovery through water tariffs should be introduced, and they should be allowed to cut-off customers, who do not pay. Furthermore, non-core businesses, such as sanatoria, should be hived off so that the water utilities may concentrate on core business only. Such a reform constitutes an important prerequisite for the emergence of water utilities that are financial viable, may carry out investments needed and are focused on customer demands and customer relations.

Two international environmental agreements are of particular importance since they pose Ukraine with some additional challenges but also offer some possibilities. These are the Convention on the Protection and Use of Transboundary Watercourses and International Lakes, which Ukraine has ratified, and the Protocol on Water and Health, which Ukraine has signed but not yet ratified.

As much as 75 per cent of Ukraine’s rivers are transboundary. Thus, they constitute an important area for regional co-operation in accordance with the Convention on the Protection and Use of Transboundary Watercourses and International Lakes. Ukraine has specific agreements on transboundary waters with the Belarus, Moldova, Poland, Slovakia and Russia. Furthermore, several international projects aimed at fostering co-operation in water quality monitoring and assessment are being carried out – some between Ukraine and Belarus/Poland in connection with the Bug river basin, others between Ukraine and Slovakia in the Latoritza and Uzh rivers. It is important to further strengthen this regional co-operation in transboundary river basin management not just on the technical, but also on the administrative level. Here the EU Water Framework Directive may serve as a valuable source of inspiration to all parties involved. It focuses on river basin management plans as best models for a single system of water management instead of according to administrative or political boundaries.

In order to meet the challenges that follow from the problems regarding water resources and water supply it is important that the environmental authorities and water utilities are capable of designing and carrying out certain measures.

The environmental authorities should take the lead in developing and implementing the required changes in the legal framework and also the various strategies, plans and state programmes. Furthermore, they should aim at ensuring compliance with the requirements established by, among others, the revised water quality standards. That is, they should focus on monitoring, enforcement, economic incentives, liability and compliance promotion. In this context it seems important to improve the early warning systems further. Finally, they should promote water conservation by all means. In order to carry out these different measures they should further develop the working relations between each other and with the water utilities, industry, agriculture, NGOs, neighbouring countries and others. This is an important prerequisite for progress in reform.

The water utilities should introduce international accounting standards, management information systems and also performance based service contracts or private sector involvement through specially designed management contracts. Certainly, excessive top management and staff training will be needed.

The introduction of full cost recovery through water tariffs at the water utilities constitutes a separate challenge that has to be properly addressed by the environmental authorities, water utilities and others. Care should be taken to ensure that customers can afford to pay. In Kiev, for instance, it will be difficult ceteris paribus to increase the water tariffs for residential consumers, as they already amount to more than four per cent of their expenditures. Here it makes sense to make a special effort to lower water consumption, while at the same increasing water tariffs. In general there is a need to introduce measures providing social protection for the vulnerable, including a better targeting of social benefits.

Public awareness should be much further improved through, among others, improved transparency in monitoring. It is important that the general public knows about possible impacts on environment and human health of the pollution of water bodies. Likewise, it is important that the general public knows about the pollution levels. Improved information about pollution levels will not only promote public awareness and thereby pollution mitigation but also diminish existing environmental psycho stress, which seems widespread in Ukraine.

3.3.1 Problems

Insufficient treatment of waste water

Today, total waste water discharges into the surface water bodies, foremost rivers, amounts to approximately 11 billion m³ per year. Approximately 35 per cent of total waste water discharges originate from waste water treatment plants, 58 per cent from industry and 7 per cent from agriculture. However, only a fraction of the total discharges are satisfactorily treated. Most likely only 20 per cent of the total discharges, corresponding to 2.2 billion m³ per year, are satisfactorily treated, which means that the remaining 80 per cent of waste water discharged is untreated or not satisfactorily treated. Consequently, waste water discharges contribute significantly to the pollution of the receiving surface water bodies. For information, total waste water discharges have decreased by 45 per cent since 1990, when they amounted to a little more than 19 billion m³. This reduction, which benefits the environment, is due to reduced discharges from industry.

The waste water treatment plants, which constitute a part of the water utilities, are normally designed with mechanical and biological treatment for removal of organic matter. In most cases nutrients, like nitrogen and phosphorus, are not removed. The vast majority of the plants do not comply with established effluent limit values (or discharge limits), whether Ukrainian discharge limits or EU discharge limits. It results in excessive pollution loads discharged to receiving waters with subsequent risk of health hazards, eutrofication and oxygen depletion. A particular problem is that some waste water treatment plants actually do not operate at all due to lack of financial sources for, among others, spare parts. They simply receive the waste water and discharge it untreated into the rivers.

Map 3.1 below provides an overview of the amount of waste water discharged in the 27 regions based upon official statistics. Furthermore, it provides an overview of the percentage shares of waste water discharged meeting the established Ukrainian effluent limit values, not meeting these and not treated at all. It follows that most waste water is discharged in the eastern regions, where mines and heavy industry are located, and also that the waste water in these regions, to a higher degree than in other regions, is treated insufficiently or not at all.

Map 3.1
– Waste water discharges in Ukraine by regions, 2001

Frequent breakdowns

The waste water collection system (sewer network), which also constitutes a part of the water utilities, is generally of poor quality and seriously deteriorated due to lack of repair and maintenance. Leaking sewers pose a considerable threat to aquifers and surface water bodies, polluting the drinking water supply as well as the receiving water bodies. Sewer pumping stations face frequent breakdowns, which in combination with sewer blockages result in severe overflows.

The frequent breakdowns or serious blockages of pipes that require action by the emergency teams illustrate the bad condition of the sewers. The number of serious emergency incidents recorded is on average 1.4 per km per year. This is far more than in the EU countries. The infiltration rate of 20 per cent also indicates the bad condition of the sewers. It is estimated that approximately 40 per cent of the 7500 pumps in urban areas are in urgent need of replacement.

Insufficient sludge handling

A major problem associated with waste water treatment is the insufficient sludge handling and sludge disposal. The sludge is often poorly stabilised and contains large concentrations of heavy metals and other heavily degradable pollutants. It is typically stored in large lagoons located close to cities and towns.

These sludge lagoons constitute an immense environmental problem –now and in future. They impose a risk for contamination of the streams and rivers due to frequent overflows and of aquifers due to pollutants seeping into the ground.

High energy consumption within the waste water sector

Energy consumption within the waste water sector is very high. Thus, potential energy savings is big. The potential energy savings on waste water treatment pants are estimated at 20-50 per cent. The total potential energy savings on a national aggregated level are in the range of 300-500 million kWh per year.

Insufficient treatment of waste water

The water sector has for several years faced several obstacles to development. Physical water supply and waste water facilities have deteriorated to a degree where substantial investments are required simply to stop further deterioration.

More than 80 per cent of the urban waste water produced in the municipal sector is treated at mechanical-biological waste water treatment plants. These plants were typically constructed in the 60’s and 70’s. Their average age is approximately 25 years. 25 per cent of the plants are more than 30 years old, and only 10 per cent are less than 15 years old. Furthermore, they suffer from inadequate maintenance throughout the 80’s and 90’s. They are simply outdated. Unsurprisingly, it leads to insufficient treatment of urban waste water, even when the urban waste water is actually treated at the waste water treatment plants.

In the rural areas, the situation is even worse, although available information is limited. Two characteristic features are the low coverage of centralised waste water treatment systems (less than 10 per cent) and the lack of interest from the side of environmental authorities to waste watertreatment. In fact, the more than 14 million people that live in rural areas are responsible themselves for handling and discharge of their waste water. Furthermore, only 40 per cent of the waste water collected by the centralised waste water treatment systems in rural areas is properly treated before being discharged into the receiving waters.

The system of effluent limit values, including the waste water treatment plant’s effluent limit values, does not promote sufficient treatment of waste water. On the contrary, it makes monitoring and enforcement regarding waste water almost impossible. The problem is that the effluent limit values for individual polluters, which are established in permits based upon the water quality standards, are so strict that they are quite impossible to enforce. In comparison with the EU legislation they are even stricter than the water quality standards. Consequently, so-called temporary effluent limit values, which are not envisioned in the legislation, and which are negotiable on a case by case basis as part of the permitting process, are used in practice, thereby increasing the discretionary power of the environmental authorities. They are much less strict than the EU discharge limits. Though they are claimed to be temporary they are, in fact, not.

Several attempts have been made to make the system of effluent limit values more realistic and therefore easier to monitor and enforce, but so far in vain. In 1999, the Cabinet of Ministers adopted a resolution that introduced new effluent limit values for wastewater treatment plants in order to converge with the requirements of the EU Urban Waste Water Treatment Directive. They impose the same requirements on all waste water treatment plants regardless of the status of receiving water bodies. They are, however, still more stringent than the corresponding EU discharge limits. It follows from Table 3.2 below.

Table 3.2
– Discharge limits are more stringent in Ukraine than in the EU

Frequent breakdowns

The entire waste water collection system in Ukraine consists of approximately 47,000 km of pipes and 1700 pumping stations with 7500 pumps. 89 per cent of the pipes are located in urban areas, corresponding to 42,000 km of pipes. More than 10,000 km of these are officially reported to be in a state of emergency and need urgently to be replaced in order to avoid breakdowns.11 per cent of the pipes are located in rural areas, corresponding to 5000 km of pipes. 650 km of these are officially reported to be in a state of emergency.

The percentage share of pipes in urban areas officially assessed to be in a state of emergency is illustrated in Figure 3.4 below with a breakdown by regions. As can be seen there is a need to replace more than 20 per cent of all pipes in urban areas in 11 out of the 27 regions. Only in two regions there is a need to replace less than 10 per cent. The situation could hardly be much worse.

Figure 3.4
– Lots of pipes have to be replaced

The many years of insufficient maintenance and upgrading of the physical infrastructure within the water sector, including the water supply sector, have led to this situation, which impacts on the drinking water quality, contamination of water resources and waste water treatment. Consequently, there is a need to increase investments within the water sector substantially in the very near future to avoid a complete breakdown of the sector. This is referred to as the investment backlog. It poses an enormous challenge to the environmental authorities, water utilities and others since the magnitude of the investment backlog is big.

One of the most difficult issues has to do with the level of ambitions that the country should aim for. Should Ukraine aim for an upgrading of the physical infrastructure within the water sector along the EU requirements? Or should it lower the level of ambitions? And in case the last option is chosen: Who should benefit and who should not benefit from an increase in investments? Regarding the urban water sector, including urban water supply, it is estimated that investments totalling EUR 24 billion have to be made during the next 10 years if the physical infrastructure should meet EU requirements. Even if water tariffs are assumed to be substantially increased, Ukraine will be short of some EUR 14 billion. This amount corresponds to a little less than four per cent of the country’s GDP during this period of time. It seems unrealistic, although the national and regional governments, environmental funds, international organisations and private investors may close part of the cumulative funding gap. As an alternative, the level of ambitions could be lowered meaning that funding available will be targeted at certain cities, towns or rural areas, certain water supply systems and certain waste water treatment plants. It seems more realistic.

In sum, the investment backlog within the water sector is so big that further disinvestments will continue to be made totally unplanned and uncontrolled, unless a realistic environmental financing strategy –alongside required, most urgent changes in the legal framework – is developed and implemented.

Insufficient sludge handling

Sludge drying and sludge incineration are not applied in Ukraine. The reason for this is that these technologies are fairly expensive. Only sludge disposal is applied. Consequently, stored sludge volumes increase from year to year.

The number of sludge lagoons is limited. Throughout the 90’s investments in the construction of new sludge lagoons have decreased considerably. As a result, the storage capacities of the sludge lagoons are often exhausted leading to storage at nearby fallow fields, which is, in fact, illegal.

The sludge lagoons are improperly designed; for instance, they do not have plastic liners, which are common at sludge lagoons in the EU countries. Furthermore, they suffer seriously from insufficient maintenance and upgrading.

High energy consumption within the waste water sector

The high energy consumption within the waste water sector is closely connected with the fact that waste water treatment plants are old and outdated.

In particular, the efficiency of the waste water pumping systems is low, aeration systems are inefficient, and means of process control are poor or absent. The lack of full automation power consumption also contributes to the high energy consumption at the waste water treatment plants. The efficiency of waste water pumping systems is estimated to be in the range of 40-50 per cent. Through proper designs and equipment it may be increased to 70-75 per cent.

3.3.3 Way-outs

Investment needs

Lessons learned from the EU accession countries in the CEE points to the fact that the largest investment costs within the water sector are usually incurred for compliance EU Urban Waste Water Treatment Directive. The two biggest cost generating components in the directive are the extension of sewerage systems so that all households in towns with more than 2000 inhabitants are connected and the proper treatment of all collected waste water.

Legal framework

The envisaged and proposed changes in the legal framework mentioned in Sections 2.6.1 and 3.2.3 above are also relevant for the waste water sector. Not least, the need to change the legal framework regarding the water utilities’ management and operation is relevant. Water utilities in Ukraine deal with water supply, sewer systems and waste water treatment. The capability of these to operate on a commercial basis is of utmost importance in order to address the above-mentioned problems related to the waste water sector, as well.

Furthermore, attention should be given to the standards, foremost the effluent limit values, role of various stakeholders and secondary legislation.

The existing system of overly stringent effluent limit values should be drastically changed as soon as possible to make it more realistic, taking into consideration what is technological and economic feasible, easier to monitor and enforceable. The EU Water Framework Directive and EU Urban Wastewater Treatment Directive could be used as benchmarks. Furthermore, other standards, such as sludge handling and disposal standards, should be changed.

In connection with a reform regarding the water utilities’ management and operation the exact role of the various stakeholders involved in waste water management should be considered and defined. The relevant stakeholders include all the ministries, state committees, regional governments, water utilities and enterprises that are involved in the overall development of the water sector.

There is a need to develop secondary legislation in terms of specific, consistent implementing regulations, procedures and guidelines. The MENR and State Committee on Housing and Municipal Economy should take the lead on the development of these. Some guidelines could provide user-friendly information to the water utilities on best available techniques within the EU, including staffing level, parameters of certain services and maintenance requirements.

Regulatory framework

In order to ensure compliance with the requirements established by the revised legal framework the environmental authorities, foremost the MENR and State Committee on Housing and Municipal Economy, should improve cooperation between each other and take certain measures aimed at, at least, avoiding a complete breakdown of the water sector, including the water supply sector.

In particular, they should elaborate, approve and implement a financing strategy for the water sector and ensure that the reporting system works properly.

The financing strategy should – on the basis of clear targets, selection criteria and financing gap assessments – prioritise major capital investments to be carried out in order to close the immense investment backlog that has emerged. Furthermore, it should specify how the investments might be financed. Close co-operation with international organisations in developing the investment projects could be established to ensure that project documentation is adequate. Most important is, however, that authorities involved in environmental policy-making and implementation, including the MENR, State Committee on Housing and Municipal Economy and Ministry of Finance, work closely together with each other on the development of the financing strategy, and also that they involve others, including regional and local governments, in the work.

The reporting system providing accurate data on the water utilities’ operation, including data on actual capacity, number of breakdowns and pipes in a state of emergency, has to be improved. It is important to the environmental authorities, public utilities and general public that such data upon which they may act exist. If they do not, it is, among others, impossible to increase public awareness, including an increased understanding of why water is not provided free of charge.

3.4.1 Problems

High level of generation of hazardous waste

The volume of hazardous waste generated in Ukraine is high. In 2001, it amounted to 77.5 million ton according to official statistics. It corresponds to 1.6 ton per capita, which is much higher than the similar figures for the EU countries; it is 7 times higher than the highest similar figure for an EU country (Belgium). As can be seen from Figure 3.5 the volume of hazardous waste generated has decreased throughout the 90’s due to the output decline. It is, however, worth noticing that the decrease has been less than the output decline. In other words, hazardous waste generation per unit of GDP has increased.

The hazardous waste is generated in few regions. Out of the 27 regions in Ukraine only three regions, namely Chernihiv, Dniepropetrovsk and Donetsk oblast’s, generate approximately 90 per cent of the hazardous waste generated annually in Ukraine. The reason for this is that hazardous waste generation is closely linked to the mining industry, which is located in the three regions.

Mining waste accounted for as much as 88 per cent of hazardous waste generated in 2001. Historically, approximately 2.5 billion tonnes of mining waste has been accumulated in Ukraine, now occupying an area equal to 23 km times 23 km. Other industrial waste accounted for 10 per cent of hazardous waste generated in 2001, and municipal waste accounted for only 2 per cent.

Figure 3.5
– Decrease in generation of hazardous waste but level still high

There are four classes of hazardous waste in Ukraine, namely Classes I-IV with Class I as the most dangerous and Class IV as the least dangerous. In 2001, 0.3 per cent was assigned to Classes I and II, 3.0 per cent to Class III and as much as 96.7 per cent to Class IV. The most dangerous types of hazardous waste are those containing heavy metals, hydrocarbons, and obsolete agricultural chemicals. Only about half of hazardous waste assigned to Classes I and II undergo special treatment (recycling or rendering safe); the remainder is either stored on the enterprise sites or dumped at landfills together with hazardous waste assigned to Classes III and IV and the bulk of non-hazardous industrial waste.

Lack of hazardous waste treatment and safe deposit facilities

There is a profound lack of an effective nation-wide infrastructure for hazardous waste (collection, treatment and disposal systems). Consequently, many regions experience severe difficulties in handling and disposal of hazardous waste.

Only very few treatment and disposal facilities are properly designed. Furthermore, many enterprises have to store hazardous waste on their own sites.

In general, the solid waste, including hazardous waste, is not stored and disposed of according to existing Ukrainian standards. Storage of hazardous waste on environmentally unsafe sites means release of pollutants into the environment. The pollutants can be borne by the wind to the environment and residential areas. However, even more likely is the transport of pollutants by water to the environment and residential areas – either by the surface water (due to surface run-off) or by the groundwater (after rainwater has percolated through the waste). In any case the environment will be affected and the risk that human health will be affected, foremost through drinking water supply, is high.

Many landfills and dumpsites for municipal waste also accept industrial waste. Dumping of hazardous waste assigned to Classes I and II at these dumpsites is frequently reported. Furthermore, it is estimated that approximately 1 million tons of industrial waste are dumped annually at unauthorised dumpsites.

A special problem is the 10-20,000 ton of obsolete and banned pesticides and fertilisers, which are extremely toxic and accumulated all over the country. They are stored in 109 centralised facilities and on about 4000 sites on land that belong to different agricultural farms, production and trading companies.

High level of generation of hazardous waste

Old and poorly maintained industrial plants and lack of effective monitoring and enforcement of existing regulations constitute the basic causes for the present high level of generation of hazardous waste in Ukraine. Relative cheap natural resources, low waste fees and weak enforcement of the environmental regulations – alongside a generally unfavourable investment climate – do not provide the enterprises with incentives to carry out investments in new and cleaner technologies that will reduce the volume of hazardous waste generated.

Lack of hazardous waste treatment and safe deposit facilities

Today, Ukraine has an estimated 1900 landfills and dumpsites, including 700 for municipal waste, covering an area of 1600 km². Most of them are so-called surface dumpsites (or waste heaps), where industrial waste has been dumped for years. Most industrial dumpsites are located next to the plants generating the waste in order to minimise transportation distance. Environmental considerations have played virtually no role, when deciding where to locate them.

Land dumping of waste without any form of pre-treatment to reduce their harmfulness is the dominant form of disposal for all types of waste, including municipal waste to be dealt with in Section 3.5. The cost to the waste producer of this method of waste management is virtually nothing. Most sites are largely unsupervised, there is no filling plan, and wastes are dumped in a haphazard manner with no compaction or capping after dumping. No restoration or aftercare of the site is undertaken after tipping operations have been completed.

The mass media have frequent reports on accidents believed to be related to environmentally unsafe storage of hazardous waste. However, data on such accidents are very incomplete. Without having proper data on the waste sites and their risks to the environment, the authorities are in a difficult position to respond to such accidents – not to mention the prevention of the accidents.

One obstacle often seen in the process of preparing the remediation plans for a specific waste site is the undefined ownership of the waste site.

Most of the landfills and dumpsites for hazardous waste belong to the industrial enterprises. Dumping waste on these sites requires a permit to be issued by the environmental authorities or the regional or local administration after various consultations with other authorities, such as branch offices of the Ministry of Health. These environmental authorities and administrations are in charge of establishing standards and regulations. However, the activities of these are not properly co-ordinated. Often there is no clear division of powers and responsibilities. On the contrary, one may find that environmental authorities and administrations, even, for instance, environmental authorities at different levels (national, regional and local) compete in becoming the authority issuing a permit since the permit itself and subsequent monitoring and enforcement provides a legal revenue. In many cases, industrial enterprises even have to pay bribe.

Investment needs

Legal framework

Ukraine has ratified the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. The Law of Ukraine "On National Hazardous Waste Management Program", which was adopted in 2000, takes all the provisions of the Basel Convention into account, including the principles that waste shall be disposed of at the source and that the generation of waste shall be minimised at all levels. It is important to ensure that this law will be properly implemented at all levels (national, regional and local). To this end it is necessary to prepare much needed secondary legislation.

Five further measures seem particular important with regard to an improvement of the legal framework. First, there is an urgent need to define the ownership of the landfills and dumpsites, including the old waste sites, which do not belong to industrial enterprises. This is a precondition for any progress regarding remediation activities and other upgrading of the waste sites. No one will invest in a waste site as long as it is unclear to whom it belongs. Second, the legal framework regarding the landfills and dumpsites for hazardous waste that belong to industrial enterprises should be further developed. The announced decrees of the Cabinet of Ministers mentioned in Section 3.6.2 are aimed at this. Third, existing permitting system should be streamlined to limit the room for discretionary decisions by various authorities. Fourth, the powers and responsibilities of authorities and administrations involved in hazardous waste management should be made quite clear to strengthen the rule of law. Fifth, specially designed legislation should promote the exchange of hazardous waste data between sectors and organisations involved in waste management and also the further improvement of official statistics regarding hazardous waste.

Regulatory framework

Two measures that concern the regulatory framework seem of utmost importance if Ukraine should succeed in achieving the three objectives. These concern the improvement of the reporting system and the elaboration of an operational hazardous waste management plan covering the whole of Ukraine.

The MENR should, together with the Statistics Ukraine and possibly others, take the lead in collecting, processing and analysing firm and reliable data on hazardous waste generated as well as on the operation of the 1900 landfills and dumpsites. An inventory of hazardous waste disposed earlier should be developed. All contaminated waste sites represent a threat to the environment and to the human health. The large and urgent challenge is to establish knowledge of the location and content of the sites and based on this to identify those waste sites posing immediate and high risks. Today, this knowledge is absent.

The elaboration of an operational hazardous waste management plan covering the whole of Ukraine and its subsequent implementation is of utmost importance. It should take into account what is technical and economic feasible to the environmental authorities, enterprises and public utilities. It should set the realistic targets for reducing the volumes of hazardous waste generated, improving collection, treatment and storage systems and eliminating the risks from presently unsafe landfills and dumpsites. Finally, it should highlight the powers and responsibilities of the stakeholders involved in its implementation, provide robust estimates of entailed costs and include a precise financing strategy.

The hazardous waste management plan should be widely disseminated so that the public awareness about the possible impacts on environment and human health of hazardous waste generation increases and also ways out. It is important that not only hazardous waste producers but also the general public is informed.

The National Plan on the Elimination of Risks Related Stockpiled Obsolete Pesticides, which was prepared with support from DANCEE and later integrated into the Law of Ukraine "On National Hazardous Waste Management Program", may serve as a source of inspiration to the MENR, when preparing operational hazardous waste management plan covering the whole of Ukraine.

3.5.1 Problems

Increasing volumes of municipal waste

Today municipal waste generation in Ukraine is estimated at 175-200 kg per capita on an annual basis. It has increased slightly throughout the 90’s due to changes in consumption patterns. Furthermore, it is expected to increase much further in future following the increase in economic growth. The total volume of accumulated municipal waste in Ukraine is estimated at 3.5 billion ton.

Even though a large portion of the municipal waste (or municipal solid waste) could be recycled or recovered, most of the collected waste is disposed at landfills. Limited efforts are made at minimising the volumes of municipal waste generated. Thus, adverse environmental impacts of disposing waste at landfills increase. Furthermore, costs linked with the collection, transport and disposal of the waste increase as the volumes of municipal waste generated increase.

Poor municipal waste collection services

Coverage of waste collection services is limited in many cities and towns. A considerable portion of the municipal waste generated is disposed through illegal dumping with adverse impacts on environment and human health. Improper contracts with private waste collectors, which are insufficiently monitored by the environmental authorities, often result in the build-up of illegal dumpsites.

Improper disposal of municipal waste

Approximately 10 million tons of municipal waste is generated yearly in the larger cities and towns. Most of the waste is disposed at the about 700 landfills and dumpsites for municipal waste. These are located fairly close to the points of generation with little consideration, if any, given to the environmental impacts. They are often improperly located with regard to hydrogeological conditions. Furthermore, they are improperly designed and operated. In addition, there are a large number of abandoned dumpsites, which still cause adverse impacts on environment and human health.

It is estimated that as much as 95 per cent of the landfills and dump-sites accept industrial waste and some also medical and hazardous waste of different kinds.

Increasing volumes of municipal waste

Economic development generally leads to changes in consumption patterns and lifestyle changes, which affect the volumes of municipal waste generated. It is common that the ratio of food waste decreases with economic development, whereas consumption of pre-processed and ready-made food increases. Packaging waste increases due to increased consumption of packaged food and goods.

Public awareness in Ukraine regarding the costs and also health and environmental problems associated with generation and associated handling and disposal of municipal waste is generally poor. The environmental authorities and existing low level of waste fees do not provide waste producers with incentives for waste minimisation and increased recycling/recovery of waste. Sufficiently developed and operational waste management strategies and plans – providing objectives and targets for increased waste minimisation and recovery/recycling and also outlining measures to achieve the targets established – do not exist at any level (national, regional or local). .

Map 3.2 below provides an overview of the municipal waste generated by regions in 2001. It follows that most waste is generated in a belt stretching from west to east. The municipal waste load is particularly high in Donetsk oblast’.

Map 3.2
– Municipal waste generated in Ukraine by region, 2001

Source: MENR.

Municipal waste is usually discharged as mixed waste, without any separation at source. This in itself makes it difficult to increase the low recycling rate. As a result, most of the collected municipal waste is disposed at landfills or dumpsites. Certainly, it contributes to a wasteful use of precious natural resources.

Poor municipal waste collection services

Collected waste fees do not provide a revenue stream capable of covering the operation and maintenance costs of a proper municipal waste collection service system, not to speak about investments. Furthermore, funding available from the government budgets, foremost the regional government budgets, is limited. Consequently, waste collection services are rather poor. The condition of the waste containers provides a striking example. Broken containers and containers without lids are plenty in any city or town. They seriously decrease the efficiency of the waste collection services provided.

In areas, typically villages, not covered by waste collection services, the waste producers often resort to local burning and illegal dumping of waste.

In the past, waste collection services in most cities and towns were entirely provided by municipally owned public utilities. However, in recent years various forms of private sector participation have been introduced in the bigger cities, which constitute the more profitable areas for waste collection services. Unfortunately, improper forms of contracting and insufficient enforcement of environmental standards have contributed to a worsening of the waste collection services and even build-up of illegal dumpsites. It has become a common practice that private waste collection companies collect waste fees directly from the waste producers for both collection and disposal, thereby providing the private waste collection companies with an incentive not to bring the waste to the authorised landfill or dumpsite, where they are charged a tipping fee. Illegal dumping by private waste collection companies is frequently reported.

Improper disposal of municipal waste

Disposal of waste is in many cases carried out at landfills and dump-sites that are improperly located, mainly in terms of hydrogeological conditions and distance to water bodies, wells and aquifers. Thus, many landfills and dumpsites, in fact, constitute a serious threat to valuable water resources.

Furthermore, the vast majority of the landfills and dumpsites, of which many date 20-40 years back, are not properly designed with regard to surface water diversion, leachate collection and treatment and also landfill gas management.

The operation of many landfills and all dumpsites is not carried out with a view to minimise the adverse impacts on environment and human health. Today private companies are operating some landfills and dumpsites. However, the municipalities (or local administrations) are operating the vast majority. There is often no or only very limited control of the municipal waste brought to the landfills and dumpsites, which can result in uncontrolled disposal of hazardous waste. Waste is often disposed over large areas rather than in small well-defined cells and without proper soil cover. This may result in wind dispersal of waste, odour nuisances and presence of rodents and vectors. It may also contribute to a large leachate generation. Proper operation of leachate collection and treatment systems and gas management systems is uncommon.

The landfills and dumpsites are usually not fenced. Fires and subsidence are common. Only very few of the landfills and dumpsites meet even the most basic requirements of modern landfilling as they are laid down in, for instance, EU Directives.

Investment needs

The most urgent – and also most financially demanding – investment needs within the waste management field are the closure or upgrading of existing landfills and dumpsites and the construction of new landfills. While it is very difficult to estimate the investment needs, it is clear that considerable financial resources will be required. It is, however equally clear that that improvements must be planned with due consideration given to the financial means and capabilities in Ukraine. An appropriate approach would therefore likely involve incremental improvements, initially aiming at closing the worst dumpsites and improving the operational procedures at the best existing landfills.

Legal framework

The Laws of Ukraine "On Environmental Protection" and "On Waste" constitute the cornerstones within the legal framework regarding municipal waste. They are, to a large extent, in line with the EU legislation. However, many of the provisions included in the two laws have not yet been put into force through the development and implementation of accompanying secondary legislation.

Furthermore, the environmental policy reform initiatives in Ukraine regarding waste mentioned in Section 2.6.2, including the forthcoming Waste Code, seem to address the above-mentioned problems very well. Please note that most of the proposed legal measures mentioned in Section 3.4.3 are also relevant in connection with an attempt to further improve the legal framework regarding municipal waste, foremost the measures aimed at defining the ownership of the landfills and dump-sites and reforming the existing permitting system.

Three further measures seem important with regard to an improvement of the legal framework regarding municipal waste. These concern the waste fees, contracts to be concluded between municipalities and private waste collection companies and powers and responsibilities of the various stakeholders.

Even though the polluters pay principle is fully recognised in Ukraine, waste producers do not pay enough to cover the full costs of municipal waste management systems and facilities, including investment costs. In some regions the waste fees levied are not even sufficient to cover the operation and maintenance costs. Instead, the regional government budgets provide substantial subsidies. It is important to increase waste fees so that they may cover operation and maintenance costs and also investment costs associated with proper municipal waste management. Furthermore, it is important to improve the legal framework regarding the collection of waste fees in order to increase collection rates. It is envisaged that these measures will promote waste minimisation and recycling/recovery.

Private sector participation is important in order to improve waste management. It is, however, important to improve the legal framework regarding the contracts to be concluded between municipalities and, especially, private waste collection companies in order to ensure viable participation of private contractors in waste management. Contracts should be awarded through formal and transparent competitive tendering. They should have a duration, which makes it possible for the private contractors to recover their investments during the contract period. An appropriate indexation mechanism should be developed.

When further improving the legal framework regarding municipal waste, including the development of secondary legislation aimed at improving waste minimisation and recycling/recovery, Ukraine may use the relevant EU Directives, foremost the EU Landfill Directive and EU Packaging Waste Directive, as benchmarks, but only as benchmarks. It is unrealistic that Ukraine will be able to attain the EU targets with regard to biodegradable waste being disposed at landfills and recycling/recovery of packaging waste within the next 20 years.

Regulatory framework

The environmental authorities and, especially, municipalities should do whatever possible to improve statistics on municipal waste. This is most important. Furthermore, they should concentrate on the development and implementation of regional and local municipal waste management plans, possibility of launching certain joint implementation projects and also public awareness building.

The municipal waste management plans to be developed and implemented with the participation of the various stakeholders should address the present problem with increasing volumes of municipal waste. They should pay much attention to the gradual introduction of the so-called waste management hierarchy principle, which is recognised in the Law of Ukraine "On Waste". This principle, briefly speaking, implies that waste management must aim at preventing the generation of waste and reducing its harmfulness. If this is not possible, waste should be reused, recycled/recovered or used as a source of energy. Only as a final resort waste should be disposed safely through landfilling or incineration.

The possibility of upgrading existing landfills and dumpsites to international standards through joint implementation projects carried out in co-operation with foreign donors should be seriously explored by the MENR. Such a project could, for instance, focus on the installation of reception facilities for methane.

Public awareness building is important because there seemingly is a profound lack of general know-how on waste minimisation, source separation and recycling/recovery, including the benefits hereof to the individual enterprise or household. It may be carried out through well-targeted information campaigns, regular publication of statistics on municipal waste and public hearings in connection with the development of the municipal waste management plans.

3.6.1 Problems

High energy intensity

Unsurprisingly, energy consumption in Ukraine has fallen throughout the 90’s as a result of the output decline. However, energy intensity –energy consumption relative to GDP – is still notably high in comparison with the OECD and the other CEE/NIS countries. In fact, Ukraine is one of the least energy efficient countries in the world. In 1999, the total primary energy supply (TPES) per unit of GDP amounted to 3.55 TOE per USD 1000 in Ukraine. The corresponding figures for Denmark and OECD were 0.10 and 0.15, respectively. The energy intensity in Ukraine is also higher than the energy intensity in all other CEE/NIS countries but Azerbaijan, Tajikistan and Turkmenistan. Even though the energy intensity in Ukraine is high the TPES per capita is a little higher in Denmark and OECD due to substantial differences in the level of GDP.

Most alarming is that the energy intensity in Ukraine has actually increased throughout the 90’s. By 1999 it was as much as 40 percent higher than in 1992. Data inaccuracies and the growth in the non-registered activities of the shadow economy may partly explain this increase, but only partly. There is no doubt that the energy intensity has increased substantially in the period.

Figure 3.6
– Energy intensity is high…

Heavy dependence on gas, coal and oil

In the words of the IEA: "Few countries in the world have a more precarious energy situation than Ukraine"³. The problem is that a heavy dependence on gas and oil imports, inefficiently mined coal and unsafe nuclear power have left the country extremely vulnerable to energy supply disruptions.

The energy sector is, to a large extent, based on oil and gas, of which 75 per cent are imported. These two energy sources account for 55 per cent of the TPES. Coal, which is mainly a domestic source, amounts only to 31 per cent.

Heat production is mainly based upon gas, coal and oil. 48 per cent of Ukraine’s electricity is supplied by steam-driven power plants that burn natural gas, coal or oil. Only 10 per cent is supplied by hydroelectric power plants. Ukraine’s 5 nuclear power plants generate 43 per cent of the country’s electricity. The combined capacity of the 13 operating nuclear reactors totals 11,818 MW. It is the world’s eight biggest and Europe’s biggest nuclear power generating capacity.

Presently, renewable energy is almost non-existing in Ukraine. In 1999, renewable final energy consumption per capita amounted to 0.01 ton per capita in Ukraine against 0.1 ton per capita in Denmark. Yet, renewable energy sources are beginning to find a market in Ukraine, partly due to investment and technical assistance projects undertaken by the various international donors. Ukraine seeks to establish wind power as a significant source of electricity generation by 2020. In July 2001, the Ukrainian parliament passed a bill that aims at developing alternative energy sources, such as solar and geothermal.

Figure 3.8
– Renewable energy accounts for only 0.2 per cent of TPES

3.6.2 Background

High energy intensity

Slow restructuring of energy-intensive industries, old capital stock in the public, enterprise and household sectors and inadequate reforms of the heat and power sectors have contributed (and contribute) to the high energy intensity. Enterprises and households are still, as a rule, anything but energy-conscious.

The most important reasons for the high energy intensity are probably the level of tariffs within heat and power sectors and the prevailing cross-subsidisation.

Even though end-user prices have increased in recent years, they are still far below cost recovery levels. Within the heat sector the residential price constitutes an estimated 17 per cent of long-run marginal costs according to the EBRD, whereas the industrial price constitutes 27 per cent. Within the power sector the residential price constitutes an estimated 25 per cent of long-run marginal costs, whereas the industrial price constitutes a little less than 29 per cent.

Cross-subsidisation within the heat and power sectors is immense. It also exists within the water and waste sectors but it is much more outspoken within the heat and power sectors. There are two distinctive types of cross-subsidisation. First, there is the cross-subsidisation of households by enterprises. This type is illustrated by the figures provided above. Second, there is the much more important cross-subsidisation of old, financial non-viable and less energy efficient enterprises – and also public organisations, such as hospitals, schools and kindergartens, and public utilities, such as water utilities – by new, financial viable and more energy efficient enterprises. This type appears because non-payers are not disconnected, as would be the case in, for instance, Denmark. That is, the enterprise, hospital or waste water treatment plant that does not pay for heat continues to receive heat supplies. In this way implicit subsidies are channelled through the energy sector, which pass the costs back in the form of arrears to the government budgets. In the end the government budgets pay the bill. It is estimated that regional energy companies alone provided implicit subsidies to non-payers in the order of 4-5 per cent of GDP annually in the late 90’s. Since then these implicit subsidies have, however, decreased somewhat due to an improvement of payments discipline following the positive growth rates.

The combination of low end-user prices and immense cross-subsidisation reflects the failure to harden budget constraints and, in fact, an attempt from the side of decision-makers to carry out social policy through energy tariffs. The economic costs hereof have been huge. It has weakened incentives to use existing assets efficiently and to restructure enterprises, while at the same time promoting, especially, rent seeking within the energy sector. It has contributed to low energy sector investments. It has lead to an increase in the energy intensity. Even if the enterprise only exploits 30 per cent of its production capacity, the heat is on all over the enterprise. Only in cases when enterprises have been closed down, supplies of heat and power have stopped. These cases are few.

Operational efficiency within heat and power sectors has remained low throughout the 90’s as a result of, among others, the low energy sector investments. Fuel use per unit of energy output is high in comparison with EU countries. One reason is that the efficiency rates of generation assets converting primary energy into heat and power are low. Another reason is that technical and commercial losses in the transmission and distribution networks are high.

Thus, there is a big potential for energy savings. The heat sector, which we will concentrate upon in the following, may serve as an example. It is estimated that fuel consumption within the heat sector may be reduced by up to 30 per cent only by improving the equipment, such as boilers, pipes, pumps and valves. Further savings may be obtained by through appropriate design of plants and effective metering of heat consumption within the household sector accompanied by an increase in tariffs and introduction of disconnection of non-payers.

In Ukraine, like in other CEE/NIS countries, the heat sector is dominated by district heating. In all large cities district heating systems are applied. They supply as 65 per cent of all dwellings with heat. The total length of the pipelines is 45,000 km, and the total capacity of the network is 200,000 MW of heat.

The design of the centralised heat plants – whether combined heat and power plants or heat only boiler plants – is crucial for their operational efficiency. The capacity of the plants should be so that it allows full capacity utilisation most of the year. The reason for this is that the investment costs linked with the construction of the plants are very high. Furthermore, the capability of the plants to utilise nearby so-called low-grade heat sources is important. Low-grade heat sources are heat sources that are difficult to utilise for other purposes, such as waste incineration, or fuels that are difficult to handle, such as surplus heat from power production. District heating systems are able to utilise low-grade heat sources, which is a major advantage. It is, however, important that the plants are capable of utilising nearby low-grade heat sources efficiently.

Effective metering of heat consumption within the household sector is important to obtain energy savings but also to improve willingness-to-pay and collection rates even when an increase in tariffs takes place. Heat is usually paid for on the basis of the square meters of the flat; individual metering is virtually absent. By contrast electricity and gas are paid for on the basis of actual consumption; individual metering is in place. Interviews reveal that more than 90 per cent of the occupiers of the flats believe that they receive less than their fair share of the heat supply to the complex of buildings in which they live.

It is, however, not that easy to introduce individual metering of heat consumption in existing buildings. The basic problem is that radiator installations are of the single string type, and that there are no valves at the radiators. It implies that the occupiers of flats have no possibility whatsoever to control room temperature and heat consumption. The control is done centrally by the heat supplier, either the power plant or the boiler plant. The caretaker of the complex of buildings, which may consist of several buildings with hundreds of flats each, does not perform any heat adjustment at all. Every flat has three to five radiators all supplied by vertical pipes. Individual metering at the pipes would require several heat meters in every flat or reconstruction of the whole pipe system – and also installation of thermostatic valves at the radiators. This is considered quite unrealistic because of the high investment costs entailed. Another, less expensive solution is to install thermostatic valves in the flats and one common meter in the basement metering heat consumption for the whole building. In combination with the common meter, individual metering could be introduced by evaporator metering. This is not an optimal solution. However, it is a technical and economic feasible solution, which is, in fact, widely applied in several EU countries. In new buildings radiator installations should be designed as two string systems with thermostatic valves at the radiators.

Heavy dependence on gas, coal and oil

The heavy dependence on gas, coal and oil is a heritage from the Soviet Union. Presently, there is much focus in Ukraine on how to make the country less dependent on imports of oil and gas, not least because prices are increasing. Several possibilities are being explored. In case the environmental authorities, maybe with support from international organisations, do not interfere there is a danger that environmental and human health impacts will not be taken into consideration when deciding upon how to obtain an increased supply security.

There is some focus on renewable energy, not least because it seems realistic to increase the share of renewable energy in TPES. The potential sources have been identified and mapped for biomass, wind power, hydropower and solar energy. Biomass, consisting of waste products from agriculture and forestry, requires further development. The many smaller district heating systems do, however, favour the utilisation of biomass products. Plans to utilise wind power are under development. Hydropower exists but needs upgrading. Solar energy is still premature. That is, many issues regarding renewable energy are pending.

Investment needs

Furthermore, investments in thermostatic valves and metering are estimated at EUR 150–250 per flat, corresponding to a total of EUR 1 billion.

Legal framework

Ukraine has embarked on a far-reaching, most cumbersome energy reform mentioned in Section 2.6.3 that addresses the above-mentioned problems well.

It is of utmost importance to introduce a reform of tariff setting so that end-user prices will reflect long-run marginal costs. Furthermore, it is important to introduce firm disconnection of non-payers. These issues have to be properly dealt with in laws and regulations to limit the room for discretionary decisions.

Admittedly, these issues are very sensitive, foremost because the envisaged increases in tariffs will affect large segments of the population severely. Higher residential tariffs will inevitable – and for good reasons – raise issues regarding the affordability of tariffs for low-income consumers. This leads to the urgent need of a social reform, including a much better targeting of the social benefits.

To the extent that changes in the legal framework are required to promote a further shift towards market-led business practices within the energy sector, including the strengthening of corporate governance, such changes should be made. In particular, there seems to be a need for changes in existing legislation that lay down the powers and responsibilities of the various stakeholders, both public and private, insofar as multiple operation systems appear following the corporatisation, commercialisation and privatisation of the industry.

Ukraine has not yet ratified the Kyoto Protocol, but as a signatory to the Kyoto Protocol, Ukraine has agreed to stabilise its emissions of greenhouse gases at 1990 levels by 2008-2012. Meeting the obligations of the Kyoto Protocol will not pose a problem to Ukraine since the output decline throughout the 90’s has reduced greenhouse gas emissions far below the 1990 levels. As soon as Ukraine has ratified the Kyoto Protocol there will be a need to prepare and implement adequate legislation. Most important is that it will be possible through joint implementation and tradable permits to change the energy sector in a more sustainable direction, including an increase in renewable energy.

Regulatory framework

The environmental authorities, foremost the MENR, should ensure that environmental impacts are being taken into consideration to a larger extent than today when deciding upon the exact content of the energy reform. They should assist in promoting energy saving measures throughout the economy and also in the forthcoming implementation of the Kyoto Protocol in Ukraine. To this end they should further develop the co-operation with the Ministry of Fuel Supply and Energy and State Committee for Energy Savings and also the co-operation with international organisations, possibly including the Energy Sector Reform Task Force co-chaired by the EBRD and the Ukrainian Government.

Ministries of Environment are (and should be) increasingly concerned with energy issues. Climate change, air pollution and possible accidents from, for instance, old and poorly designed nuclear plants have impacts on environment and human health. Furthermore, water and waste management systems may be seen as vehicles for reducing energy demand or increasing energy supply.

Various authorities should combine efforts to provide utilities within the heat and power sectors and also end-users, including enterprises, with information on the potentials for energy saving, thereby increasing public awareness. An integrated approach of supply and demand side improvements to achieve maximum fuel savings and emissions reduction should be pursued.

3.7.1 Problems

The environmental policy capacity of a certain country encompasses the capacity of the country in question to identify, prioritise and ultimately solve environmental problems. Countries with a high environmental policy capacity are better prepared in solving environmental problems than countries with a low capacity. The environmental policy capacity of Ukraine is currently very low.

Implications hereof are plenty. One, which deserves to be highlighted, is that the general public places very little confidence in the environmental authorities.

Please note that the capacity problems within the environmental sector reflect some general problems in the present governance of Ukraine. It is a recurrent theme throughout Ukrainian politics and administration that policy formulation and implementation is fragmented, that vested interests dominate in decision-making, and that political accountability is weak, due to a fragile civil society. Many of the problems are thus not restricted to the environmental sphere.

The economic features of Ukraine should obviously also be noted. Lack of administrative capacity goes hand-in-hand with social and economic problems, including the insufficient political and economic resources to the establishment of an effective, modern environmental administration and policy. At the same time, however, one finds that, for instance, overstaffing appears within certain spheres. Environmental monitoring is a good example hereof. In fact, it seems as if there at the same time is too little and too much state in Ukraine. On the one side the state should become stronger so that it may provide some basic public goods, which it cannot provide today, such as the rule of law. On the other side the state should withdraw from or streamline certain activities.

Lack of public awareness

The environmental NGOs are weak and they do not play the role as NGOs do in most EU countries. They do not have the power to put environmental issues firmly on the agenda and cannot mobilise voters to require green policies from the political parties. Nor are they directly involved in law-making processes.

Figure 3.9
– Problems causing low environmental policy capacity in Ukraine

Furthermore, the general public seems to care about other issues than environmental issues, which is in sharp contrast to the situation 10 years ago, when public environmental awareness was high. Daily life has become harder.

Environment is therefore, despite of numerous declamatory statements, framework laws and regulations, not a top-priority of the Ukrainian Government.

Weak environmental authorities

Numerous institutions are involved in environmental management but the quality of their performance is often low and so is the co-ordination between these. The success rate of the MENR in elaborating concise, prioritised strategic action plans is, for instance, mediocre, not to speak about the implementation of the plans. The same goes with action plans at the regional level. In brief, the environmental authorities are weak; they seriously lack political influence.

"Wants" mentality

The still prevailing "wants" mentality rather than an "affordability" mentality constitutes a most important problem in itself. It makes the preparation of operational spending programmes extremely difficult, if not impossible. On the one side there is only limited prestige attached to the role of being a public finance watchdog. On the other side it is common that administrative units aggressively pursue a budget-maximising strategy.

Low demand for good practices

This problem has to do with the administrative culture and the incentive structures that many public officials are facing in their everyday working. Basically, there is a low demand for good practices from within the upper-levels of the environmental bureaucracy. Public officials are often not rewarded but punished, whenever they seek to carry out their work in line with good administrative practices (e.g. in management of public environmental expenditure).

Lack of public awareness

One reason for the lack of public awareness is economic. Due to the Chernobyl’ accident, public environmental awareness was high in Ukraine, but public interest is dwindling in view of the economic situation. The social and economic hardship implies that people think (and worry) about many other issues than environmental issues. Furthermore, the prevailing low fees and tariffs, lack of individual metering and other distinctive features of the environmental management set-up have not created any incentives to the end-users to save resources. On the contrary, resources have been treated as if they were abundant.

Another reason has to do with the cultural heritage. A civil society does not exist. There is no tradition for allowing direct public and NGO involvement in decision-making. So if the opportunity was given for NGOs to have a say it is to be doubted how strongly they could voice themselves. Relatively few people in Ukraine are aware of the character of NGOs and how to organise NGO activities, and there are very few strong green NGOs. Here it is important to emphasise that most NGOs in Ukraine differ substantially from NGOs in EU. They rely, to a large extent, on public or external funding of their work, not on membership fees. And many of the NGOs in Ukraine are, in fact, consultancy companies in spe or very closely attached to selected ministries, state committees or other authorities. Nevertheless, the EC recently noted that a civil society is beginning to emerge in Ukraine adding that civil society development "requires improvements of the legal, administrative and organisational framework in order to play a more active role in the Ukraine’s political development"⁴.

Yet another reason is institutional. In many EU countries NGOs are granted a say in law-making processes. They are seen as legitimate actors because they represent a segment of the population that voluntarily has come together to forward a viewpoint. In return they are accepted as partners in decision-making. This possibility of participation is often formalised through, for instance, public hearings and has thus become a right. The Ukrainian environmental NGOs have not to the same extent been given a position in decision-making. Some progress seems, however, to be underway in this regard. Ukraine has, for instance, signed and ratified the Aarhus Convention. It leaves hopes of an increase in transparency and also in the public involvement in decision-making.

A final reason has to do with the shortage of easily accessible environmental information that is targeted a broad audience. This factor partly explains the low level of public awareness. The environmental funds in Ukraine at national and regional levels exemplify this. They are rather strong in financial terms and are becoming important actors in financing of environmental projects in Ukraine. In spite of that they do not, with a few exceptions, publish annual reports and other materials to be disseminated to the general public.

An important implication of the lack of public awareness is that a strong bottom-up demand for progressive environmental policy does not exist. The political parties in the Parliament as well as the President may interpret this as signalling that environmental concern should not have priority in decision-making.

Weak environmental authorities

In the following the focus rests with the MENR but the conclusions are equally valid for most other public authorities, including other authorities involved in environmental policy-making and implementation, in Ukraine, if not all.

The "wants" mentality means that whenever it comes to financial constraints, only very few people ask themselves the following question: How may domestic demand for financing be lowered – and how may domestic supply of financing be increased? Indications of this phenomenon are that cost recovery is not introduced as a principle for delivery of environmental services, like water supply, waste water treatment and waste management. Other indications are that the polluter-pays-principle is not enforced, and the economy is, to some extent, based upon negotiations rather than price signalling.

When a limited amount of public finance is spread thinly at many issues, sectors and projects in order to satisfy many interests, there will be only few resources to allocate to the really important problems. The "wants" mentality thereby impedes the fulfilment of long-term objectives, which the environmental decision-makers consistently adhere to. A striking example hereof is environmental strategies and plans at national and regional levels. They are not sufficiently prioritised and are more often than not mere wishlists. The need to clarify priorities in relation to available resources at all levels of administrations is a recurrent theme and certainly a problem in Ukraine.

There seems to be no prestige in taking responsibility in prioritising or in being a public finance watchdog within the MENR. The Ministry of Finance has lately emphasised the role as a public finance co-ordinator and a catalyst of public sector reform. It is therefore important that the co-operation between the MENR and the Ministry of Finance will be intensified.

Low demand for good practices

A healthy bureaucracy will appreciate public officials that perform their service in line with international standards for good bureaucratic behaviour. Such behaviour can be characterised by a commitment to conduct impartial analysis, a strive for the common good, adherence to rules, resistance to all forms of abuse of power, proper use of public finance and willingness to give free and frank advice to the superiors or even the Minister without fear of repercussion. However, many indices point to a low demand for such good practices from within the environmental bureaucracy in Ukraine.

Public officials are often not rewarded but rather punished for attempts to carry out work in line with good practices and in objecting abuse of power. The incentive structures at micro level are often counterproductive to good practice.

The background of this situation is difficult to trace. However, one factor seems to be cognitive. There is a lack of knowledge of practices and theories of modern public administration. The environmental bureaucracy is to a high degree made up by technicians or engineers while there is a shortage of people with a professional background in organisational theory and public administration.

Another factor has to do with the legacy of the past. The public administration used to be run in a very hierarchical manner with widespread control and with few incentives for the individual public official to engage in complicated decision-making where he could be held accountable. Under the prevailing bureaucratic culture, it is much safer not to make a decision than to take the possible risks involved in making a decision. What if the superior does not agree?

Yet another factor is linked to the transition itself as it has been carried out in Ukraine throughout the 90’s. Maybe this is the most important factor. As in other NIS countries the new political system was designed by incumbent leaders, mainly members of the old nomenklatura, to consolidate their power. The old nomenklatura remained strong, especially in the economy. They captured the state and also the old enterprise sector, and now they hesitate to move further in the transition and simply try to maintain the political economy equilibrium that has emerged. It has created (and creates) a low demand for good practices. In the words of the World Bank: "State capture at all levels of the political system and the lack of accountability for politicians and public officials make it difficult for even the most committed reformers to overcome the powerful vested interests against reform. In addition, weak state capacity has limited the state’s autonomy to tackle these groups effectively. (…) Politicians and bureaucrats have used their discretionary power to intervene in the economy to extract bribes and other advantages from enterprises and households"⁵. These words are not only directed at Ukraine but they are also directed at Ukraine.

3.7.3 Way-outs

How can Ukraine increase its environmental policy capacity? This section does not give a fully elaborated answer but it will point to some necessary steps.