Transition Towards High Share of Renewables in Ukraine : Linked Energy System and CGE Model Approach

The adoption of the Paris Climate Agreement has become a symbolic decision for the world community. It will have a significant impact on the development of world economy and energy as well as particular countries since it aims to keep the average temperature rise on the planet well below 2°С (compared to the pre-industrial levels). To make it happen it is necessary for the energy sector to become carbon neutral. Therefore, a so-called “energy transition” from the fossil to renewable types of energy resources based on the principles of sustainable development is needed. In the case of developing countries, this task can be even more complicated than in the advanced economies, as governments need to provide an additional catching-up economic growth and social equity improvements. In this context, an economic impact is the key criteria to prioritize environmental policies, as their implementation should primarily be aimed at the increase of energy efficiency and greenhouse gas (GHG) emissions reduction, but in an economically and socially acceptable way. In this paper, we explore the pathways for transition towards high share of renewables in Ukraine, which faces significant economic and environmental challenges. We use the soft-linkage of the energy system TIMES-Ukraine and Ukrainian computable general equilibrium models, which allows us to estimate an economy wide and environmental implications of Ukraine's long-term transition towards 91% share of renewables in final energy consumption by 2050. As results show, further maintenance of the existing highly inefficient Ukrainian energy system is even more expensive than implementation of the renewable energy development policies. With initially low energy efficiency rates, long-term transition towards high share of renewables in Ukraine provides a good opportunity to explore “double dividends”, benefiting both the economy and the environment. According to our estimates, while GHG emissions reduce by 76% in 2050 relative to the 2012 level, GDP may increase up to 14-16% by 2050 in case of efficient policies implementation