Ukraine could face $4.7 billion export losses due to CBAM; study

The EU's Carbon Border Adjustment Mechanism could cause export losses of up to $4.7 billion for Ukraine over the 2026-2030 period, a new study by Kyiv-based iron and steel consultancy GMK Center has found.

The study found that the iron and steel sectors of Ukraine would be most affected by the EU's carbon tax, with Ukraine exporting $3.3 billion worth of goods. Ukraine could also face potential losses of $2.7 billion in economic investment over 2026-2030 due to CBAM.

Ukraine exported a total of $24.8 billion worth of goods to the EU throughout 2024, of which 14.5% would fall under CBAM regulations, the report showed.

The total potential export loss in 2030 could add up to $1.6 billion, with finished steel products the most affected, followed by semi-finished steel products, with losses potentially totaling $899 million and $558 million, respectively, according to calculations from GMK Center.

Meanwhile, pig iron exports could face losses of up to $96 million, pipes $39 million, with another $25 million worth of losses expected from other products.

"The application of the CBAM to Ukraine is a prohibitive trade mechanism that will lead to a reduction in exports and a drop in production," Stanislav Zinchenko, CEO of GMK Center, told S&P Global Commodity Insights.

"Over the past three years, the EU has become a key market for Ukrainian producers," he said. "Our own market for all types of key industrial goods has shrunk. Only those enterprises that are focused on exports to the EU have survived."

The study further shows that in the first year of full CBAM implementation, Ukrainian iron and steel exports could face $311 million in CBAM payments and by 2030, CBAM could make Ukrainian exports of cement, fertilizers, pig iron, billets and long steel products uncompetitive.

Under a recent proposal, the European Commission has put forward some tweaks to CBAM to ease administrative burdens on smaller importers and adjust the timeline for purchasing obligations. Under these changes, importers will be able to purchase CBAM certificates starting in February 2027 rather than from Jan. 1, 2026, to cover the emissions embedded in their imports for 2026.

The study calls for a solution to further mitigate the impact of the CBAM on Ukraine's economy.

"This could be achieved under Article 30.7 of the CBAM regulation, which includes a force majeure clause for countries affected by unforeseeable, exceptional and unprovoked events that cause severe damage to their economic and industrial infrastructure," the report said.

The negative impact of CBAM on Ukraine would worsen over time due to rising carbon prices and the gradual reduction of free allocations in the EU emission trading system, the report said.

"Ukrainian producers of steel, cement, aluminum and other products did not have access to subsidies, grants for decarbonization and cheap loans, like their European market colleagues," Zinchenko said. "Ukrainian enterprises can decarbonize production only by gaining access to European financial instruments."