Energy Reforms: August 2016 review

This publication was prepared with the support of the European Union. The contents of this publication are the sole responsibility of NGO “DIXI GROUP”, as well as Civil Network “OPORA”, All-Ukrainian NGO “Energy Association of Ukraine”, Resource & Analysis Center “Society and Environment”, Association “European-Ukrainian Energy Agency”, and can under no circumstances be regarded as reflecting the position of the European Union.

The project “Enhancing impact of civil society in monitoring and policy dialogue on energy and related sectors’ reforms in line with the Association Agreement implementation” aims at strengthening the role of civil society in advocating reforms in the energy and related sectors.

The key objectives of the project are:

• monitoring of the implementation of the energy provisions of the Association Agreement, including relevant environmental and trade-related commitments;

• strengthening the civic experts’ and local actors’ capacity to track actual implementation of the reforms;

• facilitation of public dialog to lead in proper implementation of the European energy and environmental reforms;

• informing stakeholders and the Ukrainian society about the meaning and potential benefits of European reforms in energy and related sectors in order to empower them to keep the government accountable for pursuing these reforms.

www.enref.org

Executive Summary No significant changes took place in the gas sector during the past month, though, despite the setback, some obligations have already taken effect. In particular, a decision on restructuring Naftogaz of Ukraine was published which raised the issue of its execution.

The electricity sector is also waiting for the key legislative decisions, but is stuck with ongoing issues at the moment, such as challenges in the coal sector preceding the heating period, problems related to safety, and operation of nuclear power facilities.

The lack of action to drive activities in the energy efficiency sector, in particular the lack of comprehensive mechanisms to regulate activities of the Energy Efficiency Fund and approve its structure on a legislative basis, indicate no progress in fulfilling relevant commitments by Ukraine. In this context, the issues arising around the already adopted decisions, such as on the “warm” loans program, may threaten the trust to the government policy in this area.

The environment and renewable energy sector is still waiting for the adoption of strategic draft laws that are supposed to become key tools for the further activities. But this process became more dynamic due to the work to be done in this area. In particular, the State Environmental Policy Strategy needs to be improved and identify target indicators. This strategy must be developed on the principles of environmental policy established by the Association Agreement. Meanwhile, there’s a risk that renewable energy will, again, cease to be a priority for the executive authorities.

Ukraine made no significant achievements in the implementation of its commitments in the sector of oil and oil products either. Sa far, the preparatory work that is being done by the government has resulted in no particular decisions or completed tasks which could indicate any progress.

Some decisions were taken in the business climate sector that will facilitate the dialogue with public authorities and launch the necessary initiatives. However, no crucial laws have been adopted yet to lay the basis for the legislative framework meant to enable proper regulation and fight corruption in the sector.

August 2016 brought news about McKinsey & Company experts’ drafting of a new Energy Strategy, which raised concerns about compliance of the objectives and activities provided for by that document with Ukraine’s international commitments. A particular concern has to do, in particular, with the procedure of selecting companies to draft the strategy, taking account of the developed and discussed document “New Energy Strategy of Ukraine: Safety, Energy Efficiency, Competition”1, as well as the experience of the mentioned company in drafting the Updated Energy Strategy of Ukraine by 2030 for Azarov Government in 2013, which – in the opinion of many observers – promoted the business interests of one of the leading market players and contained a number of methodological and organizational shortcomings2.

Abbreviations

RES — renewable energy sources VRU — Verkhovna Rada of Ukraine GMS — gas metering station GDS — gas distribution system GTS — gas transmission system CMU — Cabinet of Ministers of Ukraine NERC — National Energy and Public Utilities Regulatory Commission

TPP — thermal power plant AA — Association Agreement CSNFSF — centralized spent nuclear fuel storage facility SNRIU — State Nuclear Regulatory Inspectorate of Ukraine SSTC NRS — State Scientific and Technical Centre for Nuclear and Radiation Safety SIR — sources of ionizing radiation

1 http://mpe.kmu.gov.ua/minugol/doccatalog/document?id=245032412 2 http://www.dy.nayka.com.ua/?op=1&z=863

Gas No significant progress was made in reforming the legal framework of the gas market in August (as the Parliament held no plenary sessions, no new draft laws were registered in this area). At the same time, the reporting forms for the NERC’s documenting the results of its market monitoring (including wholesale price monitoring) as provided for by the Law “On the Natural Gas Market” and other legislative acts have already become applicable.

August saw publishing of the text of the Naftogaz of Ukraine NJSC restructuring plan approved by the Government aiming to unbundle natural gas transition and storage (injection, withdrawal) functions. In the context of fulfilling commitments under the Third Energy Package, the decision on Naftogaz unbundling as such is a good step forward, however, the Package says nothing of depriving the NJSC of its dominant position on the gas market within the terms prescribed and approved by the Energy Community.

Once again, it showed ambiguity of Naftogaz’s position on the market — on the one hand, it’s an economic entity seeking maximum profits, on the other, it’s an instrument of the state influence on the industry aimed to serve the common interests. Thus, Naftogaz reduced gas prices for industrial consumers by 7.9% on September 1 (with 100% prepayment). At the same time, the Government obligated Naftogaz to accumulate 17 billion cubic meters of gas for the heating period by November 1 by introducing amendments to the Action Plan for preparing the fuel and energy sector for the 2016/2017 autumn/winter period regarding the particular volumes of gas to be injected for storage for the winter period.

NERC released four operators of gas distribution systems (GDS) from the requirements to GDS unbundling and independence provided for by Article 39(2) of the Law “On the Natural Gas Market”, and approved candidates for top officials of 36 GDS operators responsible for the monitoring of the implementation of programs aiming to ensure compliance with GDS operation safety standards.

A decision was taken on regular gas trade on the Ukrainian Gas Exchange (UGX). Therefore, Ukraine now has its first platform to arrange gas trade on conditions of guaranteed performance of stock exchange contracts.

Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (AA: Articles 338, 341, Annex XXVII) pursuant to Article 278 of the AA

According to experts3, Naftogaz restructuring plan4 published in August lacks a comprehensive vision of the gas reform in general and the Ukrainian GTS reform in particular. In fact, this plan suggests the creation of two new companies to manage the GTS and storage facilities, and sets in detail the relevant organizational procedures.

This plan postponed the term for the Government to commence the process of creation of the real competitive gas market in Ukraine by at least 30 days of the effective date of the decision of the Stockholm Chamber of Commerce in the case between Naftogaz and Gazprom. Considering the total amount of the

3 http://www.epravda.com.ua/rus/columns/2016/07/2/597900/; http://gazeta.zn.ua/energy_market/eto-ne-restrukturizaciya-naftogaza-a-likvidaciya-ukrtransgaza-_.html; http://www.epravda.com.ua/columns/2016/07/7/598119/; http://ua-energy.org/post/62357; http://gazeta.zn.ua/energy_market/kak-delyat-ukrainskuyu-gts-ili-unbundling-3-_.html

4 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249240258

Gas claim in this case — unprecedented for the Stockholm Chamber of Commerce — (which exceeds USD 65 billion5), it seems impossible, in our opinion, to predict this date at all.

The approved Naftogaz unbundling measures do not comply not only with the Naftogaz restructuring terms agreed on by the Government and the Energy Community (which, as a matter of fact, have been postponed for an indefinite period) but also with a number of provisions.

Thus, according to this plan, the new companies will be not only gas transmission and storage operators, but concessioners, and this requires amendments into the legislation. In addition to the failure to demonopolize the market which, first of all, will slow down the development of competition in this price segment, negative implications for the market operation will be caused by incapability of unrestructured Naftogaz to provide for the full compliance with the legislative requirements, the gas transmission network in the first place.

Based on Article 39(7) of the Law “On the Natural Gas Market”, the NERC released four gas distribution system operators providing their services to at least 100,000 connected consumers, from the requirements to GDS unbundling and independence (Ordinance of 17 August 2016 No. 15-р6).

The exchange committee of the commodity exchange Ukrainian Gas Exchange decided on holding regular e-trade in gas contained in Ukrtransgaz’s underground storage facilities with the participation of Tsentralnyi Gazovyi Kontragent (Central Gas Counteragent) LLC since August 4 each business day, except Friday, during the period from the 1st till the 25th of each month7. UGX is the first and, so far, only platform for natural gas exchange trade in Ukraine. This platform enables the parties in the trading process to receive up-to-date information about the gas market and observe the market dynamics in real time.

Pursuant to the provisions of the Law “On the Natural Gas Market” and p. 11, Section V of the Rules of Natural Gas Supply approved by the Resolution of the NERC of 30 September 2015 No. 2496, the NERC conducted a monitoring of prices for natural gas for all categories of consumers in Ukraine8 and reported on the maximum price in July 2016 for consumers not covered by provisions on special obligations (UAH 8,135.52 for one thousand cubic meters, inclusive of VAT).

On August 23, the Forms for reporting the results of monitoring of the natural gas market approved by the Resolution of the NERC of 07 July 2016 No. 12349 became applicable. These reporting forms must be submitted by gas market entities entrusted with the special obligations to serve common interests in the process of the market operation (Forms 1, 2 and 3), wholesale gas sellers (Form 4 — Report on natural gas wholesale prices) and gas suppliers (Form 5).

Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 (AA: Articles 338, 341, Annex XXVII) pursuant to Article 278 of the AA, trade-related issues (Articles 269–274 of the AA)

On August 8, Ukrtransgaz received a request from Gazprom10 to increase gas transmission to European consumers by 20% — up to 275 million cubic meters per day in connection with the repairs of the Nord 5 https://www.facebook.com/NaftogazUA/posts/1087020708044380

6 http://www.nerc.gov.ua/?id=21059 7 http://ugx.com.ua/files/documents/%D0%9F%D1%80%D0%BE%D1%82%D0%BE%D0%BA%D0%BE%D0%BB%20%D0%91%D0%9A%2015.pdf

8 http://www.nerc.gov.ua/?news=5326

9 http://www.nerc.gov.ua/index.php?id=21057

10 http://utg.ua/utg/media/news/2016/08/ukrana-zabezpechit-zblshenu-zayavku-gazpromu-na-umovax-kontraktu.html

Gas Stream system of gas pipelines. The press service of the Ukrainian GTS operator declared its readiness to satisfy Gazprom’s request to increase gas transit to Europe provided the Russian party fulfils its contractual obligations, in particular in terms of securing threshold pressures at the border gas metering stations (GMS) located in the territory of the Russian Federation.

Mr. Koboliev, the Head of Naftogaz, ruled out the possibility of supplying Russian gas in Ukraine in Q3 201611. In his interview on August 18, he mentioned that Gazprom had refused to sign an additional agreement required to enable such supplies. In the opinion of Naftogaz’s representatives, such refusal is a symptom of “unfriendly and non-commercial policy” that can change only after the resolution of the arbitration procedure between Naftogaz and Gazprom in Stockholm.

Also, Naftogaz reported on Gazprom’s regular violations of the terms and conditions of securing minimum threshold gas pressure at points of connection to the Ukrainian GTS provided for by the transit contract12. The last significant pressure drop was registered on August 22 at Sudzha GMS — the pressure in the Russian GTS at this key entrance point was 53.5 atm, with the minimum threshold value of 60.0 atm. In late July, Naftogaz addressed the European Commission and the Secretariat of the Energy Community with the request to consider a possibility to create a monitoring mission to investigate similar events of significant pressure drops at the entrance to the Ukrainian GTS, and is now waiting for a response.

Directive 2004/67/EC concerning measures to safeguard security of natural gas supply (AA: Articles 338, 341, Annex XXVII), early warning mechanism (Annex XXVI to the AA), emergency response (Articles 275, 276, 309, 314)

Pursuant to Article 39(5) of the Law “On the Natural Gas Market” relating to obligating a gas distribution operator to develop and implement a compliance program to provide for measures aiming at ensuring reliable and safe GDS operation, the NERC approved candidates for top officials of 36 GDS operators responsible for the monitoring of the implementation of compliance programs at these companies (Ordinance of 18 August 2016 No. 17-р13).

According to the press release of August 2514, the State Property Fund of Ukraine asked the Energy Security Secretariat to assess its proposals for the Government to impose special obligations on Naftogaz of Ukraine NJSC to secure uninterrupted supply of up to 300 million cubic meters of natural gas to Odesa Port Plant (OPP) during the period from 1 August 2016 till 31 December 2016. The Secretariat concluded that the introduction of such amendments to the Resolution of the Cabinet of Ministers of 01 October 2015 No. 758 is possible given: 1) the period of this obligation ends on 31 December 2016; 2) the amendments include a compulsory guarantee of payment for the gas supplies and detail the sources of payment (all supplies to be made at market prices not regulated by the state); 3) reporting to the Energy Community once every two months on the fulfilment of this obligation providing the proofs of payment by OPP for the gas supplied by Naftogaz. As of today, OPP refused from consumption of natural gas15 — according to Ukrtransgaz, its counterparty has no confirmed bookings for August 2016 and violated the gas transmission agreement in terms of advance payments for the transmission services.

11 http://www.naftogaz.com/www/3/nakweb.nsf/0/A98530DCF6ECE834C22580140028D280?OpenDocument&year=2016&month=08&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&

12 http://www.naftogaz.com/www/3/nakweb.nsf/0/1A828DDEEF80631BC2258017005F4781?OpenDocument&year=2016&month=08&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&

13 http://www.nerc.gov.ua/?id=21060 14 https://www.energy-community.org/portal/page/portal/ENC_HOME/NEWS/News_Details?p_new_id=13223 15 http://utg.ua/utg/media/news/2016/08/opz-samostjno-pripiniv-spozhivannya-prirodnogo-gazu.html

Gas On August 22, Naftogaz announced gas price reduction since 1 September 2016 for industrial consumers16 by UAH 519.6/thousand cubic meters, or 7.9%, as compared to the August 2016 price. This decision shows that instead of injecting the necessary gas supplies into the underground storage facilities (for the 2016–2017 winter period), the NJSC seeks bigger proceeds from gas sale. Hence, this decision was criticized by experts17.

According to the up-to-date information provided by Ukrtransgaz, storage facilities contained over 12 billion cubic meters of gas as of August 28.18 Naftogaz planned on accumulating 14.5 billion cubic meters of gas before the heating season19, which, according to expert estimations, would not suffice to guarantee safe heating period when temperature is low, as compared to the previous winter period. The Government’s decision of August 31 that obligated Naftogaz to accumulate 17 billion cubic meters of gas before November 120 proved these estimations correct.

DEVELOPMENTS IN THE EU LEGAL FRAMEWORK

Gas

In June, the European Commission carried out unannounced inspections21 of companies active in the supply and transport of natural gas in Romania. These inspections were carried out within the framework of investigation of potential anticompetitive practices aimed at hindering natural gas exports from Romania to other Member States.

Meanwhile, in July the European Commission has released German energy firm E.ON from commitments to reduce long-term bookings on the German gas grid22. E.ON was reported to have actually booked significantly less capacity than the threshold of 54% of total capacity which allowed the development of competition in the market.

Gas, Electricity and Nuclear Security

July 18 saw the commencement of consultation on the establishment of the annual priority lists for the development of network codes and guidelines for 2017 and beyond23. The objective of this consultation that will last by 14 October is to establish the priorities in accordance with Regulation (EC) No. 714/2009 (“the Electricity Regulation”) and Regulation (EC) No. 715/2009 (“the Gas Regulation”).

16 http://www.naftogaz.com/www/3/nakweb.nsf/0/3419A207E56FA699C22580170024C691?OpenDocument&year=2016&month=08&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&

17 http://www.segodnya.ua/opinion/zakrevskiycolumn/gazovaya-deflyaciya-706870.html

18 http://utg.ua/utg/business-info/live.html 19 http://www.naftogaz.com/www/3/nakweb.nsf/0/8E0598F7F98B81CEC2257FFD0050FE6E?OpenDocument&year=2016&month=07&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&

20 http://195.78.68.90/4a1a2b23/docs/d19eaccf/Proekt_rozporyadzhennya.pdf 21 http://europa.eu/rapid/press-release_STATEMENT-16-2133_en.htm 22 http://europa.eu/rapid/press-release_IP-16-2646_en.htm 23 https://ec.europa.eu/energy/en/consultations/consultation-establishment-annual-priority-lists-development-network-codes-and-0

Gas

Security of Supply

In June, the Council of the European Union approved the key principles to lay the basis for drafting the Decision on establishing an information exchange mechanism with regard to intergovernmental agreements and non-binding instruments between Member States and third countries in the field of energy24. This document is one of the cornerstones of the implementation of the Energy Union Strategy. According to the compromise achieved, the European Commission should assess intergovernmental gas agreements before their signature; other types of agreements may be assessed if so requested by EU Member States.

On June 30, the European Commission announced the second Connecting Europe Facility (CEF) call for proposals25 making EUR 600 million of funding available to finance cross-border energy infrastructure projects of common interest. Meanwhile, within the framework of the first call in July, EU Member States supported 9 projects amounting to EUR 263 million26.

On August 17, the European Commission published the updated EU Reference Scenario 201627. This is an advisory document that suggests forecast and key trends in the areas of energy, transport and climate in the EU until 2050.

24 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52016PC0053 25 https://ec.europa.eu/inea/en/connecting-europe-facility/cef-energy/calls/second-2016-cef-energy-call-proposals-cef-energy-2016-2 26 https://ec.europa.eu/energy/en/news/eu-invests-263-million-euros-energy-infrastructure 27 https://ec.europa.eu/energy/sites/ener/files/documents/REF2016_report_FINAL-web.pdf

Electricity and Nuclear Security Due to the Parliament recess, the work on the draft Laws “On the Electricity Market of Ukraine” (No. 4493) and “On the National Energy and Public Utilities Regulatory Commission” (No. 2966-д) was adjourned until autumn. The key stakeholders made no strategic decision. However, the work on improving the laws regulating the issues of electricity metering, transition to area tariffs went on. The Government of Ukraine focused on settling the issue of diversifying supplies of nuclear materials and nuclear fuel with the view to meeting the needs of Ukrainian NPPs. As a result, a series of international agreements and arrangements were made in August. The President of Ukraine signed the Law regulating the legal regime of territories affected by the Chornobyl accident that creates conditions for allocating lands within the exclusion zone for the construction of the CSNFSF. The Ministry of Finance allocated UAH 200 million to pay the arrears in miner salaries. However, the problem has not been settled once and for all, as it’s waiting for the approval by the Parliament Committee on Budget. Regulation (EC) No. 714/2009 of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No. 1228/2003 (AA: Article 270, 271, Chapter 11, Title IV) Ukrenergo National Energy Company, State Enterprise, as a system operator of the Unified Energy System, published a report on the progress in the implementation of the Investment Program in H1 201628, the financial statement for this period29 and the full 2015 financial statement30. These financial statements were audited by Deloitte & Touche USC PrJSC.

In H1 2016, with only partial payment for its services (79.32%), the company’s foregone revenues amounted to UAH 579.955 million (exclusive of VAT), or 20.68%, of the total cost of the services it had provided. Capital investments (payments) in the development of major networks in H1 2016 amounted to UAH 2,329.834 million (exclusive of VAT), which by UAH 1,007.368 million exceeds the previous year’s H1 result.

On August 22, a 40-minute threshold frequency drop down to 49.61 Hz was registered in the UES of Ukraine operating in parallel with the UESs of Russia, Belarus and Baltic countries. It was caused by an accident in Russia’s UES. While Ukraine’s UES operated in the design mode.31

On August 25, Ukrenergo’s draft 2017 Investment Program was published.32

Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (AA: Article 273, Chapter 11, Title IV) As of August 31, the Parliament’s agenda has not yet been approved. So when the draft Laws “On the Electricity Market of Ukraine” (No. 4493) and “On the National Energy and Public Utilities Regulatory Commission” (No. 2966-д) will be considered will be clear only in September.

On August 5, the NERC published the improved draft Resolution “On approval of the Amendments to the Procedure of approval and adjustment of the investment component of the electricity tariff”.33 In the 28 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=2912 29 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=2919 30 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=2945 31 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=2995 32 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=2996

Electricity and Nuclear Security opinion of the Commission, this Resolution should help increase the efficiency of using financial resources by optimizing tariffs for the electricity sold on the WEM by producers in a bidding process due to optimizing, in its turn, the investment component approved for TPP reconstruction projects.

On August 8, the NERC published the draft Resolution “On approval of amendments to the Procedure of calculating payments to current accounts of suppliers of electricity at a regulated tariff and to the special current account of the wholesale electricity supplier”34. In the opinion of the Commission, these amendments will encourage energy supplying companies to improve calculations for the electricity bought on the wholesale market.

On August 15, the NERC’s draft Resolution “On the introduction of amendments to the Procedure of establishing the regulatory asset base for natural monopolies in the electricity sector” was published which provides for a reduced term for beneficial use of assets (depreciation period) existing as of the date of transition to incentive-based regulation, i.e. from 30 to 13 years.35 In the opinion of the regulator, this will allow the increase in the cost of depreciation that is included in the tariff for electricity transmission via local electricity networks and for electricity supply at a regulated tariff, and therefore, the increase in depreciation as a source of financing investment programs, as well as the creation of conditions for a significant improvement of technical condition of electricity networks which will facilitate the improvement of energy supply.

During the Government meeting on August 23, Prime Minister Volodymyr Groysman entrusted Vice Prime Minister Volodymyr Kistion and Head of the NERC Dmytro Vovk with drafting, by September 1, a resolution of the NERC simplifying the procedure of connection to networks and allowing a standard connection of up to 5 MW in addition to the basic 160 kW.36

On August 29, the NERC approved the draft Resolution “On approval of the Procedure of ensuring compliance with electricity supply service quality standards” that introduced the mechanism of compensations to consumers in case of receipt of poor-quality services from energy companies. In the opinion of the NERC, this will enable consumer protection and encourage license holders to improve commercial quality of their services37.

The Commission also reported on simplifying conditions for installing area domestic meters. From now on, consumers may choose and buy meters at their own discretion, and regional energy companies must install them shortly.

Article 338, Chapter 1, Title V of the EU–Ukraine Association Agreement Cooperation Agreements with IFIs On August 11, Ihor Nasalyk, Minister of Energy and Coal Industry of Ukraine, met with Janez Kopač, Director of the Energy Community Secretariat. The other participants in the meeting included Dmytro Vovk, Head of the NERC, Iurii Vitrenko, Director for Business Development at Naftogaz of Ukraine NJSC, Serhii Savchuk, Head of the State Agency on Energy Efficiency and Energy Saving, and representatives of the Ministry of Energy and Coal Industry of Ukraine. The parties discussed a possibility of providing technical assistance to Ukraine within the framework of a new regional program of the European Commission (EU4 Energy) that

33 http://www.nerc.gov.ua/index.php?news=5300 34 http://www.nerc.gov.ua/?id=20908 35 http://www.nerc.gov.ua/index.php?news=5324 36 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249256324&cat_id=244276429 37 http://www.nerc.gov.ua/?news=5360

Electricity and Nuclear Security offers possible cooperation in the areas of electricity, oil and gas, as well as preparing the basis for energy saving and energy efficiency projects38.

On August 11, Ivanna Klympush-Tsyntsadze, Vice Prime Minister for European and Euro-Atlantic Integration, held a meeting with the Director of the NATO Energy Security Centre of Excellence. The parties discussed the key areas and plans for cooperation in 2017. Marius Janukonis, Ambassador of the Republic of Lithuania to Ukraine, also took part in the meeting.39

Article 339, Chapter 1, Title V of the EU–Ukraine Association Agreement, coal market When reporting on his first 10 days of work as Minister, Mr. Nasalyk mentioned that his Ministry particularly focused on the coal industry, resulting in drafting the Resolution of the Cabinet of Ministers on the creation of the coal market in Ukraine40. A concept of the coal industry reform and a relevant detail action plan were developed. This concept suggests liquidation of 11 mines41, putting up 17–18 mines for privatization, and keeping the highly profitable as state property. Closed mines will receive subventions to create new jobs for the laid-off miners. Also, according to the Minister, transition of TPPs to gas coal is in progress. In addition, the Ministry suggests modernization of generating companies and procurement of imported anthracite to reduce dependence of TPPs on the ATO zone and supplies of anthracite coal. According to Ukrenergo National Energy Company, as of August 31, coal supplies available at warehouses of energy generating companies’ TPPs reached 913.4 thousand tons, including 359 thousand tons of anthracite42, which, in the expert opinion, is critically insufficient.

During his meeting with trade unions, Mr. Nasalyk spoke of the measures taken by the Ministry of Energy and Coal Industry to arrange salary payments, such as increase in coal price up to UAH 1,370 since August, re-allocation of the Ministry’s budget expenditures, support of the draft Law of Ukraine “On the Introduction of Amendments to the Law of Ukraine “On the State Budget of Ukraine for 2016” (No. 4744 of 01 June 2016), as well as scheduling particular payment days under the industry agreement43. On August 10, pursuant to the Ordinance of the Government No. 537-р of 27 July 2016, the Ministry of Finance of Ukraine allocated UAH 200 million to pay arrears in and current salaries to Ukrainian miners. However, the actual pay-out requires the approval of the Parliament Committee on Budget44.

The Ministry of Energy and Coal Industry of Ukraine is planning on allocating UAH 25,287 billion for the purposes of restructuring of state-owned coal-mining companies under the coal industry reform program, of which UAH 10.572 billion will be allocated from the stage budget45.

Article 342, Chapter 1, Title V of the EU–Ukraine Association Agreement, cooperation in the nuclear safety sector, Directive 96/29/Euratom, Council Directive 2006/117/Euratom, Council Directive 2003/122/Euratom To diversify supplies of nuclear materials and nuclear fuel to meet the needs of Ukrainian NPPs, Ukraine made an agreement with American Westinghouse in August on increasing fuel supplies46 and a future

38 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245137251&cat_id=35109 39 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249250265&cat_id=244276429 40 http://www.ukrinform.ua/rubric-economics/2061865-minenergo-pidgotuvalo-postanovu-pro-stvorenna-rinku-vugilla.html 41 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245133420&cat_id=35109 42 http://www.ukrenergo.energy.gov.ua/Pages/ua/DetailsNew.aspx?nID=3013&urlNews=/pages/ua/ipsoperation.aspx 43 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245134213&cat_id=35109 44 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245134494&cat_id=35109 45http://economics.unian.ua/energetics/1493931-minenergovugillya-hoche-reformuvati-derjshahti-za-25-milyardiv.html

Electricity and Nuclear Security construction of nuclear fuel production plant in Ukraine47. Also, on August 18, URENCO — a company owned by the UK, Germany and the Netherlands, and Energoatom National Nuclear Energy Generating Company signed a supply agreement for enriched uranium. The uranium to be supplied under that agreement will be used to produce nuclear fuel for Ukrainian NPPs on the basis of Westinghouse’s production facilities in Sweden48.

On August 18, the Ministry of Energy and Coal Industry of Ukraine agreed with the Ministry of Energy of Kazakhstan and Kazatomprom National Atomic Company to create a joint venture for the purpose of uranium mining in both countries. According to Minister Nasalyk, Kazakhstan also invited Ukraine to join the project of construction of a plant producing fuel assemblies for NPPs that could become an alternative to Russian fuel elements49.

On August 31, Energoatom National Nuclear Energy Generating Company and Korea Hydro & Nuclear Power (KHNP) signed a Memorandum of Understanding to expand cooperation in the nuclear energy sector. The main areas of cooperation will be completion of units 3 and 4 of Khmelnytskyi NPP and the project “Energy Bridge Ukraine — European Union”50.

Within the framework of examining a possibility of continuing operation of units 1 and 2 of Zaporizhzhia NPP beyond the project, the SNRIU checked preparedness of these units for the further operation till December 2015 and 201651. Pursuant to the Aarhus Convention, the SNRIU holds public hearings during the period from August 8 till September 18 to discuss a possibility to extend the period of operation of units 1 and 2 of Zaporizhzhia NPP.52

Within the framework of the Comprehensive (Consolidated) program for enhancing safety of NPP units, Khmelnytskyi NPP commenced the introduction of a comprehensive system of diagnosing the reactor plant at unit 1 in August.53

Experts of the SSTC NRS (State Scientific and Technical Centre for Nuclear and Radiation Safety) and the SNRIU, with the support of the Norwegian Radiation Protection Authority (NRPA) developed new regulatory requirements to radiation safety in medicine. These provisions set out general requirements to radiation safety of SIR (sources of ionizing radiation) for medical uses, radiation protection of personnel and patients, prevention of incidental or accidental medical exposure to radiation54.

Article 342, Chapter 1, Title V of the EU–Ukraine Association Agreement, cooperation in the nuclear safety sector. Cooperation aims at resolving problems caused by the Chornobyl accident and putting Chornobyl NPP out of operation

On August 1, the President of Ukraine signed the Law “On the Introduction of Amendments to Certain Legislative Acts of Ukraine Regarding the Regulation of Particular Aspects of the Legal Regime of Territories

46 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245133420&cat_id=35109 47 http://ua.interfax.com.ua/news/general/361940.html 48 http://www.energoatom.kiev.ua/ua/press/nngc/45743-energoatom_ta_urenco_uklali_ugodu_pro_postachannya_zbagachenogo_uranu__/ 49 http://www.epravda.com.ua/news/2016/08/31/603868/ 50 http://www.energoatom.kiev.ua/ua/press/nngc/45785-energoatom_ta_koreyiska_khnp_pdpisali_memorandum_pro_vzamorozumnnya_v_galuz_atomno_energetiki/ 51 http://www.energoatom.kiev.ua/ua/press/nngc/45679-derjatomregulyuvannya_provela_perevrku_energobloka__zaporzko_aes_na_gotovnst_do_prodovjennya_termnu_ekspluatatc/ 52http://www.snrc.gov.ua/nuclear/uk/publish/article/331335;jsessionid=ECA074BA86AC2C51763F7989B89D7A0B.app1 53 http://www.energoatom.kiev.ua/ua/press/nngc/45764-hmelnitcka_aes_rozpochala_vprovadjennya_kompleksno_sistemi_dagnostiki_reaktorno_ustanovki_na_energoblotc_/ 54 http://www.snrc.gov.ua/nuclear/uk/publish/article/331810;jsessionid=ECA074BA86AC2C51763F7989B89D7A0B.app1

Electricity and Nuclear Security Affected by the Chornobyl Accident” that creates conditions for allocating lands within the exclusion zone for the construction of the CSNFSF. This Law came into force on 4 August 201655. At the same time, the Decree of the President of Ukraine “On establishing Chornobyl Radiation and Environmental Biosphere Reserve” No. 174 of 26 April 2016 came into force that aims to facilitate preservation of the most typical natural habitats of Polissia region, provide support to and enhance the barrier function of the zones of exclusion and unconditional (compulsory) resettlement, ensure stabilization of the hydrological regime and rehabilitation of territories contaminated with radionuclides, facilitate the organization and conducting of international scientific research56.

DEVELOPMENTS IN THE EU LEGAL FRAMEWORK

On July 18, the European Commission (DG Energy) commenced the annual consultation with stakeholders pursuant to Article 6(1) of Regulation (EC) No. 714/2009 to identify areas to be covered by network codes. The consultation will last until 14 October 2016.

55 http://www.energoatom.kiev.ua/ua/press/nnegc/45688-prezident_pdpisav_zakon_yakiyi_dozvolit_vidliti_zemlyu_v_zon_vdchujennya_pd_shovische_vdpratcovanogo_yadernogo_paliva/ 56 http://dazv.gov.ua/novini-ta-media/vsi-novyny/glava-derzhavi-pidpisav-zakon-shchodo-vregulyuvannya-pitan-pravovogo-rezhimu-teritoriji-zabrudnenoji-vid-chornobilskoji-katastrofi.html

Energy Efficiency and Social Issues Despite the importance of and the need for reforms in the area of energy saving and energy efficiency, Ukraine, unfortunately, made no significant strategic steps towards fulfilling its commitments to the EU in August. On the other hand, the statements of Minister Zubko regarding the measures aimed at achieving the declared objectives of the reform in terms of allocating UAH 100 million for “warm” credits for natural persons, as well as regarding the creation of the Energy Efficiency Fund are rather premature. According to experts, additional funds amounting to UAH 100 million that were allocated pursuant to a relevant resolution in July still remain unavailable due to lack of coordination in terms of the origin of those funds. The approved Concept of the introduction of mechanisms of sustainable financing of energy efficiency measures (establishing the Energy Efficiency Fund), as was already mentioned earlier, needs significant improvements. Moreover, a relevant resolution obligated the Ministry of Regional Development to draft an action plan for the implementation of the Concept within a one-month period. But according to information from unofficial sources, the document probably has not been drafted yet, which, however, doesn’t mean that no simultaneous work was performed for the implementation of particular measures, e.g. drafting a specific law. In addition, the approved Concept provides for no clear mechanism of operation of the Fund, which raises questions about the intentions of the Government and the line Ministry with regard to achieving the above-mentioned objectives. Therefore, preparations for the full-scale implementation of energy efficiency measures in Ukraine are very inefficient, as the three-year efforts of the public authorities resulted in nothing but a mere concept of which the implementation remains impossible because of the lack of a clear action plan. Directive 2012/27/EU on energy efficiency The 2016 working plan of the Ministry of Regional Development provides for the development of a number of regulatory and legal acts aiming at the implementation of measures to meet the requirements of the European Union in the area of energy efficiency. According to unofficial information, the draft Resolution of the Cabinet of Ministers of Ukraine “On approval of the Action Plan for the introduction of comprehensive energy management in state-financed institutions” is now being agreed on with all stakeholders. This document will create conditions for ensuring rational use of energy resources and facilitate the reduction of budget expenditures.57

At the same time, the adoption of framework laws is being postponed without which drafting of regulatory acts of executive bodies may happen to be premature. Vice Prime Minister Hennadii Zubko expressed his hope that the whole complex of amendments to the legislation, including the Tax and the Budget Codes, the Law “On Investment Activities”, as well as new laws, in particular on the Energy Efficiency Fund, on the energy efficiency of buildings and commercial accounting will be adopted by the end of this year.58

Meanwhile, the process of development of specific mechanisms and operational procedure for the Energy Efficiency Fund which is the cornerstone of the Government’s policy in this sector, is far from being finalized. This is also suggested by the general form of the relevant concept approved by the Cabinet of Ministers earlier and the recent statement of Vice Prime Minister Zubko about lack of a clear vision of even basic elements of financing the Fund.59

57 http://www.minregion.gov.ua/gromadska-priymalnya/public-links/plan-roboti-minregionu-z-vikonannya-planu-diy-kabinetu-ministriv-ukrayini-na-2016-rik/plan-roboti-ministerstva-regionalnogo-rozvitku-budivnitstva-ta-zhitlovo-komunalnogo-gospodarstva-ukrayini-z-vikonannya-planu-diy-kabinetu-ministriv-ukrayini-na-2016-rik/ 58 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249229285&cat_id=244276429 59 http://www.bbc.com/ukrainian/business/2016/08/160805_zubko_int_az

Energy Efficiency and Social Issues At the same time, the Law of Ukraine “On Public Procurement” became fully effective on 1 August 2016 and repealed the previous specific law which made procurement of energy services impossible. This effectively removed the largest regulatory barrier to mass engaging of commercial contractors in the energy modernization of buildings of state-financed institutions and other buildings owned mostly by the state or community.60 Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products According to unofficial information, despite the fact that the Ministry of Justice of Ukraine presented its opinion on the draft technical regulations developed by the State Agency on Energy Efficiency and Energy Saving of Ukraine, as was mentioned in the July monitoring report, a month later these drafts that were supposed to be submitted to the Government see no progress. Social issues On August 23, the Government approved the Resolution No. 534 “Certain issues of providing subsidies to compensate the cost of the services of district heating (heat supply) and individual gas, electricity supply and heating”. This is supposed to settle the issue of calculation and return to the state budget of unused subsidies granted to compensate the cost of services of district and individual heating (heat supply).61

This Resolution was approved despite certain criticism on the part of the stakeholders.62 In addition to the troubled practical implementation, another reason for this criticism was groundless exclusion of structural subdivisions dealing with social protection from the process of refunding of excessive subsidies. As these authorities were released from the responsibility for making calculations, correct calculations of unused funds will now be the responsibility of provider of utility services that made initial calculations. During the intragovernmental discussion of these amendments, some specialists expressed an opinion that the new calculation procedure is in contrast with the legislation, as the issue of responsibility is subject to legislative regulation only.

In addition, this solution suggesting refunding of unused subsidies does not go in line with statements by Vice Prime Minister Hennadii Zubko who, once again, announced the introduction of measures to monetize the unused portion of subsidies.63

60 http://zakon3.rada.gov.ua/laws/show/922-19/print1464095033695015 61 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249259024&cat_id=244274160 62 http://www.auc.org.ua/news/uryad-zatverdiv-poryadok-rozrakhunku-ta-povernennya-do-byudzhetu-nevikoristanikh-sum-subsidii 63 http://jkg-portal.com.ua/ua/publication/one/zubko-subsidji-treba-perevoditi-v-nvesticji-u-jenergojefektivnst-47550

Energy Efficiency and Social Issues

DEVELOPMENTS IN THE EU LEGAL FRAMEWORK

Energy performance of buildings. The European Commission published a report on the progress by Member States in reaching cost-optimal levels of minimum energy performance requirements64. This report reviews progress achieved by Member States in reaching cost-optimal levels of minimum energy performance requirements for new and existing buildings, and also for building elements. It fulfils the obligation upon the Commission to report to the European Parliament and the Council on the use of the delegated powers referred to in Article 5(4) and Article 23 of Directive 2010/31/EU on the energy performance of buildings. This report also informs the ongoing review of the Directive, which is an action point of the Energy Union framework strategy.

The Energy Efficiency Directive and the Energy Performance of Buildings Directive (EPBD), including the Smart Financing for Smart Buildings initiative, are to be revised. The current plan suggests that the amendments to those documents will be discussed and approved in Q4 2016. At the same time, the new version of the Memorandum of Understanding regarding the enhanced strategic partnership with Ukraine that was supposed to be approved in Q3 2016 is still waiting for approval.

According to the new report of the Joint Research Centre (JRC)65, efficiency of using energy (which is the basis for smart networks, e-mobility and wind power technologies) is a key priority identified by regions and countries in strategies for S3P-Energy in all EU Member States and regions thereof.

64 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2016:464:FIN 65 https://ec.europa.eu/jrc/publication/eur-scientific-and-technical-research-reports/mapping-regional-energy-interests-s3p-energy

Environment and Renewable Energy Sources The Ministry of Ecology and Natural Resources once again published the draft law introducing amendments to the Law of Ukraine “On Basic Principles (Strategy) of the State Environmental Policy of Ukraine until 2020” for public discussion. The strategy of the state environmental policy must be the key strategic document guiding the implementation of the environmental policy, including the implementation of the Association Agreement in terms of adaptation of legislation and other environment-related provisions. That is why the strategy needs significant improvements. In particular, it must include target indicators for all the set objectives and the principles of the EU environmental legislation laid down in the Association Agreement. Two important draft Laws — on environmental impact assessment and on strategic environmental assessment — are being prepared for the second reading. Given proper improvements, these Laws will become important instruments of the Ukrainian environmental policy and mark the first step towards the implementation of the EU horizontal environmental legislation under the Association Agreement between the EU and Ukraine. When reporting on his first 100 days of work as the Minister of Energy, Ihor Nasalyk named the short-term priorities for the Ministry. Boosting the development of renewable energy was not among them. Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (codification) (Article 363 of the AA) On 12 July 2016, the Parliament approved the draft Law of Ukraine “On Environmental Impact Assessment” (reg. No. 2009а-д) in the first reading.66 The document is now being prepared for the second reading. According to the Parliament Committee on Environmental Policy, Nature Resources Utilization and Elimination of the Consequences of Chornobyl Catastrophe, MPs and the Confederation of Builders of Ukraine presented a large number of comments and proposals to this draft Law.67 Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment (Article 363 of the AA) On 12 July 2016, the Parliament approved the draft Law of Ukraine “On Strategic Environmental Assessment” (reg. No. 3259) in the first reading.68 The document is now being prepared for the second reading. According to the Parliament Committee on Environmental Policy, Nature Resources Utilization and Elimination of the Consequences of Chornobyl Catastrophe, MPs have already presented their comments and proposals to this draft Law.69 The Committee itself, when preparing this draft Law for the first reading, emphasized, in particular, on the need to clarify and harmonize the terms used, define and clarify the key notions (strategic environmental assessment, report on strategic environmental assessment, customer, public discussion, public hearings), specify the procedure of the SEA, etc. Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (Article 338 of the AA) When reporting on his first 100 days of work as the Minister of Energy and speaking of prospects for the fuel and energy sector, Ihor Nasalyk said that the optimal structure of energy generation for Ukraine’s economic development and satisfactory environmental situation would be 70% of nuclear energy and 30% of hydro energy. He added that Ukraine cannot lag behind Europe, so the future target objective will be

66http://zakon3.rada.gov.ua/laws/show/1449-19 67http://iportal.rada.gov.ua/news/Novyny/133730.html 68http://zakon5.rada.gov.ua/laws/show/1450-19 69http://iportal.rada.gov.ua/news/Novyny/133790.html

Environment and Renewable Energy Sources achieving a 60% share of nuclear energy and a 15.5% share of hydro energy in the country’s energy balance by 2026, which has been approved by the Ordinance of the Government No. 552-р of 13 July 2016. Meanwhile, following the participation of Ukraine’s delegation in the VIII Ministerial conference Environment for Europe (Batumi, Georgia), an interdepartmental working group is now being created to facilitate the introduction of “green” economy principles in Ukraine. The Ministry of Ecology invites all interested NGOs to join this group.

DEVELOPMENTS IN THE EU LEGAL FRAMEWORK

Directive 1999/32/ЕС relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC, as amended by the Regulation (EC) No. 1882/2003 and Directive 2005/33/EC

Directive (EU) 2016/802 of the European Parliament and of the Council relating to a reduction in the sulphur content of certain liquid fuels (codification) was adopted on 11 May 2016 and published in the Official Journal of the European Union on 21 May 2016. The text of this Directive isn’t new, but only codifies the previous version thereof, as amended.

The text of this Directive in the EU official languages is available here: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2016.132.01.0058.01.ENG#ntr3-L_2016132EN.01005801-E0003

Oil During the reporting period, the Government’s activity in the oil sector was focused on the analysis of possibilities of expanding the oil depot that may be used to store oil and oil products, diversify oil sources, suppliers, transportation routes and transport methods and update the procedures of granting rights to use the subsoil pursuant to Ukraine’s international commitments.

Unfortunately, most statements by top officials of executive bodies relating to the implementation of the oil-related provisions of the Association Agreement show that they tend to present the products of the state policy (conducting negotiations, establishing working groups, signing agreements of intend) as the results thereof (settling problems in the sector).

Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products (Article 338 of the AA) According to p. 4 and 5 of Section 1.2 of the Plan for the implementation of this Directive, the Ministry of Energy and Coal Industry of Ukraine undertook to construct additional tanks for the storage of minimum stocks of crude oil and/or petroleum products70. Within the framework of this activity, according to Mr. Havrylenko, General Director of Ukrtransnafta PJSC, 2016 is going to see construction of two tanks for the storage of oil with the capacity of 50,000 tons each71. However, the only known plan in this area is 21-month construction of a vertical steel tank with floating roof РВСПП-50 000 in the village of Smilne, Brody Raion, Lviv Oblast, with the capacity of 50,000 cubic meters of oil72. In addition, as the mentioned oil tank will replace the four tanks put out of operation earlier, the state oil depot capacity will increase only by 10,000 (not 100,000) cubic meters. Council Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity(Annex XXVIII, Article 353 of the AA)

Pursuant to Ukraine’s commitments, the taxes applied to motor fuels should be increased at least up to EUR 359, 330 per 1,000 l and EUR 125 per 1,000 kg for unleaded petrol, diesel fuel and liquid petroleum gas, respectively. These provisions will be implemented gradually73.

On 23 August 2016, the Government approved the submission of the draft amendments to the Tax Code of Ukraine for the Parliament’s consideration. These amendments propose the increase of excise tax by 12% from 1 January 2017, in particular up to EUR 192, 140.5 and 34.5 per 1,000 l for unleaded petrol, diesel fuel and liquid petroleum gas, respectively. However, according to Oleksandr Danyliuk, the Minister of Finance, this decision was triggered not by the need to comply with international commitments, but the need to take account of UAH inflation (though the excise duty in Ukraine is expressed in EUR)74. Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons (Annex XXVII, Articles 279, 280, 341 of the AA) On 23 August 2016, within the framework of drafting the new version of the Subsoil Code that is supposed to harmonize all relevant rules to ensure equal conditions for obtaining and using permits for prospecting for, exploration and extraction of hydrocarbons for all organizations possessing the necessary resources at their disposal, the State Service of Geology and Mineral Resources of Ukraine signed a Memorandum of Understanding with the American Chamber of Commerce in Ukraine75. It provides for cooperation between the experts of the Service and the Chamber in drafting the sector laws and implementing the mechanism of quick response to the problems of investors.

70 http://www.kmu.gov.ua/document/248091904/Dir_2009_119.pdf 71 http://www.ukrtransnafta.com/ru/press_center/company_news/?id=191 72 http://mpe.kmu.gov.ua/minugol/doccatalog/document?id=245131366 73 http://www.kmu.gov.ua/document/248132235/Dir_2003_96.pdf 74 http://interfax.com.ua/news/economic/365306.html 75 http://www.geo.gov.ua/novyna/derzhgeonadra-pidpysala-memorandum-pro-spivrobitnyctvo-z-amerykanskoyu-torgovelnoyu-palatoyu

Oil On 25 August 2016, within the framework of creating the unified geological library in Ukraine, the State Service of Geology and Mineral Resources of Ukraine had an official meeting with representatives of Halliburton with the purpose to establish cooperation in ensuring openness of geological information and making it more economically attractive76. But since no details of the reached agreement were disclosed, there is a concern that during the implementation of the pilot geological information digitizing project planned by the parties, the executors may obtain information that constitutes a trade or state secret. Article 280 of the Association Agreement in terms of ensuring transparent licensing for prospecting for, exploration or production of hydrocarbons

On 19 August 2016, the State Service of Geology and Mineral Resources of Ukraine announced the first auction for selling special permits for using the subsoil under new rules clarified by the Resolution of the Cabinet of Ministers of Ukraine No. 277 of 6 April 201677. In the opinion of Mykola Boiarkin, Head of the State Service of Geology and Mineral Resources of Ukraine, the introduced amendments will allow inviting as many bidders as possible and creating conditions for open fair competition. The auction will take place on December 20. Following the official publishing of the notice of auction in the Uriadovyi Kurier paper and posting relevant information on the official website of the Service, potential subsoil users will have 75 days to submit their bids — by 2 November 2016. Seven land plots in Vinnytsia, Zakarpattia, Sumy, Kirovohrad, Odesa Oblasts have been put up for auction78.

Article 338 of the Association Agreement in terms of continuing and enhancing cooperation in the energy sector

Within the framework of establishment of new energy infrastructures of common interest in order to diversify oil sources, suppliers, transportation routes and transport methods (Article 338(c)), Ihor Nasalyk, the Minister of Energy and Coal Industry of Ukraine, during his official visit to the Islamic Republic of Iran that lasted from 31 July till 2 August 2016, met with Bijan Zanganeh, the Minister of Petroleum of the Islamic Republic of Iran, to discuss a possibility of using the oil transportation system of Ukraine to supply the Iranian oil to Lithuania, Poland, Czech Republic and Slovakia. The parties agreed to create a working group to explore possibilities for the implementation of the most promising projects within a 30-day period79. They also discussed the prospects of building Ukrainian oil storage capacities for their further use with the purpose to increase logistical competitiveness of Iranian companies on the oil markets of the Black Sea region and Europe80.

DEVELOPMENTS IN THE EU LEGAL FRAMEWORK

Consultation was held on the evaluation of Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products.

The objective of this consultation is to collect views and suggestions from stakeholders and citizens for the purposes of the current evaluation of Council Directive 2009/119/EC imposing an obligation on Member States to maintain stocks of crude oil and/or petroleum products.

The general objectives of the evaluation are to assess how the Oil Stocks Directive has been implemented in the Member States and how it is functioning in practice; to identify possible problems and areas for improvement or simplification. 76 http://www.geo.gov.ua/novyna/v-derzhgeonadrah-zustrilysya-z-predstavnykamy-vidomoyi-amerykanskoyi-korporaciyi-halliburton 77 http://zakon3.rada.gov.ua/laws/show/277-2016-п 78 http://www.geo.gov.ua/novyna/u-grudni-vidbudetsya-pershyy-aukcion-z-prodazhu-specdozvoliv-za-novymy-pravylamy 79 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245132761&cat_id=35109 80 http://www.ukrtransnafta.com/ua/press_center/company_news/?id=190

Business Climate The Government’s priorities in the field of business climate in August included fighting corruption and increasing the quality of state aid for doing business in Ukraine. The one-stop-shop system was launched at all Ukrainian customs offices. The Antimonopoly Committee of Ukraine held a series of discussions with experts and confirmed its opinion that a fine for distorting competition must exceed the illegal proceeds and have an incentive effect, but should not remove the undertaking from the market or prevent it from competing on the market. Prime Minister of Ukraine Volodymyr Groysman initiated the establishment of the Investment Promotion Office and entrusted the NERC with drafting the resolution on connection to electricity networks that is supposed to remove any possible elements of corruption in the energy sector at the regional level. Article 22 of the AA, Section III JUSTICE, FREEDOM AND SECURITY, on fight against crime and corruption Articles 29 of the AA, Title IV TRADE AND TRADE-RELATED MATTERS, Section 2 Elimination of customs duties, fees and other charges, on abolishing the import duty Articles 271-296 of the AA, Chapter 11 Trade-related energy, Directives 2009/72/EC concerning common rules for the internal market in electricity and Directive 2009/73/EC concerning common rules for the internal market in natural gas In August, the one-stop-shop system was launched at all customs offices in Ukraine which was initiated by Volodymyr Groysman, Prime Minister of Ukraine. This system introduces the unified e-database of all imported cargoes.81

Also, the interregional customs office of the State Fiscal Service was established in Ukraine which aims to enhance control over the activities of the customs authorities and reduce corruption.82 Articles 255-260 of the AA, Chapter 10 Competition, Section 1 Antitrust and mergers, on enforcement of antitrust law and state monopolies The AMCU held a public discussion of the draft advisory guidelines on applying provisions of Article 52(2) and (5) of the Law of Ukraine “On Protection of Economic Competition” and Article 21(1) and (2) of the Law of Ukraine “On Protection against Unfair Competition” regarding the method of calculation of the amounts of fines. Most issues were settled during the meeting, others, e.g. setting ratios for calculating fines, are yet to be addressed by the Committee. New advisory guidelines were approved.83

At the initiative of Prime Minister of Ukraine Volodymyr Groysman, the NERC was ordered to draft the resolution on connection to electricity networks to tackle corruption in regional energy companies.84 Articles 262–267, Chapter 10 Competition, Section 2 State aid The Law of Ukraine “On State Aid to Undertakings” will come into force on 2 August 2017. It identifies the Antimonopoly Committee of Ukraine as the authorized agency in the state aid sector. In view thereof, the Committee held a meeting of the working group to develop a document to regulate the provision of state aid.

Moreover, the AMCU added a new section on its official website to raise awareness of state aid among undertakings.85

81 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249227859&cat_id=244277212 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249238694&cat_id=244276429 82 http://zakon2.rada.gov.ua/laws/show/495-2016-%D0%BF http://www.kmu.gov.ua/control/uk/publish/article?art_id=249233385&cat_id=244274160 83 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249230310&cat_id=244277212 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249242712&cat_id=244277212 http://www.amc.gov.ua/amku/doccatalog/document?id=128682&schema=main 84 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249268156&cat_id=244276429 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249256349&cat_id=244274130 85 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249238555&cat_id=244277212

Business Climate The Prime Minister Volodymyr Groysman initiated the creation of the Investment Promotion Office to perform the function of an advisory agency subordinated to the Prime Minister. It will include leading investment, communication and marketing specialists.86

DEVELOPMENTS IN THE EU LEGAL FRAMEWORK

Directive (EU) 2016/943 on the protection of business information (trade secrets) came into force on 8 June 2016. It deals with unlawful acquisition, use and disclosure of such information and covers, among other, procurements made by legal entities working in the energy sector (Directive 2014/25/EU).

http://www.amc.gov.ua/amku/control/main/uk/publish/article/121028 86 http://www.kmu.gov.ua/control/uk/publish/article?art_id=249233079&cat_id=244276429

Methodology The Project is being implemented by five partners and two invited permanent experts. The Project is being implemented by the following five partners: NGO “DIXI GROUP”, Resource & Analysis Center “Society and Environment”, Civil Network “OPORA”, Association “European-Ukrainian Energy Agency”, and All-Ukrainian NGO “Energy Association of Ukraine”. Among the project permanent members are L. Unigovskyi, General Director of Naftogazbudinformatyka LLC, and G. Riabtsev, Social Program Director of Psycheа Scientific and Technical Centre.

For the purpose of monitoring the implementation of the Association Agreement, the project participants have been divided into six working groups. These are, in particular, Gas group: L. Unigovskyi and R. Nitsovych (DiXi Group); Electricity group: S. Golikova (Energy Association of Ukraine) and O. Pavlenko (DiXi Group); Energy Efficiency and Social Issues group: T. Boyko (OPORA) and D. Nazarenko (DiXi Group); Environment and Renewable Energy Sources group: N. Andrusevych (Society and Environment) and N. Yermakova (DiXi Group); Business Climate and Investments group: V. Beliakova (European-Ukrainian Energy Agency) and A. Bilous (DiXi Group), Oil group: G. Riabtsev (Psychea) and T. Tkachuk (DiXi Group).

The Project participants identified the monitoring framework for each working group based on the results of their analysis of the Association Agreement. This framework is described in Annex 1.

The main source of information for monitoring purposes is official information provided by public authorities. These include, in particular, adopted regulatory and legal acts, statements by top officials, information about meetings and events with the participation of representatives of public authorities. Also, monitoring could be based on messages by key energy market players, their decisions and initiatives. Other sources of information can include published articles, interviews, news, as well as results of bilateral meetings between experts and energy market players.

The subject of monitoring is transposition and, if appropriate, implementation of Directives. The groups and experts monitor, first of all, transposition of acquis into the Ukrainian legislation and compliance therewith. If appropriate, but only as an option, the quality of implementation of acquis and the effect of their implementation on the market and/or consumers can be subject to monitoring.

Methodology ANNEX 1.

List of Articles of the Association Agreement and Acquis Subject to Monitoring The group Electricity and Nuclear Security conducts monitoring and assessment of issues relating to electricity, nuclear energy, coal and elimination of consequences of the Chornobyl accident. Acquis concerned:

Article 269, Chapter 11, Title IV, Directive 2009/72/EC (market-related provisions) Article 270, Chapter 11, Title IV, Regulation (EC) 714/2009 Article 271, Chapter 11, Title IV, Regulation (EC) 714/2009

Article 273, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC Article 274, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC

Article 305, Chapter 14, Title IV, Directive 2009/72/EC, Directive 2005/89/EC Article 338, Chapter 1, Title V

Article 338, Chapter 1, Title V, Cooperation Agreements with IFIs Article 339, Chapter 1, Title V, coal market

Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector, Directive 96/29/Euratom, Council Directive 2006/117/Euratom, Council Directive 2003/122/Euratom

Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector The group Gas conducts monitoring and assessment of issues relating to gas, in particular, the implementation of the following acquis:

Articles 338, 341, Directive 2009/73/EC (market-related provisions) Articles 338, 341, Regulation (EC) 715/2009

Articles 338, 341, Directive 2004/67/EC + Annex XXVI (Early Warning Mechanism), Articles 275 (Unauthorised taking of energy goods), 276 (Interruption), 309 and 314 (resolution of disputes) of the

Association Agreement Chapter 11 Trade-related energy, in particular Articles 269 (Domestic regulated prices), 270 (Prohibition of

dual pricing), 271 (Customs duties and quantitative restrictions), 272 (Transit) and 273–274 (Transport, cooperation on infrastructure)

Annex XXVII to Chapter 1 Energy cooperation, including nuclear issues — Directive 94/22/EC + Articles 279–280 (Access to and exercise of the activities of prospecting, exploring for and producing hydrocarbons, and

licensing conditions) The group Energy Efficiency and Social Issues conducts monitoring and assessment of the implementation of the following acquis:

Directive 2010/30/EU Directive 2010/31/EU Directive 2006/32/EU Directive 2012/27/EU

Directive 2009/72/EC (social issues) Articles 338, 341 of the Association Agreement

Directive 2009/73/EC (social issues) Articles 338, 341 of the Association Agreement

Methodology The group Environment and Renewable Energy Sources conducts monitoring and assessment of the implementation of the following acquis:

Article 363, Directive 2011/92/EU Article 363, Directive 2001/42/EC Article 363, Directive 2003/42/EC Article 363, Directive 2003/35/EC

Directives 85/337/EEC and 96/61/EC Article 363, Directive 2008/50/EC Article 363, Directive 1999/32/EC

Article 363, Directive 94/63/EC Article 363, Directive 2009/147/EC Article 363, Directive 2010/75/EU Article 338, Directive 2009/28/EC

The group Oil conducts monitoring and assessment of the implementation of the following acquis:

Directive 2009/119/EC Directive 94/22/EC Directive 98/70/EC

Articles 274, Chapter 11 of the Association Agreement (Trade-related energy) Articles 275, Chapter 11 of the Association Agreement (Trade-related energy) Articles 276, Chapter 11 of the Association Agreement (Trade-related energy) Articles 279, Chapter 11 of the Association Agreement (Trade-related energy) Articles 280, Chapter 11 of the Association Agreement (Trade-related energy)

Article 337 of the Association Agreement Article 338 of the Association Agreement Article 339 of the Association Agreement

The group Business Climate conducts monitoring and assessment of the implementation of the following acquis:

Articles 15 of the Association Agreement, Title III Articles 22 of the Association Agreement, Title III

JUSTICE, FREEDOM AND SECURITY Articles 29 of the Association Agreement, Title IV TRADE AND TRADE-RELATED MATTERS, Section 2

Elimination of customs duties, fees and other charges Article 56 of the Association Agreement, Chapter 3 Technical barriers to trade

Article 88 of the Association Agreement, Section 2, Chapter 6 Establishment, trade in services and electronic commerce

Articles 93 of the Association Agreement, Section 3 Cross-border supply of services Articles 97–102 of the Association Agreement, Section 4 Temporary presence of natural persons for

business purposes Articles 104–105 of the Association Agreement, Section 5 Regulatory framework, Sub-section 1 Domestic

regulation Article 127 of the Association Agreement, Sub-section 6 Financial services

Articles 144–147 of the Association Agreement, Chapter 7 Current payments and movement of capital

Methodology Articles 150–156 of the Association Agreement, Chapter 8 Public procurement

Directive 2014/24/EC and Directive 2014/25/EC Articles 255–260 of the Association Agreement, Chapter 10 Competition, Section 1 Antitrust and mergers Articles 296–271 of the Association Agreement, Chapter 11 Trade-Related energy, Directives 2003/54/EC

and 2003/55/EC Articles 272 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 273 of the Association Agreement, Chapter 11 Trade-related energy, Directives 2003/54/EC and

2003/55/EC Articles 274 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 275–276 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 277 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 279–280 of the Association Agreement, Chapter 11 Trade-related energy,

Directives 2003/54/EC and 2003/55/EC Articles 337–342 of the Association Agreement, Title V ECONOMIC AND SECTOR COOPERATION, Chapter 1

Energy cooperation, including nuclear issues, Directives 2009/73/EC, 2009/72/EC and 2004/8/EC Articles 378–379 of the Association Agreement, Chapter 10 Industrial and enterprise policy

Articles 381–382 of the Association Agreement, Chapter 11 Mining and metals Articles 383–385 of the Association Agreement, Chapter 12 Financial services

Article 387 of the Association Agreement, Chapter 13 Company law, corporate governance, accounting and auditing

Glossary ANNEX 2.

Glossary (Short Description) of EU Acquis Subject to Implementation Monitoring

Gas Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive establishes common rules for the transmission, distribution, supply and storage of natural gas. The rules established by this Directive apply to natural gas, liquefied natural gas (LNG), biogas and gas from biomass. They aim to achieve a competitive, secure and environmentally sustainable market. This Directive provides for compulsory functional unbinding (supply) of transmission system operators (TSO) in vertically integrated undertakings. EU Member States must ensure that all customers are entitled to freely choose natural gas supplier and can easily change supplier within three weeks. At the same time, Member States may impose on suppliers selling gas to household customers obligations which may relate to security, including security of supply, regularity, quality and price of supplies, and environmental protection, including energy efficiency. Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 This Regulation sets common rules for access to gas transmission systems, LNG terminals and storage facilities taking into account the special characteristics of national and regional markets. The document establishes the procedures of certification of transmission system operators, as well as development, elaboration and implementation of network codes (with the participation of the European Network of Transmission System Operators — ENTSO — for Gas). The key objective of this Regulation is to ensure that all market participants have free and non-discriminatory access to relevant infrastructure and capacities. Directive 2004/67/EC concerning measures to safeguard security of natural gas supply This Directive establishes a common framework within which Member States must define general, transparent and non-discriminatory security of supply policies compatible with the requirements of a competitive market, and clarify the roles and responsibilities of market players (including in case of emergency). The government must specify minimum security of supply standards to be complied with by the market players, prepare and update national emergency measures, identify “vulnerable” customers and ensure adequate security for them, establish cooperation with the European Commission and other stakeholders.

Electricity and Nuclear Security Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive establishes common rules for the generation, transmission, distribution and supply of electricity. It also lays down universal service obligations and the rights of electricity consumers and clarifies competition requirements. Open internal market enables all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers (free movement of goods, the freedom of establishment and the freedom to provide services). At the same time, this Directive sets stricter requirements to unbundling of transmission system operators (TSO) in vertically integrated undertakings. It also contains consumer rights provisions, reinforces and clarifies the functions and powers of regulatory authorities.

Glossary Regulation (EC) No. 714/2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No. 1228/2003 This Regulation establishes the rules for cross-border exchanges of electricity with the view to enhancing competition and achieving harmonization within the internal market in electricity. Comparing to the previous Regulation No. 1228/2003, this Regulation contains additional provisions on certification of transmission system operators (TSO), introduction of network codes and publication of information by system operators. It also clarifies that the European Network of Transmission System Operators for Electricity (the ENTSO for Electricity) is responsible for the management of electricity transmission networks to allow trading and supplying electricity across borders within the EU. Directive 2005/89/EC concerning measures to safeguard security of electricity supply and infrastructure investment This Directive establishes measures aimed at safeguarding security of electricity supply so as to ensure the proper functioning of the internal market for electricity, an appropriate level of interconnection between Member States, an adequate level of generation capacity and an adequate balance between supply and demand. It establishes a framework within which Member States are to define general transparent and non-discriminatory policies on security of electricity supply compatible with the requirements of a competitive market for electricity. They must define and publish roles and responsibilities of competent authorities and all relevant market actors. In implementing these measures, Member States are supposed to guarantee continuity of electricity supplies, explore possibilities for cross-border cooperation in relation to security of electricity supply, reduce the long-term effects of the growth of electricity demand, ensure diversity in electricity generation, encourage energy efficiency and the adoption of new technologies, ensure regular renewal of networks. Council Directive 96/29/Euratom laying down basic safety standards for the protection of the health of workers and the general public against the dangers arising from ionizing radiation This Directive establishes common basic safety standards for the protection of the health of workers and the general public against the dangers arising from ionizing radiation. This Directive applies to all practices which involve a risk from ionizing radiation emanating from an artificial source or from a natural radiation source in cases where natural radionuclides are or have been processed in view of their radioactive, fissile properties, etc. It also applies to work activities which involve the presence of natural radiation sources and lead to a significant increase in the exposure of workers or members of the public. Council Directive 2006/117/Euratom on the supervision and control of shipments of radioactive waste and spent fuel This Directive authorizes transboundary shipments of spent fuel between Member States for processing, requires prior authorization for transboundary shipments of radioactive waste and spent fuel where such fuel is moved from, through the territory of or to a Member State. This Directive also requires return of radioactive waste to its country of origin. Council Directive 2003/122/Euratom on the control of high-activity sealed radioactive sources and orphan sources This Directive establishes stricter rules for control of sealed radioactive sources, and harmonizes a relevant policy on a common European level. “Sealed source" means the capsule, where applicable, enclosing the radioactive material as an integral part of the source (used in medical science, scientific research). This Directive applies to the storage of such materials and requires the Member States to provide plans of specific measures for the treatment thereof.

Glossary Energy Efficiency and Social Issues

Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products This Directive regulates labelling of energy-related products and provision of information to consumers relating to their consumption of electric energy. It applies to products which have a direct or indirect impact on the consumption of energy and on other resources during use. Suppliers placing products on the market must ensure that such products are labelled with the information about their consumption of energy and other resources. Suppliers must also produce technical documentation to include: a general description of the product; the results of design calculations carried out; test reports; the references allowing identification of similar models. The technical documentation must be available for inspection purposes for a period ending five years. Suppliers must provide the necessary labels and product-related information free of charge to dealers, and the latter must display labels properly, in a visible and legible manner. Directive 2010/31/EU on the energy performance of buildings This Directive promotes the improvement of the energy performance of buildings within the Union, taking into account outdoor climatic and local conditions. It lays down minimum requirements, common general framework for a methodology and covers energy used for heating, hot water, cooling, ventilation and lighting. National authorities must establish reasonable minimum requirements to energy efficiency to be reviewed every five years. They also establish a system of certification of the energy efficiency. Such certificates provide information to prospective buyers or tenants on the energy performance of buildings, and advice on enhancing it. Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC This Directive establishes a common framework of measures for the promotion of energy efficiency within the Union in order to ensure the achievement of the Union’s 2020 20% headline target on energy efficiency. Such measures include: • annual 1.5% energy savings resulting from implementing energy efficiency measures by distribution

network operators and suppliers; • enhancing energy performance of heating systems, installation of double-glazed windows and roof

insulation; • purchase of buildings, products and services with high energy-efficiency performance by public bodies; • annual energy modernization of at least 3% of the total floor area of buildings owned and occupied by

public bodies; • expanding rights and possibilities of consumers in the area of energy management which includes easy

and free access to the metering data on the actual consumption; • national incentives for small and medium-sized enterprises to conduct energy audit that should be

mandatory for all large enterprises; • monitoring of the energy performance of new energy generating capacities.

Environment and Renewable Energy Sources Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (codification) This Directive introduces an important instrument of the environmental policy — environmental impact assessment. Member States must ensure, first of all, that projects likely to have significant effects on the environment (by virtue, inter alia, of their nature, size or location) are made subject to a requirement for development consent and an assessment with regard to their effects. This Directive contains two lists of projects subject to environmental impact assessment (from nuclear power stations, gas pipelines, etc., to

Glossary large pig farms). An important element is stricter publicity requirements, including to the public participation in the environmental impact assessment. Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment This Directive introduces an important instrument of environmental policy — strategic environmental assessment. An environmental assessment must be carried out of certain plans and programmes during their preparation. Such assessment includes preparation of the environmental report (that must contain detail information on the likely significant environmental effects and reasonable alternatives) and consultations with the relevant authorities and the public. Where a transboundary effect is possible, an assessment and consultations in a transboundary context must be carried out. Directive 2003/4/EC on public access to environmental information and repealing Council Directive 90/313/EEC This Directive implements the provisions of the Aarhus Conventions relating to public access to environmental information. It aims to guarantee public access to environmental information owned by public authorities — both upon request and through active dissemination thereof. Environmental information must be made available to an applicant within one month after the receipt by the public authority of the applicant’s request. A request for environmental information may be refused if the request is manifestly unreasonable, or formulated in too general a manner, concerns an unfinished document or internal communications. Directive 2003/35/EC providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment and amending with regard to public participation and access to justice Council Directives 85/337/EEC and 96/61/EC This Directive addresses the implementation of the Aarhus Convention in respect of public participation and access to justice. It sets the requirements to the introduction of mechanisms of informing the public, holding consultations with the public and taking account of comments and proposals of the public in decision-making. Member States must ensure that the public is given early and effective opportunities to participate in the preparation and modification or review of the plans or programmes required to be drawn up under the provisions listed in Annex I of the Directive. Directive 2008/50/EC on ambient air quality and cleaner air for Europe This Directive establishes ambient air quality and ambient air quality management standards. For this purpose, it establishes upper and lower assessment thresholds, target and threshold values, sets objectives for the reduction of the effect of particulate matters, defines and classifies zones and agglomerations, introduces the systems of informing the public and ambient air quality assessment with respect to various pollutants. Where, in a given zone or agglomeration, there is a risk that the levels of pollutants will exceed the alert thresholds, short-term action plans must be drawn up. Directive 1999/32/ЕС relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC, as amended by the Regulation (EC) No. 1882/2003 and Directive 2005/33/EC The purpose of this Directive is to reduce the emissions of sulphur dioxide resulting from the combustion of certain types of liquid fuels and thereby to reduce the harmful effects of such emissions on man and the environment. It sets the maximum sulphur content in heavy fuel oil, gas oil and marine gas oils. It also specifies methods of sampling and analysis of sulphur content in fuel to check compliance with the requirements. Directive 2009/147/EC on the conservation of wild birds (Article 4.2)

Glossary This Directive relates to the conservation of all species of naturally occurring birds in the wild state in the European territory of the Member States. The mechanism of conservation of wild birds provides for the protection of their habitats; protection and use of birds; prevention of harm that can be caused by invasive species; research and reporting. According to Article 4.2, special protection areas need to be established based on ornitological criteria. Special measures also need to be taken to protect migratory species naturally occurring in the territory of a particular state, especially in wetlands. Directive 2010/75/EU on industrial emissions (integrated pollution prevention and control) This Directive lays down rules on integrated prevention and control of pollution arising from industrial activities. It requires using the integrated approach to activities referred to in Annex I thereto. All installations covered by this Directive must prevent or reduce pollution due to using best available techniques, efficient energy use, prevention and control of emissions. Transparency of the integrated approach is ensured by the public participation. Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC This Directive provides for setting mandatory national targets for the overall share of energy from renewable sources in the overall energy balance to take account of statistics and potential of each particular country. These targets include the achievement of a 20% share of energy from renewable sources in overall Energy Community energy consumption by 2020 and a 10% target to be achieved for the share of RES in the transport sector. This Directive, among other, establishes rules for joint green energy projects between Member States and third countries and access to the grid-system of electricity produced from renewable energy sources.

Oil Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products This Directive lays down rules aimed at ensuring a high level of security of oil supply in the Community through reliable and transparent mechanisms based on solidarity amongst Member States. It provides for the adoption of such laws, regulations or administrative provisions as may be appropriate in order to ensure that the total oil stocks maintained at all times within the Community for their benefit correspond, at the very least, to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. Directive 98/70/EC relating to the quality of petrol and diesel fuels The EU introduced rules prohibiting leaded petrol and limiting the permitted sulphur content in diesel fuel with the view to improving air quality and reducing greenhouse gas emissions. This Directive sets technical specifications applicable to petrol, diesel fuels and biofuels used in vehicles, as well as to gas oils used in non-road mobile machinery. Apart from the prohibition of marketing leaded petrol, Member States must conduct assessment of national consumption of fuel, adopt laws and identify the authorized body (bodies) to introduce the fuel quality monitoring system. Directive 94/63/EC on the control of volatile organic compound (VOC) emissions resulting from the storage of petrol and its distribution from terminals to service stations, as amended by Regulation No. 1882/2003 87 This Directive provides for the registration of all terminals used for storage, loading and unloading of oil products, installation of technical means allowing reduction of VOC emissions from mobile containers with

87 The official translation has a lot of mistakes resulting from inaccurate translation

Glossary oil products, bringing all stationary tanks, rail, marine and motor vehicle tanks and loading installations in compliance with the established requirements. Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons This Directive establishes common rules to ensure the non-discriminatory access to and pursuit of activities relating to the prospection, exploration and production of hydrocarbons. These objective and transparent rules reinforce integration of the internal energy market, encourage greater competition and improve security of supply. The document provides for the implementation of measures to ensure: • equal access to all organizations possessing necessary resources for prospecting, exploring for and

producing hydrocarbons; • granting authorizations on the basis of objective, published criteria; • communication of all necessary information to all organizations participating in the established

procedures.

Business Climate Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC This Directive aims to ensure market openness, as well as fair procurements, in particular in the energy sector: extraction (production), transmission and distribution of gas, heat, electricity. Directive 2014/24/EU on public procurement and repealing Directive 2004/18/EC This Directive aims to ensure open public procurement market, fair competition in awarding public works contracts, public supply contracts and public service contracts between successful tenderers and the state. Public procurements must be published on official websites. The award is made to the tender most economically advantageous from the point of view of price, quality, technical merit, experience. Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive provides for the implementation of laws on the electricity market which defines electricity as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures non-discriminatory access to the existing infrastructure, creates favourable conditions for electricity producers to invest in new forms of energy (wind, solar, etc.). Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive provides for the implementation of laws on the gas market which defines gas as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures that companies have non-discriminatory access to distribution networks, gas storage facilities and cross-border gas pipelines. Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC This Directive provides for the creation of favourable conditions for encouraging and development of high-efficiency cogeneration — provision of investment aid, tax exemptions or reductions, green certificates and direct price support schemes.

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