Ukraine is negotiating with the EU regarding a possible exemption for the steel industry from the CBAM

This mechanism could paralyze an industry that is critical to the country's defense

Ukraine is negotiating with the EU regarding a possible exemption for its steel industry from the CBAM. This exemption, if granted, would be an unprecedented step, noted Yuriy Ryzhenkov, CEO of the Metinvest Group, in an interview with Politico.

As the publication notes, the negotiations are taking place amid warnings from Ukrainian companies that the cross-border carbon adjustment mechanism could paralyze the country’s metallurgy sector during the war with Russia. The industry is critical to preserving Ukraine’s defense capabilities.

Yuriy Ryzhenkov noted that he is aware of high-level discussions between the Ukrainian government and the European Commission, which could lead to the granting of preferential treatment for one of Ukraine’s vital defense sectors.

“As far as we understand, negotiations are still ongoing; this is the message we are receiving… from our Deputy Prime Minister Taras Kachka. He says that negotiations are ongoing. He is asking us to provide analysis and some ideas,” explained the CEO of Metinvest on the sidelines of the EU-Ukraine Business Summit in Brussels.

The metallurgy sector is one of Ukraine’s largest sources of export revenue and remains one of the country’s largest industrial sectors.

Ukrainian steel producers have warned that the CBAM, which will fully take effect in January 2026, could destroy their European market, which is currently the largest for the country’s steelmakers.

However, CBAM is not the only problem plaguing the industry. As Yuriy Ryzhenkov pointed out, since the start of the full-scale invasion, exports of Ukrainian steel products have fallen by more than half—to 2.2 million tons in 2022 from nearly 5 million tons a year earlier. There are currently many complications, such as the security of maritime logistics.

European Parliament lawmakers have proposed that Ukraine, a potential EU member, also be granted special treatment. As noted by Dutch MEP Mohammed Chahim, who leads the EU legislative body’s work on revising the CBAM, we really need to help Ukrainians rebuild their economy.

“We really need to carefully assess the conditions we set at the time—whether they are too strict, or whether we should review this a bit more frequently to see if Ukraine should be granted an exemption,” he explained.

However, Shahim added that it is up to the European Commission to determine whether the conditions for an exemption exist.

With the introduction of the CBAM, even before Russia’s invasion in February 2022, Ukrainian steel companies stated that it would unfairly impact their imports. In addition, India also unsuccessfully lobbied for an exemption from the mechanism.

Liechtenstein, Iceland, and Norway are exempt from the CBAM as members of the European Economic Area. Switzerland, which is integrated into the bloc’s emissions trading system, is also exempt. Furthermore, Northern Ireland has a partial exemption due to its ties with Ireland.

As a reminder, Ukraine is working to mitigate the impact of the CBAM on domestic exports. The issue was discussed with EC representatives at the EU-Ukraine Business Summit, according to Minister of Economy, Environment, and Agriculture Oleksiy Sobolev. He noted that Ukrainian officials agreed that DG TAXUD would expedite the verification process for Ukraine’s emissions and propose practical solutions for businesses. Additionally, the discussion will be elevated to the political level for further resolution.