European CBAM: Global Preparations and Ukraine’s Call for Delay

The Carbon Border Adjustment Mechanism (CBAM) will fully launch on January 1, 2026. This EU initiative aims to reduce carbon leakage by taxing imports based on their carbon footprint. Various countries and industries worldwide are adjusting to this major change, while Ukraine urgently requests a delay for its economy.

UK and EU Agree to Merge Emissions Trading Systems

On May 19, the UK and EU announced plans to unify their emissions trading systems (ETS). This merger will create a single carbon market, eliminating duplicate carbon taxes and reducing administrative burdens for companies, especially in steel production.

The UK Steel Industry Association welcomed this move, emphasizing its support since 2019. The combined ETS aims to improve energy security and avoid £800 million in carbon taxes flowing to the EU budget. However, analysts predict a rise in UK carbon prices to European levels, already reflected in an 8.4% price jump after the announcement.

The new system will cover key sectors such as electricity, industrial heat, maritime transport, and aviation, facilitating mutual CBAM exemptions between the UK and EU. The UK also plans to launch its CBAM in January 2027, aligning with EU standards to streamline trade and reduce carbon costs.

Global Reactions and Simplification Efforts

Countries respond differently to CBAM. Some, like India, oppose it strongly, threatening retaliation. India’s Commerce Minister warned that the EU carbon tax could trigger trade conflicts. Meanwhile, Russia has requested WTO consultations, labeling CBAM a disguised trade barrier.

European companies express concerns about CBAM’s complexity. They cite challenges in emissions tracking, financial forecasting, and administrative processes. To ease these issues, the European Commission proposed simplifications in February. These include raising the import weight threshold to 50 tons, exempting 90% of small importers, simplifying declarations, and tightening anti-circumvention rules.

In May, the European Parliament approved these changes. The EC now negotiates final terms with the Council, aiming to implement the streamlined CBAM by 2026. Meanwhile, the EC is developing IT systems and registries to support the mechanism’s rollout.

Ukraine’s Urgent Appeal for CBAM Delay

Ukrainian industry groups urge the EU to postpone CBAM implementation for Ukraine. The country’s metallurgical sector, exporting $3.3 billion worth of products to the EU, faces severe risks. GMK Center estimates Ukraine could lose $7.2 billion in GDP by 2030 due to CBAM.

Industry associations argue that Ukraine’s war-affected economy cannot modernize production or meet EU carbon standards without significant financial support. They highlight the lack of equal financing opportunities compared to European producers.

The Ukrainian government is preparing official appeals to the European Commission for exemptions, including special provisions for electricity exports. Deputy Minister Taras Kachka emphasized ongoing dialogues and an active phase of negotiation for Ukraine’s CBAM relief.