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The project CGEUKR (Regulation of Air Pollution and Economic Growth in Ukraine: A General Equilibrium Approach – CGEUKR) aimed at providing an integrated assessment of economic growth, air pollution, related health effects and economic implications of carbon reduction policies in Ukraine.The analysis was carried out both at the country and at the international level.

The project CGEUKR (Regulation of Air Pollution and Economic Growth in Ukraine: A General Equilibrium Approach) aimed at providing an integrated assessment of economic growth, air pollution, related health effects and economic implications of carbon reduction policies in Ukraine. The analysis was carried out both at the country and at the international level.

During the project the following modelling tools have been developed:

  • A forward-looking dynamic general equilibrium model of Ukrainian economy. This model was employed to evaluate the alternative post-2012 CO2 reduction policies for Ukraine.
  • A bottom-up sub-model of electricity sector linked to a top-down recursive-dynamic general equilibrium model. This hybrid model was employed to evaluate the alternative post-2012 CO2 reduction policies for Ukraine.
  • A multi-country dynamic-recursive general equilibrium model ICES completed with equations that connect discharges of non CO2 air pollutants with sectors’ outputs and consumption of fossil fuels.

The project was financed by the European Commission, within the Marie Curie International Incoming Fellowship scheme of the FP7 People Programme, Grant Agreement PIIF-GA-2008-220852. Dr. Olga Diukanova, from Ukraine, was the Marie Curie Fellow. She developed the project under the supervision of Dr. Francesco Bosello.

The main results of the research undertaken are the following:

  • The economic cost of mitigation policies in Ukraine is moderate until 2020 (maximum 3% decline of GDP relative to the baseline), in addition they foster growth of least energy-intensive industries and provide non negligible health improvement (up to 40% reduction in human mortality/morbidity in 2020 relative to the baseline).
  • Economic costs can be even lower adopting a bottom-up perspective. According to this approach which better captures substitution possibilities from high to low carbon production options, cost for Ukraine drop to 2% of GDP in 2020 relative to the baseline.
  • In a “low Copenhagen pledge” framework, international cooperation can greatly reduce Annex I and II mitigation costs (0.1%-0.3% losses of global GDP per capita in 2020 relative to the baseline). Also creation of joint EU-Russia-Ukraine emissions market is likely to bring substantial benefits both for the EU and FSU countries (lowering the marginal abatement cost by a factor of two comparing with the case when the EU reduces emissions domestically). Finally ancillary benefits on health are assessed (-3% mortality in 2020 relative to the baseline).
    Moreover a full assessment of health effects of NOX, CO, NMVOC, PM2.5 and PM10 air pollutants and of mitigation policies for Ukraine and the EU.

This exercise is of high policy relevance: firstly it provides concrete estimation of costs and benefits of mitigation policies in Ukraine. Indeed these results have been delivered and discussed by high level officials of the Ukrainian Ministry of Environmental Protection. Moreover, the results and conclusions of the project can be used during climate change negotiations in order to persuade the FSU countries to adopting tighter emission targets.
Secondly, by analyzing the same problem (cost of mitigation) with the two different perspectives, it provided interesting insights on the strengths and weaknesses of top-down and bottom-up methodologies that can offer guidelines for future research.
Thirdly, it produced an up to date database of non CO2 air pollutants linked to sectoral output and fuel consumption that can serve as a backbone tool for an environmental impacts assessment and policy analysis applicable in a broader context.

Project results are summarized in a set of policy and working papers:

  • Diukanova, O. (2009), Comparative Analysis of Alternative Post-2012 Climate Policies  and Ancillary Benefits for Ukraine: A General Equilibrium Approach.– The monograph “Emission Trading and Business”–Phisica Verlag, Germany– in print.
  • Diukanova, O. (2009), Proposals to the national policy during the commitment period of the Kyoto Protocol and for the Post-Kyoto commitment periods.–on request of the Ministry of Environmental Protection of Ukraine – policy paper, in Ukrainian.
  • Diukanova, O. (2009), The state of implementation by Ukraine’s its commitments under the Kyoto Protocol  to the UNFCCC during  2005-2008 and during the first five months of 2009.– on request of the National Academy of Sciences of Ukraine – policy paper, in Ukrainian.
  • Diukanova, O. (2010), Assessing Post-2012 CO2 reduction targets for Ukraine with a hybrid top-down bottom-up modelling framework.
  • Diukanova, O. (2011), Evaluation of the Post-2012 carbon reduction options for Annex I and Annex II countries.