Towards An Acceptable Accounting of Ukraine’s Post-War Environmental Damages

Destroying the environment is a war crime, as established by the United Nations International Law Commission in 2022. In every accepted definition, the ‘environment’ consists of the human environment and man-made infrastructure designed to reduce pollution, as well as natural ecosystems that provide services to both humans and nature. In estimating Ukraine’s post-war environmental damage, however, western donors and financial institutions will have difficulty reconciling Ukraine’s methods for estimating environmental damages with conventionally accepted methods. For example, Ukrainian government uses a method that relies on foregone revenues from fees, taxes, and other regulatory charges for pollution caused by municipal and industrial discharges. This figure is then amplified by several factors to reflect the estimated damage caused by military destruction, resulting in a total of $27B for air pollution, $1.6B for water resources, $23B for waste disposal pollution, and $0.3B for soil pollution. This amounts to $52 billion, or approximately 2 Trln UAH per year of the war.  

This figure is well out of line with the recent estimate of the Second Rapid Damage and Needs Assessment (RDNA2) carried out by the World Bank in coordination with the EU and the Ukrainian Government, which covers a full year of the unprovoked and unjustified aggression by Russia against Ukraine, from 24 February 2022 until 24 February 2023. The RDNA2 estimated environment and forestry damages in the order of $2B.  How can these large disparities in damage estimates be reconciled?  

Both methods have shortcomings. The RDNA2 methodology used definitions for damage as direct costs of destroyed or damaged physical assets and infrastructure valued in monetary terms with costs estimated based on replacing or repairing physical assets and infrastructure, considering the replacement price prevailing before the war. Value was associated with the resumption of prewar normality through activities such as repair and restoration.

It means that the RDNA2 analysis assesses only the costs of physical assets and infrastructure restoration. It does not consider the costs of pollution of the environment due to the destruction and non-functioning of such as wastewater treatment plants and other industrial sites, nor for restoration of degraded ecosystem services or compensation for their impairment [aquatic, terrestrial ecosystems]. Thus, for example, if a forest was destroyed, RDNA considers the cost of replacing the forest, but not for the loss of its ecological functions and services during the period it takes to regrow/replant the forest. Ukraine’s damage assessment may be an overestimate but is unintentionally likely closer to a full accounting of total environmental damages that should include all quantified degradation to terrestrial and aquatic ecosystems, soils, and forests. 

Whereas the World Bank estimate may be useful for delineating priority restoration of basic critical infrastructure during the immediate post-war recovery phase [municipal utilities, water supply, air quality, water treatment services, etc.], it represents a large underestimate of total longer-term environmental restoration cost and ecological damages on the territory of Ukraine, which is likely to grow substantially as the war progresses. 

The great divergence in estimates largely stems from different definitions of what constitutes ‘environmental damages’, where dissimilar terminologies are further distorted by conflating estimation of restoration costs during the two stages of post-war rehabilitation: immediate recovery and longer-term reconstruction. The two phases of immediate recovery and longer-term restoration are not comparable, because they address different priorities and elements.

Clearly, immediate recovery, carried out over a relatively short period of 2-5 years after the cessation of conflict activities, requires a focus on restoring basic municipal services and rapidly rebuilding critical infrastructure, which is essentially the estimate provided by the World Bank. The longer-term restoration phase, pursued in the following decade, should encompass such aspects as ‘green infrastructure’, ecosystem rehabilitation, compensation for public health damages and associated trauma damages, as well as dealing with mitigation and adaptation upgrades for anticipated climate change impacts. Ukraine’s damage estimates incorporate both short-term recovery and longer-term reconstruction needs.

Ukraine’s current draft recovery plan for the energy sector includes decarbonization, modernization and increasing energy efficiency as core tasks. Updating the housing stock and infrastructure represents the best and fastest route to improving energy efficiency, and indeed this constitutes one of the main components of the draft recovery plan. It is also the focus of the Eastern Europe Energy Efficiency and Environment Partnership (E5P), a multi-donor fund that has earmarked €175 million for Ukraine. 

Ukraine’s current draft green recovery plan for the sector of environmental security includes mainly preventive (emissions reduction and waste management) and preservation measures while restoration measures constitute just several percent of the plan’s budget. At first glance, there is very little green restoration in this regard. Restoration of priority pollution prevention infrastructure and waste management actions cannot restore badly degraded ecosystems. One can minimize future adverse impacts on the state of the environment and ecosystem services but cannot remediate the damage that has already occurred.

The war may serve to accelerate the green transition in and beyond Ukraine. Ukraine’s recovery and reconstruction will likely see that some of the most emissions-intensive and polluting assets have been destroyed, particularly in heavy industry, being replaced with greener alternatives. Clear imperatives for decarbonization come from not only the obvious need to achieve greater energy security and independence but also the requirements for accession to the European Union, following Ukraine’s acceptance as a candidate state in June 2022. [see SIPRI article Environmental accountability, justice and reconstruction in the Russian war on Ukraine ]

The Ministry of Environmental Protection and Natural Resources of Ukraine assessed damage and losses experienced by Ukraine as a result of the military aggression of the Russian Federation according to the Cabmin Resolution #326 of March 20, 2022. The assessment methodology was based on the concept of civil liability for “traditional damage” – damage to property, bodily injuries, and economic losses.

As foreseen by this resolution, Ministry of Environmental Protection and Natural Resources already in April 2022 approved the methodology developed by the State Environmental Inspectorate of Ukraine (SEI). However, this methodology is not based on international principles and recommendations for environmental damage assessment from such organizations as European Environment Agency (EEA), US Environmental Protection Agency (US EPA), World Health Organization (WHO) and others.

On the other hand, the SEI was not engaged in any discussions before the war, although it is required by the CMU Resolution #275 from 19.04.2017. The SEI is the state agency performing the state policy of state supervision (control) in the sphere of environmental protection. Thus, it should be directly engaged in the process of appraising environmental damage. That’s why it is recommended that the Ministry of Environmental Protection (the policy-maker) develops the methodology, which SEI should implement. 

In June 2022 the working group [WG] of the State Environmental Inspectorate of Ukraine reviewed the development of methods and procedures for calculating damages inflicted on natural resources as a result of Russia’s invasion, indicating a year ago that the most suitable approach, for Ukraine’s situation, is the United Nations Compensation Commission (UNCC). It was created in 1991 as an auxiliary body of the UN Security Council with a mandate to consider claims and pay compensation for losses and damages caused by the illegal invasion by Iraq and the occupation of Kuwait.

At the same time, the WG, whose membership includes many international environmental organizations, advised MENR not to use the methods of civil liability for “traditional damage” – property damage, bodily injury, economic loss – to seek compensation for environmental damage, since such claims, most likely, will not be taken into account in any future international compensation commission, depending on which tribunal it will be created. Unfortunately, the analytical report of the WG was not taken into account at the time the assessment methods were hastily being developed.

The analytical report of the WG indicated that the UNCC relies on the definitions of the American Comprehensive Environmental Response, Compensation, and Liability Act [CERCLA] when considering environmental damage claims. The definitions used by CERCLA focus on natural resources and ecosystem services. Thus, the UNCC understood:

• under damage (injury) – an observed or measurable negative change in a natural resource or a deterioration in the quality of natural resource services,
• under compensation for damages (damages) – compensation for damage, destruction, loss or impossibility of using natural resources, including justified costs for damage assessment,
• under 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,
• primary restoration – any action, including natural restoration, which returns disturbed natural resources and ecosystem services to their original state,
• compensatory restoration – as any action aimed at compensating for temporary losses of natural resources and ecosystem services occurring from the moment of the incident to the moment of restoration,
• that measures to restore damaged resources should be aimed at primary restoration, i.e. restoration of ecological functioning,
• that compensatory restoration measures should be considered only when there is sufficient evidence that primary restoration will not be able to fully compensate for identified losses, i.e. restoration of ecological functioning.

The analytical report of the WG also indicated that the American definitions of CERCLA are very close to the definitions of “pure ecological damage” in the European Directive 2004/35/EC “On ecological responsibility for the prevention and elimination of the consequences of environmental damage”. Directive 2004/35/EU distinguishes three types of “pure ecological damage”:

1. damage to protected species and natural habitats, in particular, any damage that significantly affects the introduction or maintenance of a favorable state of preservation of such natural habitats or biological species; the size of the consequences of such damage is assessed in relation to the initial state,
2. damage affecting water resources, in particular, damage that significantly negatively affects the ecological, chemical or quantitative state or ecological potential of the specified water resources,
3. land damage, in particular any soil contamination that causes the risk of significant negative consequences for human health from the direct or indirect penetration of substances, preparations, organisms or microorganisms into the surface or into the soil.

Separately, the Directive says that it is always necessary to establish a cause-and-effect relationship between activity and damage according to the scheme of the European Environmental Agency (EEA) D(Driving force) –> P(pressure)–> S(State)–> I(Impact) –> R(Response). There is a whole Guide to how these definitions should be used in environmental damage assessment.

The European acquis,  the body of common rights and obligations that is binding on all the EU member states, has a good guide on the restoration of the state of the water environment. The European Commission also emphasizes the importance of ecosystem services in the new European Law on Nature Restoration, which is proposed to be adopted by national parliaments by the end of 2024. The European Commission proposed this new law precisely to restore ecosystems for human uses, climate change mitigation and adaptation and sustainable development objectives. The law should become a key element of the EU’s Biodiversity Strategy, which calls for mandatory targets for the restoration of degraded ecosystems. In particular, those that have the greatest potential both for capturing and storing carbon and for increasing climate resilience. Restoration of wetlands, rivers, forests, grasslands, marine ecosystems and the species that live in them will contribute to increasing biodiversity, preserving the functions that nature provides us for free, for example, cleaning water and air, pollinating crops, reducing the impact of floods and droughts, curbing global warming.

Damage assessment principles and methods for the environment and ecosystems as the basis for financial compensation for war damages are equivalent to those for private property, commercial enterprises and public infrastructure. For example, compensation should include the valuation of all components of assets [read species, habitat] and company [ecosystem] value that were negatively affected by the war, directly or indirectly. The International Valuation Standards (IVS 2022) have long been applied globally to determine asset and company value within myriad compensation adjudications. There are comparable valuation standards and methods for the environment, ecosystems and valued ecological resources developed by the United Nations,  European Union, USAID and the U.S. National Strategy for Natural Capital Accounting.

At the same time, numerous methods of valuation of ecosystem services are available in the literature (see, for example,  here, here, here, and here)  which allow remote damage assessment by means of satellite images, remote sensing and the use of GIS. This is particularly important for Ukraine where the war is not over yet. Thousands of ecological restoration and hazardous and toxic remediation projects have been undertaken in the U.S. alone. Each agency, including NOAA, EPA, Corps of Engineers, Department of Agriculture, Department of Energy, and others, have spent billions of dollars each year for such projects. There is a wealth of information related to the costs of hazardous waste remediation and ecosystem restoration that should be used to more accurately account for the 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 – how much they contribute to sustaining natural ecological systems, along with the value derived by humans for hunting, fishing and enjoyment.  The second approach is the cost of restoring or rehabilitating such ecosystems when they are damaged. The third category of methodologies centers on remediation of toxic and hazardous wastes, which is much more complex and costly, because solutions are driven according to the direct impacts on, and risks to public health and safety, which are governed by very strict contaminant regulations. The war has generated a great deal of toxic pollution from military munitions and the destruction of chemical factories, fertilizer plants and other industrial facilities that produce toxic chemicals. These toxic chemicals directly affect the health of soldiers and civilians, and pollute agricultural lands, groundwater supplies and aquatic ecosystems, with longer term adverse health effects on the populace.

There are many examples of costly toxic and hazardous waste remediation in the U.S. which can be readily transferred to Ukraine, adjusting for purchase power parity [PPP], wherein the costs of products and labor in Ukraine in Hryvnia or current USD would be lower than in the U.S., for example. There are approximately 11,000 ‘Superfund’ sites in the U.S. – that is industrial hazardous waste sites that affect human health, regulated under the CERCLA law of 1980. To date, $21 billion has been spent on remediating these sites, with an average cost of $41 million per site. The cost of treatment of hazardous wastes ranges from $50-$130/ton. Thousands of hectares of land have been contaminated in Ukraine, requiring remediation of millions of tons of soil. By the time the Russia-Ukraine war is over, there could easily be the equivalent of 10,000 ‘Superfund’ sites in Ukraine.

Another example of compensation for the adverse health effects of toxic and hazardous wastes is the recent settlement for groundwater pollution at Marine Camp Lejeune over a period of 50 years. The U.S. Congressional Budget Office estimates that $6.1 billion will be spent to compensate thousands of victims who drank this water over a period of years of continuous pollution, which causes a wide range of nerve damage and cancers.

One measure of benefits and costs of ecosystem restoration is to compare the cost of restoring one hectare versus the benefit that one hectare of habitat contributes to ecosystem maintenance of various functions. Of course, different ecosystems and habitats have different values and benefits – an estuarine wetland is worth more than a freshwater marsh, which is worth more than a hectare of forest – on average. 

A comprehensive study on the valuation of ecosystem services was conducted in 2020 by the U.K. Dept of Environment, Food and Rural Affairs.  It covered over 25 typical services provided by habitats and ecosystems, ranging from food, genetic resources, biodiversity, climate regulation to esthetic experiences and hunting. And it covered a wide range of ecosystems, from open ocean, coral reefs to mangrove forests, marshes and freshwater wetlands. The mean value of the suite of ecosystem services for all ecosystem types was computed as $3500/ha/yr [in 2020 dollars]. The figures ranged from a high of $119,000/ha/yr for tropical forests to $1600 for grasslands.  Figures that more closely represent Ukraine’s ecosystems were inland and coastal wetlands, $49,000; cultivated areas, $8,000 and rivers and lakes, $20,700/ha/yr.

The U.S Army Corps of Engineers spent $710M for aquatic restoration projects in 2022. The agency restored, improved or protected 108,000 acres [44,000 Hectares] in 2019, and 115,000 acres [46,500 ha] in 2021. This translates, on average, to approx. $13,000/ha for restoration costs.

Ukraine’s Environment Minister Strilets identified a large number of ecologically protected areas that were impaired or severely damaged by Russian forces. Ukraine is home to 35 per cent of Europe’s biodiversity. There is reported damage to 160 [of 271] ‘Emerald network’ sites, totaling 627,000 hectares. These ‘Emerald’ sites are part of a European system of protected conservation areas and natural habitats for endangered species. Also, 16 UNESCO Ramsar sites, totaling 2.9 million hectares, have been substantially impaired. These sites are wetlands designated to be of international importance under the Ramsar Convention, an intergovernmental environmental treaty established in 1971 by UNESCO. 

Ukraine’s first priority during the immediate recovery period is to deal with physical damage to critical infrastructure and living quarters, so that millions of refugees may return home. During that period, many donors and international multilateral Banks will be sending teams to conduct more detailed damage assessments of ecological sites, cultural sites, hazardous waste sites and associated human health effects. They will use the more acceptable western methodologies for evaluating damage. In any event, the bill for repairing environmental damage, which includes natural ecosystems, defined hazardous waste sites and related human health effects will be enormous.

Given the broad extent of environmental damage inflicted on Ukraine by the war on both natural ecosystems, agricultural systems and destruction of cities and towns such as Bakhmut, Bucha, Mariupol and Avdiyivka, it is easy to envision ecosystem rehabilitation totaling at least 100,000 hectares, and remediation of hundreds of equivalent Superfund sites in the many cities and neighborhoods where industrial sites were located. The long-term rehabilitation and compensation costs, based on comparable costs in the U.S., can easily reach $50 billion. 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, forest and agricultural areas are expected to begin during the longer, decadal reconstruction period, likely between 2025 and 2035.