CBAM will create additional obstacles for Ukrainian enterprises – NADPU

The National Association of Extractive Industries of Ukraine (NAEIU) and leading subsoil use market players call on the Ukrainian authorities to urgently initiate negotiations with the EU to mitigate or postpone the terms of the CBA and to apply the force majeure clause to exclude Ukraine from the mechanism.

This is stated in a letter to Oleh Bondarenko, Chairman of the Verkhovna Rada Committee on Environmental Policy and Nature Management, which GMK Center has seen.

The letter states that during the war, the EU became Ukraine’s main trading partner. More than half of Ukraine’s exports of goods go to the bloc. At the same time, the CBA (based on recent figures) can be applied to 15-17% of these goods.

“The European market is vital for Ukrainian producers affected by the war. Exports allow Ukrainian companies to continue production, support employment and the local economy at a time when the capacity of the domestic market has decreased,” the letter says.

The CBAM will create additional obstacles for Ukrainian companies, exacerbating the negative effects of the war and reducing export opportunities. The application of the mechanism will worsen the state of the country’s economy, which, among other things, contradicts the EU’s strategic interests.

Under the European mechanism, Ukraine may stop exporting cement, fertilizers, pig iron, square billets and long products after 2030. In this case, export losses will exceed $1.4 billion, including $1.3 billion in exports of mining and metals products. GDP losses will be even greater due to the inter-sectoral linkages in the Ukrainian economy.

The main industry to which the NAEIU and subsoil users ask the government to pay attention is metallurgy, which is the main exporter and makes a significant contribution to the country’s economy. Companies in the sector are also the largest taxpayers in Ukraine. Total tax losses due to CBAM could reach $910 million in 2030.

Currently, the mechanism of cross-border carbon adjustment is spreading around the world. At the same time, countries such as India, China, and South Africa are trying to resist the European CBAM in order to find solutions that will support their own exporters. For some reason, Ukraine has taken a wait-and-see approach, which seems impractical in the current circumstances.

In addition, the Ukrainian mining and metals industry can contribute to the “green” transition in the European steel industry and, by supporting supply chains, help European steel producers remain competitive in the global market.

Ukraine is joining the European trend of green transition. However, it is crucial for its war-affected economy to be exempted from the CBAM. Such a decision can be made in accordance with Article 30.7 of Regulation (EU) 2023/956 of the European Parliament and of the Council of 10.05.2023.

NAEIU and leading subsoil market participants are ready to support parliamentary control over the activities of the executive branch on the issue of postponing the implementation of CBAM for Ukraine, appeal to the Ministry of Economy, Ministry of Environment, Ministry of Foreign Affairs regarding the urgent start of negotiations with the EU authorities on this issue, etc.

According to updated estimates by GMK Center, Ukraine may lose $7.2 billion in GDP by 2030 as a result of the CBAM.