Ukrainian exporters of goods to the European Union, under the Green Deal strategy and specifically the additional tax for products with a high level of carbonization during production (CBAM), which will be implemented starting in 2026, will incur significant costs. There is a need to negotiate with the EU for a postponement of its implementation due to the war in Ukraine.
As reported by the chief analyst of GMK Center, Andriy Hlushchenko, during the round table "How CBAM Will Weaken Ukraine's Economy," held on October 23, the costs associated with CBAM will increase for the Ukrainian economy and could significantly weaken it.
At the event, a study was presented on the impact of the EU carbon tax on the Ukrainian economy, the main conclusions of which were published by the Interfax-Ukraine agency on October 14. The losses for Ukraine's economy from the additional CBAM tax in the EU in the first year will amount to $202 million, increasing to $1.440 billion by 2030, with the mining and metallurgy complex being the hardest hit.
The chief analyst of GMK Center, Andriy Tarasenko, stated that CBAM is necessary to achieve climate goals while also preventing losses for European companies. He advocated for negotiations with the EU regarding the application of Article 30.7 of the CBAM regulation, which suggests that "the European Commission can modify its approach to CBAM for countries facing unpredictable, exceptional, and unprovoked situations that have devastating effects on their economic and industrial infrastructure."
"We have been at war for three years," the expert emphasized.
The project director for sustainable development at "ArcelorMittal Kryvyi Rih" (AMKR), Olha Semkiv, noted that CBAM cannot be separated from the decarbonization process. AMKR had been working in this direction long before the introduction of CBAM; however, 2022 disrupted these efforts. Currently, there is no opportunity to give proper attention to decarbonization, nor is there the expertise to prepare the necessary reports within the framework of CBAM.
"However, AMKR plans to return to its decarbonization plans, especially since the European market will be one of AMKR's main markets. We expect a postponement of CBAM obligations, and all metallurgical companies believe that there are grounds for this – this provision should be applied due to the situation in Ukraine. We very much want the dialogue between the EU and Ukraine regarding the implementation of legislation to continue," Semkiv emphasized.
At the same time, she pointed out the requirements at the Polish customs for the submission of CBAM documents: "This is very surprising, and Ukrainian companies are better informed about CBAM than those in Europe."
The project office manager of "Metinvest," Andriy Kryl, reminded that CBAM was launched in 2023 (as part of a transitional phase during which companies must submit reports on carbon emissions related to production – IF-U). "We are currently in a process where the European Commission will assess the consequences of implementing CBAM 1.5 years ago. The practice of applying CBAM will be studied, after which the legislation will be adjusted. There will be a clearer understanding of the situation with CBAM when the documents are finally approved," Kryl explained.
He believes that CBAM should be applied to Ukraine not as a third-party country but as a country moving toward EU membership that has committed to implementing EU legislation. Therefore, Ukraine has a unique situation not only due to the war but also as a potential EU member. "And we need a constant and regular dialogue with the EU and government authorities to ensure the unhindered movement of goods. We must not forget that we are moving toward Europe and will implement these mechanisms ourselves," summarized the Metinvest manager.
The representative of the parliamentary subcommittee on industrial policy of the Committee on Economic Development, Musa Magomedov, stated that Ukraine needs to take the initiative in dialogue with the EU regarding the postponement of CBAM obligations, as the country is in a state of war.
"If we do not adjust the situation, we will face very serious consequences. It is necessary to involve both government representatives and the Rada in resolving the situation. The economic committee must make every effort to ensure that our country is treated with consideration for the situation in Ukraine," Magomedov noted.
The deputy director of the European Business Association (EBA), Svitlana Mykhailovska, reported that at a round table last week regarding Ukrainian goods' access to the EU market, opinions were expressed that "we have negotiations, which without negotiations - Ukraine agrees to the EU's proposals."
"The EU requires us to provide an analytical analysis of the damage that will be inflicted on the Ukrainian economy, what volumes of financing we need in this direction as part of assistance from the EU, and what deadlines for the introduction of CBAM in Ukraine," Mykhailovska said.
At the same time, she noted that according to some experts, CBAM currently does not benefit the environment and is rather a means of impacting trade.
The representative of the Federation of Employers of Ukraine, Mykhailo Bno-Ayriyan, announced the upcoming negotiations with the EU regarding amendments to the free trade agreement.
"The dialogue should start now, and the issue of CBAM should be discussed in this context," the expert is convinced.
The president of "Ukrmetallurgprom," Oleksandr Kalenkov, warned that discussions about terms and deadlines are possible, but not about the cancellation of norms: everyone in the EU lives by the same standards and rules. "We need a transitional period. Negotiations should be conducted in this regard. CBAM should be implemented, but the country is at war, which is a unique situation, and perhaps Europeans will be willing to negotiate and create some appropriate mechanism for Ukraine," Kalenkov said, adding that Ukraine should be viewed as part of Europe.
He also reminded that Europe has made concessions to Ukraine by lifting a number of restrictions on goods shipments – anti-dumping duties have been canceled. He expressed hope that the EU could similarly accommodate Ukraine regarding CBAM: "It is important to start negotiations."
The executive director of the "Ukrcement" association, Liudmyla Krypka, noted that Europeans are asking: "What commitments can you make in case of postponement of CBAM?" and called for the implementation of European directives without adding national remarks so that taxation serves the interests of companies.
The representative of the National Association of Mining Industry of Ukraine (NADPU), Heorhii Popov, believes that Ukraine has lost time for applying the uniqueness clause of CBAM in case of war. However, CBAM should be accepted as an inevitable event.
The Deputy Minister of Economy - Trade Representative of Ukraine, Taras Kachka, stated that currently, Ukraine is facing a critical internal situation; however, the decarbonization process in the context of the tax is developing, but the CO2 emissions tax requires adjustments as part of the transition to a different system.
"We understand that it is only a matter of time before the implementation of the emissions trading system. This work has been done and is ongoing - regarding emissions trading, measures for environmental protection are being systematized. Negotiations are underway for EU membership, and the interests of the industry must be duly considered – in accordance with European legislation," Kachka believes.
The Deputy Minister noted that the EU's role will be crucial in financing the reconstruction of Ukraine, so the country's policy cannot be so confrontational; it is necessary to negotiate with the EU on building a joint mechanism with the EU.
As reported, according to a GMK Center study, Ukrainian exporters of goods to the EU, as part of the Green Deal strategy, and specifically CBAM – an additional tax for products with a high level of carbonization during production, which comes into effect in 2026, will incur significant costs. If in the first year of full CBAM implementation Ukraine loses $202 million in exports, then by 2030 this figure will rise to $1.440 billion annually, with the mining and metallurgy complex being the most affected. Due to CBAM, Ukraine may cease to export products such as cement, fertilizers, cast iron, square billets, and rolled products after 2030, the study states.
In 2023, the transitional phase of CBAM was launched, during which companies must submit reports on carbon emissions related to production. In 2026, CBAM will be fully operational – requiring corresponding payments. Although initially, CBAM will cover a limited number of products, the number may be increased in the future.
"The Ukrainian metallurgical industry will be the most affected by CBAM since 93% of Ukrainian exports subject to CBAM consist of cast iron and steel products. At the same time, the metallurgical industry is a major exporter and makes a significant contribution to Ukraine's economy. For instance, in 2023, it accounted for 5.7% of Ukraine's GDP, including supply chains," the study emphasizes.