From Lugano to London via Dublin: where to look for money for Ukraine’s post-war “green” restoration – in mitigation or adaptation funds?

We also suggest that instead of National Ecosecurity Plan 2.0 focused on mitigation, the government should develop a new National Green Restoration Plan 3.0 to restore ecosystems damaged by war, in particular those with the most potential to capture and store carbon and to prevent and reduce the impact of natural disasters. This would be in full accordance with a new EU Nature Restoration Law, which is the adaptation part of the European Green Deal, as important as mitigation. 

Prevention or restoration?

During the donor conference in Lugano in summer-2022 the following environmental оbjectives were proposed for the National Recovery Plan of Ukraine (see Putting the Lugano Principles into Action workshop):

• Resilience: Provide environmental resilience in the marathon to victory.
•  Recovery: Find efficient solutions for the soonest recovery of the natural ecosystems.

In February 2023, the Ministry of Environmental Protection and Natural Resources of Ukraine presented for the discussion the National Recovery Plan of Ukraine in the sphere of ecological security 2.0 (hereafter the Recovery plan 2.0) updated for the Ukraine Recovery Conference in London in June 2023. First Deputy Minister Ruslan Hrechanyk stressed that Recovery plan 2.0, with a budget of about EUR 25.5 billion, should be cross-sectoral and should include principles of the European Green Deal. The Ministry suggests funding and spending almost EUR 18 billion on “Environmental Safety and Effective Waste Management”, EUR 23 million on “Climate Policy: Prevention and Adaptation to Climate Change”, and EUR 666 million on “Conservation of Natural Ecosystems and Biological Diversity, Restoration and Development of Protected Areas and Facilities”. Thus, Ukraine plans to spend an order of magnitude less on the restoration of ecosystems than on security (prevention).

 Earlier, at the hearings in the Environmental Committee of the Ukrainian Parliament “The impact of military operations on the environment in Ukraine and its restoration to its natural state”, doubts were raised about how “green” the Recovery Plan is. More importantly, why is environmental restoration planned “in the sphere of ecological security”, i.e. through prevention? Will participants of the London Recovery Conference in June 2023 get the answers to these questions? 

Let’s consider how Ukrainian environmental legislation translates into international law. In Ukraine, ecological security is “a state of the environment that ensures prevention of deterioration of the ecological situation and the emergence of an insecurity to human health” (Law on Environmental Protection, 1991). In other words, ensuring ecological security in Ukraine means prevention of hazards, which in terms of Intergovernmental Panel for Climate Change (IPCC) vocabulary implies mitigation: “Mitigation plays a key role in reducing the danger/threat of climate change “. 

In other words, the Ukrainian Environmental Recovery Plan in the sphere of Ecological Security 2.0 stipulates that prevention, or mitigation, should play a key role in restoration.

 On the other hand, IPCC says that “adaptation plays a key role in reducing vulnerability (increasing resilience) to climate change”. And the EU Nature Restoration Law stipulates that the best way to increase resilience is by restoring ecosystems and species they host to increase biodiversity, secure nature’s “services”, such as cleaning our water and air, pollinating crops, and protecting us from floods, limit global warming to 1.5°C, preventing natural disasters and reducing risks to food security. That is, environmental restoration is much more about adaptation than mitigation.

Therefore we believe that the road from Lugano to London should go via Dublin, where the European Conference on Climate Change Adaptation (ECCA) will take place on June 19-21, 2023. The conference will present real-world examples of adaptation measures offered by state-of-the-art science and research for a climate-resilient Europe.

 Ukraine’s commitment to prevention (mitigation) rather than restoration (building environmental resilience) stems from the Soviet traditional dichotomous understanding of security as the absence of insecurity (See the discussion in Rethinking of water security, Water Policy (2020) 22 (6): 1015–1023, Towards An Acceptable Accounting of Ukraine’s Post-War Environmental Damages). It has the following far-reaching consequences in modern Ukrainian environmental policy: 

1. Security-insecurity dichotomy implies a “zero risk” concept, in which no impact or risk of pollution is acceptable. 
2. Thus it is impossible to quantify the extent of environmental damage and environmental liability. This, in turn, makes it impossible to apply cost-benefit analysis and develop cost-effective environmental restoration programs.
3. Ukraine is not eligible for compensation for environmental damage since, according to the Constitution, only “compensation for damage caused by violation of the right to an environment secure for life and health” is provided. If the state is not liable for environmental damage, it should not be eligible for compensation for the environmental damage either.
4. As a result, environmental liability in Ukraine exists only as criminal responsibility – imprisonment for a term of eight to fifteen years, for such “environmental damage” as ecocide: “Mass destruction of flora or fauna, poisoning of the atmosphere or water resources, as well as other actions that may cause an environmental catastrophe” (Article 441 of the Criminal Code of Ukraine). However, the legislation demands no material compensation for harming the environment. The existing eco-tax in Ukraine has only a fiscal function and is designed to change the behavior of polluters. The eco-tax does not play any compensatory role in the restoration of the damaged environment.
5. This means that the Ukrainian state is responsible or liable only for the prevention of pollution, but not responsible for the restoration of a polluted environment.

An attempt to overcome this dichotomous understanding was made during the update of the Environmental Strategy in 2019, where the goal: “Ensuring environmental security” was replaced by “Reducing environmental risks”. Another attempt was made at the IPCC 55th session, where the Ukrainian delegation managed to break down the dichotomy of security-insecurity in the Summary for policymakers. As a result, “water insecurity” was replaced by “reduced water security”. Unfortunately, these changes are not supported by Ukrainian lawmakers, the traditional dichotomous understanding of ecological security still prevails both in the Government and in society. When quoting Sustainable Development Goal 13, only “fighting climate change” is mentioned while the second part “and its consequences” is omitted. Moreover, in the Nationally Determined Contribution to COP27 the Government “sees no benefits from adaptation”: the Government Program provides only for “reducing environmental pollution” instead of achieving the Sustainable Development Goals approved by the President’s decree, and the European Green Deal is presented as a unilateral course towards decarbonization by reducing greenhouse gas emissions. 

Apparently, because in Ukraine it is impossible to quantify the amount of environmental liability of the Russian Federation for its aggression, the Ministry decided to assess it with the “traditional damage” method, similar to property damage, economic losses, bodily injuries (see Методика для атмосферного повітря). But as the experience of Environmental claims to the United Nations Compensation Commission (UNCC) established to consider claims and pay compensation for damage caused by the illegal invasion of Iraq and occupation of Kuwait shows, it is useless to file a claim to international courts for compensation for “traditionally” accrued environmental damage. Ukrainian courts do not consider these claims either. 

Ukraine at the COP 27

Despite this, the Ministry of Environmental Protection and Natural Resources of Ukraine decided to look for money for Ukraine’s Recovery plan 2.0 through climate funds for mitigation and the sale of emission quotas at the UNFCCC Conference of the Parties (COP 27). Press conference, where Minister Ruslan Strilets estimated the amount of damage to the Ukrainian environment from Russian aggression at more than $51B, attracted much attention. The main part of that cost, according to a specially developed method for atmospheric air, is $27 billion in damage caused by unauthorized emissions of pollutants into the air calculated as the amount of the eco-tax multiplied by special military coefficients.

 The presentation at COP27 of UAH 1 trillion claims compensation for damage to atmospheric air during one year of the full-scale war (when usually no more than UAH 4 billion of eco-tax per year was accrued and only UAH 100 million or about 2.5% of it was actually collected) was perceived with skepticism. However, the Ukrainian government should not have hoped to finance the Recovery plan 2.0 through trading emission quotas. The carbon market created under the Paris Accords is still defunct, and its operation’s technical rules are under discussion. Although the Ukrainian president’s appeal to create a global platform for assessing the environmental consequences of the Russian invasion has attracted worldwide attention, its support has been limited. 

This doesn’t mean that Ukraine should not turn to climate funds at all. It needs to consider adaptation funds rather than mitigation funds since mitigation plays a key role in reducing the threat of climate change, and adaptation plays a key role in the reduction of impact and vulnerability to climate change (see Summary for Policymakers).

Rethinking the dichotomous understanding of security which stems from the historical understanding of security as the absence of danger from another state, occurred precisely in the process of humanity’s awareness of the causes and consequences of global climate change. The modern understanding is that environmental security is not just the absence of hazard risk but environmental risk management, reducing environmental risks to a socially acceptable level. Therefore, environmental security can be ensured not only by reducing (preferably to zero) the probability of the hazard itself but also by reducing the associated damage (or increasing resilience), since the magnitude of the risk depends not only on the probability of the event but also on its outcome. 

This rethinking of environmental security and understanding of the true essence of the Paris Agreement and the Green Deal requires redrafting of the Recovery plan 2.0 into the Post-war “Green” Restoration Plan 3.0, primarily focused on the restoration of disturbed and destroyed environmental ecosystems, primarily those with the greatest potential for carbon capture and storage, as well as for improving climate resilience. 

How should we look for sources of compensation for environmental damage and financing a Green Restoration Plan?

Back in June 2022, the Working Group on the Development of Methodologies (WGM) and the procedure for calculating damage caused to the environment as a result of Russia’s armed aggression at the Operational Headquarters of the State Environmental Inspectorate proposed an algorithm for finding funds. Unfortunately, Ukraine’s State Environmental Inspectorate and the Environmental Ministry did not take into account the analytical report of the WGM when approving their methodology.

To justify its algorithm, the WGM posed two questions:

• Could the state without the “environmental liability” count on external compensation for environmental restoration?
• Could one claim any compensation for environmental damage if one cannot estimate this damage?

 WGM pointed out that to answer these questions, it is necessary to introduce to Ukrainian legislation the concept of “environmental damage” and material (not just criminal) “environmental liability”.

WGM stressed that the most appropriate agency for the allocation of compensation for environmental damage is UNCC, which uses the following definitions when considering environmental damage claims:

• damage – an observed or measurable negative change in a natural resource or a deterioration in the quality of natural resource services,
• compensation for damages – compensation for damage, destruction, loss or impossibility of using natural resources, including justified costs for damage assessment,
• restoration – actions aimed at returning damaged natural resources or services to their basic state – the state of natural resources and ecosystem services that would have existed if the incident had not occurred.

One can easily see that these definitions of damages are radically different from definitions of damage as an unpaid eco-tax on unauthorized emissions, which makes Ukrainian environmental claims made at COP27 for compensation for damage caused by Russian aggression hopeless.

In view of EU accession plans, Ukraine may also use the following definitions of environmental damage from the European Directive 2004/35/EC on environmental liability with regard to the prevention and remedying of environmental damage: “damage’ means ‘measurable adverse change in a natural resource or measurable impairment of a natural resource service which may occur directly or indirectly.”

The European environmental acquis from 2004 pays much attention not only to the restoration of natural resources but also to the restoration of ecosystem services. The European Commission highlights the importance of ecosystem services in the European Law on Nature Restoration which calls for binding targets for restoring ecosystems and the species they host to increase biodiversity, prevent natural disasters and reduce risks to food security.

Can we expect to raise a significant amount of compensation funds for direct damage to natural resources or for loss of ecosystem services? 

There is a wealth of information around the world related to the costs of hazardous waste disposal and ecosystem restoration that can be used to account for environmental damage caused by Russia in Ukraine.

There are essentially three separate categories of benefits, costs and harm that need to be considered when assessing ecosystem damage, values and costs. They represent the different accepted methodological approaches used to value environmental attributes and ecological services.

The first valuation approach is the direct economic value of the stream of services provided by the ecosystem. International experience shows (see, for example, here, here, here, and here) that the valuation of ecosystem services can significantly cover the losses of the relevant business on natural resources. These European methods for assessing “net environmental damage” can be used instead of “traditional” damage assessments used by the Government of Ukraine. At the same time, numerous methods of ecosystem service valuation are available in the literature that allow for much cheaper remote damage assessments through satellite imagery, remote sensing, and GIS applications. This is especially important for Ukraine, where the war is not over yet.

According to Professor Anil Markandya, the value of ecosystem services ranges from 3000 to 25000 USD/ha for forests, rivers, and wetlands. That is, for a million hectares of disturbed ecosystems, ecosystem service losses can easily reach several dozen billion dollars, which is quite close to the 27 billion dollars calculated using an unacceptable method for atmospheric air.

The second approach is assessing the cost of restoring or rehabilitating such ecosystems when they are damaged. UK studies show that the average cost of restoration for all types of ecosystems is $3500 / ha/year.

The Ministry of Environmental Protection and Natural Resources of Ukraine has identified many ecologically protected areas that have been disturbed or seriously damaged by Russian troops, totaling 627,000 hectares, and 16 UNESCO Ramsar sites with a total area of 2.9 million hectares. It means that the costs of Ukrainian ecosystem restoration could reach $10 billion per year. 

The third category of methodologies centers on the remediation of toxic and hazardous wastes, which is much more complex and costly. There are many examples of expensive rehabilitation of toxic and hazardous waste, the experience of which can be easily transferred to Ukraine. To date in the United States, $21 billion has been spent on the rehabilitation of Superfund facilities, which is very close to Ukraine’s estimates of $23 billion for pollution from waste disposal and $0.3 billion for soil pollution. 

Given the broad extent of environmental damage inflicted on Ukraine by the war (destruction of both natural ecosystems and cities), the long-term cost of ecosystem rehabilitation and remediation can reach $50 billion (hundreds of Superfund equivalent sites). Quite inadvertently, this is the estimate of Ukraine’s Ministry of Environment, albeit calculated by problematic simplistic methods. After the more refined assessments by international agencies, restoration and rehabilitation of ecological habitats, forests and agricultural areas are expected to begin during the longer, decadal reconstruction period, likely between 2025 and 2035.

Thus the Green Restoration Plan 3.0 should consist of two parts – short-term and long-term. According to estimates of the World Bank Second Rapid Assessment of Damage and Needs (RDNA2), the budget of the short-term part of the Plan should be about USD 2 billion for the environment and forestry and USD 2 billion for water supply and sanitation. Ukraine’s first priority during this period is to repair physical damage to critical infrastructure and housing so that millions of refugees can return to their homes. 

The objectives of the long-term part of the Green Restoration Plan 3.0 can be the goals and indicators of the European Law on Nature Restoration, which provides for the development of Plans for the restoration of wetlands, rivers, forests, pastures, marine ecosystems and species that live there.

Conclusions and recommendations

1. Ukrainian legislation does not define the concepts of “environmental damage” and “environmental liability”. Only criminal liability for “ecocide” has been established. No quantitative compensation for such environmental damage is foreseen. Without a legislative definition of the concept of “environmental damage” and a material definition of “environmental liability”, the development of a methodology and receiving compensation for environmental damage as a result of Russian aggression in the international tribunal and its compensation commissions is impossible. 
2. To this end, it is urgent to ratify Directive 2004/35/EC and adopt the unrecognized provisions of the EU Water Framework Directive, the Flood Directive EIA Directive, SEA Directive, the Sendai Framework for Disaster Risk Reduction, as well as to make the necessary changes to the relevant laws and regulations: environmental liability provisions of the Constitution of Ukraine, the Law on Environmental Protection, the Laws on EIA and SEA, the Code of Civil Protection, the State Construction Norms on EIA, etc.
3. In the world, “green restoration” is usually understood as actions aimed at returning disturbed natural resources or ecosystem services to their baseline state, while the National Recovery Plan of Ukraine in the sphere of ecological security 2.0 mainly involves actions to prevent pollution, decarbonization or waste management. Therefore, in order to successfully get compensation for environmental damage, Ukraine should redevelop the Recovery plan 2.0 into a Post-War Green Restoration Plan 3.0 based on the definitions of European Liability Directive 2004/35/EC and on the goals and indicators of the European Law on Nature Restoration. This plan can be presented at the Ukraine Recovery Conference in London.
4. Ensure that proper authorities, agencies, and experts are involved in determining the scope of environmental damages, costs of restoration, and compensation mechanisms.