What problems do businesses face when reporting on CBAM?

The CBAM (Carbon Border Adjustment Mechanism) is already in place. Companies are already reporting on carbon emissions and are facing the first problems. Being in constant communication with the member companies of the Federation of Employers of Ukraine (FEU) regarding CBAM, I can conclude that all companies had problems with reporting. Such reporting is new and quite complicated for Ukrainian companies. Companies are actually forced to acquire new knowledge and skills in a learning by doing mode.

The first problems

The problems encountered at the reporting stage can be divided into several areas:

1. Information problems.

Unfortunately, for many companies that have employees responsible for environmental or sustainability issues and who can fill out the reports sent by their EU partners on their own, the issue of access to the necessary data has become a problem. Namely, to standard coefficients, for example, the CO2 emissions per 1 kW of consumed power, as reporting based on default benchmarks was completed this summer. Back in the spring of this year, we asked the government to help resolve this issue, as it is one of the main coefficients for calculations in the report. As far as I know, the work is underway, but unfortunately, there is no information on the results.

Another aspect of the information part of the problem is that our companies receive information from producers of so-called precursors (i.e., in a very simplified way, raw materials for the production of goods subject to CBAM). After all, in order to submit a report, a Ukrainian exporter also needs certain information from these partners, both in Ukraine and abroad.

2. Lack of trained employees who can prepare the relevant reports.

There is also a lack of methodological support for those employees who already work for companies and understand the reporting under the system of monitoring, reporting and verification of greenhouse gas emissions.

We often receive requests for training and/or clarification on these reports and how to fill them out. Some companies decide to turn to consultants. The cost of their services is quite high, and for some companies it is disproportionate, because of the entire range of exported goods, not all of them are subject to CBAM regulation and the percentage of CBAM goods is relatively small. However, entering the EU market for any product is a long and painstaking process, the competition is quite strong, and in this case, failure to provide reports to importers will mean losing the market.

The European Commission’s position when European companies ask about the impossibility of receiving reports from partners outside the EU is very clear: if you cannot get information, change partners.

It is important to understand that CBAM is not for 2026, as I often hear when communicating with experts, but it is already today. So far, we are at the level of training in filing reports. However, they need to be submitted now, not in 2026.

3. Complication of processes.

Next, you will need to verify the data/reports. And here the issue of access to verifiers will become acute. More precisely, whether there will be verifiers in Ukraine who will have the right to conduct the relevant verification. In addition, there will be a question of their number, which, given the increased demand for these services, will also affect the cost of such services.

The need for state support

At the national level, we believe that it is imperative to accelerate the creation of an information base in Ukraine with indicators (coefficients) of CO2 emissions per 1 kW of consumed power.

At the same time, the authorities should provide advisory and methodological support:

• Ukrainian exporters subject to CBAM regulation in preparing the documents required to export their products to the EU;
• Ukrainian producers of precursors in submitting information on CO2 emissions at the request of producers of goods subject to the CBAM, as emissions from the production of precursors should be taken into account when calculating the total CO2 emissions from the production of such goods.

In our opinion, it is necessary to immediately initiate negotiations with the European Commission on the application of a declarative approach to goods imported to the EU and subject to the CBAM starting in 2026. That is, essentially the same approach as for other countries, but without charging for emissions. This will help reduce the financial burden on Ukrainian business and help accumulate additional resources to partially restore production levels affected by the war.

Such negotiations could be based on Part 7 of Article 30 of Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a mechanism for carbon adjustment of imports, which provides for temporary measures “where an unforeseeable, exceptional and unprovoked event occurs which is beyond the control of one or more third countries covered by the CBAM and which has a disruptive effect on the economic and industrial infrastructure of such country or countries concerned”. We addressed the Ukrainian government with this proposal back in the spring of this year.

It is also important to initiate negotiations with the European Commission to involve the responsible Ukrainian authorities in the development of EU legislation on the procedure for verification of CBAM reports to ensure that Ukrainian business entities can verify such reports and, in the future, for mutual recognition of the results of verification by Ukraine and the EU.

For its part, the FEU is also making efforts to address these urgent issues at the level of the European Commission and the BusinessEurope Confederation.

The impact of CBAM on the economy

According to the companies, the full launch of CBAM will have a very strong negative impact – exports will decline or even stop. We will be able to share more detailed estimates of the impact on the Ukrainian economy (production and exports) in the near future.

In this context, I would like to give one real-life example. When supplying our goods that fall under the CBAM, importers are already asking: how much CO2 emissions are produced during the production of such goods? And they are already comparing and calculating options for changing the supplier if the emissions are excessive. In other words, the formula for calculating the competitiveness of our goods has actually been supplemented by another component – the amount of CO2 emissions during production.