Earlier this year, the Cabinet of Ministers of Ukraine adopted a procedure for the allocation of the proceeds received from the sale of Assigned Amount Units (AAUs).

The resolution provides the necessary legal framework for the use of funds originating from the sale of Ukrainian AAUs and sets a procedure for the transfer of these funds out of the state budget. It also lists the activities eligible for funding. The procedure, though, does not clarify the process of selection of particular projects, but sets limits on the amount of funds that may be used for infrastructural and administrative purposes.

The main provisions of the procedure include the following:

  • The Treasury of Ukraine shall open and maintain special-purposed foreign currency accounts in the State Export Import Bank of Ukraine for each of the agreements for the sale of AAUs executed by the National Environmental Investment Agency of Ukraine (NEIA). The Ministry of Environmental Protection of Ukraine is the main administrator of the funds, with NEIA as the lower level administrator, responsible for submitting respective requests and applications to the Treasury and the conclusion of the agreements with the funds' recipients;
  • Pursuant to a written request from NEIA, the Treasury shall transfer UAH amounts, equivalent to the funds received from the AAUs buyer (whether it is a foreign state or legal entity), from the special-purposed banking accounts to the Ministry of Environmental Protection of Ukraine;
  • The funds are allocated to the final recipients based on the agreements concluded with NEIA. Recipients may include legal entities and individuals implementing: (1) Green Investment Projects (GIS); or (2) other measures aimed at the enforcement of the Kyoto Protocol. The particular types of activities for which the funds may be used are listed in the annex of the procedure.
  • Most of the received proceeds (about 93% of the total funds) shall be used for the implementation of GIS projects in the following areas: energy saving, alternative energy, coal mine methane projects, utilisation of renewable energy sources, reduction of other green house gases apart from CO2, and protection of the environment.
  • Up to 6% of the proceeds may be spent on various administrative and infrastructural measures including:

(i) institutional framework development (up to 3% of the funds)

The measures in this category may include pilot projects and development of project documentation for state and municipal entities; scientific and research projects aimed at the development of a national action plan for the reduction of CO2 emissions, a GIS project database development, hosting related seminars and conferences, marketing research, legal services, business trips of official delegations and hosting meetings with international organisations and foreign countries.

(ii) managing the GIS projects (up to 3% of the obtained funds)

This category includes payments for the respective legal services, expert review, technical inspection and financial audit of the GIS projects, as well as participation of Ukraine in the international climate change negotiations process.

  • Up to 1% of the received funds may be used for the implementation and transfer of advanced Japanese environmental technologies.
  • The remaining unused funds may also be returned to the seller in exchange for the respective amounts of AAUs.

In addition, the Government decided to allocate UAH 50 mln from the AAUs sale proceeds to the development and implementation of the GIS projects aimed at modernization and reconstruction of the hot water supply and heating systems in Ukrainian education and healthcare institutions in different regions. The listed projects envisage installation of heat pumps and boilers, which run on solid biofuel and straw. The projects shall be developed and implemented within the period of October 2009 - January 2010. NEIA is a designated authority that shall ensure implementation of such projects.

Law: the Resolution No 1034 of the Cabinet of Ministers of Ukraine "On Approval of the Procedure for Use in 2009 of the Budget Funds, Obtained from the Sale of Assigned Amount Units, as Provided by Article 17 of the Kyoto Protocol to the Frame Convention of the United Nations on Climatic Change" dated 16 September 2009

Law: the Resolution No 1036 of the Cabinet of Ministers of Ukraine "On Approval of the Action Plan Related to Preparation and Implementation of the Environmental (Green) Investment Projects at the Education and Healthcare Institutions aimed at Reduction of Greenhouse Gas Emissions" dated 16 September 2009

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 30/11/2009.