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UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION

RESOURCE EFFICIENT & CLEANER PRODUCTION POLICY:

FOSTERING GREEN INDUSTRY

IN UKRAINE

Backgroundreport - 2017

2017


copyright © united nations Industrial development organization, 2017

this background paper was prepared without formal united nations editing. the opinions, designations and material presentations do not imply the expression of any opinion whatsoever on the part of unIdo concern-ing the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of frontiers or boundaries. designations such as “developed”, “industrialized” and “developing” are intended for statistical convenience and do not necessarily express a judgment about the stage reached by a particular country or area in the development process. Mention of firm names or commercial products do not constitute an endorsement by unIdo. although great care has been taken to maintain the accuracy of information herein, unIdo does not assume any responsibility for consequences which may arise from the use of the material.

Designed by athenea International/omnilang (Mauricio Mondragon & Maria grineva).

RESOURCE EFFICIENT & CLEANER PRODUCTION POLICY:

FOSTERING GREEN INDUSTRY

IN UKRAINE

TABLE OF CONTENTS

1

2

3

4

5

6

RECP – a toPiC valuablE foR ukRainE 7The economic, social and environmental context in Ukraine 9Concepts of Resource Efficient and Cleaner Production 10Positive economic and environmental impacts of RECP actions 11Potential values of RECP for Ukraine 12

bRiEf analysis dEsCRibing thE EnviRonmEntal REgulatoRy fRamEwoRk 15Political challenges 17Environmental policy making in Ukraine 17Available tools and instruments to apply RECP 19The need for better RECP regulations 21

thE status quo of natuRal REsouRCE usE and dECouPling in ukRainE 23Domestic material extraction 25Domestic Material Consumption (DMC) 26Material Footprint (MF) 27Resource productivity/efficiency and decoupling trends 30International comparison 33Summarising the status quo 33

bRiEf analysis on intERnational PoliCy initiativEs in thE aREa of RECP 35EU policies 37G7 38G20 38China 38OECD 39SDGs 39

CountRy ExamPlEs/bEst PRaCtiCEs 41Vietnam 43Guatemala 44Germany 46

RECommEndations to fostER RECP in ukRainE 49

REfEREnCEs 54

annEx 57List of 26 sectors of the multi-regional input-output model Eora 57

list of figuREs Figure 1: Domestic material extraction in Ukraine, 1992-2017 25Figure 2: DMC in Ukraine, 1992-2017 26Figure 3: Material Footprint (MF) by major material categories in Ukraine, 1992-2013 28Figure 4: Material Footprint (MF) by major sector groups in Ukraine, 1992-2013 28Figure 5: Material Footprint (MF) by categories of final demand in Ukraine, 1992 and 2013 29Figure 6: Material Footprint (MF) of Ukraine by 5 major countries of origin per main material category, 1992-2013 30Figure 7: Comparison of GDP/DMC (left) vs. GDP/MF (right) in Ukraine, 1992-2013 31Figure 8: Sector productivity (VA/MF – US$/kg) in Ukraine, 2013 32Figure 9: International comparison of DMC/cap and MF/cap, 2013 33Figure 10: Development of per-capita Domestic Material Consumption in Vietnam, 1970-2016 43Figure 11: Development of per-capita Domestic Material Consumption in Guatemala, 1970-2016 45Figure 12: Development of per-capita Domestic Material Consumption in Germany, 1970-2016 46

list of tablEs Table 1: Goals in National Environment Strategy 2020 18

Table 2: Priority areas and related targets 18Table 3: Tools and instruments to apply RECP 20

Table 4: Tools and instruments and their indicative level of implementation in Ukraine 21

list of boxEs Box 1: Socio-economic profile of Ukraine (2016) 9

Box 2: Environmental challenges in Ukraine 10Box 3: Green Industry and Green Economy 11Box 4: RECP benefits 12Box 5: RECP in Ukraine 13Box 6: Benefits of resource efficiency according to the Interna-tional Resource Panel 13Box 7: Key sectoral strategies and programs to be integrated with environmental policies 19

Box 8: Material Footprint 27Box 9: Decoupling 32

Box 10: Circular economy 37Box 11: RECP in the UN SDGs 39

Box 12: Policy strategies in Vietnam related to RECP 44Box 13: Principles of Guatemala’s National Policy of Cleaner Production 45

Box 14: Guiding principles of German Resource Efficiency Programme (ProgRess) II 47Box 15: Austria’s Action Plan for Sustainable Public Procurement 52

Box 16: Implementing RECP in Ukraine 52

1RECP – A TOPiC vALuABLE FOR ukRAiNE

Background Report | 98 | Background Report

ResouRce efficient and cleaneR PRoduction Policy: fosteRing gReen industRies in ukRaine

The economic, social and environmental context in Ukraine

Ukraine is a sovereign state in Eastern Europe with an area of 603,628 km2 and a population of roughly 45 million, which makes it the largest Eastern European country, and the fifth largest country in Europe. From 2000 to 2016, the coun-try showed an increase in GDP of 39%, reaching a per-capita GDP of 2,900 US$ (constant 2010), which was only about 8 % of the average EU-28 per-capita GDP and one of the lowest of Eastern Europe and Central Asia (World Bank, 2017b).

Looking at the structure of the Ukrainian economy it becomes apparent that the service sector is responsible for about half of the overall value added created, fol-lowed by industry (~40%), and agriculture with about 10%. The two specific sectors contributing the highest share of overall value added are agriculture and defence – with about 10% each of the overall val-ue added created. These are followed by the power sector (8%) and the coal sector (6%). Education accounts for about 4% of total value created (Lenzen et al., 2012).

2016 was a year of modest recovery after economic downturn in the previous years, thanks to decisive reforms as reaction to unprecedented shocks in 2014 and 2015. Value added of agriculture grew by 6% in 2016. Also other sectors showed consid-erable growth rates, though starting from low levels – for instance, construction by 16.3%, manufacturing by 3.6%, and trans-port by 3%. A strong rebound from previ-ous years could be seen for fixed capital investment (increase by 20% in 2016), e.g. for manufacturing equipment and import-ed capital goods. However, as some parts of the services sector, including educa-tion, health, and financial services remain rather weak, the overall pace of recovery remains modest (World Bank, 2017a).

In terms of trade, Ukraine has seen an in-crease in its trade volume of roughly 60% since the year 1996, with an overall trade deficit of 14 billion US$ (constant 2000) in 2016 (World Bank, 2017b). The most important export goods in terms of trade

value are iron and steel, cereals, metal ores, and food products, while the largest imports consist of plastics, vehicles, and pharmaceuticals (United Nations, 2017).

Box 1Socio-economic profile of ukraine (2016)

» GDP: 124 bn US$

» GDP per capita: 2900 US$

» Trade deficit: -14 bn US$

» Urban population: 70%

» Unemployment: 9.1%

» HDI: 0.743 (rank 84)

The Ukrainian population lives to a large share in urban areas (70%), which is slightly above the Eastern European aver-age. 60% of the total labour force work in the service sector, 25% in industries, and 15% in agriculture. While the overall un-employment rate has remained more or less stable over the last 25 years at about 9%, youth unemployment has been in-creasing and reached 22.4% in 2015. These values correspond closely to the averages of the European Union (9.4 and 22.7, respectively) (World Bank, 2017b).

With regard to the overall development of the society, the Human Development in-dex (HDI) of the United Nations combines data on economic wealth, life expectan-cy and national education levels into one index, where 1 is the maximum to be reached. For Ukraine in the year 2015, the HDI was calculated at 0.743, meaning that Ukraine ranked 84 of all countries in the world (UNDP, 2016). The HDI was increasing since the year 1995, and only from 2014 to 2015 showed a slight drop to arrive just below the threshold for ‘high human development’.

Another index related to social develop-ment is the Poverty Index of the World Bank, which shows the percentage of the population living below the nation-al poverty line. In 2015, for Ukraine this value is calculated as 6.4%, signifying a considerable improvement since the early 2000s and a slight improvement since 2008 (World Bank, 2017b).

603,628 km2

45 mln

70 %

124 bn $

tERRitoRy

PoPulation

uRban PoPulation

gdP

CountRy EConomy’s stRuCtuRE

50 % sERviCE

40 % industRy

10 % agRiCultuRE

9% agRiCultuRE

78% EnERgy

21% industRial PRoCEssEs and PRoduCt usE

land usE and foREstRy, and wastE

4%

aiR Pollution

watER Pollution

ClimatE ChangE

wastE PRoduCtion

EnviRonmEntal ChallEngEs

foREst managEmEnt

Co2

“[Ukraine is] the largest Eastern European country, and the fifth largest coun-try in Europe.”



Box 3green Industry and green economy

Green Industry means economies striv-ing for a more sustainable pathway of growth, by undertaking green public investments and implementing public policy initiatives that encourage envi-ronmentally responsible private invest-ments (UNIDO, 2017b).

A Green Economy results in improved hu-man well-being and social equity, while significantly reducing environmental risks and ecological scarcities. It is low carbon, resource efficient and socially inclusive (UN Environment, 2017b).

The OECD recognised the relevance of RE and published recommendations to in-form governments and other stakehold-ers on how to improve RE (OECD, 2004, 2008b). The Council also recognised the importance of taking action at various administrative and economic levels.

In 2011, the European Commission launched its ‘Roadmap to a Resource-Ef-ficient Europe’ (European Commission, 2011c), which signified the breakthrough of the topic on the European political agenda.

With increasing application of the con-cept, also indicator development accel-erated, to enable policy makers to moni-tor progress and identify priority areas of action (e.g., OECD, 2008a, 2011b). Spe-cific measures to be taken to improve re-source efficiency were further condensed in the Circular Economy Action Plan by the European Commission (European Commission, 2015c).

But RECP also plays a crucial role in the context of the Sustainable Development Goals (SDGs; United Nations, 2015), as the concept contributes to six different SDGs, including Goal 8 on ‘Decent Work and Economic Growth’, Goal 9 on ‘Indus-try, Innovation and Infrastructure’ or Goal 12 on ‘Responsible Consumption and Production’. Hence, RECP can be seen as a multi-return strategy serving the three levels of sustainable development – the economic, social, and environmental.

Inclusive and sustainable industrial developmentA new vision of inclusive and sustain-able industrial development (ISID) and a new focus on the role of indus-trialization as a driver for development was established in the Lima Declara-tion, and adopted by UNIDO’s Member States in December 2013 (UNIDO, 2013). UNIDO is promoting industrial devel-opment (ISID) as a tool for creating higher-skilled jobs, for building more equitable societies, and for safeguard-ing the environment, while sustaining economic growth (UNIDO, 2014).

Promoting cleaner and resource-efficient pathways to production, and the decou-pling of economic growth from environ-mental degradation and environmental-ly-sound interventions in manufacturing industries can be highly effective and significantly reduce environmental deg-radation. Moreover, clean and efficient energy have progressively become core determinants of economic competitive-ness and sustained growth (UNIDO, 2014). Applying resource efficient and cleaner production are a condition for sustainable industrial development, and using resources in an efficient way has enormous social, environmental, and economic benefits (UNIDO, 2015).

Positive economic and envi-ronmental impacts of RECP actions

As indicated above, RECP measures are characterized by a number of positive impacts, making this concept a ‘mul-ti-return strategy’. In the following the main advantages of RECP actions shall be highlighted.

Increased competitiveness / early mover advantageAdvancing industrial performance with regard to RECP reduces production costs and improves the quality of the prod-uct or service output, helping to comply with (future) quality standards. As a con-sequence, a boost in competitiveness can be expected.

As identified in its National Environ-mental Strategy 2020 (NES; Government of Ukraine, 2010) Ukraine is facing a number of environmental challenges. According to the NES, in 2014, 22 cit-ies were characterized by very high and high combined air pollution levels, with nitrogen oxides (NOx), carbon oxide (CO), sulphur dioxide (SO2), and partic-ulate matter being the key air pollutants (World Bank, 2016).

Almost all surface and ground water resources are polluted, with the main sources of pollution being the discharge of contaminated municipal and industri-al waste water, polluted runoff water from built-up areas and farmland, and soil ero-sion in water recharge areas (NES; Gov-ernment of Ukraine, 2010).

Box 2environmental challenges in ukraine

» Air pollution

» Water pollution

» Waste production

» Forest management

» Climate change

Another environmental challenge in Ukraine is waste management. The risk of ecological accidents is considerable due to large accumulations of toxic wastes from the mining sector, the chemical and metallurgical sector, machine building, the energy sector, wood pulp and paper production, and agriculture. In addition, it is estimated that between 220–350 kg of municipal solid waste is generated per capita and year, of which only 5-7% is re-covered, in comparison to about 60% in the EU (World Bank, 2016).

Over 15% of Ukraine’s land area is cov-ered by forests mainly in the northern and western parts of the country (NES 2020). While reforestation is poor, for-est contamination is increasing rapidly, and protection from pests and tree dis-eases is minimal.

By 2012 Ukraine emitted 405 million tonnes of CO2 equivalents – a reduction by 58% since the year 1990 (World Bank, 2017b) This reduction was a result of the closing of coal fired power stations, steel mills and high energy consuming industries as a consequence of econom-ic problems. The key sectors for emis-sions of greenhouse gases in Ukraine, are energy (78%), industrial processes and product use (21%), agriculture (9%), land use, land-use change and forestry, and waste (4%) (Government Agency for Ecological Investments of Ukraine, 2015). Key areas regarding their vulner-ability to climate change impacts are agriculture, forestry, and human health (World Bank, 2016).

Concepts of Resource Efficient and Cleaner Production

The term Cleaner Production (CP) was defined by UN Environment in 1990 as: “The continuous application of an integrated environmental strategy to processes, products and services to in-crease efficiency and reduce risks to hu-mans and the environment”. The “triple crisis” (economic-environmental-social) in recent years made the interdepend-ence between the socio-economic and environmental systems clearer than ever before. As a consequence, internation-al efforts were significantly increased to promote the transition towards more sustainable industrial systems and “Green Industry”. This resulted in the broadening of the definition of cleaner production by including resource effi-ciency (RE) which is a key element of the transitions towards a Green Industry and, more general, a Green Economy. Since the mid-1990s, the United Nations Industrial Development Organization (UNIDO) and UN Environment have col-laborated to foster the global uptake of resource efficient and cleaner produc-tion. Under the joint flagship Resource Efficient and Cleaner Production Pro-gramme, UNIDO and UN Environment have responded to countries’ growing demand to deliver RECP services to in-dustries (UNIDO and UNEP, 2015).

“In practical terms, RECP entails the continuous ap-plication of preventive en-vironmental strategies to processes, products and services in order to increase efficiency and reduce risks to humans and the envi-ronment. RECP addresses the three sustainability di-mensions individually and synergistically: a) height-ened economic perfor-mance through improved productive use of resourc-es, b) environmental pro-tection by conserving re-sources and minimizing industry’s impact on the natural environment, and c) social enhancement by providing jobs and protect-ing the wellbeing of work-ers and local communities.” (www.unido.org)

The 2030 Agenda for Sus-tainable Development ad-opted as goal 9 “Build resil-ient infrastructure, promote inclusive and sustainable in-dustrialization and foster in-novation”. This confirms the provisions of the Lima Dec-laration and the relevance of ISID for the new global development architecture.

“Take appropriate actions […] at the macro, sectoral and micro levels […] by involving all relevant min-istries and departments of government as well as re-search and other non-gov-ernmental organisations.” (OECD, 2008b)

“[Resource efficiency] al-lows the economy to cre-ate more with less, deliver-ing greater value with less input, using resources in a sustainable way and mini-mising their impacts on the environment.” (Roadmap to a Resource-Efficient Eu-rope; European Commis-sion, 2011c)



Box 5recp in ukraine

» Cost savings

» Innovation and creation of new markets

» Competitiveness

» Decoupling

» Decreased pressure on stumbling industries

Fostering innovation and creation of new market opportunitiesA transformation towards a green econ-omy requires re-thinking prevailing pro-cesses and practices as well as product design and life cycles as a whole. Sup-ported by specific policy measures, this will trigger innovation processes which will lead to new products and services opening up new market opportunities. Ukraine’s excellent education system constitutes a fertile ground to trigger, support and accompany research and in-novation initiatives.

Increase competitiveness of ukraine’s industryAs mentioned above, RECP helps to re-duce production costs and to improve the quality of the product or service output. By that means competitiveness increases. Even more so in cases where new firms are created and development of technological capacity can be realised, allowing to ‘leap-frog’ resource intensive production and consumption systems.

Improved performance regarding headline indicators such as resource efficiency, decoupling, waste/cap, emissions/capThe decreased input of natural resources into the economic system can be moni-tored easily with the help of the main headline indicators such as resource ef-ficiency, decoupling, waste/cap, or emis-sions/cap. By that means, it can be eval-uated to what extend Ukraine manages to catch up with other countries that already applied RECP for a longer period of time.

Improved performance of resource-intensive companies and the whole industrial sectorAs the analysis in Chapter 3 will show, a number of sectors with a particularly high resource intensity exist in Ukraine – with regard to energy, emissions or raw materials. Applying the principles of RECP will help these sectors improve their performance with regard to re-source input per unit of output and by that means reduce their costs for pro-duction. Also, negative impacts on the environment will diminish.

Box 6Benefits of resource efficiency according to the International resource panel

» Reduce per capita natural resource use globally by 28 % in 2050 relative to existing trends, when combined with ambitious global action on cli-mate change

» Reduce global GHG emissions by up to 20% in 2050 compared with exist-ing trends

» More than offset the near-term economic costs of ambitious cli-mate action

» Deliver annual economic benefits of more than US$2,000 billion globally in 2050 relative to existing trends

decreased pressure on stumbling industriesIn many cases, industries with declin-ing economic performance, such as the aerospace industry, metallurgy and manufacture of finished metal products, or the chemical and petrochemical in-dustry in the case of Ukraine, are also those with inefficient processes leading to higher production costs or taxes to be paid. Improved production processes in terms of more efficient use of resourc-es will hence decrease the pressure on these industries.

Box 4recp benefits

» Increased Competitiveness

» Early mover advantage

» Green markets and products

» Less pressure on labour costs

» Less pressure on the environment

» Prerequisite for meeting climate change targets cost-effectively

reduced import / supply dependenceWith increased efficiency the overall demand for resources used in produc-tion processes can be reduced. As a large extent of the resources needed in the Ukrainian industry is imported from abroad (see Chapter 3), RE leads to a reduction in dependence on imports, which is of special relevance in the case of critical raw materials.

development of eco-innovative green markets and productsRECP is at the heart of so-called “green” products and markets. In combination with policies supporting eco-design as well as circularity and longevity of prod-ucts, such as the Eco-design Directive of the EU (European Parliament and Coun-cil, 2009) or the Action Plan for the Cir-cular Economy (European Commission, 2015a), not only a transition towards a material resource-efficient economy can be supported, but also new markets, products and jobs can be created.

Less pressure on labour costsA reduction of production costs through decreasing resource inputs relieves the pressure to save costs via an increase in labour efficiency (i.e. through reducing the number of employees). As a conse-quence, employment rates can be in-creased or at least kept stable.

reduction in resource inputs / pollu-tion outputs – less pressure on the environmentResource efficient and cleaner production

leads not only to a reduction on the input side of industrial processes, but also on the output side – meaning less waste, waste water, and emissions. By that means, pressure on the environment can be considerably relieved.

resource efficiency and climate changeIn a recent report by the International Resource Panel of UN Environment it was shown that improved resource effi-ciency is key for meeting climate change targets cost-effectively (UNEP, 2016). Hence, RE is not only a multi-return strategy in this regard, but RE is also a prerequisite for achieving climate tar-gets in a cost-effective way.

Potential values of RECP for Ukraine

Setting a reinforced policy focus on RECP in the current economic, environmental, and political setting in Ukraine will have multiple positive impacts on the coun-try. As will be seen especially from the international comparison in Chapter 3, Ukraine still has a lot of potential for im-proving its RECP performance, which at the same time signifies that short-term positive effects can be expected.

compliance with (international regu-lations) – cost savingsUkraine is a party to the UN Framework Convention on Climate Change and the Paris Agreement, which provides provi-sions and quantitative commitments for energy efficiency and the implementa-tion of measures aimed at reducing an-thropogenic emissions of greenhouse gases. Ukraine prepared its Intended Nationally-Determined Contribution to a New Global Climate Agreement (INDC), committing itself to not exceed 60% of 1990 GHG emissions level in 2030. By applying RECP achieving this commit-ment becomes more likely. But also on the national level, improved environmen-tal performance will decrease damage to the environment and consequently to the national economy and society.

RECP sERviCEs hElP:

Increase productivity

Reduce emissions and the use of natural resources

Reduce emissions and the use of natural resources

2BRiEF ANALySiS dESCRiBiNg ThE ENviRON-mENTAL REguLATORy FRAmEwORk



Political challenges

Environmental protection in a country is strongly dependant on the overall system of public governance. Ukraine has inher-ited a certain environmental governance system from its communist past and faces a number of challenges. In 2014, Ukraine adopted a decentralization reform aiming to empower local governments. In its Re-gional Development Strategy – 2020 three key goals are identified: (1) enhancing re-gional competitiveness (11 indicators in-cluding: reduction of energy consumption by industries and residential sector for 10%, by water supplying companies for 7.6%; reduction of the heat losses by en-terprises of housing and communal ser-vices for 3,33 percentage points; reduc-tion of the water losses by enterprises of housing and communal services for 5,68 percentage points), (2) territorial socioec-onomic integration and spatial develop-ment (13 indicators including: increasing the number of renovated boiler houses using renewables for 258 %; reduction of the length of obsolete heat supplying and water supplying pipelines in 5 times; increasing share of recycled wastes in to-tal amount of wastes for 14.7 percentage points), and (3) effective governance of regional development (3 indicators) (Gov-ernment of Ukraine, 2014).

Institutional capacity and functions of environmental management were affect-ed considerably by these administrative reforms, as regional departments were abolished and their functions transferred to the state administrations. As a conse-quence, environmental information and databases as well as experienced per-sonnel got lost and gaps in implementa-tion of environmental policy and legisla-tion were created (World Bank, 2016).

Moreover, apart from achieving appropri-ate collaboration and distribution of func-tions between the national and regional levels, there is the need to integrate en-vironmental issues at the sectoral policy level, to build the relationship between the state authority and civil society and to enhance transparency and broader public participation (World Bank, 2016).

Environmental policy making in Ukraine

The general background for national pol-icy and actions for environmental protec-tion and their integration into econom-ic reforms in Ukraine was built by the “Main Directions of the National Policy of Ukraine for Environmental Protection, Natural Resource Use and Environmen-tal Safety” (“Main Directions”) adopted in 1998. On this basis a number of state targeted programs were adopted during 1999–2011, such as the ‘State Programme on the Development of Mineral & Raw Ma-terials in Ukraine till 2030’ (2011) or the ‘State Programme “Forests of Ukraine” for 2010–2015’ (2009) (Centre for RECP Ukraine, 2017; World Bank, 2016).

However, the most prominent strategy to address prevailing environmental chal-lenges is the National Environment Strat-egy 2020 (NES; Government of Ukraine, 2010). In the NES key environmental chal-lenges are identified and priorities are assigned to air quality, water and land resources, forests and biodiversity, waste management and biosafety. Seven strate-gic goals encompass 104 strategic tasks. The implementation progress of the NES was evaluated by means of a civil society review in 2015 showing different levels of success with regard to the implementa-tion of the strategic tasks (Table 1).

For the different priority areas targets are identified. Table 2 summarises the tar-gets for each area.

To implement the objectives of the NES, the National Environmental Action Plan 2011–2015 (NEAP) was adopted in 2011. It describes 278 measures for implemen-tation during its five-year period.

In addition, the Ministry of Ecology and Natural Resources of Ukraine prepared and announced a “Draft law on basic principles (strategy) for state environ-mental policy of Ukraine for the period of 2020” (Government of Ukraine, 2017). The draft law focuses on the importance of resource-efficient technologies and

LeVeL oF tHe IMpLeMentatIon

instRumEnts to aPPly RECP

+ -+-

InterSectoraL partnerSHIpBetween environmental policies and policies in other sectors

01

tool

LaBeLLIngIncreasing knowledge about product properties and supply chains

07

tool

StandardIzatIon and reportIngHelps to decrease sector-wide pressures on the environment

target SettIngDefining targets to be reached until a specific year

08

tool

02

tool

econoMIc & FInancIaL MecHanISMSTax incentives, penalties, emission certificates

BeSt practIce exaMpLeSAwarding e.g. a price, incentives (pub-licity) for front runners

09

tool

03

tool

InternatIonaL coLLaBoratIonResulting in institutional exchange, finan-cial support or in sharing knowledge

LIcenSIng SySteMEnsuring that companies emit an envi-ronmentally healthy amount

10

tool

04

tool

reSearcH and InnoVatIonEnhancing innovation and new technologies

enVIronMentaL IMpact aSSeSSMentCrucial for the ex-ante evaluation of possible negative environmental impacts

11

tool

05

tool

educatIon / InForMatIonReporting / Increasing media coverage / Educating population, etc.

enVIronMentaL audItIdentifying environmental compliance or management system implementation gaps

12

tool

06

tool

“the most prominent strat-egy to address prevailing environmental challenges [in Ukraine] is the Nation-al Environment Strategy 2020 (NES; Government of Ukraine, 2010). In the NES key environmental chal-lenges are identified and priorities are assigned to air quality, water and land re-sources, forests and biodi-versity, waste management and biosafety.”



Realising the need for coherence not only among environmental policies but also between environmental policies and policies in other sectors, apart from cre-ating the system of economic incentives for the implementation of resource effi-cient options, the RECP Centre together with its partners and respective insti-tutions initiated the elaboration of the draft of amendments to some existing regulations/laws in Ukraine related to the promotion and support of energy and resource efficient production, waste pre-vention and reduction.

The draft of amendments provides about 20 explicit suggestions how to arrive at an improved integration of policies, such as mandatory usage of sectoral stand-ards and regulations, waste separation, tax incentives, or tax credits (Centre for RECP Ukraine, 2017). Among the sectoral strategies where amendments in terms of integrating environmental with e.g. eco-nomic or societal aspects are necessary (see Box 7) one of the most relevant is the National Target Economic Programme for Industrial Development for the period up to 2020 (Government of Ukraine, 2013), which includes the aim to reduce energy consumption in industrial enterprises by means of the modernization of the energy-consuming technological equip-ment. A cross-check if further integra-tion is needed should also be made for the Sustainable Development Strategy “Ukraine 2020” (Government of Ukraine, 2015), where in various of the defined reform vectors environmental or RECP related programmes are included; for in-stance, the Energy Efficiency Programme in Vector 1 (Development), the Environ-mental Protection Programme in Vector 2 (Security), or the Innovation Develop-ment Programme in Vector 4 (Pride).

Such integration requires close collabora-tion between ministries and organizations and detailed reviews of the legislatives and normative acts. To implement chang-es, the consent of the Ministry of Economic Development and Trade of Ukraine, the Ministry of Finance of Ukraine, the Min-istry of Ecology and Natural Resources of Ukraine, the Ministry of Regional De-velopment, Construction and Housing and Utility Services of Ukraine is needed.

Box 7key sectoral strategies and programs to be integrated with environmental poli-cies (year of adoption in brackets)

» Sustainable Development Strategy – 2020 (2015)

» National Action Plan on Renewable Energy – 2020 (2014)

» National Strategy for Regional Devel-opment – 2020 (2014)

» National Targeted Economic Pro-gramme of the Industrial Develop-ment up to 2020 (2013)

» Energy Strategy – 2030 (2013)

» Agriculture Sector Development Strategy – 2020 (2013)

» National Program of Domestic Pro-duction (2011)

» Transport Strategy – 2020 (2010)

» National Action Plan on Settlements’ Improvement and their Adjacent Ter-ritories for 2010–2015 (2009)

» State Targeted Program on the Devel-opment of the Ukrainian Village up to 2015 (2007)

» National Security Strategy (2007)

» Main Provisions of State Agrarian Policy – 2015 (2005)

» National Program for Reform and De-velopment of Housing and Utility Ser-vices for 2009–2014 (2004)

» Ukraine Economic and Social Devel-opment Strategy by a Way of Europe-an Integration for 2004–2015 (2004)

Source: World Bank, 2016

Available tools and instru-ments to apply RECP

Some of the available tools and instru-ments to apply and realise environmental policy making for RECP are mentioned in the NES (Government of Ukraine, 2010). They refer to different levels of societal activity – the political, economic, and scientific level. Some of these measures

cleaner production implementation in the industrial sector of Ukraine. Empha-sis is put rather on resource efficiency than only on energy efficiency as well as on insufficient investment mecha-nisms for new resource-saving and en-vironmentally friendly technologies in environmentally hazardous industries; and also on the significance for cleaner production implementation in the

extractive and processing industries. The draft law recommends elaborating and implementing economic and finan-cial mechanisms that would promote positive fiscal, loan and investment environment to facilitate fund raising from the private sector as well as find-ing donors for further implementation of cleaner production, resource and energy saving technologies.

Table 1goals in national environment Strategy 2020

Goal No. Goal Implementation success

1 Promotion of public environmental awareness effectiveness 30–60%

2

Improvement of ecological situation and promotion of environmental safety

» Emissions » Water contamination » Waste production / recycling

effectiveness 30–60%

3 Achievement of a safe level of environmental conditions for the population health effectiveness <60%

4 Environmental policy’s integration and improvement of integrated envi-ronmental management system effectiveness 30–60%

5 Cessation of losses of biological and landscape biodiversity, and creation of environmental network effectiveness 30–60%

6

Provision of environmentally balanced nature management

» Technical upgrading of the production processes » Introducing the system of economic and administrative instruments » Increasing energy efficiency and resource efficiency » Capacity increase in using renewables and alternative energy sources

effectiveness <60%

7 Improvement of regional environmental policy effectiveness >60%

Table 2priority areas and related targets

Priority Area Target 2015 Target 2020

Air protection Reduction of air emissions from stationary sources by 10%

Reduction of air emissions from stationary sources by 25%

Reduction of usage of energy sources with low level of carbon dioxide (CO2) emissions in the en-ergy sector by 10%

Reduction of usage of energy sources with low level of carbon dioxide (CO2) emissions in the energy sec-tor by 20%

Water resources Reduction of municipal wastewater pollution by 15%

Reduction of discharge of insufficiently treated wastewater by 20%

Waste management Increase of municipal solid waste storage capacities to 70%

Increase of usage of waste as secondary raw materi-als by a factor of 1.5



Ukraine does employ environmental licensing systems by means of a large number of different permits related to emissions to air, special water uses and emissions to water, waste storage and utilisation. Further, Ukraine’s Environ-mental Protection Law (1992) formulates a mandatory requirement for carrying out environmental impact assessments.

Currently applied environmental-economic instruments to steer environmental perfor-mance in Ukraine include emission charg-es. For instance, per ton hydrocarbon emit-ted to the atmosphere a tax of 4.1US$ has to be paid, while emitting lead costs about 3,000US$ per ton. Discharge of organic matter (BOD5) to water costs 19.20US$, and the disposal of extremely hazardous waste is taxed at 41.87US$ per ton. Fur-thermore, there are taxes for special use of natural resources, sanctions on environ-mental pollution, and excises and customs duties on environmentally harmful prod-ucts (World Bank, 2016).

Of the overall tax revenue in Ukraine en-vironmental taxes account for approx-imately 1.3%. This share is low, espe-cially when compared to other European countries or the EU-28 as a whole where the average is approximately 6.3%. As a consequence, the environmental tax sys-tem would have to be revised, in order to achieve both higher tax revenues and a reduction of overall pollution levels.

The need for better RECP regulations

In the following Table 4 an evaluation regarding the level of implementation of possible measures, as identified be-fore, is provided.

Table 4 illustrates that there is still large potential in various areas of environmental policy making and management to steer Ukraine in a more sustainable direction, most importantly, in the areas of economic and financial mechanisms, environmental audit and research and innovation.

Also, an assessment of the NES’s imple-mentation showed that the foreseen de-velopment and implementation by 2015 of incentives for enterprises to introduce clean technology production, various en-ergy-efficient and environmental meas-ures, corporate social responsibility, and environmental audit and certification to stimulate Private Sector Engagement in Environmental Management was not achieved (World Bank, 2016).

These results lead to the overall conclu-sion that a more comprehensive RECP regulation is needed, as it would be an appropriate response to the require-ments as identified in the NES, while making the Ukrainian industry fit for fu-ture challenges.

Table 4tools and instruments and their indicative level of implementation in ukraine

Tool/instrument Level of implementationIntersectoral partnership +/- Target setting + Best practice examples - Licensing system - Environmental impact assessment (EIA) +/- Environmental audit - Labelling - Standardization and reporting +/-

Economic and financial mechanisms +/- International collaboration + Research and innovation (R&I) - Education / information +/-

relate to more than one level. While, for instance, the state can facilitate envi-ronmental auditing, the company level is the one where such auditing has to be applied and where the direct benefits oc-cur. In the following a selection of instru-ments is listed (Table 3).

A short analysis on the implementation of the above mentioned measures re-veals an ambiguous picture (World Bank, 2016): With regard to environmental monitoring, the foundations were estab-lished in the CMU Decree on “State En-vironmental Monitoring System”, which

was adopted in 1998 and last updated in 2013. By means of intergovernmental commissions, round tables, etc. collab-oration between different ministries and other actors are intended to be improved. Also, bilateral agreements with other ministries and agencies (for instance, with the State Service of Emergency Sit-uations, Ministry of Regional Develop-ment, Construction, Housing and Com-munal Services, State Agency for Water Resources) were set up and regulations of information exchange between the stakeholders developed.

Table 3tools and instruments to apply recp

Tool/instrument Description

Intersectoral partnership Realising coherence not only among environmental policies but also between environmental policies and policies in other sectors.

Target setting Defining targets to be reached until a specific year ensures planning reliability for enterprises as well as monitoring the distance to target for policy makers.

Best practice examples By awarding e.g. a price to best practice examples, incentives (publicity) for front runners are provided, and others start to follow.

Licensing system Such as system ensures that companies emit only an environmentally healthy amount.

Environmental impact assessment (EIA)

EIA is crucial for the ex-ante evaluation of possible negative environmental impacts and the decision if a planned project is environmentally viable.

Environmental audit Analogous to financial audits, environmental compliance or management system implementa-tion gaps should be identified, to develop corrective actions

Labelling Labelling systems’ benefits are manifold: producers increase their knowledge about product properties and supply chains; consumers have the possibility of comparison.

Standardization and reporting By means of standardisation regarding resource input, emissions (discharges) into the envi-ronment, waste production, etc. pressures on the environment can be decreased sector-wide.

Economic and financial mechanisms

Tax incentives: for enterprises using secondary materials, resource efficient technologies and/or equipment, low-waste technologies, waste recycling technologies, etc.

Penalties: in combination with measures identified before, such as auditing, standardisation, etc.

Emission certificates: to limit overall emissions to a certain amount, in compliance with (inter)national regulations

International collaborationOn the policy level, collaboration can result in institutional exchange as well as financial sup-port. On the company level, by means of business partnerships knowledge and technological advancement can be shared.

Research and innovation (R&I) Fostering R&I is essential to enhance innovation and new technologies – e.g. by means of business-science partnerships.

Education / information

Reporting to relevant authorities and customers to improve decision making;

Increase media coverage of environmental performance of specific products or sectors to in-crease awareness;

Educate population on benefits of recycling;

Improve public access to information to ensure transparency.

Source: Lytvynchuk, 2017; unIdo and unep, 2015; World Bank, 2016

3ThE STATuS quO OF NATuRAL RESOuRCE uSE ANd dECOuPLiNg iN ukRAiNE



In this chapter the results of an analysis of the use of material resources in Ukraine at national and economic sector level are shown. The analysis is based on the new UN Environment dataset on material flow analysis (UN Environment, 2017a) which covers the years 1970-2014 – and is ex-tended by estimations to the current year of 2017. For the case of Ukraine, the time series will cover the years 1992-2017. Ma-terial use is aggregated into four main groups: (1) fossil fuels, (2) metal ores, (3) industrial and construction minerals, and (4) biomass. Based on this data set, an analysis of the direct material flows related to Ukraine’s economic activities is performed, using the indicators of ‘Do-mestic material extraction’ and ‘Domes-tic Material Consumption’.

In addition, an environmental-economic model, i.e. the multi-regional input-out-put (MRIO) model ‘Eora’ (Lenzen et al., 2013) is applied in combination with the above mentioned UN Environment data set on material flows to calculate mate-rials embodied in Ukraine’s foreign trade and final demand. Thereby, the so-called ‘material footprint’ indicator can be illus-

trated. The Eora model covers 26 aggre-gated economic sectors and the years 1992-2013 (see Annex).

Domestic material extraction

Domestic extraction of raw materials in Ukraine starts with an accentuated de-cline at the beginning of the time period in the early 1990s, from more than 700 million tonnes at the time of its independ-ence in 1992 to almost half of this level in the year 1999 (Figure 1). Extraction of min-erals declined by 75%, and fossil fuel ex-traction by almost 50%. This development is strongly related to the development of the GDP and reflects the economic down-turn in the first years of independency.

With increasing income and wealth, also domestic material extraction accelerated, and continued to rise until 2013 – apart from the noticeable downturn around 2009/2010 due to the financial crisis. Only in recent years the growth in domes-tic extraction slightly slowed down, but continuing current trends would imply that in a few years from now, 1992 levels

Figure 1domestic material extraction in ukraine, 1992-2017

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trade relations slightly shifted the shares of the specific material groups in total DMC compared to the composition of domestic extraction. In 2017, the shares of biomass and fossil fuels increased to about 60% and almost 15% respectively, while the share of metal ores decreased to below 5%.

Material Footprint (MF)

The DMC allows for quantifying the amount of materials actually extracted, processed and consumed within a coun-try. However, an apparent improvement of material productivity measured as GDP divided by DMC can be achieved by shifting extraction activities abroad and importing processed materials, while in reality levels of final demand for products and services of the respective country can remain unchanged or even increase. In comparison to DMC, the indicator ‘Raw Material Consumption (RMC)’ is more comprehensive, as the direct imports and exports are converted into so-called raw material equivalents (RME). Follow-ing the concept of RME, an imported car is not only accounted for by its actual weight but also by the weight of all mate-rials needed along its production chain. Hence, the “indirect” material flows of the imports and exports are considered (Lutter, 2016). The RMC indicator has also been termed “material footprint” (MF) (Giljum et al., 2015; Wiedmann et al., 2015). The RMC is calculated as

rMc = de + rMeimp - rMeexp

In contrast to the DMC, the MF avoids distortions brought about by outsourc-ing, as both domestic material extraction and imports are measured on a compa-rable basis. This is why it is currently dis-cussed as a potential headline indicator on the European level for setting targets for resource productivity in the context of the EU Roadmap (European Commis-sion, 2014) or providing demand-based indicators of material flows in the con-text of the OECD Green Growth Indicators (OECD, 2014).

Box 8Material Footprint

The Material Footprint is a consump-tion-based indicator for raw material requirements of an economy. It takes into account all the materials needed along the supply chain of a specific product. It is calculated as the sum of domestic extraction and imports in raw material equivalents (i.e. upstream re-quirements) minus exports in raw ma-terial equivalents.

Material Footprint (MF) by major ma-terial categoriesOne way of looking at the MF of a country is to analyse the materials embedded in the goods and services of final demand in a country with regard to the main mate-rial categories (Figure 3). As Figure 3 illus-trates, Ukraine’s MF is characterised by a large share of biomass in its overall MF. It accounted for almost two thirds (65%) in 2013, followed by fossil fuels with al-most 20%, and minerals with 13%. This large share of biomass is characteristic for a country where still a large share of household consumption is dedicated to food stuff and biomass-based products. In countries with higher income levels, biomass plays a relatively smaller role. For instance, in Germany, the MF is com-posed of 44% minerals, 33% fossil fuels; and only 20% biomass, reflecting a high-er level of consumer goods which require large infrastructure and energy for their production (UBA, 2016).

Material Footprint (MF) by sector groupsApart from the disaggregation by ma-terial group also the analysis regarding the MF by sector group provides a rele-vant insight in a country’s MF. This kind of analysis (Figure 4) is closely related to the one before, though. Ukraine’s MF is dominated by two sectors – ‘Agricul-ture’ and ‘Products based on biomass’. These two sectors are mainly responsible for the large consumption of biomass as seen in Figure 3.

will be reached again. Biomass has the largest share in domestic extraction in Ukraine with about 55% in 2017, of which 40% was crop harvest; followed by non-metallic minerals (25%) and fossil fu-els and metal ores with about 10% each.

Domestic Material Consump-tion (DMC)

While domestic extraction is a proxy for a country’s wealth in natural resources as well as the pressure exerted on the do-mestic environment due to agricultural and mining activities, the quantification of an economy’s resource requirements has to include the associated trade flows. A standard indicator for such an analy-sis is Domestic Material Consumption (DMC), which adds the weight of direct imports to the weight of domestic materi-al extraction and subtracts the weight of exports. It is calculated as

dMc = de + IMp - exp

Hence, DMC is an indicator of local

pressures due to material use within a specific economic system as well as of the dependence on direct imports, with the trade flows consisting of raw mate-rials, semi-manufactured products, or final products.

The DMC currently is the most prominent indicator for quantifying resource use. GDP/DMC is the headline indicator of the EU’s Roadmap to a Resource Efficient Eu-rope (European Commission, 2011c) and is also one of the indicators used for the monitoring of the Sustainable Develop-ment Goals (SDGs; United Nations, 2015).

Ukraine’s DMC shows a similar trend compared to its material extraction pat-tern (Figure 2). DMC strongly declined until the year 1999, in particular due to a decrease in mineral DMC and fossil fuel DMC, and regains strength since then. However, the overall amounts are lower compared to those for domestic extrac-tion. This means that over the whole time period Ukraine served as a net-exporter of natural resources, i.e. the weight of the exported resources and products exceed-ed those of the imports. Also, Ukraine’s

Figure 2dMc in ukraine, 1992-2017

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Material Footprint (MF) by category of final demandInvestigating the MF of Ukraine by cat-egory of final demand also delivers a physical depiction of the Ukrainian so-cio-economic structure (Figure 5). The first characteristic is the dominance of household consumption with regard to material consumption. More than 80% of the materials finally consumed in Ukraine ended up in household consumption in the year 2013. This category was followed by gross fixed capital formation (9%) and government consumption (5%).

This picture reflects very well the eco-nomic situation in Ukraine, where house-hold consumption expenditure (in mone-tary terms) accounts for even 87% of final demand. It can be expected that with increasing investment in machinery for industry as well as with investments by the government in infrastructure, health and security, the share of household consumption will gradually shrink in the future. For instance, in Germany, private household consumption is responsi-ble for only about 50% of the country’s MF, and gross capital formation for 26% (UBA, 2016).

Figure 5Material Footprint (MF) by categories of final demand in ukraine, 1992 and 2013

changes in inventoriesgovernment

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Source: Wu, 2017

Material Footprint (MF) by origin of raw materialAs stated earlier, the MF includes all materials used along the internation-al supply chains of goods and ser-vices finally consumed in a country, independently of how the length and complexity of the supply chains. Ana-lysing Ukraine’s MF with regard to the countries of origin of the main materi-al groups, the close integration in the Asian region can be observed. For all the different materials except for min-erals, Ukraine sources most of the re-quired materials from its own territory – 92% of biomass stem from Ukraine, 39% of fossil fuels, 15% of metals, and 10% of the minerals.

However, especially the shares below 50% indicate that there are a number of countries delivering significant shares to the overall Ukraine MF (Figure 6). For fossil fuels among the main suppliers is Turkmenistan, for minerals it is China, Turkmenistan, and Turkey, and with re-gard to metals, among others, Kazakh-stan, China, and Poland play the most dominant roles. These figures show that Ukraine is to a large extend de-pendent on its close neighbours, which is still a heritage from former times.

The next two sectors are ‘Construction and mining’ and ‘Products based on metals and minerals’. Apart from metals and minerals, these sectors also con-sume large quantities of fossil fuels. But

it becomes apparent that also service sectors, retail or the transport sector con-sume materials. This can be explained by the material demand of the products they use to provide their services.

Figure 3Material Footprint (MF) by major material categories in ukraine, 1992-2013

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Figure 4Material Footprint (MF) by major sector groups in ukraine, 1992-2013

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Source: Wu, 2017



EU’s Roadmap to a Resource Efficient Eu-rope (European Commission, 2011c) and is also one of the indicators used for the monitoring of the Sustainable Develop-ment Goals No. 8 (Decent Work and Eco-nomic Growth; target 8.4) and No. 12 (Re-sponsible Consumption and Production; target 12.2) (SDGs; United Nations, 2015), while for both strategies the use of the MF is currently being discussed. Applying the indicator GDP/RMC broadens the picture and illustrates how much economic val-ue is created per material input along all supply chains and whether decoupling has been achieved. Obviously, the two in-dicators show different results, as clearly visible for the case of Ukraine (Figure 7).

For Ukraine, the left side of Figure 7 shows a decrease in DMC since the year of inde-pendency until the year 1999, followed by a recovery until the year 2013 – with some interruptions, e.g. due to the world economic crisis. GDP took a similar path, but recovered faster, leading to a so-called “relative decoupling”. This means that GDP grew faster than direct materi-al use (see Box 9). However, from 2007 onwards, the overall tendency showed a “re-coupling”, with material use growing faster than GDP. Regarding the GDP curve, it is straight forward to recognise the eco-nomic crisis in 2009 and the consecutive economic stabilisation afterwards – al-though GDP remained below pre-2009 levels. DMC shows a considerable oscil-lation in recent years. One also recognis-

es the impact of the economic crisis and a general upwards trend afterwards. The worsening productivity (GDP/DMC) can be explained by a slowdown in growth of physical exports in recent years.

In contrast, when looking at the MF in comparison to GDP (right side of Figure 7), Ukraine’s MF did not decrease as distinc-tively as the DMC (by -40% vs. -58%), and grew up to 160% of the 1992 levels in 2013. This development resulted in a decrease in material productivity (i.e. re-coupling) from the year 2003 onwards. This accentuated difference when com-paring DMC and MF with GDP trends il-lustrates very well the difference between the two indicators. Although DMC growth has been stalling in recent years, due to the increasingly complex supply chains of products and related augmenting indirect material requirements, the MF continues showing a very steep upward trend.

Both perspectives illustrate clearly the strong need for policy measures in Ukraine in order not only to return to an increase of material productivity, but also achieve a decrease in absolute material consumption levels. Aiming at decreasing absolute levels of material consumption can be seen as a multi-return strategy, as it results in a reduction of production costs, of dependency on foreign material supply as well as of negative related envi-ronmental and social impacts. Achieving this with simultaneous economic growth

Figure 7comparison of gdp/dMc (left) vs. gdp/MF (right) in ukraine, 1992-2013

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Figure 6Material Footprint (MF) of ukraine by 5 major countries of origin per main material category, 1992-2013

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Resource productivity/effi-ciency and decoupling trends

comparing gdp with dMc and MFAggregated material flow-based indicators are particularly useful for monitoring of broad, overarching policy goals and tar-gets, such as those defined in the context of the SDGs. Most notably, the aggregat-ed indicators allow measuring the overall physical size of an economy and identify-ing its main constituents in terms of mate-rial groups. Further, the aggregated indi-

cators can be set in relation to economic indicators, allowing to assess the overall material productivity and decoupling per-formance of an economy.

Using the productivity indicator GDP/DMC policy questions such as (1) how much economic value is being gener-ated by a unit of material consumed by the domestic economy or (2) whether an economy achieved a decoupling between economic growth and direct resource use, can be answered. As mentioned above, GDP/DMC is the headline indicator of the



International comparison

dMc/cap vs. MF/capFigure 9 shows an international compar-ison of Ukraine’s per-capita DMC and MF with other countries. It is structured into one part with Eastern European and Cen-tral Asian countries (left), emerging econ-omies (middle), and two European Union countries as well as the EU-28 average. Three patterns can be observed. First, DMC and MF levels rise in parallel with in-dustrialisation and income levels. Hence, the European averages are higher than for most emerging economies. The differenc-es between per-capita DMC and MF change depending on resource endowments and economic structure of the respective countries. European countries with little endowments and an established service economy show considerably higher MF than DMC. Resource-rich countries like South Africa or Kazakhstan show higher DMC than MF. Lastly, Ukraine has similar per-capita DMC and MF levels and shows higher value compared to other Eastern European and Central Asian countries.

Summarising the status quo

The analyses in Chapter 3 illustrated a few core aspects with regard to the Ukrainian

economy and its material requirements. Economic growth in Ukraine is closely linked to material inputs. While there is an established manufacturing and heavy metal sector, the largest share of mate-rial requirement is related to agriculture and biomass-processing sectors. This clearly demonstrates the still prevailing high relevance of agriculture in Ukraine.

Importantly, while the DMC has been sta-bilising in recent years, a more compre-hensive view on material requirements as realised by the MF shows that the Ukrainian industry and final demand re-quires growing amounts of raw materials and increasingly depends on raw materi-als from abroad, especially in the case of metals. Additionally, it can be expected that with ongoing industrial develop-ment material requirements will augment even faster than today.

In order to achieve a more sustainable industrial and consequently social de-velopment, (absolute) decoupling has to be achieved, requiring pro-active policy design and planning. RECP fits perfectly to this endeavour, as it aims at further de-veloping industrial activity in ways that im-prove competitiveness and income, while simultaneously reducing material input and environmental impacts (see Chapter 5).

Figure 9International comparison of dMc/cap and MF/cap, 2013. Source: un environment, 2017a; Wu, 2017

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is called “absolute decoupling” and is considered the overall goal of any re-source efficiency strategy (Box 9)

Box 9decoupling

Decoupling means using less resourc-es per unit of economic output and reducing the environmental impact of any resources that are used or econom-ic activities that are undertaken (UNEP, 2011). While ‘relative decoupling’ is achieved, when economic growth is higher than growth of resource use, ‘absolute decoupling’ signifies achiev-ing economic growth, while at the same time reducing resource use.

Sector value added (Va) vs. sector MFWhen managing resource productivity, an important level of analysis is the sectoral level (Figure 8). This perspective allows first reflections where so-called “hot-spots” may be – areas where immediate action is required. Figure 8 depicts that the most material-productive sector is the sector ‘Financial services’, with about 3 US$ of created value added per kg ma-terial consumed. Hence this sector can be described as very efficient in creating

value added per unit of raw material re-quired. At the other end are those sectors consuming most materials – ‘Agriculture and forestry’ and ‘Products based on bi-omass’ (compare Figure 4). While it can be argued that the primary sectors have relatively low potentials to increase their productivity, sectors like ‘Construction’, ‘Products based on metals and minerals’ or ‘Products based on fossil fuels’ would have to be analysed more in detail, in order to reveal improvement potentials. However, such an analysis requires sub-sectoral and company-based data and is not within the scope of this study.

It is a general pattern that service sectors show a better resource productivity than other sectors, as they depend mainly in-directly on resource inputs. However, it would be too short-sighted to purely fo-cus on establishing a service economy because with increased service-focus dependency on external production in-creases, and many services (like finan-cial services) only exist due to dealing with products of other sectors without being allocated a share of these sectors’ resource requirements Hence, as stat-ed at the beginning of this sub-chapter, such an analysis can be seen as a first pointer towards hot spots of action, but has to be used with care.

Figure 8Sector productivity (Va/MF – uS$/kg) in ukraine, 2013

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4BRiEF ANALySiS ON iNTERNATiONAL POLiCy iNiTiATivES iN ThE AREA OF RECP



In this chapter, a concise summary of in-ternational policy initiatives dealing with RECP is provided, focusing on the EU, the G7/G20, the OECD and the UN (SDGs).

EU policies

a resource efficient europeIn 2010 the European Commission pub-lished the “Europe 2020 Strategy - a strategy for smart, sustainable and in-clusive growth” (European Commission, 2010). Among seven flagship initiatives, one addresses the topic of resource ef-ficiency - entitled “A resource-efficient Europe” (European Commission, 2011b). While the flagship initiative provides the overall, long-term framework, more specific actions, benchmarks and tar-gets are identified in the “Roadmap to a Resource Efficient Europe” (European Commission, 2011c). The Roadmap iden-tifies three key sectors where efforts will result in the largest improvements of re-source efficiency – food, construction, and mobility.

circular economy action planThe EU’s Action Plan for the Circular Economy was adopted by the European Commission in 2015 (European Commis-sion, 2015b). It aims at increasing the longevity of products to maintain natural resources used for production and con-sumption as long as possible within the economy. By that means, the demand for primary material inputs should be reduced considerably. A focus is set on the product design to enhance reparabil-ity. On the output side the objective is to minimise waste generation, with one of the foci set on food waste. The expect-ed benefits from “circulating” materials within an economy are expected not only environmental but especially econom-ic, stimulating growth and the creation of new jobs. This should be achieved by strengthening competitiveness and fos-tering innovation. Clear targets with re-gard to waste reduction are set, including recycling rates and landfill limits.

european Sustainable consumption and production policyThe Sustainable Consumption and Pro-duction and Sustainable Industrial Policy

Action Plan (European Commission, 2008) aims at maximising the potential of businesses to transform environmen-tal challenges into economic opportu-nities and provide a better deal for con-sumers. It shall contribute to improving the environmental performance of prod-ucts and increase the demand for more sustainable goods and production tech-nologies. The Action Plan is an integral part of the European Union´s renewed Sustainable Development Strategy (Euro-pean Council, 2006) and closely related to the EU’s Eco-Design Directive (Europe-an Parliament, 2009).

Box 10circular economy

“Looking beyond the current ‘take, make and dispose’ extractive indus-trial model, the circular economy is restorative and regenerative by design. Relying on system-wide innovation, it aims to redefine products and services to design waste out, while minimising negative impacts. Underpinned by a transition to renewable energy sourc-es, the circular model builds economic, natural and social capital” (Allen McAr-thur Foundation, 2017).

eco-InnovationThe Eco-Innovation Initiative was launched in 2008 as part of the EU’s Entrepreneurship and Innovation Pro-gramme (EIP). The EIP was set up to support innovation among SMEs and to improve their competitiveness. The in-itiative is a tool for the implementation of the EU’s Eco-innovation Action Plan (EcoAP; European Commission, 2011a). It bridges the gap between research and the market and fosters ideas for environ-mentally innovative products, services and processes. In doing so the initiative not only should help the EU meet its en-vironmental objectives but should also boost economic growth.

One central pillar of the Commission’s eco-innovation activities is the ‘Eco-In-novation Observatory (EIO)’ which is a platform for the structured collection and analysis of information and data related to

Eu PoliCiEs • Eco-Innovation (2008)• European Sustainable Consumption and Production

Policy (2008)• A resource efficient Europe (2011)• Circular Economy Action Plan (2015)

oECd • Recommendations on Resource Efficiency (2004, 2008)• OECD-UN- Environment conference on resource effi-

ciency (2008)• Policy guidance for G-7 Leaders

g7 • G7-Alliance on Resource Efficiency (2015)• Synthesis report ‘Resource efficiency: Potential

and economic implications’

g20 • G20 Resource Efficiency Dialogue to strengthen na-

tional resource efficiency policies (2017)

China • Law on the Promotion of Cleaner Production (2002)• Circular economy promotion law (2008)

sdgs • RECP is related to six out of 17 Sustainable Develop-

ment Goals



lar economy promotion law” (Govern-ment of China, 2008), the purpose of which is to promote the development of the circular economy, improve the resource utilisation efficiency, protect the environment and realise sustaina-ble development. Also in the previous Five-Year Plan (2011-2015) one of the objectives was to increase resource productivity by 15% (Government of China, 2011).

OECD

The OECD recognises resource efficien-cy as one of the top priorities in today’s world and has undertaken various ini-tiatives to foster the implementation of related measures. As mentioned above, recommendations to inform govern-ments and other stakeholders on how to improve resource efficiency were pub-lished (OECD, 2004, 2008b). Also, in 2008 the OECD-UN- Environment confer-ence on resource efficiency was organ-ised, focusing on specific flows of mate-rials and key sectors (OECD, 2008c). The conference addressed economic effi-ciency and environmental effectiveness of resource use, corporate environmen-tal responsibility as well as the related development aspects. The need for sys-temic thinking and approaches was em-phasised as being of utmost importance to help reach environmental, economic and social goals. Further, in 2016, the OECD published a policy guidance on the topic of resource efficiency, provid-ing input for the G7 Leaders. The report aims at improving resource efficiency by considering the 3R principle of resource, reuse and recycle (OECD, 2016).

Box 11recp in the un Sdgs

Target 8.4: Improve progressively, through 2030, global resource effi-ciency in consumption and production and endeavour to decouple economic growth from environmental degrada-tion, in accordance with the 10-year framework of programmes on sustaina-ble consumption and production, with developed countries taking the lead

Target 12.2: By 2030, achieve the sus-tainable management and efficient use of natural resources

The following elaborates on measures and instruments which foster RECP and green industries in Ukraine.

SDGs

RECP is also a highly relevant matter with-in the Sustainable Development Goals (SDGs). RECP is related to six out of 17 Sus-tainable Development Goals, which under-lines the relevance of the concept regarding environmental and social issues. Specific mention is made in two SDGs – Goal 8 “Sus-tainable economic growth, employment and decent work for all”, with the RE-spe-cific Target 8.4, and Goal 12 (Box 11 refers to both), “Sustainable consumption and production patterns” with the RE-specific target 12.2 (United Nations, 2015). Other relevant goals are Goal 6 “Water and sanita-tion”, Goal 7 “Sustainable and modern en-ergy”, Goal 9 “Industry, Innovation and In-frastructure”, and Goal 13, “Climate change and its impacts” (United Nations, 2016).

eco-innovation. While the eco-innovation scoreboard allows for comparative anal-yses of the eco-innovation performance across all EU Member States, the annual reports present the results of in-depth analyses focused on specific topics. For instance, the 2016 report discusses the role of policy for eco-innovation in the cir-cular economy transition (EIO, 2016).

G7

The G7 adopted its first decisions on re-source efficiency under German presiden-cy in 2015. These decisions emphasised the importance of resource efficiency for sustainable development as well as the competitiveness of industries, economic growth and employment and called on G7 countries to take ambitious steps to promote resource efficiency at national level. Next to the improvement of resource efficiency, the promotion of sustainable materials management and material-cycle societies were targeted. Also, the G7-Al-liance on Resource Efficiency was estab-lished as a new forum for cooperation and concrete common activities, such as a workshop held in 2016 to share best prac-tices and identify further opportunities to use life cycle thinking to achieve resource efficiency across supply chains. In order to create a network, the Alliance collaborates with businesses, SMEs and other relevant stakeholders (G7, 2015). The G7 also gave a mandate to UN Environment’s Interna-tional Resource Panel (IRP) to elaborate a synthesis report called ‘Resource efficien-cy: Potential and economic implications’. The report discusses the potential of de-coupling resource use from both material and energy use, and the related impacts

from economic growth. It also includes scenarios illustrating the positive effect of resource efficiency regarding achiev-ing the SDGs, climate change targets, and economic growth (UN Environment, 2017).

G20

In 2017, at the G20 summit under the German G20 presidency, a workshop on resource efficiency was organised. The overarching goal of the resulting G20 Resource Efficiency Dialogue is to strengthen countries’ national resource efficiency policies. Germany, support-ing strongly for a dialogue on the sus-tainable use of natural resources, also presented a resource efficiency pro-gramme with guiding ideas. Three main topics were elaborated: a closer coop-eration and contribution with regard to the SDGs related to natural resources, an improvement of the scientific basis of resource efficiency policies, and the exchange of policy options and good practice examples regarding resource efficiency (G20, 2017).

China

In 2002, China promulgated the law on the Promotion of Cleaner Produc-tion (Government of China, 2002). It aims at increasing the utilization ratio of resources, reducing and preventing pollutant-generating, protecting and improving the environment, protecting human health, and promoting the sus-tainable development of the economy and society. Also China has struck the RECP path by implementing the “circu-

“In this chapter, a concise summary of international policy initiatives dealing with RECP is provided, fo-cusing on the EU, the G7/G20, the OECD and the UN (SDGs).”

5COuNTRy ExAmPLES/BEST PRACTiCES



Recognising the various benefits as de-scribed in Chapter 1, concrete RECP meas-ures have been taken in a large number of countries. In the following three coun-try/region examples will be presented to provide an insight in RECP strategies and measures around the globe. The exam-ples cover Vietnam/SE-Asia, Germany/EU and Guatemala/Latin America.

Vietnam

The Asian and Pacific region accounts for more than half of the world’s population, encompassing six of the ten most pop-ulous states in the world. In economic terms, the region has achieved unprec-edented growth in the past decades. However, rapid growth and demographic pressures have exerted significant stress on environment and natural resources, transforming South-East Asia into a “hot spot” for activities on RECP. With regard to per-capita resource consumption, Vi-etnam shows patterns of resource use, which are typical for South-East Asia (Figure 10). Starting from very low lev-els of per-capita DMC in the 1970’s and 1980ies, the economic boost of the 1990ies and the new Millennium was accompanied by an increase in per-cap-ita consumption up to almost 13 tonnes.

The material category with by-far the highest growth rates is the category of “non-metallic minerals”, i.e. minerals used in particular for construction pur-poses for building up infrastructure in the housing, energy and transport sec-tors. The period 1991-2000 showed an annual growth rate of more than 10% in the housing sector, and also the housing fever in 2000/2001 and 2007/2008 had a significant impact on the construction industry growth and development in the decade 2001-2010. In the period of 2011-2013, interest rates rose to 20% per year due to tight monetary policy, which ham-pered construction investment (Vinh Nguyen, 2015). This development is re-flected in the physical data, where the year 2012 saw an abrupt down-turn to almost 9 tonnes, which can be explained by the fact that new investments and construction projects were postponed, as well as private renovation works at home were stopped due to the very high interest rates.

In 1998, the Vietnam Cleaner Production Centre (VNCPC) was established, today located at the Institute for Environmental Science and Technology (INEST) at Hanoi University of Science and Technology. Its mission is to “disseminate the cleaner production concept and promote its

Figure 10development of per-capita domestic Material consumption in Vietnam, 1970-2016

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Biomass Fossil fuels non-metallic minerals Metal ores


• National Action Plan on Cleaner Production (in industry for period 2001 -2005)

• Revised Environmen-tal Protection Law and National Strategy on Environmental Protec-tion towards 2010 and orientation to 2020 (2005)

• CP Strategy in indus-try until 2020 (2009)

• National green growth Strategy (2012)

vietnam Cleaner Pro-duction Centre estab-lished in 1998

• Environmental man-agement Framework Policy (2003)

• Policy on Conserva-tion, Protection and improvement of the Environment and Nat-ural Resources (2007)

• National Policy of Cleaner Production (2010)

guatemalan Cleaner Production Centre established in 1999

• german Resource Efficiency Programme (2012 and 2016)

• National platform for resource efficiency (NaRess)

• waste management Act (2012)

Resource Efficiency network established in 2007

viEtnam

guatEmala

gERmany

RECP-RElatEd stRatEgiEs and mEasuREs



Environmental management in Guatema-la started in 1986 with the foundation of the National Commission on the Environ-ment, followed by the establishment of the Ministry for Environment and Natural Resources in 2000. Cleaner production is incorporated in various political strategies – like the Environmental Management Framework Policy from 2003 (Government of Guatemala, 2003), or the Policy on Con-servation, Protection and Improvement of the Environment and Natural Resources from 2007 (Government of Guatemala, 2007). The next step in the advancement towards industrial development and en-vironmental protection was the “National Policy of Cleaner Production” (Government of Guatemala, 2010), which is defined as a technical tool for competitiveness and preventive environmental management. The objective of this law is to contribute to the improvement of environmental man-agement by introducing ways of produc-tion and consumption building on cleaner production. It is seen as a tool to support, align and coordinate the actions of the public and private sector with regard to actions related to the environment. The policy identifies the relevant actors and related strategies to implement RECP, and sketches how to ensure its own sus-tainability (Box 13). It is the most relevant RECP-related policy in Guatemala.

Embedded in this political framework is the Fundación Centro Guatemalteco de Producción Más Limpia Guatemala - the Guatemalan Cleaner Production Centre – which was established 1999 as a non-profit technical institution. Supported by UNIDO, UN Environment, SECO and national institutions such as the Guatemalan Chamber of Industry Centre, it has 16 years of experience in implementing RECP, giving technical as-sistance to more than 375 enterprises from different industrial sectors.

Box 13principles of guatemala’s national policy of cleaner production

» Preventing possible negative impacts

» Material efficiency

» Gradual realisation of actions

» Shared responsibility, differentiated among the involved actors

» Improve competitiveness

» Integration with environmental policies

» Participation of all relevant sector

Figure 11development of per-capita domestic Material consumption in guatemala, 1970-2016

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application in industrial activities in or-der to improve the competitive position of the Vietnamese industry in the context of global economic integration”.

Since its establishment, the VNCPC has made valuable contributions to policy making related to RECP as well as to the dissemination of relevant information. As such, it has been involved in the de-sign of the policy strategies related to RECP in the last almost 20 years (Box 12).

Box 12policy strategies in Vietnam related to recp

» National Action Plan on Cleaner Production (in industry for period 2001 -2005)

» Revised Environmental Protection Law and National Strategy on Envi-ronmental Protection towards 2010 and orientation to 2020 (2005)

» CP Strategy in Industry until 2020 (2009)

» National Green Growth Strategy (2012)

The “Cleaner Production Strategy in In-dustry until 2020” (Government of Viet-nam, 2009) encompasses three main “viewpoints”. One viewpoint is to raise awareness of the benefits of RECP as well as to encourage and provide technical support. For two periods (2009-2015 and 2016-2020) specific targets regarding awareness and application of and advice on cleaner production are identified. For instance, for the period 2016-2020 it is envisaged that 90% of all industries are aware of the benefits from cleaner produc-tion application, 50% of industries apply cleaner production, and 90% of the pro-vincial industry departments are capable of giving CP advice to industries. The more recent National Green Growth Strategy (Government of Vietnam, 2012) sets one of its focuses on “the efficient utilization of natural resources and energy by sectors aiming at achieving higher added values” as well as on conducting researches and enhancing the application of appropriate advanced technologies.

In line with these political develop-ments, from 2012 onwards a series of projects related to RECP started, funded by different international donors such as UNIDO, UN Environment, World Bank, and the EU (Switch Asia). The most re-cent project ”Implementation of Eco-in-dustrial Park Initiative for Sustainable Industrial Zones in Vietnam” funded by GEF and SECO and implemented by UNIDO, started in 2015 and has a strong component on in-plant assessment on Resource Efficiency and Cleaner Produc-tion” and capacity building.

Guatemala

Latin America and the Caribbean is a region with a wealth of resource endow-ments, especially in the area of metal ores and biomass, but also with respect to fossil fuels and non-metallic miner-als. Recent decades showed steady economic growth as a result of in-creasing trade and investments. While this led to growing income, increasing regional - but more also internation-al - demand for the region’s resources resulted in considerable environmental and social impacts.

In the region, UNIDO acts as a catalyst for promoting industrial development, aim-ing at raising industrial capacity. Com-petitive industrial production shall be fostered, international industrial partner-ships developed, and socially equitable and environmentally friendly industrial production promoted.

In Guatemala, per-capita resource con-sumption has been increasing through-out the last 46 years (Figure 11). The peak was reached in 2007/2008 with about 5.5t/cap of DMC, and after the economic crisis of 2008/2009, in 2016 a level of 5t/cap was reached again. Guatemala’s economy is built mainly upon biomass with about 50% of the biomass harvest being sugar crops, almost 25% wood, and 10% fruits; followed by non-metallic minerals. The comparatively low share of non-renewable materials in total ma-terial consumption is a characteristics of an economy in development, not yet fully industrialised.



Box 14guiding principles of german resource efficiency programme (progress) II

» Principle 1: Combining ecological necessities with economic opportu-nities, innovation focus and social responsibility

» Principle 2: Viewing global respon-sibility as a key focus of our national resource policy

» Principle 3: Gradually making eco-nomic practices and production pat-terns in Germany less dependent on primary resources, developing and expanding circular economy

» Principle 4: Securing sustainable resource utilization for the long term by guiding society towards qualita-tive growth

The relatively recent Action Plan for the Circular Economy by the European Com-mission (2015b) takes the aim to reduce absolute resource use one step further by proposing specific actions how to in-crease longevity of products (see Chap-ter 4). It builds to a certain extend on the EU Waste Framework Directive of the year 2008 (European Parliament, 2008) which was translated into German law by means of the Waste Management Act (KrWG; Deutsche Bundesregierung, 2012b). The latter focuses on tightening resource, cli-mate and environmental protection regu-lations by adopting the ranking of waste management. Setting priorities on waste management strategies helps expanding the lifespan of used resources.

ResouRce efficient and cleaneR PRoduction: fosteRing gReen industRies in ukRaine

“It is the German Govern-ment’s goal to decouple even further the use of natural resources from eco-nomic growth. Germany aims to become one of the most energy-efficient and environmentally sound economies in the world.” Dr. Barbara Hendricks, Ger-man Minister for the Envi-ronment, Nature Conserva-tion and Nuclear Safety

Germany

The European Commission established various policy initiatives targeting the improvement of resource efficiency, in order to decouple resource use from economic growth, in a region where per-capita consumption is among the highest worldwide (see Chapter 3).

Germany as an EU member has taken a leading role in translating the EU require-ments into national law. Germany is one of the few countries whose per-capita re-source consumption decreased between 1970 and 2016 (Figure 12). In 1971, Ger-many reached the highest per-capita material consumption with almost 19 tonnes. Since then, the consumption rate decreased, reaching 14.6 t/cap in 2016. The consumption of – especially domestic fossil fuels like anthracite or brown coal – has decreased. The share in overall energy production decreased from 57% in 1992 to 42% in 2015. At the same time, while consumption of non-re-newable materials decreased, biomass has become more important and its con-sumption has increased. This represents the picture of an industrialized economy that has a high material consumption but also focuses on sustainable develop-ment, in order to reduce overall levels of environmental pressures.

Already in 2002, Germany´s government established the goal of doubling the re-source productivity of the German econ-omy between 1994 and 2020 (Deutsche Bundesregierung, 2002). In 2007, the Re-source Efficiency Network was established bringing together people from politics, business and science. The ambitious tar-get of the network is to make Germany´s economy the most resource efficient in the world by 2020. In order to reach this tar-get, the German Resource Efficiency Pro-gramme was adopted in 2012 by the Fed-eral Government for the years 2012-2015 (ProgRess I; Deutsche Bundesregierung, 2012a). With this Programme Germany was among the first countries determining targets for a decrease in natural resource use and creating a long-term guiding framework. The overarching goal of this programme was to increase resource ef-ficiency, focusing on biotic and abiotic natural resources such as water, air, land, soil, biodiversity and ecosystems. In 2013, a national platform for resource efficiency (NaRess) was set up in order to ensure a dialogue among institutions with focus on management associations (BMUB, 2017). Based on the evaluations of the ongoing progress, the German Resource Efficiency Programme II (ProgRess II) was adopted for the years 2016 onwards; see Box 14 for the guiding principles of ProgRess II (Deutsche Bundesregierung, 2016).

Figure 12development of per-capita domestic Material consumption in germany, 1970-2016

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6RECOmmENdATiONS TO FOSTER RECP iN ukRAiNE



Based on the analyses above a number of recommendations can be derived – for the more general level of environmental policy making as well as for the level of resource efficient and cleaner production (RECP). Regarding the first, in its Coun-try Environmental Analysis for Ukraine (World Bank, 2016), the World Bank strongly recommends to prepare and implement a precise roadmap towards a reform of environmental management in Ukraine, which would specify the differ-ent activities for the next 1-2 years. The World Bank suggests to carry out such a reform in close correlation to EU environ-mental directives, being the best prac-tice example to be followed; all the more in the light of Ukraine’s approximation to the European Union. For this to hap-pen, a first task would be to cross-check whether Ukraine institutions are capable of implementing EU directives. While environmental priorities and especially their linkage to Ukraine’s growth and de-velopment agenda have to be identified, the World Bank further recommends to develop a roadmap for the implementa-tion of necessary legislative and regula-tory changes, based on Ukraine’s iden-tified priorities and taking into account its commitments under the EU–Ukraine Agreement (World Bank, 2016).

In the light of Ukraine’s ambition on RECP, one priority is to achieve higher resource efficient and cleaner production in Ukraine’s industrial sectors. The anal-yses in Chapter 3 revealed three “hot-spot” areas where RECP measures would yield the largest success.

Sectors of high material intensityThe sectors ‘Construction’, ‘Products based on metals and minerals’ or ‘Prod-ucts based on fossil fuels’ show to be specifically material intensive. This means that their relationship between material input and created value added is higher than in other sectors. Thus mea-sures can be targeted towards two differ-ent directions: (1) To decrease material inputs, e.g. through substitution of mate-rial-intensive raw materials entering pro-duction or after production technologies towards higher RE, and (2) to increase value added: e.g. including measures of “up-grading”, i.e. producing products with a higher level of value added. Also,

the performance of the sector’s best com-pany can be used as threshold to aim for by the other sector representatives.

Sectors of large material inputAnother hot spots are those sectors where in absolute terms the highest lev-els of material input are reached. This implies that by taking actions in these sectors, the largest amounts of absolute reduction can be achieved. In Ukraine the sectors with the largest material in-put are ‘Agriculture and forestry’ and ‘Production of products based on bio-mass’. Examples from other countries, for instance Germany, show that espe-cially those sectors producing goods on the basis of raw materials tend to achieve higher productivity rates than observed in Ukraine.

categories of final demand with large material footprintIt’s not only the production side where RECP has to be aimed for, but also the consumption side is of high relevance as it is the trigger of industrial produc-tion. Chapter 3 showed that private consumption is responsible for 83% of overall material footprint. Accordingly, by steering private consumption into a direction where RECP products are demanded for, will trigger increased RECP on the production side. Guidance should be provided by the state: on the one hand, via related subsidies and oth-er incentives and on the other hand by acting as archetype. Government con-sumption is responsible for 5% of final demand for materials. By implementing standards of RECP, as in the case of Aus-tria and its Action Plan for Sustainable Public Procurement (Box 15; Österre-ichische Bundesregierung, 2010), public procurement can be a powerful lever for both a change in private consumption as well as a change in production pro-cesses would be activated.

But it is certainly not only the hot spots which deserve (political) action. A num-ber of powerful measures have been out-lined in Chapter 2. Box 16 shows some of them which have shown to be successful in a number of countries. The following elaborates on measures and instruments which foster RECP and green industries in Ukraine.

hot spot analysis

16

Research and innovation

5

Best practice examples Target setting

2

4

Standardisation incentives

3

RECP mEasuREsin ukRainE

dECouPling

isid

“the World Bank strongly recommends to prepare and implement a precise roadmap towards a reform of environmental manage-ment in Ukraine, which would specify the different activities for the next 1-2 years. [...] the World Bank further recommends to develop a roadmap for the implementation of neces-sary legislative and regu-latory changes, based on Ukraine’s identified priori-ties and taking into account its commitments under the EU–Ukraine Agreement (World Bank, 2016).”

•Environmental tax reform•Eco-innovation•Foreign direct investments•Resource pricing & tax

exemption•Education policy•knowledge and technology

transfer•Technical assistance and

development finance institutions

•Access to working capital



country need to be calculated and must include possible environmental external-ities. One precondition for granting FDIs has to be that applied or new technolo-gies are cleaner than the average used in the host country (UNIDO, 2016).

resource pricing & tax exemption:Environmental taxes allow to take into consideration the market failure of mar-kets ignoring environmental impacts. By increasing the price of a good or ac-tivity in a way that it reflects the cost of the environmental harm that it impos-es on others is internalised into market prices. This ensures that consumers and firms take these costs into account in their decisions (OECD, 2011a).

In addition to increasing the tax burden, another option is to implement tax incen-tives. In the context of RECP, this would mean to decrease taxes for those enter-prises which are using secondary materi-als, resource efficient technologies and/or equipment, low-waste technologies, waste recycling technologies, etc.

education policy:For an industrialized, and even more so for a green economy, education policy is an essential building block. Consequent-ly, it is key that education policy raises awareness in relation to the importance of greening industry and the economy. Therefore, education stakeholders should partner with industry to ensure that any new concepts are quickly integrated into present-day curricula (UNIDO, 2016).

Although Ukraine has a high-quality ed-ucation system, increased focus should be set on RECP and green industry. This can start on the high school level, but should definitively be incorporated in the curricula of the undergraduate and Master’s level at universities. By that means scholars learn the main princi-ples of RECP for economic decision mak-ing and production planning.

knowledge and technology transfer:New technologies and innovations are often outside of the direct control of en-terprises and industries. To enhance the development and dispersion of environ-mental technologies, partnerships, joint ventures, incubators, clusters, science

parks and networks are important means. To build their own innovative capabili-ty and to harness the benefits that new technologies have to offer, in particular SMEs depend on external sources of in-formation, knowledge, know-how and technologies. The role of the government is to enable the setup of new and mainte-nance of existing linkages between com-panies, industries and universities. It can do so by providing infrastructures such as science parks, clusters, incubators, and networks etc. It can implement a system of co-funding public-private partnerships for research, or strengthen linkages with global networks. These can be accompa-nied by suitable policy frameworks in ar-eas such as education, finance, competi-tion and regulation (UNIDO, 2016).

technical assistance and develop-ment finance institutions (dFIs):Strategic and direct partnerships with de-velopment finance institutions (DFIs) are key for achieving inclusive and sustain-able industrial development. The objec-tive here is to effectively support larger flows of resources, and thereby to trigger a stronger impact on the ground. For this purpose, UNIDO has elaborated techni-cal assistance interventions. While UN-IDO supports in identifying investment opportunities for DFIs and their partner financial institutions, development im-pact and financial returns of investment by DFIs and other financial institutions can be enhanced by the Organization’s technical assistance services. Moreover, technical assistance can play a key role in facilitating coordination between private and public investment, as public inves-tors can strategically position their in-vestment projects to unlock and promote private investment (UNIDO, 2017a).

access to working capital:Green investments can be encouraged by policies that aim to provide long-term fi-nance to investors. Measures to do so are the introduction of cleaner production and green economy criteria or by redefining the objectives for making this finance available. For instance, credit lines available for spe-cific industrial sectors may be greened by subjecting the investment to requirements such as ensuring that it contributes to a reduction in GHG emissions and a reduc-tion in the use of water, etc (UNIDO, 2016).

Box 15austria’s action plan for Sustainable pub-lic procurement

The APSPP (2010) identifies a number of focal areas for which criteria on sus-tainable public procurement were de-veloped, for instance:

» Construction

» Food

» Vehicles

» Furniture

» Cleaning agents

Box 16Implementing recp in ukraine

» Hot spot analysis

» Target setting

» Incentives/penalties

» Standardisation

» Fostering best practice examples

» Research and Innovation

The following elaborates on measures and instruments which foster RECP and green industries in Ukraine.

target setting:The European Commission identified the need for target setting as a means to eval-uate progress towards the overarching pol-icy goals. According to the Commission, identifying the right indicators and defin-ing a process for broad resource efficiency targets will “help trace the path to the 2050 resource efficiency vision: public policy can be better designed to take into account the costs and benefits of using resources more efficiently and the private sector will benefit from better signals for their invest-ment plans, the necessary predictability and transparency to take long-term de-cisions” (European Commission, 2011c).

A prominent examples is the resource productivity target as approved by the German Federal Government. Until 2020 resource productivity has to be doubled, in relation to the 1994 levels (Deutsche

Bundesregierung, 2002). And in the Eu-ropean Commission’s Action Plan for the Circular Economy (European Commission, 2015b) the Commission identifies com-mon EU targets, for instance, for recycling 65% of municipal waste by 2030; and for recycling 75% of packaging waste by 2030.

environmental tax reform:Overall, the share of environmental taxes in Ukraine’s overall tax revenue forms ap-proximately 1.3%, compared to EU aver-age of approximately 6.3% (World Bank, 2016). An environmental tax reform con-sists of changing the national tax system in a way that the tax burden is shifted from labour to environmentally damaging activ-ities, for instance, unsustainable resource use or pollution. Analyses of policies in Germany and the Netherlands for the Euro-pean Environment Agency show that such reforms and other environmental policy in-struments have broadly positive effects in increasing innovation. Estimates say that wider economic effects of a tax reform creat-ed an estimated 250 000 jobs (EEA, 2016).

eco-innovation:There is strong evidence that by means of relatively small investments process in-novations reducing natural resource use in companies can be achieved. Such in-novations save material and energy costs and are called “eco-innovation”, which is defined as any innovation that reduces the use of natural resources and decreases the release of harmful substances across the whole life-cycle. Cleaner production focuses mainly on process innovation that helps to render production of goods more efficiently. It plays a significant part in eco-innovation. However, eco-innovation has a wider notion, as it includes the de-velopment of new products, new business models, new behaviour of consumers, and new policy instruments and frameworks (EIO, 2016; Hinterberger et al., 2013).

Foreign direct investments (FdI):FDI have the potential of creating spill-overs contributing to industrial growth and/or industrialisation. Such spillovers can be diffusion of skills in the labour force, of management practices in busi-ness, or through the subcontracting of lo-cal producers. Moreover, technology and finance can become easier available. For each investment, costs and benefits for a

“In the light of Ukraine’s ambition on RECP, one pri-ority is to achieve higher resource efficiency and cleaner production in Ukraine’s industrial sectors. The analyses in Chapter 3 revealed three “hot-spot” areas where RECP mea-sures would yield the larg-est success.”



Government Agency for Ecological Investments of Ukraine, 2015. National Inventory Report to the United National Framework Convention on Climate Change.

Government of China, 2002. Law of the People’s Republic of China on Promotion of Cleaner Production. Government of China.

Government of China, 2008. The Circular Economy Promotion Law of the People’s Republic of China. Government of China.

Government of China, 2011. China’s Twelfth Five Year Plan (2011-2015). Government of China.

Government of Guatemala, 2003. Política Marco de Gestión Ambiental. Government of Guatemala, Guatemala DF.

Government of Guatemala, 2007. Política de Conservación, Protección y Mejoramiento del Ambiente y los Recursos Naturales. Government of Guatemala, Guatemala DF.

Government of Guatemala, 2010. Política nacional de producción más límpia. Government of Guatemala, Guatemala DF.

Government of Ukraine, 2010. Strategy of National Ecological Policy of Ukraine up to 2020. Government of Ukraine.

Government of Ukraine, 2013. National Target Economic Programme for Industrial Development for the period up to 2020. Government of Ukraine.

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Government of Ukraine, 2015. Sustainable Development Strategy “Ukraine – 2020”. Government of Ukraine.

Government of Ukraine, 2017. Draft law “On basic principles (strategy) for state environmental policy of Ukraine for the period of 2020”. September, 12th. Government of Ukraine.

Government of Vietnam, 2009. Cleaner Production Strategy in Industry until 2020. Government of Vietnam, Hanoi.

Government of Vietnam, 2012. National Green Growth Strategy. Government of Vietnam, Hanoi.

Hinterberger, F., Giljum, S., Omann, I., Polsterer, N., Stocker, A., Burrell, L., Campregher, C., Fuchs, D., Hartwig, F., 2013. “Green growth“: From labour to resource productivity. Best practice examples, initiatives and policy options. Agence France de Developpment, Paris.

Lenzen, M., Kanemoto, K., Moran, D., Geschke, A., 2012. Mapping the structure of the world economy. Environmental Science & Technology 46.

Lenzen, M., Moran, D., Kanemoto, K., Geschke, A., 2013. Building Eora: A Global Multi-Region Input–Output Database at High Country and Sector Resolution. Economic Systems Research 25, 20-49.

Lutter, S., 2016. Quantifying sustainable resource use within planetary boundaries, Institute for Sustainable Economic Development, . University of Natural Resources and Life Sciences (BOKU), Vienna, Austria.

Lytvynchuk, M., 2017. Explanatory note to the draft Law of Ukraine “On Amendments to Some Laws of Ukraine regarding promotion and support to energy and resource efficient production, waste prevention and reduction”, in: Ukraine, C.f.R. (Ed.).

OECD, 2004. Recommendation on material flows and resource productivity. OECD, Paris.

OECD, 2008a. Measuring material flows and resource productivity. Synthesis report. Organisation for Economic Cooperation and Development, Paris.

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REFERENCES



1. Agriculture

2. Fishing

3. Mining and Quarrying

4. Food & Beverages

5. Textiles and Wearing Apparel

6. Wood and Paper

7. Petroleum, Chemical and Non-Metallic Mineral Products

8. Metal Products

9. Electrical and Machinery

10. Transport Equipment

11. Other Manufacturing

12. Recycling

13. Electricity, Gas and Water

14. Construction

15. Maintenance and Repair

16. Wholesale Trade

17. Retail Trade

18. Hotels and Restaurants

19. Transport

20. Post and Telecommunications

21. Financial Intermediation and Business Activities

22. Public Administration

23. Education, Health and Other Services

24. Private Households

25. Others

26. Re-export & Re-import

OECD, 2016. Policy Guidance on Resource Efiiciency. , Policy Highlights.

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UNEP, 2016. Global Material Flows and Resource Productivity. An Assessment Study of the UNEP International Resource Panel. H. Schandl, M. Fischer-Kowalski, J. West, S. Giljum, M. Dittrich, N. Eisenmenger, A. Geschke, M. Lieber, H. P. Wieland, A. Schaffartzik, F. Krausmann, S. Gierlinger, K. Hosking, M. Lenzen, H. Tanikawa, A. Miatto, and T. Fishman. United Nations Environment Programme, Paris.

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Wiedmann, T., Schandl, H., Lenzen, M., Moran, D., Suh, S., West, J., Kanemoto, K., 2015. The material footprint of nations. Proceedings of the National Academy of Sciences (PNAS) 112, 6271–6276.

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WU, 2017. Own calculations based on the MRIO Eora, Version 199.82. Vienna University of Economics and Business.

ANNEx List of 26 sectors of the multi-regional input-output model Eora

Images and illustration copytights ©

UNIDO: RECP images and logos.Shutterstock: Iryna Sunrise; Seamuss; Ideldesign; Nnnnae.AETHEREAL SOLUTIONS: otherwise.

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