Centre for Defence Strategies

A new tool could make Russia pay for environmental damage in Ukraine

With the support from

Svitlana Andrushchenko, expert of the Center for Defense Strategies

The long-term costs to Ukraine’s ecosystems caused by Russia’s war are difficult to quantify but they are very real. Many observers believe the idea of receiving compensation for the damage might be even less realistic than confiscating frozen Russian assets to rebuild Ukraine. Yet there is a new mechanism available that could force Russia to pay for these environmental losses.

The unprecedented damage in Ukraine when it comes to the environment will have lasting consequences globally. Moscow’s attacks on fuel depots and energy and industrial facilities have led to the release of toxins into the air and groundwater, affecting climate stability and human health. The country’s natural resources and infrastructure have been severely affected.

The soil in areas of military conflict is no longer suitable for agriculture, and more than 3mn acres of protected nature reserves are now a war zone. Up to 600 species of animals and 750 species of plants and fungi, some endangered, are under threat. More than 6mn Ukrainians have limited or no access to clean water, and according to the World Wildlife Fund more than 280,000 hectares of forest have been destroyed. The estimated cost of environmental restoration is more than $51bn, which Ukraine can ill-afford.

Thinking Russia would pay voluntarily for the damage it has inflicted would be naive indeed, so a smarter mechanism is needed. One possible tool is the EU’s recently introduced Carbon Border Adjustment Mechanism. CBAM is the world’s first such tool; it will start in 2026 and take full effect in 2034 and will impose a fee on carbon emissions embedded in certain products imported into the EU, particularly those from the most carbon-intensive sectors. The money raised will be directed to three funds boosting green projects, one of which is the Social Climate Fund. The SCF supports decarbonisation in third-party states and could be part of a compensation mechanism in Ukraine.

Russia’s trade with the EU remains high despite sanctions. Some materials, such as iron ore and aluminium, do not fall under these sanctions, but are covered by CBAM and an extra environmental tax on them could be directed to the SCF. To understand the huge value of some CBAM-applicable materials to Russia, in 2022 the country’s exports to the EU of iron, steel and aluminium was $8.9bn, about 4.55 per cent of total EU imports from Russia.

Environmental compensation through CBAM has multiple benefits. It will reduce the pressure on European state budgets to finance Ukraine’s recovery and force Russia to pay for the damage it has inflicted. The taxes could not only finance Ukraine’s postwar green recovery but also reduce Moscow’s ability to fund its war efforts. CBAM could further contribute to Russia’s decarbonisation by incentivising investments in sustainable development.

It is only fair that an aggressor should pay for the environmental damage caused by the resulting conflict. This innovative use of CBAM could be an effective tool for achieving global environmental justice — an additional mechanism in the UN’s peace-building agenda. To secure the EU’s leading position on the environmental agenda and ensure a just and sustainable recovery for Ukraine, an environmental compensation plan should be developed under this framework before 2026.

Incorporating a practical mechanism for such a plan into climate taxation could encourage other countries to adopt this approach as well. Helping Ukraine might prove an “ice-breaking” opportunity to entrench such compensation within international legislation, promoting environmental justice, peace and protection globally through climate diplomacy.

Source: Financial Times