The European Union’s Carbon Border Adjustment Mechanism (CBAM) is intensifying the investment deficit in Ukraine, as the country grapples with the implications of new decarbonization requirements. While the EU has benefited from nearly zero capital costs for years, Ukraine has not, raising concerns about the competitive landscape for its industries.
Experts have indicated that CBAM acts as a significant trade barrier for Ukrainian producers of long steel products and semi-finished steel. According to industry assessments, the competitiveness of these manufacturers in the EU market has already diminished. This issue extends beyond a single sector, as metallurgy constitutes 7.2% of Ukraine’s GDP, including supply chains.
CBAM is part of the EU’s broader climate policy, and should Ukraine pursue EU membership, its industries will inevitably face similar decarbonization demands. However, the critical question remains how these requirements will be implemented. Other Eastern European nations, such as Poland, received substantial investments during their integration into the EU, whereas Ukraine is being asked to comply with the same regulatory standards without accompanying financial support.
The ongoing conflict with Russia has severely disrupted investment opportunities. Prior to the war, major metallurgical enterprises in Ukraine had established decarbonization roadmaps. Currently, these projects are on hold, not only due to the war but also because rising energy costs have rendered them financially unfeasible. Experts argue that a postponement of CBAM would not solve the underlying issues but could provide essential time for adjustment. The European Commission has estimated that the impact of the eco-tariff on Ukraine will be minimal, at just 0.01%. However, analysts from GMK Center project that Ukraine could lose 2.1% of its GDP by 2030 due to these measures.
Critics assert that decisions based on flawed data cannot be considered sound. They emphasize the need for the European Commission to revisit its reports, as the potential consequences of miscalculations are significant. By 2029-2030, Ukraine risks losing two out of five operational metallurgical plants.
Experts argue that CBAM exacerbates the existing investment deficit in Ukraine. For the past 15 years, the EU has enjoyed nearly zero capital costs, while Ukraine has not had the same advantage. Imposing identical decarbonization timelines under these disparate conditions overlooks the fundamental asymmetry between the two regions. Therefore, both CBAM and decarbonization financing should be addressed in a comprehensive manner.
The Ukraine Investment Framework, part of the Ukraine Facility, currently allocates only €9.3 billion in direct grants and €7.8 billion in credit guarantees for the entire industrial and energy sectors. This amount is deemed insufficient, as approximately €70 billion is needed for the recovery of the energy sector alone. Without access to affordable low-carbon energy, the production of ‘green’ steel remains unattainable.
According to GMK Center, an additional €12 billion is required for the decarbonization of existing capacities in the mining and metallurgical complex. The pressing question is where businesses will source these funds. Until a clear answer emerges, Ukraine requires a postponement of CBAM. Legal grounds for such a delay exist, and current data on export declines in early 2026 support this need. What is lacking is the political will to acknowledge that the initial assessment was inaccurate and to pursue a new, urgent resolution.
CBAM, set to be implemented in 2026, will introduce carbon tariffs on imports to the EU for various products, including steel, cement, fertilizers, electricity, aluminum, and hydrogen.
The implementation of the EU's CBAM is raising significant concerns about Ukraine's investment landscape, particularly for its metallurgical sector. Experts warn that without adequate financial support and a reconsideration of the decarbonization timeline, Ukraine's economy could face severe repercussions.