The purpose of this Report is to provide sector guidance for environmental policy options, based on constructing a “Business as Usual” (BaU) analysis tool that enables an assessment to be made of current & future operational practices, and forecasting their impact from 2010 to 2030. Historically (1930’s to 1980’s) coal mining in the Donbass region has provided one of the greatest boosts to economic growth and the well being of the population, achieved through intensive industrialisation, using coal as the fundamental source of the energy. However, the side effect of this, the environmental impact, has been disregarded in favour of industrial growth. Although the scale of coal related environmental losses are nowhere as significant as in related industry that uses coal, such as metallurgy, steel production and downstream products, the past practices have imposed heavy cumulative economic and environmental costs to coal mining. These costs arise from the production of excess mining spoil (per tonne of coal product) and its poor disposal management, the excess pumping of mine water and its poor disposal, the production of coal washing slurry and its poor disposal and finally, the venting of methane gas to the atmosphere, rather than its capture and utilisation. These by-products of mining were never given due attention required in favour of the priority given to production of coal. The Business as Usual analyser was used to test a series of scenarios to see what combination of cost reductions can be made, such that the environmental expenditures of coal mining bring the production costs below the market price, for business projections for the period 2010 to 2030. The scenario that will provide such opportunities is based on making significant, well planned and programmed improvements that will allow lower costs to be incurred in disposal and management of the by-products that cause the environmental impact. If such a plan was implemented, the BaU analyser indicates that the Sector could become profitable within 5 to 7 years after its implementation. Coupled with the adoption of such a business plan, a complete transformation of the institutional framework would be a prerequisite. The Government made a good start in July 2010, by issuing a Programme for the Sector 2010-2014 in which institutional changes are mentioned, and by dissolving the Ministry of Coal in December 2010. However the next steps are not clear and therefore an appropriate institutional framework has also been recommended in this Report. The implementation of the business strategy mentioned above, coupled with the suggested institutional framework would enable Ukraine to move into a new era of sustainable coal production till 2030, with significant environmental gains achieved in the same period
