Carbon tax (CBAM) and Ukrainian industry: blow or opportunity
From January, Ukrainian industry faces a new tax
Since the fall of 2023, a new climate policy instrument has officially come into force in the European Union - the Carbon Border Adjustment Mechanism (CBAM). For Ukraine, whose industry is focused on exports to the EU, this initiative has far-reaching consequences. It is not only about new fiscal burdens, but also about the need for a deep transformation of the industrial sector.
Ukrainian Energy has found out what the carbon tax threatens domestic industry.
A sophisticated strategy
CBAM is an instrument that provides for the imposition of a carbon tax on imported products in the EU if they are produced with CO₂ emissions that are not taxed according to EU standards. This solution is designed to prevent the so-called "carbon leakage" when enterprises transfer production to countries with less stringent environmental requirements.
The CBAM mechanism covers imports of steel, pig iron, cement, fertilizers, aluminum, electricity and hydrogen and is based on the principle of “pay as in the EU”: importers must buy CBAM certificates, the value of which corresponds to the price of European emission permits (ETS). Such a test regime in the EU began to operate from October 2023 (reporting phase). However, financial obligations will come into force from January 1, 2026.
The official goal of introducing carbon border adjustment is to reduce global greenhouse gas emissions and level the playing field for European manufacturers, who already operate within strict environmental standards. At the same time, there is also a pragmatic economic logic behind it: EU industry is gradually losing competitiveness against the backdrop of cheaper production in countries such as China, India, South Africa and Vietnam. The reason is the high costs of environmental modernization, increased wages and social guarantees. Such data is provided by Volodymyr Omelchenko, an expert at the Razumkov Center.
While the United States directly raises import tariffs to protect its own producer (even despite the violation of WTO principles and inevitable trade wars), the European Union has chosen a more sophisticated strategy. The protection of the domestic market is carried out under the slogan of combating climate change - through the CBAM mechanism.
Impact on exports
Ukraine, as a state that has a free trade zone with the EU, is not formally exempt from CBAM. Since October 2023, Ukrainian exporters have been subject to reporting under new requirements. This primarily concerns the submission of information on the volume of greenhouse gas emissions in products, and the transparency of the production process. In addition, industrialists are required to prepare for further payments for emissions from 2026.
CBAM already affects the export of Ukrainian metal products, as the share of supplies to the EU in the metallurgical sector reaches 40–50%. Ukrainian producers, including ArcelorMittal Kryvyi Rih, Metinvest and others, have become part of a new reality where the price of emissions is starting to affect competitiveness.
According to analysts at the Center for Economic Recovery, CBAM could potentially affect 6-8% of all Ukrainian exports, but in some sectors the risks are much higher. For example, metallurgy exports to the EU account for 40-50%, cement for 30%, and fertilizers for 15-20%.
Ukrainian exporters of iron and steel are at the greatest risk - these products account for almost 93% of Ukrainian exports to the EU, which will be subject to CBAM from January 1, 2026. For the energy sector, the risks so far look moderate - only about 2% of exports fall under the new rules in the first stage. However, the situation may change in the medium term: after the post-war restoration of the energy infrastructure, the potential for electricity exports will increase, and with it - the dependence on the conditions of European carbon regulation.
It is also important that electricity supplies from Ukraine to the EU are not just exports for the sake of profit. In the current conditions of a critical shortage of flexible generating capacities and the absence of energy storage systems, cross-border electricity trade performs a strategic function - it helps maintain balance in the country's energy system.
Politics or ecology?
Ukrainian industry and think tanks generally recognize the feasibility of CBAM as a tool for climate justice, but emphasize the challenges.
Vladislav Antipov, Director General of the Center for Ecology and Development of New Technologies, stated that the introduction of the European environmental duty SVAM for Ukraine is not only a loss of billions of GDP, but also a matter of the survival of Ukrainian export industries, in particular metallurgy. Therefore, we must insist on postponing the introduction of this duty for Ukraine, using the force majeure clause.
Anatoliy Kinakh, President of the Ukrainian Union of Industrialists and Entrepreneurs, believes that the carbon adjustment mechanism will be a serious challenge for Ukraine.
“For us, this is not just a technical innovation, but a real test, in particular, of the ability to conduct an effective dialogue with European partners. The country's economy is in an extremely difficult situation, so the introduction of European standards and requirements cannot be instantaneous. Adaptation to real conditions is required, and therefore transitional periods,” Kinakh emphasized.
According to him, if CBAM begins to operate for Ukraine without a phased implementation, the consequences could be extremely negative — from the loss of external markets to the closure of key production sectors.
“Our mining and metallurgical complex is experiencing a severe crisis. A significant part of the assets has been destroyed or lost due to hostilities, and the import of coking coal makes production more expensive and less competitive,” he explained.
Kinakh emphasized that the state must urgently develop national programs to support strategic industries — those that are critical for both economic stability and the country's post-war recovery.
"To rebuild hundreds of thousands of square meters of housing, infrastructure, transport and energy facilities, we need large volumes of metal. If we lose our own production, we will be forced to import what we can produce on our own. And this is exactly what we must convey to our partners in the EU," he concluded.
The CBAM carbon tax, which the European Union is introducing ostensibly to combat climate change, is in practice turning into an instrument of economic pressure. If the mechanism works for Ukraine in full, the consequences could be catastrophic — billions in losses and a threat to economic integration with the EU.
This opinion was expressed by Ksenia Orinchak, executive director of the National Association of Mining Industries of Ukraine.
“The idea of CBAM was presented from the very beginning as part of the “green transformation” aimed at reducing global emissions. But now European officials are saying outright: this mechanism is also created to protect domestic markets and support their own producers. The funds that come to the EU budget from the sale of carbon certificates are directed to subsidies for their own industry. That is, it is not only about the climate, but also about trade competition, where ecology has become a convenient screen,” Orinchak explained.
According to her, Ukraine has found itself in a very vulnerable position. Due to the lack of a systemic response to the implementation of CBAM, the state may lose up to $5 billion in export revenues by 2030.
“This is not just statistics - it is under-received investments, destroyed jobs and a weakened industrial base. In addition, CBAM may call into question the depth of our integration with the EU. If Ukrainian companies lose access to the European market, they will have to look for new, less profitable directions. And economic integration is primarily about trade and investment, not just political declarations,” the expert emphasized.
She also drew attention to the problem of uncertainty faced by business: companies are already suffering losses due to the lack of clear mechanisms for applying the SWAM to Ukraine.
“We urgently need to define transparent rules of the game and begin substantive negotiations with the European Union. It is necessary to seek either a relaxation of the conditions or a postponement of the deadlines for their implementation. One of the options is to obtain an exception for Ukraine under Article 37 as a state in extraordinary circumstances. This decision would be quite logical: it would allow for a more flexible integration of Ukraine into the European economy and demonstrate the EU’s ability to adapt its rules to reality,” Orynchak concluded.
A chance for modernization or a new barrier wall?
However, industrialists call the situation critical. This opinion was expressed, for example, by Stanislav Zinchenko, Director of the GMK Center.
“For some reason, in Ukraine, CBAM is still perceived through a climate prism, although in the EU it is already considered exclusively as an economic and trade tool. We have not yet seen active negotiations between the Ukrainian government and its European colleagues on this mechanism. This weakens our country’s position. It is worth noting that the volume of Ukrainian exports to the EU is only growing: in 2024 it reached $25 billion. About 15% of Ukrainian exports to the EU already fall under CBAM,” he says.
“We are already investing in modernization, but adaptation to CBAM requires billions of capital investments. Synchronization with European climate policy and support from the government are needed,” says Yuriy Ryzhenkov, CEO of Metinvest Group.
CBAM could be a disaster for companies that remain on “yesterday’s” technologies. But for innovative enterprises, it is a window of opportunity. For example, reorientation to “green” products. Also, the carbon tax will make it possible to attract financing for decarbonization (in particular, through the EBRD, the World Bank, the Green Deal) and significantly strengthen positions in the global market due to compliance with "green" standards.
However, without a clear state strategy to support the “green transition”, stimulate energy efficiency and implement the Ukrainian СЕTS (emissions trading system), CBAM risks becoming not a boost, but a blow to export-oriented industry.
This is also confirmed by industrialists. This opinion was expressed, for example, by the Director of GMK Center Stanislav Zinchenko.
“For some reason, in Ukraine, CBAM is still perceived through a climate prism, although in the EU it is already considered exclusively as an economic and trade tool. We have not yet seen active negotiations between the Ukrainian government and European colleagues on this mechanism. This weakens our country’s position. It is worth noting that the volume of Ukrainian exports to the EU is only growing: in 2024 it reached $25 billion. About 15% of Ukrainian exports to the EU already fall under CBAM,” he claims.
The Head of the Secretariat of the Council of Entrepreneurs under the Cabinet of Ministers of Ukraine, Andriy Zablovsky, estimated that most experts, as a possible key argument in negotiations with the EC, appeal to Article 30.7 of the CBAM Regulation, which contains a provision on force majeure for countries that have suffered from unforeseen, exceptional and unprovoked events that cause serious damage to their economic and industrial infrastructure. He emphasized that at present Ukraine is objectively not fully ready for the introduction of CBAM, therefore it is necessary to intensify our negotiation track with the EU on this issue.
According to Zablovsky's calculations, potential losses of Ukrainian exports for 2026-2030 due to the introduction of CBAM will amount to $4.7 billion, and investment losses for the same period will amount to $2.7 billion, Ukraine may also lose 6.4% of GDP by 2030, and the number of jobs will decrease by more than 116 thousand. positions. Therefore, entrepreneurs are hoping for diplomatic efforts in negotiations with the EU.
According to the assessment of the Federation of Employers of Ukraine, in 2026–2030, Ukraine's GDP may decrease by 4.8-6.1%. For the war and post-war economy of Ukraine, this is a big loss and limits the possibilities for recovery, so Ukraine needs special conditions with a sufficient transition period
CBAM is not a temporary technical barrier, but a new paradigm in international trade. For Ukraine, this is a serious challenge that will force business to change - or lose markets. Whether Ukraine is ready for this, and whether the European Union will make concessions - we will see next year.
Olena Marchenko, specially for "Ukrainian Energy"
