
Posts Green steel CBAM 966 21 January 2025
Only one third of Ukrainian companies are ready for practical work under carbon tax conditions
The Climate Platform of the Federation of Employers of Ukraine hosted a presentation of two studies conducted by CMD-Ukraine. In particular, the studies addressed the study of domestic business awareness of the Carbon Border Adjustment Mechanism (CBAM) and the results of modeling the impact of CBAM on the Ukrainian economy. GMK Center briefly recounts their results and key findings.
Ukrainian companies’ awareness of CBAM
The first survey shows the level of awareness of Ukrainian companies, whose products are subject to CBAM regulation, about the mechanism itself and the nature of its impact on exports. The survey was conducted in September-November 2024 and showed the following results:
- High general awareness of green policies. Approximately 70% of respondents indicated that they have an idea or have heard in general terms about the Green Deal and CBAM.
- A fairly high level of understanding of the potential impact of green initiatives on exports. Approximately 54% of Ukrainian companies realize that the introduction of CBAM will have a negative impact on their exports to the EU. However, a significant part of companies still do not fully realize what specific changes await their business.
- Low level of practical readiness to work under CBAM conditions. Some Ukrainian companies focus on plans to directly reduce CO2 emissions (31% of respondents), while 19% of respondents indicated that they have defined sustainable development goals and developed plans to achieve them.
According to CMD-Ukraine expert Eugene Ivanov, the survey results showed the following main CBAM-related problems recently faced by Ukrainian companies when exporting their products to the EU:
- lack of open data – 30%;
- difficulties in filling out reports – 26%;
- lack of knowledge and skills – 18%;
- high cost of consultants’ services – 15%;
- refusal of partners due to high emissions – 12%.
The presentation also included a discussion of the results of the first year of the CBAM mechanism for Ukrainian companies.
“The biggest challenges for us in implementing CBAM are uncertainty, unpredictability and lack of data. Yes, we have already learned how to complete CBAM reporting, but the overall amount of uncertainty remains very high. In particular, we do not yet know the reference values of greenhouse gas emissions in the EU for our HS codes, which will be in force and how the EU will change them, what will be the dynamics of the cost of CBAM certificates, how the EU will expand the list of goods subject to CBAM, etc,” – said during the discussion Sergiy Lavrynenko, General Director of PJSC Stalkanat.
Impact of CBAM on the Ukrainian economy
The second study – assessment of CBAM impact on the country’s economy showed a very significant effect already in the perspective of five years. According to CMD-Ukraine estimates, 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.
At the same time, according to GMK Center estimates, CBAM may apply to 15-17% of Ukrainian exports to the EU, and total export losses in 2026-2030 may exceed $4.6 billion (over 5 years). In particular, in 2026 (the first year of full implementation of CBAM) export losses may reach $202 million, while in 2030 this figure may reach $1.4 billion. Because of CBAM Ukraine may stop exporting cement, fertilizers, pig iron, square billets and long products to the EU after 2030.
The key challenges for Ukraine due to CBAM include the following:
- Falling demand for machinery and equipment needed to produce products subject to CBAM regulation.
- Limited opportunities for Ukraine to reorient its exports. This is due to war, geographical location, logistical constraints, etc.
- Negative impact on certain industries. Steel industry, cement and fertilizer industries may be particularly affected by the introduction of CBAM.
In any case, the financial burden from CBAM will be significant for Ukraine and will negatively affect the development prospects of our economy, its ability to self-finance and the possibilities of post-war recovery.
Mitigation of CBAM for Ukraine
The survey of Ukrainian companies revealed a lack of direct awareness of how CBAM will affect their operations and what measures need to be taken to adapt. This problem is directly related to the lack of trained personnel and the need for skills development.
Given the negative impact of CBAM on the economy, Ukrainian business speaks about the need for state support. In particular, respondents name such priority measures as:
- staff training – 66.4%;
- concessional financing: low-interest loans (60%) and grants (53%);
- improved provision of advanced technologies and equipment – 36%.
In this regard, the Ukrainian authorities and specialized associations need to strengthen educational and consulting work with Ukrainian exporters. The survey showed that 62% of Ukrainian companies would like their employees to undergo additional training in the following areas: transition to low-carbon technologies, calculation of greenhouse gas emissions, preparation and verification of CBAM reporting, etc. The survey showed that almost all Ukrainian companies would like their employees to undergo additional training. This situation is due to the fact that almost 60% of respondents note the lack of qualification of their employees, who cannot even calculate the carbon footprint of the company’s products.
However, the key in terms of importance should be the receipt by Ukraine of preferences from the EU to mitigate the effects of CBAM. In particular, it could be a declaratory approach to goods imported from Ukraine to the EU and subject to CBAM for the period of martial law and several years for the period of recovery, as proposed by the European Business Association.
From the legal point of view, the EU has all the necessary tools to provide Ukraine with conditions mitigating the impact of CBAM. In particular, according to Article 30 of the CBAM Regulation, in case of occurrence of an unpredictable event that is related to CBAM and has devastating consequences, the European Commission can initiate changes and implementation of temporary measures to overcome these exceptional circumstances. According to Ukrainian experts and businesses, Russia’s full-scale aggression against Ukraine fully falls under the criteria of an unpredictable event.
“Under the existing conditions, Ukrainian business actually forces the Ukrainian authorities to answer uncomfortable questions about the negotiating position and prospects for a solution to the CBAM issue. Ukraine still has no position paper, strategy or action plan on CBAM at the state level, unlike all other EU trading partners, which have been actively negotiating for 3 years,” – comments Stanislav Zinchenko, head of the Industrial Ecology and Sustainable Development Committee of the European Business Association.
According to Taras Kachka, Deputy Minister of Economy, Trade Representative of Ukraine, who seems to be the only government representative dealing with this issue, it is not yet clear what the final decision will be, but it will not be a complete non-application of CBAM for Ukraine.
As a result, less than a year before the unexpected challenges in the form of CBAM for the Ukrainian economy, we have general and florid answers of the government representatives and the office of the Vice Prime Minister for European Integration, and, in fact, indicative inaction of the Ukrainian authorities, which speaks for itself.