What problems do companies face when preparing CBAM reports?

The Carbon Border Adjustment Mechanism (CBAM) has been in effect since October 1, 2023. Since then, and until January 1, 2026, there has been a transition period during which importers report on carbon emissions from their production.

As practice shows, already at the reporting stage, all Ukrainian companies have faced significant problems that they cannot overcome on their own, and therefore engage external expertise.

Read more about the difficulties Ukrainian companies have faced in submitting CBAM reports in GMK Center’s article.

Challenges in preparing CBAM reports

In general, at the first stage of preparing CBAM reports, Ukrainian iron and steel exporters faced several challenges. The key one is the overall complexity of collecting the necessary data and a rather controversial methodology for calculating embedded emissions.

Since this is the first time that CBAM reporting is being prepared, it is logical that there is a lack of trained employees to prepare the reports. In this case, the problem is not only a lack of experience in filling out CBAM reports among the company’s specialized staff, but also partly the physical absence of specialized specialists.

“Over the past few years, business owners have optimized costs and, as a result, disbanded environmental safety departments. And all this despite the declaration of the green course. Their work was entrusted to labor protection specialists, technical directors, and other employees,” explains Liudmyla Tsyhanok, President of the Association of Environmental Professionals (PAEW) and CEO of the Office of Sustainable Solutions.

The lack of experience is also a result of insufficient expertise and communication.

“With the deadline for submitting actual emissions data for the third quarter approaching, instead of using the coefficients approved by the European Commission, there is a risk of repeating communication problems. After all, importers will now receive templates prepared by producers with rather complicated technical information that requires an understanding of the topic on the part of importers. Not all market participants have had time to understand the issue well, which can lead to certain misunderstandings,” ArcelorMittal Kryvyi Rih explains.

Other preparation problems include the lack of methodological assistance, despite the European Commission’s considerable efforts in this area (webinars, handbooks, online meetings).

“Each of the tens of thousands of importers has their own specific questions that require accurate and quick answers. Even the period for submitting the first report had to be extended for another month because the electronic registry was not ready to accept such a large number of applications. As the CBAM becomes fully operational, when the next changes come into force and companies start making payments, there will be more questions,” emphasizes Vladislav Varnavsky, Director of Environmental and Industrial Safety at Interpipe.

In addition, ArcelorMittal Kryvyi Rih notes that operators of large and complex plants have limited time to adapt to the new requirements in a short time, which can negatively affect the quality of the documentation prepared.

In addition, there are large gaps in the government’s work. According to Liudmyla Tsyhanok, the government has not taken any measures to help Ukrainian companies prepare for CBAM, and the Ukrainian government is also turning a blind eye to the lack of accreditation from the European Commission for Ukrainian emission verifiers.

Preparation features

The complexity of preparing CBAM reports has led to the fact that all or most Ukrainian companies are forced to engage external assistance. In particular, the Association of Environmental Professionals (PAEW) has recently been approached by many companies to help them fill out the CBAM form – Communication template for installations.

“Our company engages contractors to prepare the necessary CBAM reporting. The contractor is responsible for developing a package of documents and filling in the templates used to communicate with importers. In addition, the company’s employees responsible for implementing the national monitoring, reporting and verification (MRV) system are now fully focused on CBAM-related issues,” ArcelorMittal Kryvyi Rih explains.

In such circumstances, the cost of services to help prepare CBAM reports can be quite high. According to Liudmyla Tsyganok, the preparation of a CBAM report is equivalent to the amount of money spent on preparing EIA reports (from UAH 500 thousand to $25 thousand).

However, even attracting external assistance is not the final solution to the problem. According to Vladyslav Varnavsky, the company has engaged external experts from both Ukraine and the EU. But even this step did not save the company from constant revisions and clarifications. This was primarily due to the specifics of the CBAM electronic registry and its constant updating.

Mitigating the impact of CBAM

Given the negative impact of the CBAM on the Ukrainian economy and the steel industry in particular, it is very important that Ukraine receives certain preferences to mitigate the effect of this mechanism. In particular, it could be a declarative approach to goods imported from Ukraine to the EU and subject to the CBAM for the period of martial law and several years for the period of reconstruction.

Such a solution would be beneficial for the EU as well. For example, in the steel sector, it will ensure guaranteed supplies of iron ore and semi-finished steel products produced with low carbon emissions from Ukraine. However, Ukraine needs help in investing in the green transition process for the iron and steel industry.