Summary:
Deferred maintenance and repair investments reduce the value of the Ukrainian building stock and annihilate private and public property. Moreover, the poor condition of the Ukrainian building stock accounts for high energy consumption and is a large contributor to GHG emissions. Both is economic inefficient in short and long-term and directly impact living conditions of the population negatively. A long-term retrofitting strategy in line with the Energy Efficiency Directive (2012/27/EU) is required for residential as well as public buildings.
We evaluate an ambitious annual retrofitting of approx. 5,500 public buildings representing approx. 16m m². This will require energy saving related investments of EUR 1bn annually until 2030. The primary energy savings sum up to 700 TWh until 2059 and save 140 Mt CO2. We propose to finance the energy retrofitting through emittinggreen bonds worth EUR 8bn. Assuming a constant bond issue in EURin the period 2021-2030 with an interest rate of 7% and a run time of 15 years – trough reinvestment of bonds with a maturity of approx. 5 years – the CAPEX sums up to approx. EUR -19.6bn, including a budget funded own contribution of building owners of approx. EUR 1.6bn (see Table 1). Energy savings reduce payoffs amounting to approx. EUR 24bn until 2059 while the resulting CO2 abatement costs are approx. -5 EUR/t CO2 discounted which indicates a gain. We expect additional non-energy related investment needs of about EUR 640m that are required for an overall modernisation of these public buildings. A funding has to be provided by the state and/or municipal budgets for securing long-term usability of the building stock. This funding is not considered in the following analysis.
We are aware of the administrative difficulties resulting from the implementation of green bonds at state level to finance investments at local and/or municipal levels. We recommend that this issue be addressed in a newly established working group for exchange between the Ministry of Finance and the Ministry of Regional Development of Ukraine.
What is a Policy Note?
Policy Notes provide a very concise overview of one specific topic. They often build on earlier more substantive work. Some Policy Notes were also published as part of the Quarterly Monitoring Reports.