This chapter highlights progress on mainstreaming of green growth considerations in national strategies and plans in selected thematic areas in Eastern Europe, the Caucasus and Central Asia (EECCA). The chapter also provides examples of reforms in institutional arrangements to promote such mainstreaming in the countries. It also includes a focus on EECCA countries’ on-going effort for greening their recovery from the COVID-19 pandemic.
Green Economy Transition in Eastern Europe, the Caucasus and Central Asia
Progress and Ways Forward
OECD Green Growth Studies
3. Progress on mainstreaming green economy in national strategies and plans in EECCA
Abstract
For Eastern Europe, the Caucasus and Central Asia (EECCA)1 countries to achieve their climate goals and Sustainable Development Goals (SDGs), each government must send a clear and strong signal of its commitment through ambitious and implementable national targets. Those targets must also be supported by roadmaps with specific actions towards them, integration of climate and environmental considerations into sectoral policies, and effective mechanisms to monitor and ensure implementation and compliance.
This and the following chapters highlight examples of progress in EECCA countries in collaboration with the GREEN Action Task Force. It also provides recommendations for the Task Force to tackle remaining challenges in the coming years. In particular, this chapter focuses on national-level targets and policy frameworks on green economy transition and climate action and greening the countries’ efforts for recovery from the COVID-19 pandemic.
Setting national targets and policy frameworks towards a green economy in EECCA
Many EECCA countries have set and updated national targets to guide their transition towards a green economy, including on environmental protection, climate change and natural resource management. Effective implementation of actions to achieve the targets face a number of technical and political challenges. Yet, these targets have provided EECCA countries with a foundation for integrating environmental considerations into broader sectoral development policies and targets, as well as mandates of government institutions in each country. For instance, Kazakhstan, the Kyrgyz Republic (hereafter “Kyrgyzstan”), the Republic of Moldova (hereafter “Moldova”), Ukraine and Uzbekistan have developed their overarching national strategies and programmes on green economy. The Concept on Transition to Green Economy of Kazakhstan which was adopted in 2013 has been followed by the on-going implementation of three major stages of actions towards 2050 (Kazinform, 2018[1]).
Even under the COVID-19 pandemic, many EECCA countries have continued to advance the green economy agenda (OECD, 2021[2]). In 2021, in collaboration with the OECD, Kazakhstan adopted a new Environmental Code to replace its 2007 version. The changes, developed in collaboration with the OECD, aimed to strengthen, for example, protection of forests and soils, environmental education and awareness raising, research and development on green technologies and management of radioactive waste (WECOOP, 2021[3]). Tajikistan is developing its national green economy strategy, aiming for adoption by the end of 2022 (Government of Tajikistan, 2021[4]). Kyrgyzstan was also reviewing implementation of its Programme for the Development of Green Economy for 2019-2023 at the time of writing. This review aims to identify implementation gaps, adjustments needed following socio-economic changes and areas of improvement for the future.
All EECCA countries have also adopted national targets of climate action through their Nationally Determined Contributions (NDCs) (Table 3.1). Many have also raised the levels of ambition of their climate mitigation targets through NDC update processes (OECD, 2021[2]). Further, several EECCA countries such as Armenia, Kazakhstan, Ukraine and Uzbekistan, have developed their targets on net-zero carbon emissions. Kazakhstan, Georgia and Uzbekistan, for example, have also started developing long-term low-emission development strategies (OECD, 2021[2]; Government of Georgia, 2021[5]).
Most EECCA countries have also started developing National Adaptation Plans (NAPs). Among them, Armenia has already approved its NAP and a list of measures for 2021-25. The country submitted its NAP to the UN Framework Convention on Climate Change in May 2021 (Government of Armenia, 2021[6]). In addition to national-level strategies, the five Central Asian countries established a process for developing a regional climate change adaptation strategy. This will promote transboundary co-operation to strengthen climate resilience in the region (Green Central Asia, 2021[7]).
Table 3.1. Climate action: Status of NDC updates, net-zero targets and NAPs in EECCA countries
Note 1: UNFCCC=United Nations Framework Convention on Climate Change.
Note 2: The UNFCCC’s annual summary of progress on NAPs tracks 23 measures in the process of formulating and implementing a NAP.
Source: Updated and based on (OECD, 2021[2]).
Box 3.1. Good practice example: EECCA countries’ effort to modernise environmental policies and legislation
EECCA countries have significantly advanced their efforts to modernise broader environmental policies and legislation at both strategic and technical levels:
Armenia, Georgia, Moldova and Ukraine have been reviewing their legislative and institutional arrangements on environmental regulations, monitoring of implementation, and tools for enforcement and compliance promotion for further improvement (EU4Environment, 2021[8]; EU4Environment, 2021[9]).
Uzbekistan adopted a series of environment-related laws such as the Concept on Environmental Protection until 2030, Strategy on Municipal Waste Management for the period 2019–2028 and Strategy for the Conservation of Biological Diversity for the period 2019–2028 (UNECE, 2020[10]).
Georgia has adopted a new law on environmental liability, and is continuing legislative reforms, including on industrial emissions and risk-based methodologies. The country has also adopted a Law on Environmental Liability that aims to define the legal regulation on issues related to environmental damage, based on the polluter pays principle (Government of Georgia, 2021[11]).
To assess progress and effectiveness of environmental policies, several EECCA countries in partnership with the UN Economic Commission for Europe, conducted Environmental Performance Reviews over the past decade: Uzbekistan in 2020, Kazakhstan in 2019, Tajikistan in 2017 and 2012, Belarus in 2016, Georgia in 2016 and Moldova in 2014 (UNECE, 2022[12]).
Developments in multilateral policy agendas influencing the EECCA countries’ approach to a green economy transition
The abovementioned progress on policy development in EECCA countries has also been driven by the international policy related to sustainable development and climate action, as well as approximation to the EU legislative frameworks. Selected examples of international and regional policy developments over the past few years are highlighted below.
The 2030 Agenda for Sustainable Development
The 2030 Agenda for Sustainable Development is a global commitment to eradicate poverty and achieve sustainable development by 2030, ensuring that no one is left behind. Sustainable Development Goal (SDG) 13 is dedicated to taking urgent action to combat climate change and its impacts, while SDG 6 is dedicated to clean water supply and sanitation. Action on green economy transition in EECCA and across the world is nevertheless relevant to most of the 17 SDGs. It includes action on responsible consumption and production, sustainable ocean and terrestrial ecosystems, sustainable cities, environmental protection, poverty eradication, economic growth, health and well-being, and land use.
The Paris Agreement
The Paris Agreement is a global response to climate change with a focus on adaptation, mitigation and finance. It sets the goal of holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C. The global goal on adaptation focuses on enhancing adaptive capacity, increasing resilience and limiting vulnerability. The agreement also aims to make finance flows consistent with a pathway towards low-carbon and climate-resilient development.
All EECCA countries have adopted their national targets of climate action through their Nationally Determined Contributions (NDCs). Many have also raised the levels of ambition of climate mitigation targets through NDC update processes (OECD, 2021[2]). Most EECCA countries have also started the process of developing National Adaptation Plans (NAPs).
The Strategic Plan for Biodiversity 2011-2020 and the Aichi Biodiversity Targets
Under the Convention on Biological Diversity (CBD), the Strategic Plan for Biodiversity 2011-2020 aimed to halt biodiversity loss and enhance the benefits it provides to people. It also highlighted climate change as a major pressure on biodiversity, while recognising the role of biodiversity in supporting adaptation to climate change. Twenty Aichi Biodiversity Targets are organised under five Strategic Goals. An agreement on the Post-2020 Global Biodiversity Framework is expected at the 15th meeting of Conference of Parties (COP 15) in December 2022, setting new targets for the coming years.
The EU Association Agreements
Several countries of Eastern Europe and the Caucasus have been aligning their environmental policies with EU laws and standards in the context of implementation of the EU Association Agreements (for Georgia, Moldova and Ukraine) and a Comprehensive and Enhanced Partnership Agreement (for Armenia) (Andrusevych et al., 2020[13]). For instance, Armenia, Georgia, Moldova and Ukraine have been working to strengthen political and economic links with the European Union and approximation towards legislation such as the EU’s Water Framework Directive (OECD, 2021[14]). The EU Industrial Emissions Directive (IED) and the Environmental Liability Directive (ELD) have driven efforts to improve environmental legislative set-ups for compliance assurance in many Eastern Europe and Caucasus countries (EU4Environment, 2021[15]). Meanwhile, Eastern Europe and Caucasus countries have been reforming environmental permits for large emission sources in compliance with EU IED, greening small and medium-sized enterprises (SMEs) and translating recommendations into actual changes to environmental regulations (EU4Environment, 2021[15]).
Reforming institutional arrangements to promote a green economy transition
Many EECCA countries have restructured government ministries and agencies. Within these processes, countries have strengthened the status, mandates or functions of the environmental ministries and agencies:
Moldova: within the new governmental structure, adopted by Parliament in 2021, the Ministry of Environment was restored as a separate institution. It has become the central body for the development and promotion of national policies in environmental protection and rational use of natural resources. The ministry has approved 62 posts, doubling its staff. Conversely, 29 experts work on the environment within the Ministry of Agriculture, Regional Development and Environment.
Ukraine: after prolonged institutional reform of environment administration, during which the Ministry of Environment was first merged with the Ministry of Energy, Ukraine re-established a separate Ministry of the Ecology and Natural Resources.
Kazakhstan: The Ministry of Ecology, Geology and Natural Resources in 2021 was re-established; it had been part of the Ministry of Energy and the Ministry of Agriculture since 2019.
Kyrgyzstan: As part of government restructuring in 2021, Kyrgyzstan changed the State Committee on Ecology and Climate into the Ministry of Natural Resources, Ecology and Technical Supervision.
In many cases, the development of national-level strategies and policies on a green economy transition has also been accompanied by the creation of inter-ministerial co-ordination mechanisms. These mechanisms aim to help integrate cross-ministerial dialogue of green and environmental considerations into development policy processes. Georgia has added “Sustainable Development” to the official name of its Ministry of Economy. Moldova and Kyrgyzstan, respectively, created inter-ministerial committees that co‑ordinate policy processes on greening economic development. The Government of Ukraine established an inter-service governmental working group on the European Green Deal in January 2020 (Holovko, 2021[16]). The official high-level dialogue between Ukraine and the EU also began in 2021, led by the Ukrainian Deputy Prime Minister and the EU Deputy Director-General for European Neighbourhood and Enlargement Negotiations (Holovko, 2021[16]). These are also examples of initiatives that have attempted to place the green agenda closer to economic and financial decision-making bodies.
Greening the post-COVID-19 economic recovery in EECCA
The COVID-19 pandemic has been a major economic and jobs crisis in addition to an enormous human health crisis. The economies of EECCA have been facing the severe recession with long-lasting repercussions for citizens, businesses and governments. Russia’s war against Ukraine has added challenges to EECCA countries’ effort for economy recovery from the COVID-19 pandemic. However, the ambition of making the economy compatible with climate targets should stay the course and not be scaled back. The countries are well aware of the urgent need to address key environmental and societal challenges, such as climate change and biodiversity loss. Furthermore, EECCA countries increasingly recognise that measures to spur low-carbon economic development should also help improve energy security. To that end, they should promote diversification of the energy mix and improved energy efficiency (OECD, 2021[17]; Berlin Economics & OECD, 2022[18]).
A focus on green economy in responses to, and recovery from, the COVID-19 pandemic in EECCA
In response to the COVID-19 pandemic, EECCA countries continued support for a green economy, including helping firms and industries transition towards low-carbon models. For instance, in Georgia, despite competing priorities and limited fiscal space, pre-pandemic plans to install clean energy in public buildings and encourage green transport alternatives continued and accelerated during the first waves of the COVID-19 pandemic. The government of Ukraine provided support for the country’s energy sector conditional on energy efficiency improvements and the integration of renewable energy sources. For its part, Georgia’s Rural Development Agency incentivised its beneficiaries to adopt resource and energy efficiency practices. EECCA countries also integrated green stimulus measures into their broader recovery packages (Box 3.2).
Box 3.2. Good practice example: Integrating green stimulus measures into broader recovery packages in EECCA
The Green Action Task Force, hosted by the OECD, conducted several studies on green stimulus measures in the EECCA region. One study assembled a comprehensive database of measures to help identify how EECCA countries’ efforts to recover after the COVID-19 crisis have influenced their green economy plans. By assessing the environmental impacts of measures put in place in response to the pandemic, the Task Force provides transparency, presents new evidence and suggests ways to strengthen green recovery efforts. Selected examples follow:
In Armenia, the government created a short-term employment programme in the agricultural sector. The programme aims to simultaneously create jobs for vulnerable communities, and to improve resilience and water quality through reforestation of riparian zones.
Azerbaijan supported activities to restore degraded lands for sustainable dryland agriculture.
Georgia and Moldova provided financial support to micro, small and medium enterprises (MSMEs) that qualified as being innovative and green.
In Moldova, the government supported development of villages in the Coșnița area as sustainable tourism destinations, thereby improving service delivery to the local community. It also launched a programme to support MSMEs affected by the pandemic and its economic impacts, and to accelerate the adoption of circular economy, energy efficiency and resource efficiency principles. Training, awareness raising and consulting initiatives aimed to encourage “eco-innovation” through green and circular business models.
Ukraine, as part of its COVID-19 pandemic recovery package, sought to improve the energy efficiency of public buildings across the country, including hospitals and educational facilities. At the subnational level, Vinnytsia in the country designed similar measures, encouraging retrofits of building stock to improve energy efficiency, and incentivising energy and resource efficiency in infrastructure projects across the region.
Uzbekistan invested in infrastructure for improved water supply and sanitation, as well as irrigation through its Anti-Crisis Fund. The country has also provided financial support for energy efficiency improvements in industry.
Sources: (Neuweg and Michalak, forthcoming[19]), (OECD, 2021[20]).
Stimulus packages still lean towards business-as-usual activities rather than towards transformational investments for a green economy transition
OECD assessments show that more funding is allocated to post-COVID recovery measures with a mixed or negative environmental impact than to those with a positive one in the EECCA region. As shown in Figure 3.1, only approximately USD 360 million went to recovery measures with a positive environmental impact from the beginning of the COVID-19 crisis in 2020 to February 2022. Almost USD 1.7 billion was allocated to measures with a mixed or negative environmental impact (Neuweg and Michalak, forthcoming[19]). The total funding volume allocated to measures with a mixed or negative environmental impact is almost five times larger than funding for measures with an environmentally positive impact.
Almost USD 1.8 billion was allocated to existing infrastructure or to measures unlikely to have a sizeable environmental impact. These trends however show that stimulus packages overall still lean heavily towards business-as-usual type activities, rather than the transformational investments required for green economy transition in the EECCA region.
Figure 3.1. Total funding allocated to COVID-19 recovery measures in EECCA countries by environmental category
Broken down by sector (Figure 3.2), many such measures supported the energy industry (USD 670 million) and the ground transport sector (almost USD 650 million). The likely longer-term environmental impact of such support will be negligible. The measures only eased liquidity constraints of existing utilities and energy providers. They were not used to build new power plants, for example, or to repair existing roads. In short, they did not support the building of additional infrastructure.
At the same time, these measures help continue business-as-usual emissions (Neuweg and Michalak, forthcoming[19]). Adequate support to keep systems running is necessary in a crisis. However, the pay-offs of such support measures will be small. Such initiatives need adequate incentives to reinvest part of the recovery money to modernise infrastructure and make it compatible with climate and energy targets. Any financial support to maintain polluting infrastructure is arguably a lost opportunity to develop low-carbon, climate-resilient alternatives.
The industry sector, closely followed by the energy sector, received the largest amount of financial support. Ground transport (more than USD 600 million) and the agricultural sector (more than USD 250 million) also received comparatively larger financial support. The aviation sector and forestry are the sectors for which the OECD study identified the least support (Neuweg and Michalak, forthcoming[19]).
Figure 3.2. Total funding allocated to COVID-19 recovery measures in EECCA countries by environmental category and sector
Measures with a positive environmental impact have supported projects in the industry, agriculture and waste management sectors and across the economy (Neuweg and Michalak, forthcoming[19]). Examples include financial support to improve energy efficiency in industry in Uzbekistan; to restore degraded lands for sustainable dryland agriculture in Azerbaijan and Uzbekistan; to green SMEs in Moldova and finance MSMEs that are particularly innovative and green in Georgia; and to build sewerage facilities in Uzbekistan (Neuweg and Michalak, forthcoming[19]; OECD, 2021[21]).
The study also distinguishes between different types of recovery measures. It uses the following broad categories: tax reduction or other subsidies, except those for research and development (R&D); grant or loan (including interest-free loans and guarantees); regulatory change; skills and training; and R&D-specific subsidies. As the results in Table 3.2 show, most measures are grants or loans. The next biggest category is tax reduction or other subsidy, followed by regulatory changes (Neuweg and Michalak, forthcoming[19]).
Table 3.2. Financial and policy instruments used to support COVID-19 green recovery measures in EECCA
Green innovation is crucial to decarbonise economies, but the study could only identify one green R&D measure in recovery plans (Neuweg and Michalak, forthcoming[19]). Around half of the CO2 emissions reductions by 2050 need to be delivered by technologies not yet commercially available. The study also identified one measure as an R&D subsidy – a capacity-building project for green hydrogen in Ukraine. However, only around USD 60 000 went towards this green R&D project.
Funding for green skills training amounts to only 0.11% of the total environmentally related recovery budget across the seven EECCA countries. Four measures identified by the study support green skills and training (Neuweg and Michalak, forthcoming[19]). Skills training is essential to ensure a just transition to net-zero. Upskilling2 is also an important component of improving productivity and ensuring competitiveness in future. In addition, vocational training and re-skilling help workers to more easily absorb the structural adjustment of the economy that high energy and commodity prices may bring (OECD, 2022[22]).
Recovery budgets with environmental consequences mainly affect climate mitigation (94%), biodiversity (58%) and water (60%) (Figure 3.3). The study also identified effects on air pollution for 31% of measures with environmental impact. Estimated effects on climate adaptation and waste and recycling were small (4% and 3%, respectively), albeit only positive. The environmental effects on climate mitigation, biodiversity and water are mainly negative. Of recovery measures, there is an estimated negative effect of 66% on climate mitigation, of 53% on biodiversity and of 53% on water. The effects on air pollution are mostly mixed (21%) compared to 5% negative and 4% positive estimated effects on air pollution.
Figure 3.3. Total funding allocated to COVID-19 recovery measures in EECCA countries by environmental dimension
Note: For ease of understanding and clarity, the neutral/existing infrastructure category has been excluded from the analysis given the focus on environmental impact per environmental dimension here.
As shown in Figure 3.4, the size of green recovery measures varies by country. In Uzbekistan, the largest amounts by far (around USD 2.2 billion) were allocated to measures with an environmental impact. Uzbekistan has the largest size of both positive and negative measures.
Figure 3.4. Total funding allocated to COVID-19 recovery measures in EECCA region by environmental category and country
Figure 3.5 shows spending with an environmentally positive effect as a percentage of total recovery packages per country. More than 14% of overall recovery spending in Uzbekistan is considered green compared to more than 2% in Armenia, almost 2% in Georgia and almost 1% in Azerbaijan.
Of the seven countries analysed, Kazakhstan put together a comparatively much larger stimulus package. However, it spent almost nothing on measures with a positive environmental impact. The assessment found little publicly available information on announced spending for the environmental measures identified in Kazakhstan, which could have affected results. In Ukraine, the assessment found only one green measure with little funding attached to it.
Figure 3.5. Volume of environmentally positive measures as percentage of total COVID-19 recovery spending in EECCA by country
Note: Some of the secondary data from the IMF was complemented with government spending reports.
The COVID-19 pandemic severely affected the global economy in terms of GDP, and accelerated a re-evaluation of how economic activities are carried out. The pandemic profoundly disrupted economic activities. It forced companies and governments to revisit assumptions about in-person versus virtual tasks. As countries chart their course out of the economic downturn, they should ensure policy measures to stimulate the economy are aligned well with other important environmental and social objectives.
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Notes
← 1. EECCA countries include Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Republic of Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.
← 2. Upskilling: training employees in a particular occupation with new skills to improve how they perform their jobs. For instance, employees who use the Microsoft Excel spreadsheet program in the grant administration process might be upskilled to use robotic process automation instead (Source: OPM (2018), OPM Strategic Plan Fiscal Years 2018-2022, www.opm.gov/aboutus/budget-performance/strategic-plans/2018-2022-strategic-plan.pdf.