CBAM and Ukrainian Industry: How the EU’s Carbon Barrier Will Affect Exports and the Economy
Starting January 1, 2026, Ukrainian exports to the EU will face a new customs barrier CBAM (Carbon Border Adjustment Mechanism). This carbon levy is intended to encourage emissions reductions but may deal a painful blow to Ukraine’s economy. Are domestic companies ready, how is the government responding, and why is time working against us? Here are the key facts and explanations, directly and without embellishment.
What Is CBAM and Why Does It Matter?
CBAM is a mechanism that, starting in 2026, will require exporters to the European Union to pay additional duties on goods with a large carbon footprint. The list already includes steel, cement, aluminum, electricity, fertilizers, and hydrogen. Historically, Ukraine supplies significant volumes of exactly these goods to the EU metallurgy and metal products account for up to half of all Ukrainian exports to Europe. Officially, CBAM aims to make the European market “cleaner” and protect EU producers from cheaper but “dirtier” imports. For Ukraine, however, it’s less about environmental challenges and more about survival for entire industries.
Who and When Will Be Affected
Financial obligations under CBAM for importers take effect from January 1, 2026. However, since October 2023, Ukrainian companies have been required to submit detailed reports on the CO₂ emissions in their products to the EU. All this data is meticulously recorded, and from early 2026, each ton of carbon emissions will mean real costs. The main sectors at risk are metallurgy, cement, fertilizers, aluminum, and energy. According to industry analysts, CBAM could cover 6–8% of Ukraine’s total exports to the EU. In some segments (for example, metal products), the losses could be dramatic with export volumes dropping by up to 93% if production is not adapted.
Economic Consequences
Analysts’ projections are alarming:
- GDP losses up to 4.8%;
- Export decline by 7.8%;
- Industrial production down 13.1%;
- Tax revenue a decrease of $2.8 billion;
- Jobs more than 70,000 jobs at risk in key sectors alone.
For a country at war, fighting for every export dollar, this is a very high price.
Why Ukrainian Industry Is Struggling to Keep Up
The key message voiced by all industry associations and experts: Ukraine will not manage to adapt to the new European requirements in time. As Hennadiy Riabtsev, Director of Special Projects at the Psycheya Scientific and Technical Center, put it: “No, we won’t make it, definitely not.” There are several reasons for this:
- Lack of investment in decarbonization war drains resources, and businesses cannot afford to invest in “green” modernization.
- Slow energy and industrial reform there is a shortage of policy decisions and technology projects.
- Delayed government programs the government has yet to establish a national carbon pricing system, emission trading scheme, or CO₂ tax.
- Insufficient EU support there has been little funding for technological modernization so far.
Industry associations have already sent appeals to European institutions, requesting a deferral of CBAM’s introduction for Ukraine because of the war. Some experts propose invoking “force majeure” and seeking special treatment for Ukrainian industry. But for now, the issue remains at the negotiation stage.
Revelant
Possible Solutions
A realistic scenario involves several urgent steps:
- Postponing CBAM for Ukraine until after the war and during the country’s economic recovery.
- Rapidly implementing a national carbon pricing system for example, a domestic emissions trading scheme or CO₂ tax.
- Attracting European funds (IPA, Just Transition Fund) to help finance the modernization of enterprises.
- Clear government strategy in negotiations with the European Commission not just formal positions, but specific actions and decisions.
Without a comprehensive strategy, the risks of losing markets, jobs, and tax revenue become not hypothetical but entirely real.
What to Expect Next
If the current trajectory continues, CBAM will become the most serious external shock to Ukraine’s economy since the start of the large-scale Russian invasion. Ukrainian producers must prepare for a new reality exporting to the EU will become harder, more expensive, and riskier. Either adapt and become “greener,” or lose ground to competitors from countries that have already modernized. The main challenge is not to waste time and lose the chance for equal integration into the European market and not to let another trade barrier undo decades of effort in foreign trade.
Explanations
- CBAM – a carbon adjustment mechanism at the EU border that, from 2026, imposes additional duties on goods with a high carbon footprint.
- Decarbonization – reducing CO₂ emissions in production.
- Carbon pricing – a system where emissions must be paid for (through trading or a tax).
- Just Transition Fund – a European fund to support the green transformation of the economy.
About the Author
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