‘We stand with Ukraine’: EBRD vows to support green reconstruction

One year on from the start of the full-scale Russian invasion, Dimitri Gvindadze and Mark Magaletsky look at how the international community can help Ukraine build back better.

Fighting back against the Russian invasion, Ukraine’s leaders do not yet know when the war will end. But they do know that peace will bring the need not only to build their economy back, but to build it back better – and, crucially, greener.

That message came over strongly at Ukraine’s pavilion at COP27 in Egypt. The exhibit showcased Ukraine’s pre-war work on greening its economy and promised still greater ambition for the peacetime future.

“The war started by Russia… hasn’t stopped our plans,” it read. “Together we are moving towards climate neutrality.”

The exhibit included a quote from Ukraine’s president, Volodymyr Zelenskyy: “Ukraine can and, I am certain, will, become a green energy hub for Europe. We are able to replace dirty Russian energy resources. Ukraine has huge natural potential for creating green energy power plants, and for producing green hydrogen – for generating, at least, tens, and, realistically, hundreds of gigawatts of green electric energy.”

These are big, but realistic, ambitions.

Helping to bring Ukraine’s aims to life is where the European Bank for Reconstruction and Development (EBRD) comes in. The bank has been Ukraine’s biggest institutional investor over the past 30 years and is also a leader in climate finance, aiming to promote the green transition across its countries of operation.

Ukraine has taken centre stage in the EBRD’s investment in 2022. We mobilised donor funding, pledged to invest €3 billion in Ukraine in 2022-23, and delivered €1.7 billion of new investments in 2022. This was a record annual level for our investment in Ukraine, following a total €3 billion of investment over the three previous years. Ukraine will continue to be at the centre of the EBRD’s attention in 2023 and beyond.

When the time for reconstruction comes, the EBRD will stand with Ukraine on its green development as part of the country’s overall multifaceted rebuilding efforts. Fostering Ukraine’s green transition to promote long-term growth and prosperity is among the EBRD’s key priorities.

For Ukraine, the EBRD sees reconstruction as an opportunity for smart infrastructure, a green and highly integrated energy system, green cities, energy-efficient public buildings and homes and strong advances in decarbonisation.

This will be an opportunity to rethink industrial development, moving from inefficient coal-dependent industries and towards clean knowledge-based industries, digital technologies and modern agriculture.

Backing for greening Ukraine will come from many quarters.

The country’s EU candidate status, granted in June, will support its green ambition. The EU is on its own green transformation path. Its REPowerEU programme, announced in 2022 soon after the start of the war, is an ambitious plan to eliminate the dependence of the EU and its neighbourhood on Russian gas and to fast-forward the green transition. As Ukraine moves to align with EU practices, REPowerEU will facilitate its green development.

Looking ahead, Ukraine could anchor itself strongly to global value chains and thus benefit from international production, trade and investments patterns. Nearshoring by European companies to Ukraine could support the country’s industrial transition by strengthening the implementation of its digital, climate-neutral and circular pathways.

This would have significant positive impact on Ukraine’s resilience, employment and corporate governance.

What might Ukraine focus on?

Green targets for Ukraine’s post-war reconstruction include expanding biomethane and green hydrogen capacity, enhancing wind and solar power generation, phasing out coal thermal power plants, adapting the existing gas pipeline network to transporting low-carbon gases, and decarbonising the extraction and processing of Ukraine’s raw materials. All will require significant investment.

In early 2022, Ukraine joined the EU’s energy system. This synchronisation provides new funding opportunities in the renewable energy market, and the EBRD is ready to support implementation of utility-scale renewables projects as soon as the situation permits.

In order to plug new renewable assets into the energy system, rehabilitating and strengthening Ukraine’s war-damaged grids will be important. So will full integration into the network of European Transmission system operators (ENTSO-E), which will require substantial investment.

Ukraine’s financial system will channel green finance to businesses. Risk mitigation products, trade facilitation instruments and green financing facilities for agribusiness, manufacturing and services can help to buy efficient capital equipment and fertilisers, as well as promoting sustainable farming and other measures advancing Ukraine’s low-carbon agenda.

Implemented through commercial banks, such financing facilities can benefit from donor grants and guarantees. Investment incentives will enable banks to focus lending on projects that combine post-war reconstruction with energy-efficiency and decarbonisation efforts. The EBRD will promote adoption by banks of best climate corporate governance practices.

Enhancing energy efficiency in buildings will be an integral part of post-war rehabilitation. Targeted lending/leasing programmes can be blended with concessional co-financing to ensure affordability and strengthen uptake. They will make it easier to buy and install energy-efficient equipment such as heat pumps and to address war-related damage.

Supporting sustainable connectivity and mobility will be another important priority in light of the war-related damage to Ukraine’s transport infrastructure. Infrastructure investments will prioritise sustainable low-emissions public transport such as trams, trolleybuses and metro lines, as well as providing charging stations for electric vehicles, scooters and bikes.

The war has also highlighted limited connectivity options between the EU, Ukraine and the wider region. Projects improving cross-border links with low-carbon transportation services will help to address these bottlenecks.

Potential projects include switching to euro-size rail track gauge on the sections connecting Ukraine regional hubs with EU borders, introducing cross-border high-speed trains, improving waterway transportation and modernising border-crossing infrastructure using sustainable construction principles.

Ukraine’s post-war reconstruction and modernisation is at the core of the EBRD’s mission. We will spare no effort to help Ukraine rebuild a vibrant and resilient economy and offer all support as it implements its low-carbon transition.

Dimitri Gvindadze is director of climate strategy and delivery at the EBRD. Mark Magaletsky is deputy head Ukraine, sustainable infrastructure