CBAM threatens exports to the EU: business united and calls on the Cabinet of Ministers to take immediate action

Minister Denys Shmyhal to urgently submit an official request to the European Commission to postpone the application of CBAM (the carbon border adjustment mechanism for imports) to Ukrainian companies. Otherwise, Ukraine may lose a significant portion of its exports to the EU as early as 2026.

Industry associations speak with one voice

Industrialists have long been talking about the need to postpone the application of the carbon import adjustment mechanism for Ukraine. Since August 2023, the associations have been systematically appealing to the government to submit a request to the EU, participating in meetings with officials on CBAM, and organizing thematic events to discuss ways to save Ukrainian exports.

This year, they tried to reach government officials again by sending official requests to the Cabinet of Ministers of Ukraine. Among other things, they stated in their calls:

• The Ukrainian League of Industrialists and Entrepreneurs (ULIE) stated that the introduction of an additional duty on CO2 emissions without taking into account wartime factors is “a direct blow to the competitiveness of Ukrainian exports.”
• The Federation of Employers of Ukraine (FEU) emphasized that the introduction of the European carbon tax will lead to a decrease in Ukrainian exports of products subject to the CBAM by $1.8 billion in 2026.
• The Association of Cement Producers of Ukraine Ukrcement also called on the Cabinet of Ministers to appeal to the EU to postpone CBAM for Ukraine and reminded that on June 18 last year, representatives of key sectors of the domestic economy had already appealed to the Prime Minister to immediately hold talks with the European Commission regarding CBAM about the application of the declarative method for Ukraine for the martial law period and the initial period of reconstruction.
• The National Association of Extractive Industries of Ukraine (NADPU) and leading participants in the subsoil use market reminded that during the war, the EU became Ukraine’s main trading partner and more than half of Ukraine’s exports of goods go to the bloc. At the same time, the CBAM can be applied to 15-17% of these goods.
• The Energy Club, a leading association of Ukrainian energy companies, has sent an appeal to the Ministry of Energy and the Ministry of Environmental Protection and Natural Resources of Ukraine regarding the threatening economic consequences of the CBAM introduction for the Ukrainian energy sector and the economy as a whole.
• The Association of Environmental Professionals (PAEW) also emphasized that the mechanism affects precisely those industries that form the basis of Ukrainian exports, are among the largest employers in the regions and currently do not have the physical capacity to modernize.
• For the past 4 years, the European Business Association (EBA) has been addressing the Government almost several times a year on the issue of postponing the CBAM, participating in all discussions and constantly providing its calculations to all ministries.

MPs do not stand aside

Members of Parliament from various committees have already responded to the issue of the CBAM.

MP Oleksiy Honcharenko drew attention to the fact that during all this time, there was not a single person in the entire Cabinet of Ministers who would have requested a postponement.

“Just so you understand: the introduction of this duty without a postponement is a deep minus for GDP (up to -5%). This is a shutdown of the already affected industry. This is a devaluation of the hryvnia. This is a cross on several budget-forming industries. It means tens of thousands of unemployed. And all of this is money that is currently being spent on defense. Because we pay salaries to our defenders from our own money. Our partners do not give us money for this,” wrote the Ukrainian MP.

MP Musa Magomedov, Chairman of the Subcommittee on Industrial Policy of the Committee on Economic Development, emphasized that Ukraine should do its best to negotiate a transition period for CBAM. According to him, everyone should be involved in this process: The Cabinet of Ministers, the Verkhovna Rada, and business. Also, according to his Facebook page, he raised this issue at a recent meeting of the Ukrainian delegation in Brussels.

On 28 May, the Parliamentary Committee on Economic Development called on the government to take the necessary steps to initiate a request to the European Commission to postpone the implementation of the CBAM for Ukraine.

There is a chance – time is running out

An official request has not yet been submitted, which is a prerequisite for activating Article 30.7 of the CBAM Regulation, that allows for exemptions for individual countries in force majeure circumstances. Upon receipt of such a request, the European Commission must submit a report to the European Parliament and the Council of the EU along with a legislative proposal.

This procedure means that any final decision will face significant bureaucratic delays, experts say. They explain that the tangible impact of the CBAM on the market will begin in November, so finalizing Ukraine’s request within the next 4-5 months is critical to avoid trade disruptions.

All stakeholders agree that if Ukraine is not granted a delay from the CBAM, it will have catastrophic financial consequences for both domestic companies and the Ukrainian budget.

According to GMK Center’s updated estimates, in 2024, Ukraine exported $24.8 billion worth of goods to the EU, of which 14.5% are subject to the CBAM. These are primarily iron, steel, electricity, aluminum, cement, and fertilizers.

Analysts predict that under the current structure, potential losses of Ukrainian exports in 2026-2030 due to the introduction of CBAM will amount to $4.7 billion, and losses of investments over the same period will amount to $2.7 billion.

The loss of access to the European market will be a blow to the entire economy, which is already operating in extremely difficult conditions of war.

Business has made another appeal. The industry demands that officials protect it in foreign markets. The Cabinet of Ministers should use the diplomatic window of opportunities and submit an official request to the EU in the coming weeks, as any delay will inevitably result in a collapse for part of the Ukrainian economy and exports.