Wet blanket for warm credits

Drafting of a budget is a responsible duty. Behind each of these figures there are opportunities for either development or stagnation of whole industries, the fates of many people. However, despite the complexity and responsibility of this work, sometimes one can get shocked by the disproportions when money is wasted in unbelievable amounts on one things, while almost nothing is allocated for the things that are vital for the country and which could optimize spending in a number of other areas.

A typical example of such a disproportion is the comparison of two figures. There are 55 billion allocated for the payment of subsidies for utility tariffs to citizens in the draft budget for 2018. This is the money that does not build anything, does not develop anything, and does not create additional services for people. Meanwhile, only 800 million hryvnias are provided for energy efficiency measures – 400 million for the Energy Efficiency Fund and 400 million for the “warm credits” program.

I would like to talk precisely about the program of “warm credits” in order to draw public attention to the unacceptably small funding for this program, which is extremely necessary for the state.

Two years ago, the then government took an unprecedented step towards stimulating energy efficiency and launched the “warm credits” program. Its goal is to stimulate the introduction of measures aimed at the insulation of individual housing, the installation of solid fuel boilers and the introduction of energy efficiency measures in high-rise buildings.

The essence of the program is simple: citizens buy energy-efficient materials or equipment with the help of loans obtained from state-owned banks, and the state reimburses a part of the sum. Loans within the program were issued by Oschadbank, Ukrgasbank, Ukreximbank, and since February 2017 – by PrivatBank as well.

The amount of compensation for the replacement of boilers is 20% of the loan, which, however, should not exceed 12 thousand hryvnias. For energy efficient materials and equipment for individuals 30% of the loan can be returned, but not more than 14 thousand hryvnias. For similar materials and equipment for condominiums – 40% of the loan, but no more than 14 thousand hryvnias on average per apartment. Previously, if citizens were subjected to subsidies, they had additional benefits in obtaining “warm loans” – up to 70% of the loan were paid back. However, presently, this advantage was preserved only for subsidy recipients that live in condominiums.

This program has a number of advantages. First of all, there is no fixed list of energy-efficient materials, which significantly expands the possibilities of various companies to sell their products. Secondly, a part of the money is refunded automatically – that is, the decision of the officials is not necessary for this. As a result, there is practically no corruption in the program.

The installation of non-gas boiler or wall insulation generated significant savings. For example, according to the data of 2015, owners of private homes that had carried out such measures could save up to 125-190 cubic meters of gas per month.

During the first 11 months of the program’s operation, only 23,000 families made use of it, because the trust into government’s credit programs was low. However, since the summer of 2015, the demand started growing rapidly and began to exceed the amounts planned for its financing. This, in turn, caused frequent suspension of the implementation of the program, since there was just no money for it. As of the end of August this year, 320,000 families took “warm credits” and received about 4.2 billion hryvnias from the state. The Lviv region, Kyiv with the Kyiv region, and the Sumy region are the leaders in the amounts of loans taken by citizens. On average, up to 150 million hryvnias of loans are accounted for one region.

However, already this year it became clear that the demand for the program is much higher than the amount of the funding approved by the government. In the first quarter, 400 million hryvnias were allocated for “warm credits”, in the second quarter – 300 million. The process of the program implementation was already stopped due to the lack of funds several times. According to the leaders of public organizations dealing with this issue, 3.2 billion hryvnia should be allocated for the program next year. And this amount will not really be too burdensome for the budget given the benefits that “warm credits” bring.

I would like to draw particular attention to the role of condominiums. After all, it is only through the association of co-owners of multi-apartment buildings that complex projects on modernization of the entire buildings can be implemented and savings can be made in the form of a reduction in the amount of heat payments from 30 to 60 percent. That is why the program for condominiums must be especially supported and popularized by the state, since it is impossible to achieve this kind of saving by individual measures. Nevertheless, since August, “warm loans” for condominiums have been stopped altogether, and for 2018 and in the future it is planned to allocate just slightly more than 28 million hryvnias.

Thus, this means that the state created a successful credit program, which now cannot actually develop due to insufficient funding. And if no immediate changes to the draft state budget for the next year are introduced, this will be a “wet blanket” for all those who worked on implementing effective energy efficiency policies.

Returning to the comparison of the amounts suggested for subsidies and energy efficiency (55 billion against 800 million), one thought involuntarily comes to mind. It looks like for the authorities it is better to keep citizens in a humiliating state of non-alternative dependence on the state aid rather than giving people the opportunity to regulate their own expenses and, thus, to reduce their payments. Perhaps this is because in the second case citizens will not be so dependent on the state in providing their basic household needs?

This situation of creating artificial barriers for energy efficiency promotion should be changed. A number of public organizations have already asked MPs to hold an extraordinary joint meeting of several parliamentary committees and to make a statement on the need to increase the financing of “warm credits”.

This is the battle that we, MPs, are obliged to win before the New Year in the interests of the entire public. After all, it is from such small successes that great victories arise.

Viktoriya Vojtsitska
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