Issues with the application of the CBAM regulation and default values for the EAF, and the negative impact on exports to the EU

Andriy Ostapets, Director of Environmental and Industrial Safety at Interpipe, discussed these and other challenges related to the full implementation of the Carbon Border Adjustment Mechanism (CBAM) during the roundtable discussion “The impact of CBAM on Ukraine’s economy and mining and steel sector, 2026–2030.” GMK Center presents the key points of his speech.

Incomplete default values in the European Commission’s reference document

The issue of competitiveness is very acute today. Currently, everyone relies on the reference guide published by the European Commission in December. This is a guide to default values. Using it, clients compare non-EU countries based on specific CN codes.

The routes listed in the reference guide may not correspond to actual ones. For example, for products with CN code 7304 19 (seamless pipes), the reference guide specifies a carbon footprint of 2.596 tons for Ukraine and the exclusive use of the BF-BOF route. But in reality, Interpipe uses an electric arc furnace route with a carbon footprint of 110 kg per ton of steel or 300 kg per ton of pipe (an average figure for seamless pipes).

Because electric arc furnaces were not included in this document for Ukraine, customers are refusing to cooperate and are beginning to consider manufacturers from other countries. For example, for manufacturers of products under CN code 7304 19 from Azerbaijan, the default figure is set at 0.240 tons and the use of exclusively the scrap-EAF route.

Interpipe is currently losing its competitive edge not because of more carbon-intensive processes, but due to the incompleteness of this reference guide. The reports that Interpipe has submitted since 2023 in accordance with all CBAM requirements have not been taken into account.

Additional financial burden

Starting in 2027, companies will be required to purchase allowances in advance. According to the CBAM regulation, 50% of allowances must be covered either using default values or actual emissions from the previous period. Since Interpipe will not have actual figures for 2026, the company will be forced to cover quotas using default values until verification—at least until the second quarter of 2027. This directly increases the costs of covering these CBAM certificates.

Starting January 1, 2026, customers are already refusing to clear customs and purchase Ukrainian products because they need to cover their financial obligations. Currently, Interpipe is doing this for key customers. These financial resources will effectively be frozen for a year and a half—until the third quarter of 2027. According to the regulations, all obligations for the current year must be paid by September 30 of the following year.

A separate issue is the price of the CBAM certificate. Everyone is using the value as of January 1, 2026—€90/t. As of today, the cost of a CBAM certificate is €67/t. Accordingly, the additional burden due to the price difference amounts to about 25%.

Uncertainty regarding verification

A Ukrainian verifier must obtain accreditation in an EU country to be authorized to verify reports. European verifiers must confirm their accreditation in a non-EU country. They cannot enter Ukraine or another third country and begin operations without confirmation from the accreditation body in that country.

European verifiers do not fully understand how to navigate this process in Ukraine. Consequently, a situation has arisen where companies cannot contract services from Ukrainian verifiers because they are not accredited, and European specialists in this field cannot enter Ukraine because they do not understand the accreditation mechanism. This is not the mechanism required under the MRV ETS (Monitoring, Reporting, and Verification Emissions Trading System). It differs because upstream (precursors) will need to be verified. A methodology for such verification is currently lacking.

If a company supplying precursors cannot confirm actual emissions, default values higher than the actual ones must be used. This affects the entire upstream supply chain.

The question is: Is Ukraine ready to resolve the issue regarding verifiers from EU countries and confirm their accreditation?

Challenges with registering facilities in the O3CI registry

Operators of Third Countries Installations is the CBAM registry for non-EU countries. Interpipe has found that the European Commission has not provided any feedback regarding the registration of its facility in the O3CI registry for three months.

Interpipe’s proposals

A complete exemption from CBAM for Ukraine is not a viable option. It is worth considering the possibility of exempting financial obligations while establishing a reliable reporting infrastructure. In other words, the time during the war should be used to set up the reporting infrastructure in collaboration with European Commission departments, as Ukraine has diverse production routes and manufacturing processes. Currently, green steel accounts for approximately 15% of Ukraine’s total steel production.

While this figure was around 1% before the war, it now represents a significant share of green steel in our country. Therefore, it is illogical to discuss financial obligations for Ukraine at this time, when even within the European Commission, the processes and documentation regarding CBAM still have certain gaps.

The EU has not yet been able to address such a large number of countries that are not part of the bloc. Therefore, financial obligations should be suspended for the duration of hostilities, while reporting requirements should remain in place to establish a reliable data infrastructure regarding the carbon footprint.