The Carbon Border Adjustment Mechanism, set to take effect next year, will impose tariffs on carbon-intensive imports to the bloc
Thousands of Ukrainian jobs could be at risk when the EU’s Carbon Border Adjustment Mechanism (CBAM), an environmental tariff on imports produced with high carbon emissions that takes effect next year, the Federation of Employers of Ukraine has warned, adding that the effect on the country’s economy could be significant.
The CBAM is aimed at preventing more polluting foreign goods – which can often be made more cheaply – from undermining the EU’s green transition. However, the tariff could pose a threat to more than 116,000 jobs in Ukraine in sectors such as steel, chemicals, and cement, which are heavily reliant on carbon-intensive processes, according to a report issued by the federation on Friday.
“The biggest challenges for us in implementing CBAM are uncertainty, unpredictability, and a lack of data,” said Sergey Lavrynenko, CEO of Stalkanat, a Ukrainian manufacturer of steel ropes and fibers.
CBAM, which is set to take effect in 2026, aims to create a fairer market by taxing goods imported into the EU that don’t meet strict environmental standards. Under the scheme, exporters to the EU will have to buy certificates to cover their CO2 emissions.
According to the report, CBAM could have a severe impact on Ukraine’s economy, which relies heavily on exports. The federation warned that by 2030, the country’s GDP could shrink by 6.4%, exports could drop by 6.3%, including a 9.8% decline in exports to the EU.
The measure will potentially protect EU producers from losing out to foreign competitors, while the latter would be incentivized to invest in modernizing their processes to meet the EU targets and thus have the tariffs removed.
While the EU argues the tax scheme is necessary to tackle climate change, Kiev claims it will put its industries at a competitive disadvantage.
“We still don’t know the specific greenhouse gas emissions limits for our products in the EU, how these limits will change, what the cost of CBAM certificates will be, or how the EU will expand the list of goods affected by the tax,” Lavrynenko said.
Ukraine is now seeking an exemption or at least a delay in the CBAM’s implementation, citing an article in the regulation covering unexpected events that cause serious harm, which Kiev believes could apply to the conflict with Russia.
To mitigate the impact, Ukrainian officials have been calling for financial support for industries that are not equipped to meet the EU’s environmental requirements.
While Kiev claims that the EU has all the legal tools to reduce the impact of the tax for the country, the bloc reportedly remains at a crossroads as the CBAM is a key part of its broader climate plan, which includes the aim of supporting the green reconstruction of Ukraine.
