Summary:

Despite its continuously decline in the past 30 years, Ukrainian hard coal production still plays a salient role in Ukraine’s economy. On the demand side, thermal powerplants which are fueled with coal, still generate 31% of Ukrainian electricity. However, to comply with its climate obligations, a coal phase-out is an inevitable step for Ukraine on its decarbonization path. Economic reasons will also push coal out of the market as an energy source. This is due to the decreasing profitability of coal mines in Ukraine, which will be further reduced by the implementation of the National Emission Reduction Plan, a potential move away from coal subsidies and a presumed increase of the carbon tax.

This paper proposes accompanying measures for the coal phase-out, aimed at dampening its negative impact on the development of affected regions and their labour market. The measures proposed include direct measures addressing former miners, such as retraining programs, but also broader instruments like the set-up of a just transition fund and the creation of new regional development agencies. If successfully implemented, a politically accompanied structural change offers the opportunity to bring about an economic shift towards a more future-oriented industrial landscape and to overcome the socio-economic challenges that coal mining areas are facing today. A phase-out of subsidies can accelerate the process and carry some costs of this change.