Ukrainian manufacturers are experiencing a decline in clients and contracts due to deficiencies in the regulatory framework of the Carbon Border Adjustment Mechanism (CBAM), which is not fully adaptable to the country’s context. Industry leaders are urging the European Union to postpone financial obligations for Ukraine.
According to industry expert Ostapets, a significant issue is the lack of a verification mechanism. Ukrainian verifiers lack accreditation in the EU, while European verifiers are unable to operate in Ukraine due to unresolved procedural issues.
Moreover, there is an absence of a methodology for emissions verification in supply chains, forcing companies to rely on inflated default metrics.
Ostapets pointed out that a critical concern is the use of inaccurate default emissions figures by European clients to assess products from third countries. For instance, the carbon footprint for seamless pipes from Ukrainian manufacturers is listed in the European Commission’s database as 2.596 tons of CO₂ per ton, based on the blast furnace route. In contrast, even though companies like Interpipe produce steel with emissions around 110 kg of CO₂ per ton, this is not recognized because the electric arc route is not accounted for in Ukraine.
In comparison, manufacturers from Azerbaijan have a significantly lower emissions figure of 0.240 tons of CO₂, creating uncompetitive conditions for Ukrainian products. Additionally, reports submitted by Ukrainian companies in compliance with CBAM requirements since 2023 have not been considered.
Financial obligations further complicate the situation: starting in 2027, companies will need to purchase CBAM certificates in advance, covering at least 50% of volumes based on either default or actual metrics. However, as actual data for 2026 will not be verified in time, businesses are compelled to use inflated default values.
This scenario is already leading to increased costs and frozen capital. Ostapets noted that financial resources could be locked until the third quarter of 2027, coinciding with the completion of verification procedures.
In light of these challenges, the business community advocates for a different approach: temporarily suspending the financial component of CBAM for Ukraine during the ongoing war while maintaining reporting requirements to establish a transparent emissions accounting system.
“It makes sense to use this time to build reporting infrastructure in collaboration with the European Commission, rather than imposing financial pressure,” Ostapets stated.
Interpipe emphasizes that the Ukrainian industry is already moving towards decarbonization, with the share of green steel increasing to approximately 15%, up from around 1% before the war.
However, without a postponement of CBAM, Ukrainian manufacturers will continue to lose competitiveness in the EU market, which could have detrimental effects on exports and the overall economy.
The Carbon Border Adjustment Mechanism is set to introduce a carbon tax on imports to the EU for specific products, including steel, cement, fertilizers, electricity, aluminum, and hydrogen, starting in 2026.
Previously, the European Commission did not foresee any exemptions for Ukraine under CBAM, asserting that the mechanism’s impact on the Ukrainian economy would be minimal. However, estimates from the Federation of Employers of Ukraine suggest that the implementation of CBAM could result in a GDP reduction of $8.7 billion in 2026 and $11.3 billion by 2034.
Additionally, ArcelorMittal Kryvyi Rih reported a complete loss of exports to the EU due to the CBAM, leading to a halt in production. CEO Mauro Longobardo stated that the bloom shop has already closed, and now the casting and mechanical shop is shutting down, affecting over 3,000 employees. He urged the government to intensify efforts to secure a postponement of CBAM for Ukraine under force majeure conditions.
Ukrainian manufacturers are facing significant challenges under the EU's Carbon Border Adjustment Mechanism due to regulatory inadequacies and financial pressures. Industry leaders are calling for a postponement of financial obligations to mitigate the adverse economic impact.