Can Ukraine reconcile environmental priorities with economic interests?

In August 2025, the Ukrainian government approved changes to indicators in the Ukraine Plan, the reform and investment roadmap that determines how funding is accessed under the 2024–2027 Ukraine Facility, the European Union (EU)’s financial support instrument for Ukraine. The updates are largely technical, involving adjustments to the content and timeline for implementing reforms and investments. The revised indicators now require approval by the EU’s main institutions before they can take effect. 

The strategic vision outlined in the Ukraine Plan, approved by the Council of the European Union on 14 May 2024, remains unchanged, including components relating to the green transition and environmental protection – reforms that are essential to Ukraine’s European future. Yet a crucial question persists: How seriously is the government pursuing these reforms? 

Why environmental issues must remain a priority 

The Ukraine Plan provides the core framework for reforms and investments under the EU’s Ukraine Facility Regulation. The total support package amounts to EUR 50 billion, of which EUR 38.27 billion is provided by the state through grants and loans. 

The Facility’s priorities include growing the Ukrainian economy, reducing social and economic inequalities, and progressively aligning Ukraine with the EU’s social, economic and environmental standards on its path towards European integration. 

From the very beginning, the Plan has been defined by a strong environmental component, emphasising decarbonisation through the transition to carbon-free technologies in metallurgy, the replacement of fossil gas with renewable energy sources to transform heat supply, and the implementation of climate solutions across key sectors of the economy. 

The guiding principle is clear: Ukraine’s reconstruction should not revert to an approach that maintains the status quo, but should instead adopt modern green standards aimed at reducing fossil fuel dependence, cutting greenhouse gas emissions, and strengthening economic resilience. 

Key provisions of the Ukraine Plan 

In the energy sector, the Ukraine Plan outlines changes in the regulatory framework to promote the development of renewable energy sources, increase the efficiency of district heating, improve the energy performance of public buildings, and localise the production of renewable energy equipment. These measures are important given assessments that reconstruction could cause significant additional carbon emissions. 

The Plan is notable for introducing a green approach to the agricultural sector and prioritising support for small and medium-sized farms over large agricultural holdings for the first time compared with previous strategies. It also includes measures to develop advisory services and transition to products with higher added value, creating the potential for sustainable policy change. 

With regard to climate policy, key measures include the creation of a scientific and expert council on climate change, the introduction of market-based carbon pricing mechanisms, and preparations for emissions trading. Crucially, climate change adaptation is recognised as a cross-cutting priority as opposed to an individual category. 

At the same time, the Plan contains a number of contradictions. For instance, the document outlines a biodiversity strategy and action plan without specifying any goals for increasing protected areas. In the forestry sector, the Plan commits to forest preservation but also outlines an increase in the volume of timber harvesting from 15 to 25 million cubic metres within 10 years. And despite the Plan’s broader commitment to decarbonisation, the emphasis on reviving nuclear energy contradicts principles of decentralisation and economic feasibility. 

Other issues are also left unaddressed. Climate adaptation at the community level, the over-ploughing of land, and problematic land-use patterns receive little attention. While irrigation is referred to as a key agricultural solution, the Plan lacks a systematic approach to adapting farming practices to climate change, even as water access becomes an increasingly urgent concern. 

Overall, then, the Plan sets out the right strategic direction but in an inconsistent way, with measures promoting green approaches paired with policies that risked undermining them. 

Progress under the Ukraine Facility 

During the first year of the Ukraine Facility, Ukraine fulfilled several conditions that opened the way to funding. In 2024, the European Commission officially confirmed that the Ukrainian government had fulfilled these criteria, paving the way for the release of the first funding tranches. But while formally the government has been following the recommended reforms, civil society has questioned the quality of their implementation and the extent to which they meet EU standards. 

In September 2024, the then Ministry of Environmental Protection and Natural Resources adopted a concept note defining the scope of deviations from the EU’s Environmental Impact Assessment (EIA) and Strategic Environmental Assessment (SEA) Directives. The note had been expected to detail the drafts and justifications for deviations, explain the scope and rationale for exceptions, and set clear timelines. 

Instead, the draft limited the application of EIA and SEA requirements to projects classified as rehabilitation work. This loophole effectively limits the public’s participation in decision-making and access to information, violating the principles of the Aarhus Convention, the Espoo Convention and the EIA Directive. 

Subsequently, the government launched a new action plan outlining further steps to simplify the EIA procedure, which it viewed as an obstacle to business development. Yet the EIA Directive is an essential framework that prevents significant risks and should be regarded as a vital component of Ukraine’s EU integration pathway. Instead of simplifying the EIA procedure, it should be improved to ensure businesses proceed in a manner compliant with environmental standards. 

Among the steps taken under the Ukraine Plan is the adoption of a national energy and climate plan until 2030. However, it lacks sufficiently ambitious measures for the development of decentralised renewable energy. Similarly, the 2030 national transport strategy fails to provide the comprehensive focus or concrete policy measures needed to meet EU and international decarbonisation goals for the transport sector, despite explicitly stating the importance of decarbonisation as a necessary implementation step. 

Civil society’s concerns were reflected in the Commission’s 2024 report on Ukraine, which noted only partial progress on aligning legislation with EU standards. Some advances have been made in horizontal environmental legislation, monitoring and control systems, access to information, waste management, and the reduction of industrial pollution. However, there has been no progress on biodiversity, highlighting the need for the government to take environmental issues more seriously and allocate funding for reforms, including from the Ukraine Plan. 

Following approval of the national climate law in 2024, which creates a legal basis for low-carbon development, the key priority in 2025 is to establish a comprehensive emissions trading system. This is a market-based instrument, without which it is impossible to enter the European climate space. Although the system has yet to be implemented, Ukraine’s commitment to developing an emissions trading system sends an important signal to business and investors. 

But the application of legislation to reforms thus far is far more concerning. Only some of the Facility’s requirements have been incorporated into Ukraine’s recovery financing. While the Facility mandates that a minimum 20 per cent of funds are directed towards climate, the environment, and the green transition, there is currently no mechanism in place to ensure this principle is applied to investment projects. 

Additionally, the government has accelerated the implementation of several energy measures. Most notably, a draft law on the implementation of EU renewable energy standards, released in August 2025, contains several inaccuracies and risks. These pertain to territories designated under the Nature Reserve Fund, the need to conduct impact assessments for Emerald Network areas before determining zones for accelerated renewable energy development, and the identification of individual sites for new energy grid and storage infrastructure. Public consultation and feedback under the law’s SEA framework are also limited. 

The draft law’s definition of energy communities is also problematic. By restricting energy associations to non-profit entities, it contradicts the EU’s Renewable Energy Directive (RED II), which the law is meant to align with.  

In the heat supply sector, a comprehensive state modernisation programme is expected to be unveiled by the end of 2025, which should lead to the wider involvement of stakeholders. However, a decision on hot water tariffs has been postponed yet again, this time until the end of 2026. 

The management of critical materials also requires attention. Reforms should provide for public discussion and strategic assessments, given their national economic significance. Instead, the focus has been on inventory administration and attracting investors without assessing environmental and social impacts. 

Collectively, reforms rolled out during the first year of the Facility show that Ukraine does have the capacity to fulfil the EU’s formal conditions, but the quality of the documents adopted has often fallen short. Without substantive content or effective implementation, the government’s current approach is likely to impede its ability to meet the EU’s environmental standards. 

What are the current risks? 

The recent consolidation of Ukraine’s environmental policy under the new Ministry of Economy, Environment and Agriculture presents a significant challenge. The new arrangement, which merges the former Ministries of Environment, Agrarian Policy, and Economy into one administrative unit, begs the question: Can a ministry with such a broad mandate pay enough attention to environmental protection and climate action? The risk is that an ‘economy-and-resources-first’ approach could sideline pressing environmental issues for the sake of mineral exploitation, agricultural production, and rapid growth in GDP. 

The quality of the environment is a matter of national security given that public health, food security and access to drinking water depend on the state of the country’s water reserves, soil, ecosystems and air. In the context of a major war, the lack of a strong institutional centre for environmental policy makes the state even more vulnerable. 

There is also a crucial external dimension. While technical meetings involving screenings under EU law and preparations for negotiation positions have already taken place, the success or failure of Ukraine’s EU accession bid ultimately depends on the country’s ability to meet the environmental and climate standards laid out in chapter 27 of the EU acquis. However, if environmental policy is absorbed by the agriculture and economic sectors, meeting these criteria is far from certain. 

Following a meeting with Ukraine’s leading non-governmental organisations on 11 August 2025, the Minister of Economy, Environment and Agriculture Oleksiy Soboliev highlighted the importance of ensuring the principle of do no significant harm becomes a guideline for investment. However, without strong institutional oversight and clear control mechanisms, it remains to be seen whether the principle becomes a tangible element in decisions made on development and recovery projects. 

It is similarly unclear whether the Ukrainian government has the capacity to align environmental priorities with its economic interests. One thing remains certain, however: Ukraine’s recovery cannot afford to rely on outdated practices and models, which would only delay the country’s successful integration into the EU.