Ukraine will collect 88 years’ worth of carbon tax for decarbonization

If the carbon tax is earmarked, Ukraine will collect €102 billion needed to meet its 2030 climate targets under NDC-2 over 88 years. This is assuming that 50% of capital needs will be covered by government instruments.

These calculations are provided by the GMK Center in its study “Carbon Pricing and Financing Decarbonization in Ukraine and the EU.”

Analysts note that a sharp increase in CO2 prices in Ukraine will not stimulate the development of green industry but, on the contrary, will lead to the deindustrialization of the economy.

“For example, in a scenario where the carbon tax in Ukraine is €10/t CO2, this will mean a higher carbon burden on the economy than the price of €72/t CO2 in phase 4 of the EU ETS,” the study says.

The study concludes that Ukraine will not be able to accumulate sufficient funds for decarbonization of the economy on its own — external financial support from the EU is needed.

At the same time, analysts emphasize that carbon payments should increase gradually so that businesses have time to adapt and modernize their production capacities. For businesses, rising CO2 prices mean increased costs, which in turn can lead to accelerated inflation, loss of competitiveness, and even production stoppages.

«A gradual increase in CO2 prices, combined with targeted decarbonization support programs, is the key to ensuring a ‘green’ transition without harming the Ukrainian economy. Convergence with the European level of CO2 prices should only take place once some of the decarbonization projects have already been implemented in Ukraine. Until then, the carbon burden on GDP in Ukraine should be lower than in the EU,» the study says.

As GMK Center reported earlier, the transition to zero-emission steel production is the only option for the Ukrainian steel industry. The main driving factor is Ukraine’s integration into the EU and the harmonization of regulations, standards, plans, and goals.

It should be noted that large steel companies in the EU are currently postponing their green transformation plans, seeking greater certainty, in particular regarding the bloc’s steps to protect the industry and the market.