Just Transformation And The Coal Industry: European Trends And Ukrainian Realities

The current basic trend that has an impact on the industrial policy of the European Union is decarbonization. New substantive perspectives of Ukraine’s integration into the pan-European economic space actualize this trend for us as well. But are we ready – at least to an open dialogue about the scale of the work that precedes it and the challenges that cannot be bypassed?

In the European system of strategic planning of industrial development, the trend of decarbonization was reflected through the planning of the energy transformation of industry, the development of alternative energy sources, energy-efficient technologies, and their application in production activities, as well as the planning of the restructuring of territories whose economic activity is directly related to the extraction of fossil fuels.

This process was called a just energy transition, or a just transformation. Its peculiarity lies in the search for ways and tools that, on the one hand, contribute to dynamic structural changes, and on the other hand, will provide an opportunity to ensure an economically expedient and socially painless transition of society to a post-carbon stage and provide for effective actions to protect the climate. Energy transformation ensures a significant reduction in coal production and an adequate reduction in the need for auxiliary services, and the industrial development of the current coal territories is determined by the replacement of coal with alternative energy sources, retraining of workers, the ability to diversify the economy and attract investments into new sectors of the economy. Appropriate planning of industrial development takes place in the context of the European concept of just transformation of industrialized regions.

In Ukraine, the process of just transformation has also begun. The approval of the Concept Of The State Target Program For The Just Transformation Of The Coal Regions Of Ukraine For The Period Until 2030 testified to the intentions to solve the problems of the coal regions that arise as a result of the restructuring of the energy sector. The just transformation of coal regions within the framework of the pan-European discourse should provide for the systematic closure of coal enterprises, which should be based on the Strategy for the Transformation of the Coal Industry, detailed mutually agreed strategies for the development of coal communities and plans for the liquidation of coal enterprises, as well as consider the strategic vision of the development of the coal industry and the energy sector as a whole.

Until now, the principles of transformation of the coal industry in Ukraine were outlined by the Energy Strategy for the period until 2035 Safety, Energy Efficiency, Competitiveness, approved in 2017. Restructuring changes in the coal sector, determined by this document, were to be carried out within the framework of the reform of the entire energy sector of Ukraine and considered the global trends of reducing the share of fossil fuels in the energy balance. This approach outlined the prospects for the development of the coal industry at the expense of the following measures:

— selection of promising mines, which the Ministry of Energy of Ukraine planned to leave in state ownership; these enterprises were supposed to be used to ensure the energy independence of the country on the basis of technical re-equipment, modernization and improvement of the level of labor protection, as well as optimization of the structure of separate divisions of the National Coal Company SE (creation of a project-scientific center and service-technical center for maintenance and repair of equipment, liquidation of non-core assets, etc.);

— allocation of mines for privatization;

— choosing mines for liquidation because of their hopeless unprofitability. This approach largely outlined the “fields” on which measures were to be taken to ensure a fair transformation of the economy of coal regions and, in particular, coal communities.

In late April 2023, the Cabinet of Ministers of Ukraine, on the proposal of the Ministry of Energy, approved the new Energy Strategy of Ukraine until 2050, which envisages achieving carbon neutrality of the energy sector by 2050. Ukraine’s energy strategy was presented in London as part of the Recovery Conference, but its text remains unavailable to the domestic expert community.

According to the press service of the Ministry of Energy, the new strategy considers:

• the consequences of a full-scale war, strengthening the role of energy security and strengthening the stability of the energy system;
• the results of joining the unified energy system of Ukraine to the European electricity network and deepening the integration of the energy system of Ukraine with the European one;
• the availability of the latest technologies, technical changes in the energy sector, world trends and innovative solutions, requirements for environmental safety in accordance with EU norms and obligations accepted by Ukraine;
• Ukraine’s international obligations regarding energy efficiency and the use of renewable energy sources, reduction of greenhouse gas emissions, etc.;
• the importance of decentralization of electricity generation throughout the country.

How these factors are embodied in the new energy vision of Ukraine-2050 remains to be guessed at the moment. In particular, according to the official information of the ministry, one of the main priorities of the new Energy Strategy is the transformation of Ukraine “into the energy hub of Europe, which will help the continent finally get rid of dependence on Russian fossil fuels thanks to the clean energy produced in Ukraine.” It is also reported that the strategy determines the achievement of climate neutrality in energy by 2050.

Meanwhile, the plans for the construction of the energy sector of Ukraine must be inextricably linked with the general process of transformation of the domestic industry based on the principles of decarbonization. In the absence of an agreed Strategy for the post-war recovery and development of Ukraine's industry, there is a lack of comprehensive strategic ideas about the development of industry both in general and in individual industries and sectors. So, the following logical questions arise:

— What were the authors of the Energy Strategy guided by when determining prospective needs for energy capacities and their spatial location?

— How does the Strategy consider the task of energy transformation of industry?

— Is there a place for Ukrainian industry in the energy hub of Europe, which Ukraine should become?

One of the stages of the energy transformation of industry, which should be reflected in the Energy Strategy, is the transformation of the domestic coal industry. Currently, Ukraine is developing a program to gradually abandon the use of coal for the period until 2030, which, however, does not yet provide a final answer to important systemic questions that, perhaps, should be defined in the broader framework of the Energy Strategy until 2050. In particular, the mentioned program plans the mandatory closure of coal mines in Ukraine, and not only those that have exhausted reserves or are unprofitable.

In the context of broader energy transformation tasks, isn’t it more appropriate to consider that the use of coal has not only a direct energy direction? Therefore, those mines that have deposits for profitable extraction can be involved in the production of both clean energy (based on the use of innovative coal mining technologies for chemical and technological processing of coal), and non-energy carbon materials that are widely used in other sectors of industry.

The situation with the Energy Strategy until 2050 demonstrates how important it is to observe the European principle of mutual coordination of strategic documents on the restructuring of the economy, which, unfortunately, often remains unimplemented in Ukraine. It is advisable to overcome this problem by strengthening the interaction between Ukraine and the EU in the field of implementing the principles of fair transformation, in particular through the development and implementation of pilot projects to develop new technological solutions in the energy sector: renewable energy, eco-innovations, innovative coal technologies, etc. Among the promising, but, unfortunately, currently insufficiently developed directions in mutual cooperation is the European strategic program RePowerEU, introduced in 2022 with the specific goal of countering the risks posed to Europe's energy security by Russian aggression in Ukraine and Russia’s hybrid influence on the European energy market.