Economy

The EU and the carbon tax: why CBAM is becoming a trade weapon

The CBAM was initially positioned as an environmental mechanism aimed at reducing CO₂ emissions, but in practice it has turned into an economic protectionist tool used by the European Union to protect domestic markets and support its own producers. This opinion was expressed by Stanislav Zinchenko, Director of GMK Center, as reported by Komersant ukrainskyi.

According to him, CBAM revenues are used to subsidize European companies in the process of decarbonization, making this mechanism an element of the EU’s industrial policy.

CBAM as a global trend

The EU was the first to introduce CBAM, but soon other countries, including the UK, Australia, Canada, Norway, and South Korea, began to consider similar mechanisms. They realize that without similar measures, their producers will lose their competitive position to imports from countries without environmental restrictions.

The EU is not ready for its own CBAM

Despite extensive preparations, the European Union has faced problems with CBAM administration. The requirement for more than 120,000 companies to submit reports created an excessive burden, so it was decided to exclude small and medium-sized businesses from the system. At the same time, all financial obligations remain for large companies, and physical payments will be introduced in 2027.

At the same time, European manufacturers are putting pressure on the authorities to strengthen the CBAM to protect the domestic market, including new anti-dumping investigations and subsidies for the “clean transition” of the industry.

Ukraine and CBAM: passive position and potential losses

In Ukraine, the CBAM is still viewed as an environmental mechanism, although in the EU it is already used for economic regulation. There are no active negotiations between the government and the EU to mitigate the impact of this duty, although 15% of Ukrainian exports to the EU are already subject to CBAM.

GMK Center forecasts that Ukraine’s costs due to the CBAM will increase as free allowances are reduced and the price of CO₂ rises, which could reach $150/t by 2030. The expected losses of Ukraine’s exports to the EU in 2026-2030 could amount to $4.7 billion, and potential investments in the industry will be reduced by $3 billion.

CBAM as a threat to Ukraine’s integration into the EU

Ukraine is a candidate for the EU, but CBAM effectively puts it in the same category as third countries such as Turkey or China. If Ukrainian producers do not adapt, they will be forced to look for alternative markets, which will weaken economic integration with the EU. Without active action, Kyiv risks losing its status as a reliable trading partner.

The need for a Ukrainian CBAM

Experts suggest that Ukraine should create its own mechanism for carbon adjustment of imports, as Norway has done. This will help protect the domestic market and use CBAM as an argument in negotiations with the EU.

CBAM will be expanding and may cover new sectors, including agriculture and consumer goods. Ukrainian businesses need to prepare for the new rules by developing adaptation and modernization strategies.

What is CBAM and why is it important?

CBAM is a mechanism for regulating carbon emissions at the EU border that obliges importers to pay an additional duty for products whose production was accompanied by significant CO₂ emissions. The main goal of the initiative is to prevent “carbon leakage,” i.e. the relocation of production to countries with less stringent environmental standards.

Through CBAM, the EU plans to level the playing field between European manufacturers, which already pay high emission taxes, and foreign companies that produce products without significant environmental regulation.

What products are covered by the CBAM?

In the first phase, CBAM will cover the most carbon-intensive industries, such as

• metallurgy (iron, steel, aluminum);
• chemical industry (cement, fertilizers);
• energy (electricity);
• plastics production.

The list of products will be expanded in the future, making the mechanism more comprehensive.

How will CBAM work?

CBAM is being implemented in several stages:

From October 1, 2023, to 2025, a transitional period when importers must report CO₂ emissions, but no duty will be levied.

From January 1, 2026, the mechanism will be fully launched. Importers will start paying a duty according to the amount of emissions generated during the production of goods.

To import products into the EU, companies will have to buy CBAM certificates, the cost of which will correspond to the internal price of carbon in the EU.

How will CBAM affect Ukraine?

Ukraine, as one of the EU’s key trading partners, especially in the metals and chemicals industry, may be significantly affected by the introduction of the CBAM. Since most Ukrainian companies are not ready for the new environmental standards, their products may lose competitiveness in the European market.

Main challenges for Ukraine:

• Increased cost of exports. Ukrainian producers will have to compensate for the additional costs of CBAM certificates.
• The need for environmental modernization. It is necessary to introduce technologies that reduce greenhouse gas emissions.
• Risk of losing markets. Companies that do not adapt to the new conditions may lose their positions in the European market.

In addition, the Ukrainian government will have to develop government support programs to help companies implement environmental standards and reduce the risk of losing competitiveness.

Benefits of CBAM for the global market

Despite the difficulties for exporters, CBAM also has positive aspects:

• Stimulating environmental innovation. Companies are forced to switch to green technologies, which will contribute to sustainable development.
• Reducing carbon emissions. In the long run, CBAM will help reduce global CO₂ levels.
• Strengthening the EU’s position in the fight against climate change. This mechanism can serve as an example for other countries that are also considering similar initiatives.

Economic and environmental experts emphasize that CBAM is only the first step in changing global trade rules in favor of environmental sustainability. Governments, businesses, and international organizations will continue to discuss implementation details and possible exemptions for developing countries.

Ukrainian producers need to urgently adapt to the new realities: invest in energy efficiency, obtain international certificates of environmental production, and seek government support for production modernization.