Economy

Ukraine's reconstruction is taking place amid profound structural changes that require not only support for the wartime economy and the rebuilding of what has been destroyed, but also planning for the transformation of the economy in line with new challenges and European standards. Limited access to finance, labour shortages, a critical need to modernise existing production facilities and develop a systematic industrial policy all form a context in which sustainable economic development is becoming a strategic priority.

Over the past five years, individual elements of industrial policy have begun to take effect in Ukraine, including the government programme ‘Affordable Loans 5-7-9’ and mechanisms for state stimulation of the creation and development of industrial parks. At the same time, there is a lack of comprehensive policies and approaches. During the full-scale war in Ukraine, a powerful defence industry has developed. In 2025, the first export of biomethane to the EU took place — an example of how new industries are beginning to integrate into the European energy space. Reform of the public investment system is continuing. Work is also underway to introduce elements of the EU green taxonomy and sustainable financing mechanisms, which should form the basis for economic recovery. However, these initiatives remain fragmented and need to be integrated into a comprehensive strategy aligned with European framework documents on climate and industrial policy.

Sustainable development requires a rethinking of resource use, transition to a high value-added economy and integration into European and global supply chains. This means not only modernising existing production facilities, but also creating new industrial clusters capable of producing competitive goods, including those based on green energy, smart solutions, energy-efficient and clean technologies.

In this context, it is important to take into account the framework initiatives of the European Union, in particular the Clean Industrial Deal, the European Green Deal and the Net-Zero Industry Act, which set the direction for industrial development in the region for the coming decades. Ukraine's inclusion in this process requires a strategic vision, adaptation of regulatory approaches, and investment in infrastructure and human capital. At the same time, it is necessary to develop Ukraine’s own industrial vision that takes into account the specificities of the national context, military risks, and the need for long-term economic security.

Ukraine has a number of strategic advantages: access to critical resources, a common border with the European Union and a free trade agreement with the EU, scientific and educational potential, and basic energy infrastructure. However, realising this potential requires targeted efforts by state institutions, communities, businesses and international partners, especially in terms of modernising the regulatory environment, attracting investment and developing human capital. Compliance with European market requirements remains a fundamental element, particularly in the areas of environmental standards, resource efficiency and transparency.

The green transition should be seen as a tool for structural transformation, competitiveness and security, not just as climate policy or a challenge. It is an opportunity to move from a raw material-based to a high-tech economy. Investments in the production of energy equipment, batteries, smart grid solutions, biomethane and public transport are just some of the new areas where Ukraine can offer unique value for the recovery of its own economy and the strengthening of supply chains in Europe and the global market.

Institutional and strategic barriers

• Lack of an integrated national industrial policy and state strategy for the development of economic sectors.

• Insufficient integration of economic security and reindustrialisation issues into state policy.

Financial constraints

• Lack of access to long-term and cheap finance.

• Insufficient development of state support instruments (guarantees, co-financing).

• Import duties on components necessary to launch local production.

Infrastructure barriers

• Insufficient development of the infrastructure of existing industrial parks (land, electricity, logistics).

• Low capacity of power grids and complexity and cost of connecting to these.

• High logistics costs and long delivery times for imported equipment (with full advance payment).

Market and regulatory imbalances

• Market distortions: tariffs that are lower than the real cost of resources.

• Lack of a comprehensive system of state aid to stimulate investment in production capacity: tax incentives, special economic zones, designated priority sectors.

• Inefficient work of regulatory bodies, including supervision of product standards in the domestic market, excessive regulation, corruption.

Human resources and educational challenges

• Shortage of specialists in engineering, environmental and management fields and highly skilled production professionals.

• Lack of modern educational programmes, R&D infrastructure and links between science and industry.

• No comprehensive adult education system.

• Weak vocational and technical education.

Information closure

• Limited access to statistical and geological data, particularly on critical minerals.

• Lack of a transparent licensing and monitoring system.

Security and environmental risks

• Security risks are a key factor in attracting investors.

• Unregulated management of military and construction waste.

• Lack of a modern waste management and recovery system.

Objective: To lay the foundations for a competitive, low-carbon and innovative industry through formulation of industrial policy focused on energy transition, environmental sustainability and regional development.

1.1. Development and implementation of a comprehensive industrial policy for Ukraine aimed at achieving structural changes in the economy

• Identification of the central executive body responsible for the formulation and implementation of industrial policy.

• Development of a national industrial policy strategy with a focus on technological modernisation, green transformation, high added value and institutional capacity to implement such a strategy.

• Developing a set of financial instruments to stimulate production, including access to preferential financing and guarantees, which requires close cooperation with IFIs.

• Supporting carbon-intensive and mono-industrial communities in the decarbonisation process through economic diversification programmes.

• Ensuring the preparation of high-quality investment projects, in particular through the Project Preparation Facility.

1.2. Development of the industrial base in Ukraine

• Scaling up the activities of the Innovation Fund for green civil projects (e.g. equipment for renewable energy sources).

• Government support for patenting, intellectual property protection and new developments.

• Developing mechanisms to support innovative production.

• Concluding new free trade agreements to ensure demand for Ukrainian green industrial goods.

• Opening up data and simplifying access to it for manufacturers and investors.

• Support for the localisation of critical mineral processing in Ukraine: agreements on extraction should stipulate that the principle of such activities should be maximum mineral processing and value addition in Ukraine.

1.3. Development of sustainable production standards

• Introduction of ESG criteria and the EU taxonomy into the practice of bank financing of industrial projects.

Objective: Decarbonisation, improvement of energy efficiency and sustainability of production processes through modernisation and introduction of innovative technologies.

2.1. Introduction of best available technologies and management methods (BATs)

• Development and implementation of a co-financing model for the introduction of BATs, following the example of European Union countries, where enterprises that implement BATs ahead of the deadline required by law are eligible for financial support.

• Ensuring the targeted use of environmental tax revenues to support projects for the modernisation of production and the introduction of BATs.

• Update of CMU Resolution No. 1147 of 17 September 1996 ‘On approval of the list of activities that are considered environmental protection measures’ to take into account the need to finance BATs and implement decarbonisation measures.

2.2. Introduction of monitoring at emission sources

• Introduction of mandatory installation of automated monitoring systems at emission sources for all categories of enterprises.

• Ensuring access to monitoring data for the public and regulatory authorities.

2.3. Development of a circular economy in industry

• Strengthen the capacity of the central government body responsible for circular economy policy (Ministry of Economy) by providing resources for development and implementation of relevant policies and ensuring coordination with other central government bodies.

• Adopt national standards to ensure the development of circular production.

• Develop a national system of Environmental Product Declarations (EPDs) for Ukrainian-made construction materials.

• Update educational programmes to include best practices in the circular economy in various sectors.

• Implement EU-supported pilot projects on circular production (international cooperation).

Decisions are taken by: the Verkhovna Rada of Ukraine, Cabinet of Ministers of Ukraine, Ministry of Economy of Ukraine, Ministry of Environmental Protection and Natural Resources of Ukraine, and Ministry of Community and Territorial Development of Ukraine.

CEE Bankwatch, Centre for Economic Strategy, Centre for Environmental Initiatives “Ecoaction”, DiXi Group, Helvetas, Institute for Development of National Economy, Institute for Economic Research and Policy Consulting,Razom We Stand, People in Need, ReThink, WWF-Ukraine, as well as experts from: Eindhoven University of Technology, Green Transition Office, Institute for Economics and Forecasting of the National Academy of Sciences of Ukraine, Oxford University, State Enterprise “Ukrainian Industrial External Expertize”