Ukraine returns €5 mln in unspent AAU funds to Japan, deal sought for remaining cash

Published 09:24 on February 3, 2016  /  Last updated at 09:30 on February 3, 2016  /  Asia Pacific, EMEA, International, Japan, Kyoto Mechanisms  /  No Comments

Ukraine has returned to Japan €5 million in AAU sale proceeds that it was obligated to invest in domestic emission reduction projects but failed to spend, with green groups calling for the government to prosecute officials involved in carbon market-related corruption under former President Viktor Yanukovich.

Ukraine has returned to Japan €5 million in AAU sale proceeds that it was obligated to invest in domestic emission reduction projects but failed to spend, with green groups calling for the government to prosecute officials involved in carbon market-related corruption under former President Viktor Yanukovich.

The revenues are from 30 million AAUs that Ukraine sold to Japan in 2009 and 2010. As part of the contract, Ukraine committed to investing the funds in projects that cut GHG emissions, but after implementation of those initiatives had been delayed three times since 2012, Japan in December asked for the money to be paid back.

“I can confirm that Ukraine has returned €5 million to Japan, since the money was not used for green investments,” a Japanese government official who wished to remain anonymous due to the diplomatic sensitivity of the issue told Carbon Pulse.

Ukraine’s government is reportedly seeking an agreement with Japan regarding investing the remaining funds in energy efficiency measures and in improving urban rail in Kiev.  The amount of unspent cash left in Ukraine has not been disclosed.

In early 2014, in the midst of an emerging civil war and Russia’s annexation of Crimea, Ukraine’s then Environment Minister Andriy Mokhnyk warned that the country was in a “difficult situation” as it had not yet spent the roughly $800 million it had earned through selling AAUs to buyers including Japan, Spain, and the World Bank.

Many buyers of AAUs from Eastern European nations insisted on including so-called Green Investment Scheme (GIS) clauses as part of the deals, under which the seller had to invest the revenue in low-carbon technology.

The collapse of the economies of former Soviet Union nations in the 1990s left most of these countries with millions of surplus Kyoto Protocol carbon credits. For buyer nations, the GIS clauses were a way to ensure that the AAU purchases were environmentally sound and not just payments for so-called “hot air”, or reductions that occurred with no investment or effort.

But implementation of the projects did not always run smoothly. Former Ukrainian Prime Minister Yulia Tymoshenko was jailed in 2011 following accusations by rival Viktor Yanukovich that included misappropriating at least €200 million in AAU sale proceeds, and at least two environment ministers and two senior government officials have since been removed from office for reasons relating to AAU cash.

The Japanese official on Wednesday told Carbon Pulse there are still outstanding issues between Japan and Ukraine in regards to AAU deals, but declined to provide further details.

JUSTICE

“The acting government should initiate as soon as possible legal proceedings on corruption abusing during the presidency of Yanukovych with funds obtained under international carbon trading mechanism with Japan and bring to justice officials, who have distributed funds, and companies, which have never implemented projects,” Iryna Stavchuk, climate change director at green group the National Ecological Centre of Ukraine (NECU), said in a statement.

She said the government should be obligated to provide information about all government projects to ensure transparency and public control.

Another NECU expert, Andriy Zheleznyi, said said that out of 500 GIS-related pre-approved insulation projects at schools, kindergartens and hospitals, only some 150 projects were completed in 2013 and a few dozen more in 2014.

“Despite the investigation conducted by the General Prosecutor’s office and the head department of the Ministry of Internal Affairs of Ukraine, no one of those found guilty in the misuse of power during 2012-2014, which led to a breach of international agreements, has been brought to justice so far,” he said.

“Dishonest contractors gained public contracts for hundred million hryvnias but failed to complete thermal rehabilitation projects for educational and health care institutions. There is no doubt that abusing of authority by a number of governmental officials that time caused a multimillion loss to the state. However, the prosecution office fails to follow these cases to their logical end.”

Ukraine’s participation in international carbon markets has been plagued by controversy.

In 2011, it was temporarily suspended from trading carbon units under Kyoto for failing to report accurate emissions data, and last year it failed to retire enough emissions rights to comply with the pact, even though it held a sufficient number in its UN registry account.

Last week, acting minister of environment and natural resources Serhii Kurykin and two senior officials were fired for allegedly attempting to embezzle 550 million Hryvnia ($22 million) in AAU revenues.

By Stian Reklev and Mike Szabo – stian@carbon-pulse.com

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