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Ledger 1 : 33 — For each dollar financing nature-based solutions in 2023, about $33 financed activities harmful to nature. (UNEP)
Cases / Carbon credits · Ukraine · 2008–2021

Ukraine's Joint Implementation credits and Kyoto unit sales to Japan and Spain, 2008–2021

Nature's voice · report
According to a 2015 Stockholm Environment Institute estimate covering all Joint Implementation projects, my atmosphere may have received about 600 million tonnes of CO2 equivalent more than it would otherwise have.
Did nature suffer? Yes. Harm is on record. Disputed
Recorded
What the record lacks: 9 none on record · 1 not disclosed · 7 disputed · 1 unclear See the gaps
Accounts of the harm differ
Whether Ukrainian JI credits reflected additional emission cuts

Ukraine hosted the largest number of Kyoto Joint Implementation projects, with 503.3 million emission reduction units issued, and sold surplus Kyoto allowances to Japan and Spain for money earmarked for emission-cutting and environmental projects. Criminal cases over the use of that money were brought; no verdict is on record.

503.3 millionEmission reduction units issued for Ukrainian Joint Implementation projects
278 registered projects, as of August 2014 (Stockholm Environment Institute). The state sold 47 million surplus allowance units to Japan and Spain, valued at €470 million in a 2015 press report and at about €320 million in a 2010 NGO report.

Status As of August 2021: the High Anti-Corruption Court set the LED-lighting Kyoto-funds case for trial on the merits; no verdict on record. Outcome of the 2010 charge against Yulia Tymoshenko: none on record.

What?
Ukraine issued 503.3 million Joint Implementation ERUs from 278 registered projects and sold 47 million surplus AAUs to Japan and Spain under a Green Investment Scheme whose money was meant for emission-cutting and environmental projects. Funds were moved to the Treasury, €5 million was returned to Japan, and criminal cases over the use of Kyoto money were brought without a verdict on record. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin), Working Paper 2015-07
Where?
Coal waste pile JI projects in the Luhansk and Donetsk regions (about 48.0 N, 38.0 E); administration by the State Environmental Investment Agency in Kyiv; GIS-funded projects in 24 regions; buyers in Japan and Spain. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin), Working Paper 2015-07
When?
JI procedures adopted in 2006; first Kyoto commitment period 2008–2012; GIS Guideline and NEDO contract on 18 March 2009; Tymoshenko charged December 2010; €5 million returned December 2015–February 2016; High Anti-Corruption Court trial set for 9 August 2021. Ministry of the Environment, Japan
Who?
Gained
  • Ukrainian JI project owners and intermediaries — 503.3 million ERUs issued; SEI cites reports that intermediaries sometimes kept up to 50% of the units or their value. Revenue not stated. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin), Working Paper 2015-07
  • Ukrainian state — AAU sale proceeds, valued at €470 million (LB.ua, 2015) or about €320 million (CAN-International, 2010) LB.ua
  • Sumitomo Corporation — Contract for 1,200 Toyota Prius hybrids for police under the GIS Interfax-Ukraine
  • Agrotekhbud LLC — Won the LED tender on 70% prepayment, with UAH 480 million due to it; its director is among the accused Slovo i Dilo
Lost
Harmed
Why?
The Kyoto JI mechanism let host-country projects earn ERUs sold into the EU emissions trading system, and Ukraine's surplus AAUs were sold for money meant to fund domestic emission cuts. SEI wrote that many projects registered in 2011–2012 had started long before and were clearly not motivated by carbon credits. Stockholm Environment Institute
How?
Ukrainian projects were endorsed and registered by SEIA; SEI reported some projects received letters of endorsement, approval and ERUs within one to four months while others waited years. AAU payments were pooled in a NEIA account under the GIS Guideline; KRU reported a €200 million transfer to the Single Treasury Account after a September 2009 Cabinet order changed the funds' designated purpose. Radio Svoboda
6 of 6 questions answered from the record

What happened

The record, in order.

Ukraine was the largest host of Kyoto Protocol Joint Implementation (JI) projects. The Stockholm Environment Institute (SEI) reported in August 2015 that Ukraine had 278 registered projects and 503.3 million emission reduction units (ERUs) issued, and that Ukraine and Russia together accounted for more than 90% of the almost 857 million ERUs issued. Three project types made up almost 89% of Ukrainian ERUs: coal waste pile fire prevention (219,288 thousand ERUs, 43.6%), energy efficiency in industry and power (143,668 thousand, 28.6%) and natural gas transport and distribution (82,705 thousand, 16.4%). SEI identified these types as having questionable or low environmental integrity. All registered coal waste pile projects were in the Luhansk and Donetsk regions.

SEI found that almost all coal waste pile projects were registered in 2012 but implemented at least four years earlier, and that together they implicitly claimed to have produced around 30% of all coal in Ukraine, which SEI called a highly unrealistic scenario. The start dates of the 30 Ukrainian gas projects fell between 2003 and 2006, while most received their letters of endorsement only in 2012. SEI cited personal communications and a Forbes.ua investigation for a report that, at the end of the first Kyoto commitment period, project participants were required to transfer ERUs through selected intermediary companies, which sometimes kept up to 50% of the units or their value; SEI described these as reported allegations. An official of the State Environmental Investment Agency (SEIA) told SEI the agency did not make a big issue of additionality.

Separately, the state sold surplus Assigned Amount Units (AAUs) under a Green Investment Scheme (GIS). On 18 March 2009 Japan's NEDO signed a contract to buy 30 million tonnes of AAUs from Ukraine, and the GIS Guideline signed the same day required the payment to be pooled in an account of the National Environmental Investment Agency (NEIA) for emission-cutting and environmental projects. The ministry's April 2013 total was 47 million units, 44 million to Japan and 3 million to Spain. LB.ua put the value at €470 million in October 2015; CAN-International's ECO newsletter had reported about €320 million in June 2010.

On the use of the money, the State Control and Audit Service (KRU) said in October 2010 that the State Treasury converted €200 million into about UAH 2.3 billion and moved it to the Single Treasury Account under a Cabinet order of 9 September 2009 that changed the funds' designated purpose; KRU could not trace the money to the Pension Fund, and the Cabinet said the funds had been returned. In December 2010 the Prosecutor General's Office charged former Prime Minister Yulia Tymoshenko over the use of Kyoto funds during her 2007–2010 premiership. By June 2014 about UAH 6 billion in green investment funds and 817 projects in 24 regions were reported, and the Finance Ministry had blocked project funding from March 2014. Between December 2015 and February 2016 Ukraine returned €5 million to Japan.

In January 2016 the government dismissed the acting Minister of Ecology and two other officials after an internal investigation into Kyoto money meant for LED lighting (UAH 550 million at stake), and the Prime Minister referred the case to the National Anti-Corruption Bureau (NABU). The High Anti-Corruption Court (HACC) set the case, in which several named people are accused of attempted embezzlement, for trial on the merits on 9 August 2021; no verdict is on record. In February 2018 the Prosecutor General's Office notified two people of suspicion over overpriced insulation works financed from Kyoto money.

  1. 2006Ukraine adopts its first Joint Implementation procedures (February); detailed project requirements published (August)
  2. 2008Japan–Ukraine memorandum on JI/GIS cooperation (14 July)
  3. 2009GIS Guideline signed in Kyiv and NEDO contract for 30 million t of AAUs (18 March); Cabinet order No. 1049 changes the designated purpose of the funds (9 September, per KRU)
  4. 2010KRU reports on the use of the funds (October); former Prime Minister Yulia Tymoshenko charged (December)
  5. 2011First Deputy Prosecutor General says in parliament that the Kyoto money was spent but not exclusively on pensions (1 June); surge of JI registrations in 2011–2012
  6. 2013Ministry reports 536 projects agreed with Japan and 47 million AAUs sold (April)
  7. 2014Finance Ministry blocks project funding (from March); Ukraine announces closure of the SEIA (September); LB.ua reports 817 projects (24 June)
  8. 2015Deadline for exchanging first-period credits into EU allowances (31 March); SEI study (August); Spain and Ukraine agree seven projects (22 October)
  9. 2016€5 million returned to Japan (reported 3 February); acting Minister of Ecology and two officials dismissed and case referred to NABU (27 January)
  10. 2018Prosecutor General's Office notifies two people of suspicion over insulation works (22 February)
  11. 2021HACC sets the LED-lighting Kyoto-funds case for trial on the merits (9 August)

What was said

Claims, in the words of those who made them.

“significant environmental integrity concerns for more than 80% of ERUs from Russia and Ukraine”

“in 2011–2012, numerous projects were registered in Ukraine and Russia which had started long before and were clearly not motivated by carbon credits. This was like printing money.”

“I paid pensions to people, but this is not a crime under Ukrainian law.”

Yulia Tymoshenko, former Prime Minister, on the charge against her · 20 December 2010 · RFE/RL

“But I am telling you again: it is not true.”

Renat Kuzmin, First Deputy Prosecutor General, in parliament · 1 June 2011 · Kyiv Post

“All the money provided for by the contracts is kept in special accounts at Ukreximbank”

State agency administering the funds, as reported by LB.ua · 24 June 2014 · translated from Ukrainian · LB.ua

“In total, Kyiv sold Spain and Japan 47 million units of emissions for €470 million”

LB.ua · 22 October 2015 · translated from Ukrainian · LB.ua

Where accounts differ

Each party's account, side by side, with its source. The record does not settle these points; it shows them.

Where the Kyoto money moved in 2009–2010 went
Government and regulators
Yulia Tymoshenko, former Prime Minister

The money was used to pay pensions and was intact.

RFE/RL
Government and regulators
Prosecutor General's Office (Renat Kuzmin)

The money was spent but not exclusively on pensions.

Kyiv Post
Government and regulators
State Control and Audit Service (KRU)

Could not trace the money to the Pension Fund specifically; the Cabinet said the funds had been returned.

Radio Svoboda
Total volume of AAUs sold to Japan
Government and regulators
Japanese Ministry of the Environment (NEDO contract)

30 million tonnes of AAUs under the contract of 18 March 2009.

Ministry of the Environment, Japan
Government and regulators
Ukrainian ministry (via Interfax-Ukraine, April 2013)

44 million AAUs sold to Japan and 3 million to Spain, 47 million in total.

Interfax-Ukraine
Press and investigations
LB.ua

The Japanese counterparties were NEDO plus three private Japanese energy companies, with talks under way with a fourth.

LB.ua
Total proceeds of the AAU sales
Communities and civil society
CAN-International (ECO, June 2010)

Ukraine received about €320 million for AAUs.

CAN-International (ECO)
Press and investigations
LB.ua (October 2015)

Spain and Japan paid €470 million for 47 million units.

LB.ua
Whether the GIS contracts with six companies complied with law
Government and regulators
Tax ministry

Questioned the contracts with the six companies.

LB.ua
Government and regulators
State agency administering the funds

The contracts comply with law; the companies paid UAH 10–30 million each in tender guarantees.

LB.ua
Whether Ukrainian JI credits reflected additional emission cuts
Researchers
Stockholm Environment Institute

Coal waste pile projects implicitly claimed about 30% of all coal in Ukraine, which SEI called highly unrealistic; the three largest project types, almost 89% of ERUs, had questionable or low environmental integrity.

Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin), Working Paper 2015-07
Government and regulators
SEIA official (via SEI)

The agency did not make a big issue of additionality.

Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin), Working Paper 2015-07

How it looked

What was shown, beside what was recorded.

Shown

  • Payments for the AAUs were to be pooled in an NEIA account and spent on eligible categories: energy conservation, fuel switching, coal bed methane, renewables, non-CO2 greenhouse gas cuts, pollution reduction and capacity building.
    Governments of Japan and Ukraine (GIS Guideline, 2009) · Governments of Japan and Ukraine (Japan Ministry of the Environment)
  • 536 projects agreed with Japan, valued at UAH 3.814 billion, with UAH 571 million sent for financing.
    Ukrainian ministry, April 2013 (via Interfax-Ukraine) · Interfax-Ukraine
  • The contracts with the six companies questioned by the tax ministry comply with law.
    State agency administering the funds, June 2014 (via LB.ua) · LB.ua

Recorded

  • Ukraine: 278 registered JI projects and 503.3 million ERUs issued, against 98 projects and 266.2 million ERUs for Russia (SEI Table 17).
  • Ukraine endorsed 440 JI projects; 304 were approved, 278 registered (SEIA, 2013) and 217 generated ERUs.
  • SEI: Ukrainian JI procedures and institutions aimed to ensure environmental integrity, but compliance with the rules was very low, particularly at the end of the first commitment period; Ukraine presented JI project data in a transparent manner.
  • SEI estimated an AAU surplus of more than 2.5 billion AAUs, almost 57% of Ukraine's total first-period assigned amount.
  • KRU (October 2010): the Treasury converted €200 million into about UAH 2.3 billion and moved it to the Single Treasury Account; KRU said the change of purpose under Cabinet order No. 1049 was contrary to law (the audit body's finding; no court ruling on the point is on record).
  • Ministry (April 2013): 47 million AAUs sold, 44 million to Japan and 3 million to Spain; 1,200 Toyota Prius hybrids for police contracted with Sumitomo Corporation.
  • LB.ua (June 2014): 817 projects since 2009 in 24 regions, mostly insulation and lift replacement in social facilities; the Finance Ministry blocked project funding from March 2014.
  • In 2015 NEDO used remaining funds to upgrade 348 Interior Ministry patrol police vehicles and modernise Kyiv Metro cars; Spain and Ukraine agreed seven projects worth UAH 270.7 million.
  • Ukraine returned €5 million of AAU sale proceeds to Japan that it was obliged to invest in domestic emission reduction projects but had not spent (Carbon Pulse, 3 February 2016).
  • Under the EU rules, first-period credits had to be exchanged for EU allowances by 31 March 2015; the EU does not envisage international credits after 2020.

Who gained

Money that reached nature, beside money that stayed elsewhere.

Reached nature or the ground

Not published
Spending on measured emission reductions or environmental outcomes from the AAU proceeds—
None on record: no evaluation of emission reductions from the GIS-financed projects. UAH amounts are in the notes and metrics.

Gained elsewhere

Not totalled
AAU sales to Japan and Spain, total value (LB.ua, October 2015)€470m
Window: 2009–2015
AAU sale proceeds, about (CAN-International ECO, June 2010)≈ €320m
Window: to 2010
Funds moved to the Single Treasury Account (KRU, October 2010)€200m
Window: 2009–2010
Returned to Japan€5m
Window: 2015–2016
Currency: EUR · Window: 2009–2016 (mixed; see each line). Figures cover different periods and are not compared as a ratio. * Estimate built from cited figures.

Responses on record

  • Yulia Tymoshenko (20 December 2010): Said she paid pensions with the money, that this was not a crime under Ukrainian law, and that the charge was a way of removing the main competitor of the President; she said the money was intact. · RFE/RL
  • Prosecutor General's Office of Ukraine (1 June 2011): First Deputy Prosecutor General Renat Kuzmin told parliament the Kyoto money was spent but not exclusively on pensions and called Tymoshenko's account a deliberate lie. · Kyiv Post
  • Cabinet of Ministers of Ukraine (October 2010): Said the diverted funds had been returned. · Radio Svoboda
  • Government of Japan (embassy) (2010): Planned to audit the funds and said the quota sale agreement was confidential. · Radio Svoboda
  • State Environmental Investment Agency (June 2014): The contracts with the six companies questioned by the tax ministry comply with law; the companies paid UAH 10–30 million each in tender guarantees. · LB.ua
  • SEIA official (via SEI) (2015): Did not make a big issue of additionality. · Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin), Working Paper 2015-07
  • Prime Minister of Ukraine (January 2016): Referred the attempted-theft case over Kyoto money meant for LED lighting to NABU. · Ukrinform
  • Environmental groups (2016): Called for prosecution of officials over conduct in the carbon market under President Yanukovych. · Carbon Pulse

In court and with insurers

Every proceeding and every insurer decision on record.

Lawsuits and rulings

  1. 2010–Ongoing
    Prosecutor General's Office v. Yulia Tymoshenko (use of Kyoto funds)
    Prosecutor General's Office of Ukraine (pre-trial) · Criminal · Prosecutor General's Office of Ukraine → Yulia Tymoshenko, former Prime Minister

    Charged in December 2010 with abuse of power over the use of Kyoto funds during her 2007–2010 premiership; RFE/RL reported the sum as 320 million euros. She denied wrongdoing, saying she paid pensions with the money. None on record: outcome of this charge. RFE/RL

  2. 2017–OngoingUAH 336m potential damage per forensic economic expertise
    NABU/SAP case over the Kyoto-funded LED lamp replacement project
    High Anti-Corruption Court · Criminal · National Anti-Corruption Bureau and Specialised Anti-Corruption Prosecutor's Office → Vadym Levchenko (tried in absentia), Oleksiy Koval (former director of SE Ukrainian Environmental Investments), Oleksandr Prokopets, Dmytro Sokolov, Ihor Rakhimov, Oleksiy Altunin (director of Agrotekhbud LLC), Roman Kravchenko, Oksana Dobrylovska and one other

    The accused are on trial for attempted embezzlement of Kyoto funds through an LED lamp replacement project. The tender was won by Agrotekhbud LLC on 70% prepayment, with UAH 480 million due to it; the forensic economic expertise put the potential damage at UAH 336 million. The court set the case for trial on the merits on 9 August 2021; part of the charges had been closed earlier because of decriminalisation. None on record: a verdict. Slovo i Dilo

  3. 2018–OngoingUAH 11m alleged overpricing
    Prosecutor General's Office: overpriced insulation works financed from Kyoto money
    Pechersk District Court (preventive measure) · Criminal · Prosecutor General's Office of Ukraine → A former acting director-general of Derzhinvestproekt and a former head of Intertekhenergo LLC

    On 22 February 2018 the two were notified of suspicion over insulation works for schools and hospitals in 2012–2013, allegedly overpriced by UAH 11 million; the Pechersk District Court released them on personal recognisance. Intertekhenergo received UAH 634 million of orders from Derzhinvestproekt in 2013. The stage was suspicion; none on record: a verdict. Slovo i Dilo

Insurers

No insurer decision on record.

What nature saw

Outcomes measured on the ground, and nature's note.

Nature's report opens this page. Below: further outcomes measured on the ground.

ERUs issued
503.3 million
Ukrainian projects, as of August 2014 (SEI)
Surplus allowances sold
47 million
44 million to Japan, 3 million to Spain (ministry, 2013)
Integrity concerns
> 80%
Share of ERUs from Russia and Ukraine (SEI)
Returned to Japan
€5 million
Unspent proceeds, 2015–2016

What we don't know

Undisclosed, unproven, untried: recorded as data.

Nature

  • Disputed Whether Ukrainian JI credits reflected additional emission cuts

Money

  • None on record Spending on measured emission reductions or environmental outcomes from the AAU proceeds — None on record: no evaluation of emission reductions from the GIS-financed projects. UAH amounts are in the notes and metrics.

Accounts

  • Disputed Where the Kyoto money moved in 2009–2010 went
  • Disputed Total volume of AAUs sold to Japan
  • Disputed Total proceeds of the AAU sales
  • Disputed Whether the GIS contracts with six companies complied with law

Record

  • None on record None on record: the unit price of the NEDO purchase. The Japanese Ministry of the Environment release does not state it, and the Japanese embassy described the quota sale agreement as confidential in 2010.
  • None on record None on record: total revenue earned by project owners and intermediaries from ERU sales.
  • Not disclosed Not disclosed: the amount of unspent funds remaining after the €5 million return to Japan (Carbon Pulse, February 2016).
  • Unclear Unclear: where the money moved to the Single Treasury Account in 2009–2010 ultimately went; KRU could not trace it to the Pension Fund specifically.
  • None on record None on record: outcome of the 2010 charge against Yulia Tymoshenko over the use of Kyoto funds.
  • None on record None on record: a verdict in the High Anti-Corruption Court case over the LED-lighting project, which was set for trial on the merits on 9 August 2021, or in the 2018 case over overpriced insulation works.
  • Disputed Figures differ: the sum in the charge against Yulia Tymoshenko is given as €320 million by RFE/RL; other reports give €380 million or €200 million.
  • Disputed Figures differ: AAUs sold to Japan are 30 million in the Japanese Ministry of the Environment release on the NEDO contract and 44 million in the ministry's 2013 total; proceeds are about €320 million (CAN-International, 2010) and €470 million (LB.ua, 2015).
  • None on record None on record: price and volumes of the AAU sales to the private Japanese companies named by LB.ua.
  • None on record None on record: data on project rejections in Ukraine's JI pipeline (SEI).
  • None on record None on record: measurement of the local land, water or air effects of the coal waste pile extraction projects.
  • None on record None on record: evaluation of whether the GIS-financed projects (insulation, police cars, metro cars) produced measured emission reductions.

Did the harm stop?

The first Kyoto commitment period ended in 2012. The European Commission set 31 March 2015 as the deadline for exchanging first-period credits for EU allowances and does not envisage international credits after 2020.

Who paid?

The atmosphere, according to SEI's estimate for Joint Implementation worldwide. Ukraine returned €5 million of unspent proceeds to Japan; the amount still unspent was not disclosed.

Sources

Voices on record: — Company or project✓ Government and regulators— Courts✓ Press and investigations✓ Communities and civil society✓ Researchers

Press and investigations

  1. Tymoshenko charged
    RFE/RL · 2010-12-20

Communities and civil society

  1. Ukraine's AAU black hole
    CAN-International (ECO) · 2010-06-08

Researchers

  1. Has Joint Implementation reduced GHG emissions? Lessons learned for the design of carbon market mechanisms
    Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin), Working Paper 2015-07 · 2015-08

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