Energy versus Development

Since the collapse of communism the region of Central and Eastern Europe has faced significant changes. After a period of sharp decline the region’s economy is growing now and this growth is likely to continue in the future. However, the welfare of countries in the Central and Eastern Europe is different. While some countries has achieved comparatively good results in the economic reform and experienced steady growth in the last years, others have just recently started to recover after the long recession period. This study will focus on economic transition in Ukraine, which economy is likely to start recovering this year.

According to OECD data the level of energy intensity in Ukraine is among the highest in the world. Thus, if the country’s economy will grow the total primary energy supply could grow as well. Since energy production is the main source of pollution in the world (Urge-Vorsatz 2000), the economic growth may lead to increasing the impact on the environment. The main question of this study is whether it is possible for a country in transition to reach high development level without significant increase in fuel consumption and, thus, rising impact on environment.

According to the data from the Energy Efficiency and Alternative Power Sources in Ukraine by V. Didkovsky, Ukraine is a country with a huge economic potential – taking only 2,7 per cent of the territory of the former Soviet Union it possesses about 17 per cent of its industrial potential (Didkovsky 1996). However, since proclaiming independence in 1991 Ukraine has experienced sharp economic decline. As stated in OECD report "Ukraine's GDP has fallen by over 55 per cent between 1990-95. Total primary demand … has declined by about 35 per cent".

Figure 1

Figure 1 shows the dynamics of change of the total primary energy supply (TPES) per capita during the sharp economical decline in Ukraine compared to European OECD countries. Energy intensity in Ukraine is several times higher compared to European OECD countries. Thus, the energy which is produced in Ukraine now is more than enough for the welfare level of a developed European country. Starting at a very high level in 1990 the TPES per capita level was growing in the following years. Energy intensity increased while economy was collapsing. The increase in TPES per capita may be explained by the fact that Ukraine has outdated and low efficient technology in power generation as well as in heavy industry, which caused a lot of energy losses (OECD 1996).

After a decade of economic stagnation since 1990 Ukraine is likely to achieve the economic growth this year. In the interview to UA Today daily Yuri Yekhanurov, the deputy prime minister of Ukraine revealed that in the first nine months of the year 2000 the growth of country's GDP was about 5 per cent compared to the similar period of the previous year. Yekhanurov said that government projection for the GDP growth for the whole year 2000 is 3,5 per cent with industrial output increase by 9 per cent (UA Today 2000).

Year19901991199219931994199519961997199819992000*

GDP, percent change

-2.4

-13.5

-16.8

-14.2

-23

-8

-10

-3

-1.9

-0.4

3.5

Figure 2