Ukrainian Businesses Urge EU to Postpone CBAM Implementation Amid War

The National Association of Extractive Industries of Ukraine (NAEIU) has raised concerns about the impact of the EU’s Cross-Border Adjustment Mechanism (CBAM) on Ukraine’s economy. The association has called on Ukrainian authorities to initiate urgent negotiations with the European Union to either postpone the CBAM’s terms or apply a force majeure clause to exclude Ukraine from the mechanism. This appeal follows the significant role the EU plays in Ukraine’s economy, especially during the ongoing conflict.

CBAM’s Impact on Ukrainian Exports and Economy

Ukraine’s export relationship with the European Union is crucial, with more than half of the country’s goods being sent to the EU. However, the introduction of CBAM could negatively affect 15-17% of these exports, especially in sectors like cement, fertilizers, and metal products. The association highlights that Ukrainian companies, particularly in the metallurgy sector, may face severe challenges due to the carbon tax on exports, reducing their ability to compete in European markets. The expected export losses could amount to over $1.4 billion, and GDP losses could be even higher.

Metallurgy’s Role in Ukraine’s Economy

The metallurgy sector, which is a major contributor to Ukraine’s economy and tax revenue, stands to be the most affected by CBAM. The industry faces the prospect of losing export opportunities, particularly in pig iron, square billets, and long products, by 2030. The NAEIU has warned that such losses will exacerbate the negative effects of the ongoing war. Tax losses from the implementation of CBAM could total up to $910 million by 2030. The NAEIU urges the government to prioritize these concerns and seek solutions to protect the country’s economic stability.

Global Resistance to CBAM and Ukraine’s Position

Countries such as India, China, and South Africa have expressed opposition to the EU’s CBAM, citing the detrimental effect on their own exporters. Despite these global pushbacks, Ukraine has largely taken a wait-and-see approach, which many industry players consider unfeasible in the current circumstances. There is a pressing need for Ukraine to act swiftly in negotiations with the EU to mitigate the adverse effects of the mechanism.

Ukraine also has an opportunity to support the EU’s green transition efforts. By continuing to supply raw materials like steel and iron ore, Ukraine can contribute to the decarbonization of European steel industries. This could strengthen the EU’s competitiveness in the global market. However, this potential benefit is threatened by the imposition of CBAM, which could undermine the country’s role in supporting European supply chains.

Call for Action and Negotiation with the EU

The NAEIU and major subsoil industry players have urged Ukraine’s government to initiate negotiations with the European Union, starting with the Ministry of Economy, Ministry of Environment, and Ministry of Foreign Affairs. The goal is to either postpone the CBAM’s full implementation or exclude Ukraine from its provisions in light of the ongoing war. These negotiations are essential to protecting Ukraine’s economy, preserving jobs, and ensuring the competitiveness of its industries on the European market.

According to GMK Center’s updated estimates, the CBAM could result in a loss of $7.2 billion in GDP for Ukraine by 2030, highlighting the urgent need for action.