The Ukrainian Union of Industrialists and Entrepreneurs (USPP) has warned that the application of the EU’s Carbon Border Adjustment Mechanism (CBAM) to Ukraine without a transitional regime could pose serious risks to the country’s economic stability during wartime.
According to the association, any additional fiscal burden on Ukrainian exports could have systemic consequences under the current conditions of full-scale war. The group noted that it had warned three years earlier that launching a new environmental tariff during wartime would disproportionately affect Ukrainian industry, and that these risks are now starting to materialize.
Carbon costs and operational constraints weigh on producers
The USPP stated that CBAM is already affecting production, with additional carbon-related costs estimated at €86-100 per ton of emissions. These charges create unequal competitive conditions for Ukrainian producers, which are operating amid damaged energy infrastructure, destroyed industrial assets, disrupted logistics, and workforce shortages.
The association emphasized that companies currently lack the financial and operational capacity to carry out rapid modernization or major emissions-reduction investments. Such transitions would require billions of dollars and several years of stable operating conditions, while companies are currently focused on maintaining production, safeguarding jobs and securing logistics.
Steel sector exposure heightens export risk
Based on forecasts from industry research centers, Ukraine could lose up to $5 billion in export revenues over the next five years due to CBAM.
The impact is expected to be particularly severe because roughly 80 percent of Ukrainian steel exports are shipped to the EU. The mining and metallurgical sectors account for about seven percent of the country’s GDP, 15 percent of total exports, and up to 30 percent of freight turnover.
Industry calls for transitional CBAM regime and state support
To mitigate the risks, the USPP called on the Ukrainian government to intensify political-level negotiations with the EU and seek a transitional or special CBAM regime for the country. The association also proposed establishing a joint Ukraine-EU technical working group to assess the mechanism’s real impact under wartime conditions.
In addition, it urged the creation of a state support package for exporters, including modernization programs, financing mechanisms, logistics cost compensation and incentives for decarbonization investments.
The organization warned that CBAM in its current form could reduce exports, industrial output and state revenues at a critical time, and called on the government to prioritize the issue in its economic diplomacy with the EU.