Exclusive As a result of CBAM introduction Ukraine may lose $7.2 bln of GDP by 2030

Export losses for the same period may amount to $4.7 billion, of which $3.3 billion refer to iron & steel products

GMK Center has updated its estimates on the potential impact of the Carbon Border Adjustment Mechanism (CBAM) on Ukraine’s economy, using 2024 export data. With CBAM set to take effect in 2026, Ukraine’s traditionally export-oriented economy is expected to face significant losses. In 2026-2030, total export losses may exceed $4.7 billion (over 5 years).

Overall impact on the economy

For Ukraine, the introduction of CBAM is quite painful, as more than half of Ukrainian exports of goods are directed to European markets. Since the beginning of the war, the EU has been a major trading partner due to Ukraine’s blocked seaports and logistical proximity. In 2024, Ukraine exported $24.8 billion worth of goods to the EU, of which 14.5% is subject to CBAM.

Updated estimates from GMK Center indicate that, under the current export structure, Ukraine could face export losses of $4.7 billion between 2026 and 2030 due to CBAM implementation. In addition, investment losses over the same period are projected to reach $2.7 billion.

CBAM losses for the Ukrainian economy will grow over time. In 2026 (the first year of full implementation of CBAM) GDP losses may reach $1.4 bln. However, in 2030 this figure may reach $7.2 bln.

Recall that according to alternative estimates of CMD-Ukraine, as a result of CBAM Ukraine may lose 6.4% of GDP by 2030, the decrease in exports may amount to 6.3%, including to the EU – 9.8%, and the reduction in the number of jobs – more than 116 thousand positions.

CBAM will hit Ukraine the hardest compared to other countries, as our country, being at war, has close trade ties with the EU and depends on its assistance. Ukraine has already lost and continues to lose time, investments, human and energy potential that could have been used for a green transition. Ukraine has not had the opportunity to prepare for CBAM implementation and therefore the instrument could have a very negative impact on its economy, which has yet to recover from the effects of the war.

Sectoral losses

Among all export-oriented sectors of the Ukrainian economy, the steel sector, which exported $3.3 billion worth of products to the EU last year, will suffer the most from CBAM implementation.

The full implementation of CBAM in 2026 is expected to have a highly negative impact on exports, leading to higher costs, reduced product competitiveness, and a forced shift toward alternative markets, among other challenges. According to GMK Center estimates, total potential export losses for Ukrainian iron & steel industry in 2030 may amount to $1.6 billion, including:

• steel finished products – $899 mln;
• steel semi-finished products – $558 mln;
• pig iron – $96 mln;
• pipes – $39 mln;
• other products – $25 mln.

In the first year of full CBAM implementation, Ukrainian iron and steel exports may face $311 million in CBAM payments. The negative impact will increase over time due to rising CO2 prices and the gradual reduction of free allowances in the EU ETS.

CBAM will create new trade barriers that will reduce access to the European market for those producers who cannot comply with EU environmental regulations. CBAM will also lead to supply chain realignment unless European trading partners are willing to adhere to stronger climate ambitions. CBAM will create additional barriers to exports for Ukrainian companies already affected by the war.

Ukraine’s domestic market capacity has already shrunk, and CBAM will reduce export opportunities. By 2030, CBAM could make Ukrainian exports of cement, fertilizers, pig iron, square billets and long products uncompetitive, given the high emissions from their production and the need to make appropriate CBAM payments.

The negative impact of CBAM on the iron & steel industry will lead to even greater losses for the overall Ukrainian economy, as this sector plays a significant role in the country’s GDP. According to GMK Center estimates, the industry’s total contribution – including its supply chain – was 7.2% of GDP in 2024. Steel insudtry also remains one of the largest exporters. In 2024, the industry’s share in total exports amounted to 15.4%.

Solution options

As Ukraine moves toward closer integration with the EU, it needs a new level of partnership with the bloc. While the European Commission has proposed continuing support for the Ukrainian iron & steel industry by maintaining the current exemption from trade restrictions on steel imports to the EU, this alone is not enough. Additional support is needed – particularly when it comes to addressing the challenges posed by CBAM amid the ongoing war.

Ukraine needs a solution that will mitigate the negative impact of CBAM on the economy. This can be achieved under Article 30.7 of the CBAM Regulation, which contains a force majeure provision for countries affected by unpredictable, exceptional and unprovoked events causing serious damage to their economic and industrial infrastructure. Russia’s full-scale aggression against Ukraine and its aftermath fits the criteria of an unpredictable event with significant damage.

The full-fledged launch of CBAM is just under a year away, but this is a sufficient period of time to find a compromise solution to mitigate the application of the mechanism to Ukrainian exports. At the moment there is already a negotiation process with the EU, where the issue of CBAM is being discussed.

At the same time, according to Taras Kachka, Deputy Minister of Economy and Trade Representative of Ukraine, it is not clear yet what the final decision will be, but it will not be a complete non-application of CBAM for Ukraine. On the other hand, against the backdrop of geopolitical difficulties with the United States, the EU is more interested in Ukraine’s economic development and its defense capabilities than it was a couple of months ago.