The Biomethane Paradox: Why Ukraine’s “Green” Fuel Is Saving Europe, Not Its Own Market
6 May 17:18
Ukraine has one of the most extensive raw material bases in Europe, yet domestically produced biomethane remains, for now, a product intended exclusively for export. Will the introduction of climate taxes and the transition of steelmakers to environmental standards redirect biomethane flows within the country, and will Ukrainian drivers see “green” fuel at gas stations? "Komersant Ukrainian" investigated.
In 2025, Ukrainian companies exported over 11.2 million cubic meters of domestically produced biomethane to EU countries. According to Georgiy Geletukha, head of the Bioenergy Association of Ukraine, biomethane is only sold at a price that makes its production profitable when exported. In Ukraine, however, biomethane can only be sold at the price of natural gas, resulting in losses, so the focus on Europe remains the main priority.
Export is the priority
Presenting the recently government-approved Program for the Development of Biomethane Production for the period up to 2035, Energy Minister Denys Shmyhal emphasized that this program will unlock Ukraine’s potential to become a major producer of biogas and an exporter to the European Union. These plans are made realistic by the raw material potential of Ukrainian agriculture and the fact that Ukraine has an extensive gas transmission system connecting various European countries.
Oleksandr Sokolov, CEO of Pro-Consulting, a company that has researched the Ukrainian biomethane market, confirms the potential for the industry’s development.
“Ukraine has one of the largest raw material bases in Europe for biomethane production. The EU is currently actively seeking an alternative to fossil gas and increasing demand for renewable gases as part of its decarbonization policy. For Ukraine, this opens up the opportunity to become an external supplier of biomethane to the EU. Given its geographical proximity, existing gas transmission infrastructure, and vast resource base, Ukraine can occupy a significant niche in the European market,” the expert believes.
Already this year, the government plans to gain access to the EU database on renewable fuels, initiate the conclusion of an agreement with the European Union on the mutual recognition of guarantees of origin for biomethane, and approve rules for determining the quality of natural gas. The government also promises to work on creating investment incentives for businesses. Alexander Sokolov, CEO of Pro-Consulting, explains what these incentives might look like.
“Key investment incentives for the development of biomethane production in Ukraine could include: preferential lending, attracting foreign partners to finance projects or collaborate in Ukraine, duty-free import of equipment, and so on. It is equally important to ensure fast and transparent connection to gas networks, as bureaucratic procedures often hinder the launch of facilities. Another strong incentive is guaranteed access to the European market. If Ukrainian biomethane has unimpeded export to the EU, recognized certificates of origin, and stable demand, this will significantly improve the investment attractiveness of projects,” the expert emphasizes.
The industry’s development depends not only on the availability of raw materials, the gas transmission system, investment incentives, and an ambitious program. There are other objective conditions and calculations as well. The government program sets a specific goal, for example, of reaching a biomethane production volume of 1 billion cubic meters per year by 2030. Heorhii Geletukha, head of the Bioenergy Association of Ukraine, assessed the feasibility of such plans.
“The six plants already operating in Ukraine produce 0.1 billion cubic meters, or 100 million cubic meters per year, but we need ten times that amount. In my opinion, achieving this is practically impossible now. The war is holding us back. That is, there are ready-to-go projects—the land is there, the partners are there, the money is there. Probably about twenty projects that are practically ready to launch. If they all started now, they would be up and running by 2030. And then we would achieve a good result. People are just waiting because they don’t want to lose all that if they build it. The cost of such a plant ranges from six million euros up to fifty million—depending on capacity. So as long as the war continues… In short, the longer the war lasts, the fewer chances there are, unfortunately,” the expert notes.
At the same time, Heorhii Geletukha emphasizes: it is not so crucial whether Ukraine will produce 1 billion cubic meters of biomethane per year by 2030. The main thing, he says, is that the state, having adopted the relevant program, has made up its mind: it is interested in this, it is important to it, and it sees a future in it.
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Ukrainian biomethane in search of Ukrainian consumers
Although the focus on exports to Europe is clearly evident in the government’s program for the development of biomethane production, government officials have not forgotten to mention “stimulating domestic consumption of biomethane.” This is defined as one of the three main goals. So where is the “mass consumer” of Ukrainian biomethane “hiding”? Georgiy Geletukha, head of the Bioenergy Association of Ukraine, explains .
“The field for biomethane use is in transportation. This is particularly relevant now that gasoline and diesel prices have risen. And in terms of measures to implement the aforementioned program, among other things, it specifically addresses the domestic motor fuel market and the creation of legislation regarding the use of biomethane in transportation. And the first thing that needs to be done here is to sort out the excise taxes. In our country, all petroleum products are subject to excise taxes. There is compressed gas, liquefied gas, and tax authorities will likely classify biomethane under this category. And for biomethane, if nothing changes, the same excise taxes will have to be paid as for petroleum products,” the expert notes.
As a result, biomethane may cost more. That’s a downside. But there’s also an upside. Ukrainians have experience, dating back to Soviet times, with using vehicles that run on compressed natural gas. There are even still some special refueling stations left, albeit in small numbers. Heorhii Geletukha continues.
“Such stations are fully suitable for refueling systems with biomethane. And the logic is that we can use these stations for biomethane. There is also quite a lot of gas-powered vehicles. Moreover, right now it is actually more cost-effective to drive on compressed gas than on diesel. The only thing is that biomethane is still more expensive than natural gas. Therefore, incentives are needed for vehicle owners to refuel with compressed biomethane rather than compressed natural gas. And this is where the climate incentive comes into play. That is why I believe this topic is promising,” the expert emphasizes.
The climate incentive is not just about the environmental friendliness of biomethane, which, as is well known, is an environmentally clean and renewable energy source. It is also about reducing greenhouse gas emissions—that is, decarbonization. The use of biomethane itself is one of the cheapest ways to achieve decarbonization. This is an option for representatives of those sectors of the Ukrainian economy that have already fallen under the scope of the European Carbon Border Adjustment Mechanism (CBAM). According to Heorhii Geletukha, head of the Bioenergy Association of Ukraine, it is precisely in these sectors that wider use of Ukrainian biomethane is also possible.
“When metallurgists transport their products to the EU, they must show how much CO2 emissions are associated with each ton of their product and how much tax has been paid for those emissions. And when crossing the border, the difference between the European CO2 tax and our CO2 tax must be paid for that ton of steel. In effect, this is like an additional tax on all Ukrainian goods subject to the CBAM. “It could be profitable for these Ukrainian producers to buy Ukrainian biomethane, demonstrate that they have decarbonized, and as a result, avoid paying taxes in Europe. By using Ukrainian biomethane, they would keep money within the country and use those funds to develop the biomethane industry,” the expert emphasizes.
Accordingly, demand for biomethane will emerge when Ukraine implements an ambitious and predictable climate policy that will encourage, as in Europe, a reduction in greenhouse gas emissions. Heorhii Geletukha explains how this works.
“You have clear emission reduction targets set by the government. If you’ve reduced emissions by the amount required of you, you pay nothing. But if you’ve reduced them by less, you pay for the difference. In other words, you then have to buy the right to emit greenhouse gases. To do this, they use the European Union Emissions Trading System, where the price ranges from 60 to 80 euros per ton. This is the main incentive for why they do this. We need the same incentive. And in order to develop biomethane production, we need our own domestic greenhouse gas emissions trading system, and the price should be, if not European, at least close to it. Then there will be incentives to use biomethane here as well. “We haven’t established such a system legislatively yet, but the Ministry of Economy is working on it,” the expert notes.
As is known, the Ministry of Economy, Environment, and Agriculture has already prepared a draft Law of Ukraine “On the Principles of Operation of the National Greenhouse Gas Emission Quota Trading System.” Next comes the process of approving the draft law.
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