Future-proofing the Ukrainian recovery

Ukraine is defending its sovereignty against Russia’s full-scale invasion, while at the same time trying to shape a prosperous European future. To help secure a lasting peace, future European support for Ukraine’s recovery should aim at aligning the Ukrainian economy with EU standards and pave the way to EU accession. Central to recovery planning should thus be a decentralised and more resilient energy sector, focusing on renewable energy sources and energy efficiency.

To date, Ukraine has lost about 50 per cent of its solar power and about 80 per cent of its wind power capacity to the invasion. In the first year alone, war-related CO2 emissions were estimated at 120 million tonnes, roughly equivalent to the annual emissions of Belgium. The World Bank estimates the current cost of reconstruction to be at least 411 billion US dollars, far exceeding Ukrainian GDP.

The Market alone won’t fix it

Recent remarks by the head of asset management giant BlackRock about Ukraine becoming the »beacon to the rest of the world of the power of capitalism« spotlight the opportunism already overshadowing the country’s reconstruction plans. This approach, supported by the Ukrainian government, is based on the assumption that foreign investment is the main driver of development and prosperity, and that »the market« will fix everything, notwithstanding its track record of driving economies into recession. Accountability mechanisms for external actors are lacking and Ukrainian elites have shown little enthusiasm for reform. The all too familiar austerity measures therefore loom, as evidenced by a 15.6 billion US dollar IMF loan agreement that mandates significant cuts in social spending.

Ukraine needs to be prepared for the transition to a modern, efficient, climate-resilient and sustainable economy. Rebuilding former carbon-intensive energy systems would soon leave Ukraine with stranded assets. Focusing solely on job creation to encourage the return of displaced Ukrainians neglects the importance of public services and social guarantees, especially because women with children constitute the majority of refugees. Ignoring these issues will exacerbate social inequalities and impede the development of a climate-resilient society, especially given the widespread corruption.

Planning for sustainable Recovery

The EU must help shape the recovery to prevent large-scale foreign-led infrastructure projects that favour particular foreign and local actors. This is the fate that befell Kosovo because of the US corporate-led post-war reconstruction. Ukraine’s development needs must be planned sustainably and prevail over short-term individual business interests.

Ukraine's Academy of Sciences estimates the country’s renewable energy potential at 874 GW. This is three times the total installed capacity of Germany and points to promising future industrial opportunities, such as hydrogen-based metallurgy and green hydrogen-based fertiliser production. This would combine Ukraine’s existing strengths in a sustainable model. This is in line with the European Green Deal's Industrial Plan, which aims to establish partnerships for clean hydrogen and low-emission industries.

What the EU can do

As a key actor for achieving sustainable peace in Ukraine the EU should therefore tailor its grant conditions to favour advanced zero-emission technologies and the transition towards an economic model aimed at increasing the value chain. Measures to prevent excessive public debt are crucial. The reconstruction process must favour Ukrainian producers, not – for example – foreign construction giants. Climate change adaptation must be mainstreamed into national reconstruction planning to ensure a sustainable framework that can attract long-term investment. In light of Ukraine's prospective EU accession, orienting its recovery along these lines would significantly enhance the EU's positive impact on its neighbourhood.