Ukrainian business leaders are urging the government to clarify its stance on the Carbon Border Adjustment Mechanism (CBAM) and its repercussions on exports, particularly concerning potential losses in foreign currency earnings. Officials acknowledge that Ukrainian and European steel producers face unequal conditions due to differing levels of state support.
During an industry discussion, Alexander Vodoviz, CEO of the Metinvest Group, criticized the EU’s introduction of the tax under the guise of environmental protection, claiming it serves primarily as a shield for the European market. He stated, “CBAM is essentially a tax that has little to do with ecology; it is a tool for protecting the European market and boosting their exports. As a result, we are forced to reduce our supplies because we cannot compete there. While other countries protect their markets, Ukraine is missing out on foreign currency revenue. This raises the question for the Ukrainian government: what are our joint actions and calculations? What is the plan?”
Vodoviz highlighted that the implementation of CBAM compels Ukrainian manufacturers to cut back on exports to the EU, thereby limiting their competitiveness in this crucial market.
Vice Prime Minister Taras Kachka acknowledged the disparity in competitive conditions between Ukraine and the EU, noting significant differences in funding levels. He remarked, “European metallurgy has been developing for nearly 20 years through decarbonization with state support, while in Ukraine, such support has been nonexistent.”
Moreover, European companies benefit from substantial subsidies for green transformation, whereas Ukrainian producers are facing rising costs amid the ongoing war. Kachka emphasized that the metallurgy markets are highly competitive and politicized, but Ukraine is engaged in negotiations with the EU to maintain acceptable export conditions.
According to the Federation of Employers, the implementation of CBAM could result in an $8.7 billion decline in Ukraine’s GDP by 2026, escalating to $11.3 billion by 2034. Additionally, the country may experience a reduction in tax revenues and social contributions across all budget levels due to decreased business activity, potentially amounting to $2.8 billion in losses by 2026 and reaching $3.6 billion by 2034.
Previously, Stanislav Zinchenko, director of GMK Center, emphasized that Ukraine could secure a delay in the implementation of the CBAM mechanism, but only with proactive and swift government action.
Ukrainian businesses are pressing the government to take a definitive stance on the Carbon Border Adjustment Mechanism, highlighting its adverse effects on exports and competitiveness. Officials recognize the unequal support between Ukrainian and European producers, raising concerns about significant economic losses if the mechanism is fully implemented.