Building a carbon market under fire: Oxford report lights path forward for Ukraine

“Ukraine has the opportunity to build one of the world’s first carbon markets designed to operate under conditions of conflict and climate risk,” says Dr Kopytsia, who will attend COP30 as part of Ukraine’s delegation this month. Such a system would not only support national recovery and integration with the European Green Deal, but also offer a model for other high-risk regions facing increasing instability, she adds. 

The policy brief sets out recommendations, including:

• Establish buffer and insurance mechanisms: Require higher-risk projects to contribute more to shared buffer pools or hold insurance to cover potential losses.
• Promote diversification: Encourage portfolios that combine different types of projects (forestry, soil carbon, engineered removals) and regions to pool uncorrelated risk.
• Invest in data and transparency: Develop an open-access national database to track project risks, reversals, and performance over time.
• Clarify governance and liability: Define which actors bear responsibility for reversals and how replacement or compensation will occur.
• Align with EU frameworks: The UK and EU ETS may provide models for integrating removals and setting risk-based thresholds for credit eligibility.

The policy brief also details how renewable energy infrastructure and innovative restoration projects can make countries more resilient to the impacts of war. “Unlike fossil-fuel infrastructure—often tied to geopolitically volatile supply chains and centralised and costly facilities—renewables such as solar micro-grids, wind turbines and decentralised battery systems can be deployed quickly, locally and with reduced risk of targeted disruption or sabotage,” explains co-author Dr Injy Johnstone, Research Associate in Net Zero Aligned Offsetting at the Oxford Smith School of Enterprise and the Environment . “Use of innovative agricultural practices, including biochar can help detoxify soil and boost agricultural yields, delivering direct benefits to local communities,” she adds. 

Well managed ecosystems can also help shield people and nature from the impacts of blast waves and shelling, the authors say. 

The brief notes that Ukraine already has an evolving regulatory environment for emissions trading and carbon pricing, with several voluntary initiatives in action, such as forest carbon and soil projects, but greater coordination and transparency is needed.

“Carbon markets represent an opportunity to mobilise private capital for projects such as rebuilding green industries, restoring degraded land, and financing demining-linked reforestation, as well as other forms of high-integrity mitigation and durable carbon removal. Yet without clear governance and alignment with the Paris Agreement, these mechanisms risk creating fragmented, low-integrity transactions,” explains co-author Kaya Axelsson, Net Zero Policy Engagement Fellow at the Smith School of Enterprise and the Environment, University of Oxford. 

By the following steps set out in their policy brief, Dr Kopytsia and her colleagues believe Ukraine can speed up its path to a green and prosperous recovery and set an example of leadership for other nations. 

“As the world looks to COP30 for signs of credible climate action, Ukraine is crafting one of the most ambitious carbon market systems in Eastern Europe — while still fighting a war,” says Dr Kopytsia. “If it succeeds, it can attract green investment and prepare for post-war reconstruction while also embedding transparency, integrity, and resilience into national climate governance.”